Bloomberg News

Teva Premium Swells on $250 Million Settlement: Israel Overnight

February 28, 2012

Feb. 22 (Bloomberg) -- Teva Pharmaceutical Industries Ltd. climbed in New York, pushing the premium over Israeli stock to a six-week high, on speculation the drugmaker is settling lawsuits alleging a treatment led patients to develop hepatitis C.

U.S.-traded shares of the world’s largest maker of generic drugs jumped 1.3 percent to a two-week high of $45.24 in New York yesterday, widening the advantage over stock traded in Tel Aviv to 80 cents, the most since Jan. 9. It was the biggest premium among dually traded shares on the Bloomberg Israel-US 25 Index, which gained 0.9 percent to 92.79. The shares in Tel Aviv climbed 0.8 percent to 167.3 shekels, or $44.49 today.

Teva agreed last week to pay more than $250 million to resolve around 80 claims by people alleging that the anesthetic Propofol was intentionally sold in vials large enough to be reused by doctors, leading colonoscopy patients to develop hepatitis C, two people familiar with the case said. Shares of the drugmaker slid 23 percent in 2011, the biggest drop in five years, on concern the dominance of multiple sclerosis treatment Copaxone in Teva’s drug portfolio will impede revenue growth.

“There are so many clouds floating about Teva that seeing any one of them go away brings some sunshine in,” Scott Tapley, who helps oversee $2.5 billion at 1st Source Investment Advisors Inc. and holds Teva shares, said in a phone interview yesterday from South Bend, Indiana. “The Copaxone, lawsuits, competition. It’s nice to see some progress.”

Denise Bradley, a U.S.-based spokeswoman for Petach Tikva, Israel-based Teva, confirmed that the company had settled the Nevada Propofol cases, without specifying how much it will pay.

‘Behind Us’

The deal also resolves a May 2010 case over Teva’s sales of the anesthetic that spawned a jury award of more than $500 million against the company, according to the people, who spoke on the condition of anonymity because they’re not authorized to speak publicly about the agreements.

“Teva is pleased to have put the vast majority of these matters behind us,” Bradley said in an e-mail. Fifteen Propofol cases remain active on court dockets in Las Vegas, she said.

Henry Chanin, a private-school principal from Las Vegas, alleged he developed hepatitis C after getting tainted Propofol during a colonoscopy.

“The parties notify the court that they have agreed to a settlement in this matter,” Chanin’s lawyers told the Nevada Supreme Court in a Feb. 17 filing. Teva had asked the state’s highest court to overturn Chanin’s verdict.

Teva has settled about 120 Propofol lawsuits and reserved $270 million for the litigation, the drugmaker told the U.S. Securities and Exchange Commission in a Feb. 17 filing. Teva will set aside an additional $15 million in the first quarter for the cases, Bradley said in an interview.

Jumbo-Sized Vials

The drug is an intravenous agent used for sedation or anesthesia, according to Teva’s website. The patients’ lawyers allege Teva intentionally sold Propofol in jumbo-sized vials to encourage doctors to reuse them, even with the risk of spreading blood-borne illnesses such as hepatitis, an incurable liver disease.

Propofol is the medication that was at issue in the involuntary manslaughter trial in Los Angeles of Conrad Murray, who was pop star Michael Jackson’s doctor. Murray was convicted in November and sentenced to four years in jail for giving the singer injections of Propofol and other sedatives that led to his 2009 death.

Lawyers for Las Vegas colonoscopy patients argued during a series of trials that Teva officials stopped selling Propofol in single-use-sized vials because it was more profitable to sell it in larger containers that encouraged reuse.

Grand Jury

Probes by Nevada health officials and regulators from the federal Centers for Disease Control and Prevention blamed the 2008 hepatitis C outbreak on the reuse of Propofol vials.

In 2010, a state grand jury indicted Dr. Dipak Desai, who ran the Endoscopy Center of Southern Nevada at the time of the outbreak. Many of the hepatitis-related cases were linked to that colonoscopy clinic. Desai also faces federal charges over the outbreak.

Teva, which no longer makes Propofol, said last week that fourth-quarter profit rose 23 percent as last year’s acquisition of biopharmaceutical provider Cephalon Inc. shifted the company further away from its original identity as a generic-drug maker.

Earnings rose to $1.4 billion, or $1.59 a share, from $1.1 billion, or $1.25, a year earlier, the company said on Feb. 15. Teva bought Cephalon, based in the Philadelphia suburb of Frazer, Pennsylvania, for $6.5 billion last year in a bid to broaden its reach into brand-name drugs.

‘Encouraging Development’

In May, Teva will replace Chief Executive Officer Shlomo Yanai with Jeremy Levin, a Bristol-Myers Squibb Co. executive known for overseeing the U.S. drugmaker’s “string of pearls” strategy of small acquisitions and partnerships.

The CEO change is “an encouraging development,” 1st Source Investment’s Tapley said.

The Israeli drugmaker’s 12 percent climb since the start of the year helped spur an 11 percent increase for the Bloomberg Israel-US 25 Index. The TA-25 Index, down 0.2 percent today, has gained 3 percent this year.

Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq, the most of any country outside the U.S. after China. The country is also home to more startup companies per capita than the U.S.

Ceragon, Tower

Ceragon Networks Ltd., an Israeli maker of wireless- networking systems, rose to the highest level in more than three months, adding 5.9 percent to $9.10. The company’s shares in Tel Aviv declined 0.4 percent today to 34.31 shekels, or $9.12, after climbing 5 percent yesterday.

Tel Aviv-based Ceragon received orders for its systems from Telefonica SA, Spain’s biggest phone company and the second- largest wireless carrier in Latin America, according to a statement released yesterday.

Tower Semiconductor Ltd., a maker of customized chips, sank the most in five months, retreating 8 percent to 81 cents. The Tel Aviv shares gained 0.9 percent today to 3.038 shekels, or the equivalent of 81 cents.

Migdal Haemek, Israel-based Tower raised $64 million from Israeli institutional investors in the company’s convertible bonds offering, according to a Feb. 20 statement.

--With assistance from Margaret Cronin Fisk in Detroit. Editors: Marie-France Han, Emma O’Brien

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net; Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net; Emma O’Brien at eobrien6@bloomberg.net


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