Israel's Teva Plunges on Opioid Settlement, Bezeq on Write-off Woes

Investors fear the drugmaker will pay billions for its alleged role in the U.S. opioid epidemic, while the communications giant has been stung by losses at its satellite TV unit

The CEO of Teva Pharmaceutical Industries Kare Schultz speaks during a news conference in Tel Aviv, February 19, 2019.
Reuters / Amir Cohen

Two major Israeli companies – Teva and Bezeq – saw their shares tank in Tel Aviv on Wednesday, the drugmaker’s because of U.S. legal woes and the communications company’s because of losses at its satellite television subsidiary Yes.

Shares in Teva Pharmaceutical Industries plunged nearly 13% after sinking to a 19-year low on Wall Street on Tuesday. The losses came as investors feared the company would find itself on the line to pay billions of dollars in compensation due to its alleged role in the U.S. opioid epidemic.

>> Teva’s legal woes threaten its ability to repay heavy debt | Analysis

The dual-traded stock fell 13% in New York on Tuesday and the same percentage in Tel Aviv on Wednesday.

The latest trigger was Teva’s announcement Sunday that it had come to a $85 million settlement with Oklahoma over allegations that it helped fuel the opioid epidemic in that state. The trial against Teva and fellow drugmaker Johnson & Johnson would have begun Tuesday.

Teva also faces legal proceedings over allegations that it took part in price-fixing in generic drugs.

Meanwhile, UBS analyst Navin Jacob lowered his recommendation for Teva shares to neutral from buy. Jacob cut his target price for the stock to $12 from $22; the share closed at $9.50 on Tuesday.

The sell-off suggests that investors don’t believe Teva’s claim that the Oklahoma settlement isn’t a harbinger for the outcome of the 1,500 individual opioid-related suits – now joined together as one big suit – that the company faces.

Jacob said Teva is likely to pay damages ranging between $600 million and $3.2 billion to settle the price-fixing suit, and another $154 million to $4.25 billion in painkiller-related settlements. These estimates work out to an average loss of $4.1 billion, or $3.75 per share, he said.

Bezeq plummets on write-off fears

Also Wednesday, Bezeq shares tumbled 6.5% on unusually heavy turnover of 106 million shekels ($29 million), while parent company B Com’s stock plunged 10.5% on turnover of 1 million shekels.

Bezeq is due to release its first-quarter report Thursday. According to market sources, investors fear it will reveal a 1.2-billion-shekel write-off – losses incurred by subsidiary Yes that Bezeq had been hoping to use for tax purposes to offset its profits in its landline telephone operations.

For this to happen, Bezeq would have had to receive approval from the Communications Ministry to break down the structural barrier between Bezeq and its subsidiaries. But it has never received such approval, and as long as Israel’s government is in crisis mode, it seems increasingly unlikely that this rescue will arrive.