Opioid crisis: this is going to hurt
Litigation will be long and tortuous, with billions of dollars at stake
Americans are more likely to die from an accidental opioid overdose than in a car crash. The odds are one in 96, according to the National Safety Council. No wonder the federal judge overseeing 1,500 lawsuits against drugmakers and distributors described the opioid epidemic as a “man-made plague”. Late last year, he refused to dismiss claims, paving the way for a trial this autumn. Billions are at stake.
A similar spate of lawsuits led to a $206bn master settlement with tobacco companies nearly 20 years ago. Sales of opioids are a small fraction of those of tobacco products. But there are parallels, not least in the way businesses allegedly downplayed the risks. One opioid attorney claims to have evidence capable of securing a $100bn judgment. Analysts at Berenberg argue that the bill for manufacturers could be up to $50bn.
Privately held Purdue would be most exposed, as it has the largest market share. Its liability is estimated at $27bn. Next is US-listed Endo Intl at up to roughly $10bn, believes Bloomberg Intelligence. The rest, including Johnson & Johnson, Teva and Insys could be at risk for another $13bn. These are big numbers. The liability for Purdue and Insys could amount to more than 13 times their sales, it is said.
Markets are understandably nervous. Over three months, Teva’s share price has dropped 15 per cent, while Endo and Insys have fallen by nearly a half. The S&P 500 pharmaceuticals index is down 4 per cent over the same period.
The companies intend to push back strongly. They point out regulators approved their drugs. Overdoses often involved pills bought on the black market. Litigation will be long and tortuous. But with 130 Americans dying every day from an opioid overdose, the sector is to be avoided.
That takeaway is obvious enough. The subtler lesson is that supposed medical breakthroughs — powerful but non-addictive painkillers, for example — regularly prove to be nothing of the sort. Investors can thank their lucky stars they only bear the financial risks of such failures.
Asian stocks climbed Tuesday, as markets recovered from the impact of weak economic data in Europe and China Monday that sparked concerns about slowing global growth. Treasuries were little changed and the dollar dipped.
Equities in Japan rose to nearly a one-month high and climbed Hong Kong and Australia as futures rebounded in the U.S. and Europe. Chinese shares also pushed higher, as senior economic policy officials vowed to increase tax cuts to boost growth. Earlier, the S&P 500 fell, led by technology companies after China’s slumping exports fueled worries about the growing impact of the trade war. Still, financials outperformed after Citigroup said the trading environment was starting to improve, helping to boost the bank’s stock. The yen fell, while the pound rose before Tuesday’s key vote on Brexit.
US after hours PLAY +6% following guidance, GNW +4% on M&A progress
Nikkei +0.96% Hang Seng +1.84% CSI +1.91% Shanghai +1.35% Shenzen +1.45%
Eur$ 1.1476 CNH 6.7585 CNY 6.7540 JPY 108.66 GBP 1.2902 CHF 0.9814 RUB 66.9836 TRY 5.4571 WTI$ 51.23 +1.43%
S&P +0.63% EuroStoxx +0.82% FTSE +0.71% Dax+0.83% SMI +0.61%
Macro :
- Baupost Is Said to Hold $1 Billion in PG&E Insurance Claims
- Fed Shadow Rate at 5.45% Shows Stock Rout Justified, SocGen Says
- China to Cut Tax, Fees on a Larger Scale, Increase Spending: MOF
Keep an eye on :
- AIRN SW : Airopack Says Three Apollo Representatives Resign From Board
- BLS SW : Blackstone Resources to Invest €200m in German EV Battery R&D
- BNP FP : BNP Paribas Is Said to Shutter U.S. Commodities Trading Desk
- CPI LN : Capita Says It Will Lose Money on Army Recruitment Contract: FT
- CGG FP : CGG: Continues to Expand Anadarko Basin Library
