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Teva Stock Downgraded To Neutral By UBS, Stock Down 12%

Shares of Teva Pharmaceutical Industries Ltd. (TEVA) slumped 12% after UBS downgraded the stock to Neutral after the company announced an $85 million settlement with state of Oklahoma.

UBS Analysts Navin Jacob downgraded Teva to Neutral from Buy, and cut his target share price to $12 from $22. Jacob believes Teva's litigation cost could go up as much as a $4 billion, up from his previous estimate of $1 billion. The company and its affiliates face 1,500 lawsuits over their promotional activities of the addictive drugs.

The Oklahoma settlement amount was larger than expected, which could lead to "larger potential litigation expense (for both opioids and drug price fixing) than we had built into our previous valuation," he wrote.

Teva also faces lawsuit over alleged price-fixing of generic medicines that could result in $600 million to $3.2 billion in additional damages, according to Jacob.

Teva on Sunday said it agreed to pay an $85 million settlement with Oklahoma. The Israeli company was originally supposed to go to trial on Tuesday, along with Johnson & Johnson (JNJ) and OxyContin maker Purdue Pharma LP, over allegations that their marketing practices contributed to the opioid crisis. Purdue agreed in March to pay $270 million to settle the claims. Now, J&J will stand trial alone.

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