Allergan (AGN - Free Report) announced that it has settled with two counties of Ohio for almost $5 million, resolving all claims against itself related to the federal multidistrict litigation for opioid drug abuse scheduled in October.
Per the settlement terms, Allergan will pay $1.9 million to Summit County and $3.1 million to Cuyahoga County, which will remove the company from the defendant list in the first-ever multidistrict litigation related to opioid drug abuse. The company stated that these settlements have been done keeping in view the timeline for the trial outcomes and costs related to it. The settlement should remove an overhang on the company.
Please note that the two Ohio counties, Summit and Cuyahoga, are the bellwethers in the multidistrict litigation, and will represent nearly 2,000 political subdivisions – cities, counties, townships, and others. Thus, the settlement will relieve Allergan from a major chunk of opioid abuse claims. The company is seeking indemnification with other related parties. Moreover, Allergan stated that it does not have any pending generic claim as the company had sold its related assets to Teva (TEVA - Free Report) in 2016. It has not been actively involved in marketing or promotion of opioid products since 2013.
Last month, Endo International (ENDP - Free Report) announced a settlement in a similar litigation for $10 million. There are several other pharma companies still on the defendant list in the multidistrict litigation. We expect similar settlements to be offered by some of them.
Allergan’s shares have increased 19.5% so far this year against the industry’s decline of 9.1%.
Opioid-based drug abuse has come to the limelight as 400,000 patients are estimated to have died in the past couple of decades due to overdose. Per the United States Department of Health and Human Services, pharmaceutical companies encouraged use of opioid pain relievers by assuring that patients will not get addicted to the drugs. More than 2000 lawsuits have been filed against pharma companies in multiple states, holding them responsible for the opioid epidemic and deaths due to opioid overdose.
The multidistrict litigation, scheduled to start next month, will provide a clearer picture of the impact on pharma companies as it represents nearly 2,000 different lawsuits clubbed under a single trial. The trial is expected to span over seven weeks.
However, the market is already predicting a gloomy outlook for pharma companies due to the risk of increasing litigation costs. In August, an Ohio district court provided its ruling in the opioid litigation brought by the state of Oklahoma, directing the only defendant, J&J (JNJ - Free Report) , to pay $572 million. Teva and Endo had settled their litigation with the state of Oklahoma prior to the start of the trial.
Meanwhile, Purdue Pharma and its owners, the Sackler family, are reportedly in discussions to settle all pending litigations related to its opioid-based drugs for payment in the range of $10 billion to $12 billion. However, no agreement has been reached yet. The company will file for bankruptcy if any deal materializes to meet the settlement payment.
Allergan currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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