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Why Mallinckrodt and Endo International Shares Jumped Today

Brian Orelli, The Motley Fool

What happened

Shares of Mallinckrodt (NYSE: MNK) closed up 12% on Monday while Endo International (NASDAQ: ENDP) jumped almost 13%, without either company releasing any news.

It could just be a coincidence, but it seems likely that investors have more confidence that the opioid lawsuits that both companies face will be settled sooner rather than later.

So what

A decision in an opioid lawsuit between Johnson & Johnson (NYSE: JNJ) and the State of Oklahoma is expected in the coming weeks, so opioid companies have an incentive to settle their cases rather than let the Johnson & Johnson ruling set the bar for what others might have to pay.

Earlier this month, Bloomberg reported that drug distributors McKesson (NYSE: MCK), Cardinal Health (NYSE: CAH), and AmerisourceBergen (NYSE: ABC) were in talks with a group of state attorneys general to settle their lawsuits. The companies reportedly wanted to pay $10 billion and the states wanted $45 billion, which seems like a fairly large gap to find a compromise.

Pills on $100 bills

Image source: Getty Images.

Now what

While a settlement would be great news for Mallinckrodt and Endo International -- assuming it didn't send either company into bankruptcy -- without any additional information, it's hard to see why now is a good time to invest in the companies. Mallinckrodt hasn't been able to spin off its specialty generics business, and Endo International continues to struggle, with second-quarter revenue down 2% year over year.


Brian Orelli has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson and McKesson. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com