Corner of Berkshire & Fairfax Message Board

General Category => General Discussion => Topic started by: Gregmal on January 13, 2020, 08:19:06 PM

Title: Opioid names
Post by: Gregmal on January 13, 2020, 08:19:06 PM
Curious if others have any thoughts on this. It is my feeling that there have been enough settlements now that not only is there precedent but enough clarity in these stocks to go long. The flip side is that most carry a huge debt load and there is the chance that they would have a hard time earning their way out of it regardless. But my 2c is that the death by opioid litigation thesis is dead. I only have a small TEVA position but am looking at restarting ENDP and maybe MCK
Title: Re: Opioid names
Post by: lnofeisone on January 14, 2020, 04:11:53 AM
MCK was wise to start settling in 2017s. MNK not so much and will be dealing with this for some time. I took a look at this few months back. Some thoughts:

1) Purdue was the smallest by pill count (though not potency) market share but the scummiest of the bunch. They went for the $12B global settlement + $3B penalty against the owning family (the family is getting away easy here). Last I read, the proposed structure was something like $4B in medication + around $8B of cash derived from profits of medication. I think this will serve as a high bar for any other global settlement.

2) TEVA would be wise to take the $20B global settlement of which nearly all is in the form of providing drugs to the impacted counties/cities/states.
3) Looks like ENDP is taking BofA approach of litigating/settling on case by case basis. If that's the route they want to take, they would be my least preferred holding, even if they manage to come out ahead on costs and get better deals. Litigating against motivated gov't actors will be expensive and introduces too much uncertainty.
4) Others (e.g., ABC, WBA, MCK, JNJ) will probably trade up or down on opioid-related news as they have some tangential exposure and there might be some irrationality here.
Title: Re: Opioid names
Post by: cherzeca on January 14, 2020, 09:43:26 AM
while one can look to tobacco stocks for precedent, tobacco stocks were less diversified than most opiod affected stocks
Title: Re: Opioid names
Post by: Gregmal on February 18, 2020, 06:12:43 AM

Seems to be continuing to play out as they almost always do. Price in the worst, and then it turns out the world doesnt end. Hardly out of the woods yet, but there seems to be a lot more clarity.