Shares of Endo International (NASDAQ:ENDP) were tanking 13.1% as of 11:07 a.m. EDT on Thursday after falling as much as 19.3% earlier in the day. The drug stock felt the ripple impact from reports that another opioid maker, Mallinckrodt (NYSE:MNK), was restructuring and considering options including filing for bankruptcy. Endo, Mallinckrodt, and other drugmakers face multiple lawsuits related to their past promotion practices for highly addictive opioid drugs.
The main concern for investors is that opioid drug companies could fall like a line of dominoes. Rumors surfaced last week that privately held Purdue Pharma was considering a settlement to opioid litigation that would include filing for bankruptcy. Those reports were enough to cause Mallinckrodt stock to plunge.
Now, the potential that Mallinckrodt might be mulling a bankruptcy route is making investors fret that Endo could follow suit. Those worries appear to be warranted.
It's important to note, however, that Endo hasn't issued any public statements indicating that it could be considering restructuring or exploring the potential for filing for bankruptcy. The company actually even had some good news recently with its settlement in principle with two Ohio counties in opioid-related lawsuits.
We'll have to wait and see what happens next in Endo's continuing saga. With a huge debt load and continued losses, though, the company would be in trouble if it has to pay out a lot of money to reach settlements in other lawsuits.
Investing in pharmaceutical stocks comes with quite a few risks. But Endo's risk level makes that of most other drugmakers look like a walk in the park. Investors tempted to bet on a comeback for Endo at this point should probably think long and hard before making any decisions. Staying on the sidelines appears to be the smartest approach.