- CLASB SS : Clas Ohlson December Sales SEK1.32 Bln
- EXEL US : Exelixis Says FDA Approves Cabometyx for HCC Treatment
- FCA IM : Fiat Chrysler Sees U.S. Truck Market More Robust in 2019: CEO
- DASNKE DC : Danske’s Laundering Case Triggers Drop in Client Satisfaction
- DEC FP : JCDecaux UK to Promote Chris Collins and Dallas Wiles to Co-CEOs
- IFX GY : Roche, Infineon Among Liberum’s Most-Preferred Stocks for 2019
- ITP FP : Interparfums Raises 2018 Guidance; Sees FY Op. Margin 13.5%-14%
- JEN GY : Jenoptik 4Q May Be Stronger Than Market Expects, Lampe Says
- JMT PL : J. Martins Full Year Revenue Meets Estimates
- KE RFP : Kering PT Lowered at SocGen, Which Remains Bullish on Gucci
- LISN SW : Lindt & Spruengli Full Year Sales Meet Estimates
- NDX1 GY : Nordex New Orders Rise 73% in 2018
- ORSTED DC : Orsted May Turn to Seas-NVE to Sell Radius Assets, JP Says
- PGHN SW : Partners Group Dec. 31 Assets under Management up 18% to EU72.8b
- UG FP : PSA FY Unit Car Sales Rose 6.8% to 3.9 Million; China Down 32.2%
- RI FP : Pernod Ricard to Meet With Elliott Before Earnings Update: Rtrs
- RNO FP : Saikawa Says Ghosn Was ‘Remarkable Leader’ in Echos Interview
- RNO FP : Tokyo Court Rejects Ghosn’s Bail Application After Indictment
- ROG SW : Roche, Infineon Among Liberum’s Most-Preferred Stocks for 2019
- SAN SM : Spain Court OKs Santander HQ Bid by Reuben Bros.: Europa
- SAN FP : FDA Approves Use of Sanofi’s Adacel for Repeat Vaccination
- STMN SW : Straumann CEO Gadola to Be Succeeded by Daniellot as of 2020
- SREN SW : Swiss Re Sees 4Q Burden From Big Natural Catastrophes at $1B
- TKTT FP : Tarkett Names Interim Chief Fabrice Barthelemy as Permanent CEO
- TECN SW : Tecan Names Von Leoprechting CEO as of April 1
- TIGO SS : Millicom Confirms Talks With Liberty Latin America
- VRP LN : Verona Pharma Defended by Analysts on Promising Low-Dose Data
- DG FP : French Govt Says Received Highway Toll Tariff Proposals From Cos
- VOW3 GY : Volkswagen Says Pickup Combination A Key to Alliance with Ford
- WHA NA : Wereldhave CEO Dirk Anbeek to Step Down On April 1
>>> Up
* DIA Upgraded to Hold at HSBC; PT 45 Cents
* dormakaba Upgraded to Buy at SocGen; PT 715 Francs
* Eiffage Upgraded to Buy at HSBC; PT 95 Euros
* Ferrari Upgraded to Market Perform at Bernstein
* Jenoptik Upgraded to Buy at Bankhaus Lampe
* SIAS Upgraded to Outperform at Intermonte; PT 15 Euros
* Weir Upgraded to Buy at SocGen; Price Target 17.50 Pounds
>>> Down
* Atlas Copco Downgraded to Sell at SocGen; PT 200 Kronor
* BBVA Downgraded to Hold at HSBC; PT 5.50 Euros
* Cairn Energy Downgraded to Equal-weight at Morgan Stanley
* Faroe Petroleum Downgraded to Hold at Jefferies
* Fresenius SE Downgraded to Equal-weight at Barclays; PT 51 Euros
* GEA Group Downgraded to Sell at SocGen; PT 18 Euros
* Geberit Downgraded to Sell at Berenberg
* IMI Downgraded to Hold at SocGen; PT 10.50 Pounds
* Kion Downgraded to Sell at SocGen; PT 40 Euros
* Osram Downgraded to Sell at SocGen; PT 32 Euros
* Schneider Downgraded to Hold at SocGen; PT 65 Euros
* Soco Downgraded to Hold at Jefferies
* Swatch Downgraded to Sell at SocGen; PT 270 Francs
* TEN Entertainment Downgraded to Hold at Berenberg
* Volvo Downgraded to Sell at SocGen; PT 105 Kronor
>>> Initiation
* Glanbia Rated New Underweight at Morgan Stanley; PT 15 Euros
* Sanne Group Rated New Overweight at JPMorgan; PT 6.50 Pounds
* Spie Rated New Outperform at MainFirst; PT 18 Euros
>>> Call
* Roche, Infineon Among Liberum’s Most-Preferred Stocks for 2019
* *BHP REMOVED FROM CONVICTION LIST AT GOLDMAN SACHS
After Hours Summary: PLAY +6% following guidance, GNW +4% on M&A progressAfter Hours Gainers:
Companies trading higher in after hours in reaction to guidance: PLAY +6%, RBBN +4.7% (light volume)
