Markets

Here's Why Teva Pharmaceutical Is Sinking Today

What happened

Shares of Teva Pharmaceutical Industries (NYSE: TEVA) fell over 11% today after the company announced it had agreed to pay $85 million to the state of Oklahoma for its role in the American opioid crisis. While the business can comfortably afford the higher-than-expected payout, analysts are worried that the settlement marks only the beginning. 

That's because the generic drug manufacturer is involved in legal disputes with many states for its opioid distribution practices. Separately, attorneys general from 44 different states are pursuing legal action against many companies in the generic drug industry for an alleged price-fixing scheme. Teva Pharmaceutical was identified as the conspiracy's leader.

As of 12:43 p.m. EDT, the stock had settled to an 11.1% loss.

A declining stock chart on a chalkboard.

Image source: Getty Images.

So what

How painful could litigation become for Teva Pharmaceutical? UBS analyst Navin Jacob thinks the Oklahoma settlement is an indicator of future payouts, estimating that the business could be forced to spend as much as $4.1 billion to settle ongoing opioid and price-fixing lawsuits. That marks a significant increase from the roughly $1 billion previously expected. The business held just $1.97 billion in cash and cash equivalents at the end of March.

Now what

It's been an awful year for Teva Pharmaceutical stock -- and investors haven't even made it through May. Shares of the generic drug manufacturer are down 37% year to date and more than 81% in the last three years. Whether or not the $4.1 billion estimate proves true, investors don't need much of an imagination to see that there's a significant amount of uncertainty hanging over the business. That suggests volatility is here to stay.

10 stocks we like better than Teva Pharmaceutical Industries
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Teva Pharmaceutical Industries wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of March 1, 2019

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

TEVA

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More