Please ensure Javascript is enabled for purposes of website accessibility

Why Teva Pharmaceutical Is Getting Hammered Today

By George Budwell – May 13, 2019 at 2:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An alleged price-fixing scheme is the weighing on the drugmaker's shares today.

What happened

Share of Israeli generic-drug giant Teva Pharmaceutical Industries (TEVA 2.29%) fell by an eye-popping 16.5% as of 12:56 p.m EDT today. What's causing this double-digit dip?

Teva's stock is cratering in response to the news that a whopping 44 U.S. states have filed an antitrust lawsuit against the company, as well as several other top pharma entities, over an alleged industrywide price-fixing scheme that occurred mainly from July 2013 to January 2015. Over the weekend, Teva denied any wrongdoing.

A man with a laptold folded over his head, holding a sign that reads Help! in red letters.

Image source: Getty Images.

So what

Although Teva is far from the only household name to pop up in this lengthy court filing, the company is cast as the main culprit behind the conspiracy. That puts Teva in line to possibly receive a massive fine that could come in at around $2 billion, according to pharma analyst Steven Tepper.

Given Teva's poor financial health and anemic growth prospects, it can ill afford a fine of that magnitude. Fortunately, these types of lawsuits often take several years to work their way through the courts, giving the company some much-needed time to assess its options and form a legal strategy.

Now what

If you're thinking about buying Teva on this hefty pullback, you might want to think again. Teva's debt-to-equity ratio is among the highest in the healthcare sector, and sales of the company's flagship multiple sclerosis medication, Copaxone, haven't hit rock bottom quite yet. The company does have some promising new growth products like Austedo and Ajovy under its umbrella, but these two drugs simply aren't enough to change the company's underlying fundamentals -- at least not anytime soon. For the moment, you may want to avoid this falling knife.

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Teva Pharmaceutical Industries Limited Stock Quote
Teva Pharmaceutical Industries Limited
$8.26 (2.29%) $0.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.