Opioid Makers Sink as Traders Assess J&J Ruling Consequences

(Bloomberg) -- While Johnson & Johnson’s stock got a boost when an Oklahoma judge ordered it to pay a much lower-than-expected fine for its role in the opioid epidemic, shares of some other makers of prescription painkillers are getting battered.

Teva Pharmaceutical Industries Ltd. and Endo International Plc reversed initial gains to trade near recent lows on Tuesday as Wall Street came to grips with just how much the opioid crisis could cost the manufacturers of those drugs. The pair of companies along with Mallinckrodt Plc are facing similar claims related to their role in the epidemic. Meanwhile, J&J shares extended their gains.

Opioid Makers Sink as Traders Assess J&J Ruling Consequences

Shares of Teva fell as much as 7.3% and remain down roughly 70% in the last year. Endo fell as much as 10%. Mallinckrodt shares declined 16%, on pace to extend a now four-day losing streak, to trade at a record low.

The declines come as the ruling that J&J pay a $572 million penalty for fueling Oklahoma’s opioid epidemic, while less than expected, stoked concern that other states will follow with similar lawsuits against drugmakers. Future damages across the country could total $37 billion, Tom Claps, an analyst with Susquehanna Financial Group, wrote in a note.

Bets against the companies that are most exposed to opioid risks have continued to rise through the year and into yesterday’s decision, data compiled by analytics firm S3 Partners show. More than 50% of Mallinckrodt shares available for trading are currently sold short while almost 20% of Endo shares are being shorted, S3 data show. Short interest in Mallinckrodt and Teva are at the highest level in at least a year.

It is worth noting that earlier Mallinckrodt lost an appeals court bid to revive claims over Praxair Inc.’s generic version of its INOmax infant-respiratory medicine.

©2019 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.