What happened

Shares of the Israeli generic drug giant Teva Pharmaceutical Industries (TEVA -0.06%) are poised for a strong session Wednesday. The drugmaker's stock jumped by as much as 20.4% in premarket action Wednesday morning. 

What's sparking this double-digit move higher? After Tuesday's closing bell, Teva announced its 2022 second-quarter earnings results. While the company's bottom- and top-line results were slightly better than Wall Street's consensus estimates, the real reason the drugmaker's shares are popping today is the news that its opioid lawsuit may soon be resolved.

So what

In its Q2 earnings press release, Teva announced an agreement in principle on the primary financial terms of a nationwide opioid drug settlement. The company reportedly agreed to pay $3 billion over the course of the next 13 years to various state and local governments, along with another $100 million to the Native American tribes involved in the lawsuit over the same period.

Plus, Teva said it will provide access to $1.2 billion worth of its generic version of the opioid overdose reversal medication, Narcan, across the nation for a period of 10 years. The proposed settlement is subject to approval by the plaintiffs in the case.

A final deal is also reportedly dependent on the resolution of AbbVie's ongoing nationwide opioid litigation. AbbVie and Teva's opioid cases are closely linked because of their prior deals to acquire different segments of the drugmaker Allergan. 

Now what

Under normal circumstances, Teva's shares would probably be headed in the opposite direction today. The beleaguered drugmaker, after all, can ill afford to siphon off precious financial resources to cover such a hefty settlement. But there is more than meets the eye with this proposed deal.

First, Teva has 13 years to pay the cash portion of the settlement. Over this period, the drugmaker ought to be able to significantly up its free cash flows, and perhaps return to moderate levels of top-line growth as well. Second, the company's stock has been weighed down for several years at this point because of the sizable risk posed by this lawsuit. Now that the end appears to be in sight, investors seem to be breathing a sigh of relief.