Purdue Offers Deal on Opioids. What It Means For Other Drugmakers

Stocks of companies such as Teva Pharmaceutical Industries and Endo International fell on Tuesday.

Stocks of companies such as Teva Pharmaceutical Industries and Endo International fell on Tuesday.

News that Purdue Pharma, the privately-owned drugmaker, could be nearing the end of its litigation over opioids has offered clues about the prospects for other pharmaceutical companies also caught up in the drug crisis.

On Tuesday, NBC News reported that the company had offered to declare bankruptcy as part of a proposed $10 billion to $12 billion deal to settle thousands of lawsuits brought against it by cities and states. The company said in a statement that while it is prepared to defend itself against the lawsuits, it sees little value in prolonged, expensive litigation.

The proposal is subject to change, according to The Wall Street Journal.

The news sent the stocks of other defendants in the opioid litigation tumbling late Tuesday. Teva Pharmaceutical Industries (ticker: TEVA) fell 9.6% to close at $6.71, while Endo International (ENDP) fell 12.4%. The stock was down another 2.4% in premarket trading on Wednesday.

Investors have spent the summer worrying over how the settlement negotiations in the opioid litigation will shake out for the defendants. Shares of Endo are down 65% so far this year. Shares of Mallinckrodt (MNK), another drugmaker defendant, are down 77.5% over the same period. The companies are defending against an extraordinarily complex web of legal proceedings, including a federal multidistrict litigation that has grouped together more than 2,000 individual lawsuits.

The judge in the multidistrict litigation, Dan Polster, has been pushing the litigants to settle as quickly as possible. So far, evidence of progress in the settlement talks has been scant. The judge has ordered the parties not to discuss the negotiations. Meanwhile, Polster and the parties are preparing for the first of a series of so-called bellwether trials in open court.

The proposal from Purdue appears to have taken place in the context of the multidistrict litigation settlement talks, though state attorneys general, who have brought their own cases against the opioid companies, seem also to have been involved.

The deal, as described by NBC, is somewhat convoluted. It includes at least $3 billion from the Sackler family, which controls Purdue, plus $4 billion in drugs provided to the plaintiffs, and up to $8 billion in future profits from sales of Purdue’s drugs.

Analysts differed on what the unusual deal would mean for other defendants in the opioid litigation.

“The fact that the biggest branded opioid manufacturer is effectively offering to declare bankruptcy to settle opioid claims obviously does not read well for” Teva, Endo, and Mallinckrodt, wrote JPMorgan Chase analyst Chris Schott in a note published Tuesday.

Yet Raymond James analyst Elliot Wilbur noted that the settlement would require the company to pay no cash up front. Aside from the Sackler family portion of the payments, all of the proposed settlement would be made up of drugs and future profits.

“The [payment in kind] drugs to be supplied to the trust likely have a margin north of 80% so cash value is probably $700-800M,” Wilbur wrote.

Meanwhile, Berenberg Capital Markets analyst Patrick Trucchio wrote that the $10 to $12 billion offer suggests that Purdue can’t afford any more.

If the Purdue offer is accepted and approved, it could be a sign that the roadblocks holding up the opioid settlement talks are clearing. They have a deadline: The first bellwether trial is set to start in just a few weeks.

Write to Josh Nathan-Kazis at

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

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