• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

These Drug Cos. Could Soon Feel Big Side Effects of Opioid Crisis

No company is safe from the litigation risk tied to the drug epidemic, but Johnson & Johnson may be one of the few guaranteed to survive.
By KEVIN CURRAN Aug 27, 2019 | 02:26 PM EDT
Stocks quotes in this article: MNK, AGN, TEVA, JNJ, INSYQ, ENDP, ZCOR

With Johnson & Johnson (JNJ) bearing the brunt of the newsbreaks on opioid litigation, the data on where to point the finger is much murkier.

Shares of the New Jersey-based drug manufacturer have moved upward after the landmark decision in Oklahoma, not only because of the company's noted ability to withstand such a penalty in contrast to opioid-exposed peers, but its vehement defense on culpability.

A company statement notes that the its opiate drugs have accounted for less than 1% of total opioid prescriptions in Oklahoma, as well as the United States, far below peers like OxyContin maker Purdue Pharma, Mallinckrodt (MNK) , and Allergan's (AGN) Actavis unit.

"Janssen did not cause the opioid crisis in Oklahoma, and neither the facts nor the law support this outcome," said Michael Ullmann, executive vice president and general counsel for Johnson & Johnson. "We recognize the opioid crisis is a tremendously complex public health issue and we have deep sympathy for everyone affected. We are working with partners to find ways to help those in need."

He added that the company will continue to appeal the decision in light of the oversight, which may be encouraging for investors expecting a successful final ruling.

Huge Human Cost

But even small players in the opioid space may get little sympathy given the monumental human cost of the drug epidemic and the profits raked by manufacturers as the problem grew.

According to the Centers for Disease Control and Prevention, the amount of opioids prescribed to patients began to grow precisely in tandem with overdoses and deaths in the past two decades.

"From 1999 to 2017, almost 218,000 people died in the United States from overdoses related to prescription opioids," a recent report reads. "Overdose deaths involving prescription opioids were five times higher in 2017 than in 1999."

The report notes that statistics on pain sufferers have not moved significantly, indicating a trend of overprescription.

While this does shift some blame to distributors and physicians, the aggressive marketing of pharmaceutical companies is clearly within the crosshairs of legislators and prosecutors.

While settlements have been reached with Teva (TEVA)  and Purdue Pharma in Oklahoma already, and the Johnson & Johnson promises to appeal its ruling, the less-than-harmful market reaction may incline litigation to be even more aggressive in the wake of the human cost.

That is particularly troublesome for Mallinckrodt and Endo International (ENDP) , which still have litigation to deal with, adding to the further state and federal suits upcoming for every company operating in the space.

How to Kill the Pain?

No company is necessarily safe from the litigation risk tied to the national health concern, but Johnson & Johnson may be one of the very the few basically guaranteed to survive.

In fact, many companies seeing shares plummet on the potentially larger load they could bear after Johnson & Johnson's sizable penalty are already considering drastic options.

"Due to the already enormous amount of litigation and increased regulatory scrutiny by federal and state agencies, it is likely that these companies will experience significant impacts to their profits and operational costs," Kirk Burkley, Managing Partner at Bernstein-Burkley law firm said. "The crisis is likely to force certain pharmaceutical companies into insolvency."

He noted that privately held Purdue Pharma has already hired restructuring consultants in light of lost sales and rising legal costs. Chapter 11, in the end, could be the best defense.

"Purdue Pharma is not alone in considering bankruptcy as a strategy in the face of mounting legal fees and costs associated with actions brought as a result of the opioid crisis," Burkley added.

He named Insys Therapeutics (INSYQ) as another company at high risk as it treads at a serious low valuation, while Egalet Corporation (ZCOR) has already gone under due to the legal burden.

Teva Pharmaceuticals, which has seen debt climb and shares fall nearly 90% in the past five years, and Mallinckrodt, which has seen its long term debt climb to over $5 billion while its market cap dropped by billions, might not be far behind.

With a major case in Ohio coming up later this year, it will be important for those holding the bag on the most exposed companies, and even those less exposed, not to lose sight of the severe consequences that could be ahead.

"If we try the Ohio case, if we win a verdict against these manufacturers and distributors there, it could bankrupt them. It'd put them out of business," Mike Moore, the lawyer who led major lawsuits against tobacco giants in the 1990s and is currently spearheading the opioid lawsuits told "60 Minutes" on Sunday. "When a jury hears the evidence in this case, they're not gonna award just a couple hundred million dollars. It may be $100 billion. And whoever amongst these companies thinks they can stand up to that? Good luck."

JNJ is a holding in Jim Cramer's Action Alerts PLUS member club.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from trading individual securities.

TAGS: Bankruptcy | Corporate Governance | Regulation | Restructuring | Litigation | Investing | Stocks | Healthcare | Pharmaceuticals | Stock of the Day

More from Stocks

The Chasing Slows on Wall Street

James "Rev Shark" DePorre
Mar 24, 2023 4:34 PM EDT

After Deutsche Bank shakes up investors, market cools a bit, which might be a healthy development.

Stay Away From These Types of Stocks, They're Radioactive

Jim Collins
Mar 24, 2023 2:35 PM EDT

Here's what you're better off buying. I certainly have.

GE Looks Poised for a Pullback: How to Trade It Now

Bruce Kamich
Mar 24, 2023 1:45 PM EDT

The shares stopped short of my price targets.

It's Not Whether the Next Shoe Will Drop, But Where and When

Bret Jensen
Mar 24, 2023 11:30 AM EDT

A few months of anxiety likely lies ahead of us, and caution remains the watchword of the day.

The Good, Bad and Ugly: What's Happening and What Investors Need to Do

Stephen Guilfoyle
Mar 24, 2023 10:45 AM EDT

Right now I have more in cash, or equivalents, than in equities. Ever hear of a Wall Street guy saying that before?

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 01:56 PM EDT PETER TCHIR

    Very Cautious

    I am very cautious here. I don't like how the c...
  • 08:58 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How to Adjust Your Trading Style as Market Conditi...
  • 05:00 PM EDT CHRIS VERSACE

    AAP Podcast on the Fed Decision!

    Listen here!
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login