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Why Mallinckrodt and Endo International Shares Jumped Today

By Brian Orelli, PhD - Updated Aug 19, 2019 at 4:37PM

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Investors appear to have some confidence that the companies will settle their opioid lawsuits.

What happened

Shares of Mallinckrodt (MNK) closed up 12% on Monday while Endo International (ENDP -19.52%) jumped almost 13%, without either company releasing any news.

It could just be a coincidence, but it seems likely that investors have more confidence that the opioid lawsuits that both companies face will be settled sooner rather than later.

So what

A decision in an opioid lawsuit between Johnson & Johnson (JNJ 1.75%) and the State of Oklahoma is expected in the coming weeks, so opioid companies have an incentive to settle their cases rather than let the Johnson & Johnson ruling set the bar for what others might have to pay.

Earlier this month, Bloomberg reported that drug distributors McKesson (MCK 1.17%), Cardinal Health (CAH -0.05%), and AmerisourceBergen (ABC 0.54%) were in talks with a group of state attorneys general to settle their lawsuits. The companies reportedly wanted to pay $10 billion and the states wanted $45 billion, which seems like a fairly large gap to find a compromise.

Pills on $100 bills

Image source: Getty Images.

Now what

While a settlement would be great news for Mallinckrodt and Endo International -- assuming it didn't send either company into bankruptcy -- without any additional information, it's hard to see why now is a good time to invest in the companies. Mallinckrodt hasn't been able to spin off its specialty generics business, and Endo International continues to struggle, with second-quarter revenue down 2% year over year.

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Stocks Mentioned

Endo International plc Stock Quote
Endo International plc
ENDP
$0.47 (-19.52%) $0.11
Mallinckrodt Public Limited Company Stock Quote
Mallinckrodt Public Limited Company
MNK
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$176.98 (1.75%) $3.04
Cardinal Health, Inc. Stock Quote
Cardinal Health, Inc.
CAH
$55.80 (-0.05%) $0.03
McKesson Corporation Stock Quote
McKesson Corporation
MCK
$322.86 (1.17%) $3.73
AmerisourceBergen Corporation Stock Quote
AmerisourceBergen Corporation
ABC
$150.18 (0.54%) $0.80

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

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