Teva Pharmaceuticals (NYSE:TEVA) and a handful of current and former executives were hit with a lawsuit yesterday alleging that the drugmaker hid the negative fallout linked to its $40.5 billion purchase of Actavis Generics.
Barry Baker, a Teva investor, claimed that the company, former CEO Erez Vigodman, ex-CFO Eyal Desheh and interim CEO Yitzhak Peterburg issued false and misleading statements after the acquisition which caused shares in Teva to trade at artificially high levels.
“Defendants misled investors about Teva’s financial health and performance and its prospects for future financial success by failing to disclose the negative impact resulting from the acquisition and integration of Actavis Generics to the company’s financial results and business prospects,” Baker said, according to Law360.
Teva inked a deal to buy Actavis from Allergan in 2015 and at the time, Vigodman praised the deal as an opportunity to “establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products.”
The Actavis-Teva merger closed in August 2016.
According to the compliant filed in federal court in Pennsylvania, the company was publicly declaring that it was already reaping benefits of the deal by November 2016.
But when Teva filed its second-quarter financial results with the SEC in August this year, it noted a $6.1 billion goodwill impairment charge related to its Actavis purchase, according to Baker. The company also reportedly said that its generics business played a crucial role in Teva’s decision to lower its forecast.
After the news broke, Teva’s share price dropped to a 52-week low, Baker said – from $31.25 per share on Aug. 2 to $20.60 just two days later.
“Each disclosure of adverse fact that removed inflation from Teva’s share prices was connected to defendants’ false statements and omissions and the fraudulent conduct alleged herein,” Baker said in his complaint.
Baker is reportedly hoping to recover unspecified damages on behalf of a class of investors who bought common stock or American depository shares between Nov. 15 in 2016 and Aug. 2, 2017.