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Opioid Drug Companies Rally On Hopes of Broader Settlement

Shanthi Rexaline

Shares of companies embroiled in the U.S. opioid crisis were trading sharply higher Wednesday following a Tuesday Wall Street Journal report that said three opioid drug distributors are in talks with state and local governments regarding a settlement agreement.

Distributors Discuss Deal

The three drug distributors — Cardinal Health (NYSE: CAH), McKesson Corporation (NYSE: MCK) and AmerisourceBergen Corp. (NYSE: ABC) — are negotiating a deal that envisages the companies collectively paying $18 billion over 18 years, the report said, citing people familiar with the discussions.

The three distributors are set to go on trial Monday in a lawsuit initiated by two Ohio counties. 

Johnson & Johnson (NYSE: JNJ) is also in talks to contribute additional money, the report said. 

Broader Settlement In The Works? 

If a settlement is reached, it could pave a way for a broad resolution to all opioid lawsuits filed against opioid drugmakers, distributors and pharmacies, the Journal said. 

The U.S. opioid crisis was fueled by pharma companies promoting prescription opioid pain relievers without properly warning of their addictive potential.

This has led to opioid overdoses and related deaths, costing the U.S. economy about $78.5 billion a year, including the cost of health care, lost productivity, addiction treatment and criminal involvement, according to the National Institute for Drug Abuse. 

Oxycontin maker Purdue Pharma filed for bankruptcy protection in mid-September, agreeing to settle litigation with 24 state attorneys general.

Johnson & Johnson was ordered to pay $572 million by the Cleveland District Court of Oklahoma, although the company has decided to contest the decision. The company has reached a $20.4-million settlement agreement with the Ohio counties of Cuyahoga and Summit.

Other companies such as Endo International PLC (NASDAQ: ENDP), Allergan plc (NYSE: AGN) and Mallinckrodt PLC (NYSE: MNK) have also negotiated settlement agreements.

In an Oct. 2 note, Morgan Stanley analyst David Lewis said he expects updates on whether Endo, J&J, Teva Pharmaceutical Industries Ltd (NYSE: TEVA) and Mallinckrodt will push for a global opioid settlement that would be enacted through Purdue's Chapter 11 case.

The first trial is scheduled to begin on Oct. 21 in the Northern District Court of Ohio.

At last check:

  • McKesson shares were rallying 6.02% to $146.49. 
  • AmerisourceBergen was adding 4.96% to $87.33. 
  • Cardinal Health was advancing 4.01% to $49.83. 
  • Johnson & Johnson was moving up 2.74% to $136.46. 
  • Endo was rallying 21.49% to $4.24. 
  • Teva was gaining 5.38% to $7.34. 
  • Mallinckrodt was surging up 12.02% to $2.33. 
  • Allergan was edging up 0.49% to $170.99. 

Related Links:

Mallinckrodt Eyes Restructuring Ahead Of Cleveland Opioid Trial: 'Bankruptcy A Real Option'

Sell-Side Positive On Johnson & Johnson's Unexpected Ohio Opioid Settlement

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