Teva's $15B free drug opioid settlement might be a great deal in the long run: analyst

Instead of fighting it out in court, Teva is reportedly offering $15 billion in free drugs to escape a massive opioid litigation in Cleveland that has ensnared some of the industry’s biggest players. It’s an unusual—and pricey—offer for Teva, but one analyst thinks it might just work.

Teva’s $15 billion giveaway, which according to Bloomberg would be structured out over 10 years, has “multiple added benefits that reduce the economic impact of the settlements,” according to Bernstein analyst Ronny Gal.

Among those, Gal noted Wednesday to investors, is that Teva would not be forced to declare bankruptcy as part of that agreement and that the drugmaker could set a long-term plan “that can be used to plan for absorbing overhead, manufacturing, improving public perception of the drugs, etc.”

On Wednesday, Teva reportedly offered up its drugs, including opioid addiction treatment Narcan, in order to skip out on both the Cleveland litigation—which includes thousands of state and local lawsuits—and a bellwether trial involving two Ohio counties. The overall settlement Teva has offered totals around $28 billion, according to Reuters.

On the heels of the reported offer, Teva's share price jumped around 6.6% at Thursday press time to $7.41.

RELATED: Teva, J&J make multibillion-dollar settlement offers as opioid trial gets going

Although many details of the offer are unknown, including at what price Teva’s drugs would be valued, Gal said the impact of giving away the drugs rather than selling them would likely impact about $5 billion over the 10 years, assuming no R&D and a price valued at the current commercial list.

Overall, Gal said that impact is around what his team previously predicted and likely won’t creep lower given public sentiment.

“We would also argue that if the damages were less, there would be public outcry that Teva is not being punished enough," Gal wrote. “For the same reason, we suspect Teva would not be shown much pleasure with the agreement (assuming it was struck).”

The monumental offer follows Teva’s decision earlier this year to back out of an Oklahoma opioid trial for a cool $85 million—a decision the drugmaker attributed to the unique circumstances of the state case.

RELATED: With clock ticking before bellwether trial, opioid makers consider participating in Purdue settlement: WSJ

When it comes to the thousands of lawsuits against it wrapped up in federal court, Teva is following other major drugmakers in coming to the table rather than fighting it out.

In August, Purdue set the tone with a settlement offer valued at up to $12 billion. As part of that deal, the company’s founding family, the Sacklers, agreed to pony up $3 billion while Purdue undergoes a court-supervised restructuring into a public benefit trust.

On Wednesday, Johnson & Johnson reportedly offered $4 billion to settle claims against it. That offer comes after the drugmaker was knocked by an Oklahoma judge in August to the tune of $572 million for its role in the state’s opioid epidemic. J&J vowed to appeal the decision.

Teva, J&J and three drug distributors will meet with the U.S. district judge in charge of the Cleveland case to discuss a combined settlement agreement that could total $50 million, Reuters reported.

Editor's note: This story has been updated to correct a mistake. Bernstein analysts assumed Teva's generic drug giveaway would be priced at the current commercial list.