The drugmaker’s shares tumbled after it set aside $646 million to help pay legal expenses related to its alleged role in the abuse of the addictive painkillers linked to tens of thousands American deaths annually.
U.S. authorities are seeking steep damages from Teva and a handful of other prominent pharmaceutical companies — three drug distributors offered $10 billion to settle a range of state lawsuits against them, people familiar with the matter told Bloomberg earlier this week.
The provision is the biggest step Teva has taken in this legal fight, one that could stall the company’s turnaround plans or sink the heavily indebted firm entirely. Teva, which manufactures opioids, agreed in May to pay $85 million to settle claims made by the state of Oklahoma.
“We deny liability and will continue to vigorously defend ourselves,” Teva said Wednesday in an earnings presentation. “We maintain our defenses while also exploring responsible and comprehensive alternatives.”
Teva shares plunged as much as 10.2% in New York, bringing the decline this year to 58%.
The provision is at the low end of the range of possible settlements, the company said. The funds may also be used to cover expenses related to an investigation of alleged price-fixing in the U.S. generic drug industry, Chief Financial Officer Michael McClellan said on a conference call.
The looming threat of multibillion-dollar fines has overshadowed efforts to revive profit, with shares dropping to 20-year lows. With Kare Schultz as chief executive officer, Teva has been fending off financial collapse for more than two years.
Schultz lost a key partner in improving Teva’s debt management as McClellan said he’ll step down, citing personal reasons. The CFO was instrumental in lengthening the time the company had to pay back its loans, which are currently worth more than three times Teva’s market capitalization. Teva has initiated a search for a replacement.
–With assistance from Katie Linsell.
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