Companies trading higher in after hours in reaction to news: EXEL +4.5% (announces FDA approval of CABOMETYX tablets for previously treated hepatocellular carcinoma), ARRY +3.7% (announces updated safety and efficacy results from Phase 3 BEACONC CRC trial), GNW +3.8% (Genworth Financial receives approval from New York regulator for proposed Oceanwide transaction), NBEV +3% (ongoing volatility), AGI +2.1% (ticking higher; reports Q4 production with 2019 guidance), FFBC +1.1% (announces stock repurchase plan of up to 5.0 mln shares of common stock)
After Hours Losers:
Companies trading lower in after hours in reaction to guidance: ENR -2% (also commenced concurrent offerings of $187.5 mln of shares of common stock and $187.5 mln of shares of Series A Mandatory Convertible Preferred Stock pursuant to an effective registration statement), CTRN -0.9% (light volume), TTMI -0.6%
Companies trading lower in after hours in reaction to news: ALNY -4.1% (announces 5 mln share offering as part of previously announced shelf offering), STML -3.6% (proposed offering to sell 6.6 mln shares of common stock), ARR -2.7% (commences underwritten public offering of 5 mln shares of common stock), XLRN -1.9% (announces proposed public offering of $200 mln of its common stock)
Closing Market Summary: Stocks Slide as China Stirs Global Growth ConcernsThe S&P 500 lost 0.5% on Monday, pulling back from a three-week winning streak. The benchmark index never traded in positive territory but it did cut its intraday losses in half. The Dow Jones Industrial Average (-0.4%) also finished off its low. The Nasdaq Composite (-0.9%) and the Russell 2000 (-1.0%) did, too, yet they did not fare as well overall.
The S&P 500 utilities (-2.3%), health care (-1.2%), and information technology (-0.9%) sectors weighed on the broader market. Conversely, the financials (+0.7%) sector helped offset losses and it was the only sector to finish in positive territory.
The broader market opened on a lower note, as disappointing trade data out of China stirred ongoing concerns over global economic growth. Specifically, China's exports unexpectedly declined 4.4% year-over-year in December and its imports declined 7.6%.
In addition, the amount of attention surrounding the partial U.S. government shutdown, which is currently the longest in U.S. history with no clear end in sight, also weighed on investor sentiment.
The S&P 500 managed to bounce off its early lows as Citigroup (C 58.93, +2.24, +4.0%) overcame early weakness that was initially attributed to some disappointment over a fourth quarter revenue shortfall that overshadowed better than expected earnings results driven in part by expense savings and a lower tax rate.
Citigroup was down more than 1.0% in pre-market hours but quickly reversed course shortly after the start of the trading session. Its quick turnaround, which several pundits attributed to a discounted valuation, helped lift other bank stocks and the financial space.
There was no coming back for PG&E (PCG 8.38, -9.21), however, after the company disclosed intentions to file for Chapter 11 bankruptcy protection amid possible liability for the California wildfires. The stock consequently plunged 52.4% and was a huge drag on the underperforming utilities sector.
U.S. Treasuries finished mixed with the 2-yr yield decreasing three basis points to 2.52% and the 10-yr yield adding one basis point to 2.71% in a curve-steepening trade. The U.S. Dollar Index lost 0.1% to 95.59. WTI crude lost 2.1% to $50.58/bbl.
Investors did not receive any economic data on Monday.
Looking ahead, investors will receive a couple of economic reports on Tuesday: the December Producer Price Index and the Empire State Manufacturing Survey. Also, the UK Parliament is expected to hold a widely-watched (and potentially market-moving) vote on the UK Brexit plan around 2:00 p.m. ET.
- Russell 2000 +6.3% YTD
- Nasdaq Composite +4.1% YTD
- S&P 500 +3.0% YTD
- Dow Jones Industrial Average +2.5% YTD