- Four generics companies could face about $14.7 billion in potential penalties related to legal actions, including lawsuits alleging mis-marketing of opioid pills as well as accusations that the companies engaged in price fixing, according to one Wall Street analyst.
- The bank estimates $8.5 billion related to lawsuits charging false marketing of pain pills, a practice that has been linked to rising opioid addiction rates across the U.S. Endo International has the greatest exposure from these actions, estimated at $4 billion, SVB Leerink analyst Ami Fadia wrote in a July 22 note to clients.
- Teva's alleged key role in price-fixing behavior, meanwhile, puts it at greatest risk from the legal action taken by the attorneys general of 44 states, with up to $3.1 billion potentially due if treble damages are applied.
The past business practices of biopharma companies like Endo and Teva continue to be under scrutiny. The scope of pending legal actions is difficult to quantify, given that both governments and individuals are involved, and the actions have now extended to price fixing as well as marketing.
Using Iqvia prescription data, Purdue Pharma's $270 million settlement with Oklahoma and Teva's subsequent $85 million deal as benchmarks, Fadia calculated the total liability to be $4 billion for Endo, $2.5 billion for Teva, $1.2 billion for Amneal and $800 million for Mylan. That estimate relates to improper marketing of opioids.
On the price-fixing charges, Fadia built an estimate around Iqvia prescriptions and potential excess sales that could have occurred on 114 different drugs, and then applied treble damages. In this scenario, Teva's liability could be as much as $3.1 billion, Mylan's $2.8 billion, Endo's $265 million and Amneal's $55 million.
The generics sector has already been hit hard by price erosion, and the legal exposure has made it an even less attractive area for investment. Teva in particular faces a difficult future, burdened as it is by a debt load of $28 billion tied to the acquisition of Allergan's generics business.
Credit monitoring agencies have downgraded Teva's debt rating thanks to the rising litigation risks and struggles to expand topline sales. The company's turnaround plan has yielded $2.5 billion of cost reductions, although some analysts believe it will take more than that to fully absorb both the top-line pressures and the potential legal settlements.
Fadia did not downgrade her rating on any of the companies analyzed in the note on legal settlements, although she cut the 12-month price targets on all four.