Overview
Cohen Milstein, on behalf of the Public School Teachers’ Pension and Retirement Fund of Chicago (February 05, 2019), and the State of Oregon and the Oregon Public Employee Retirement Fund (April 30, 2019), filed separate actions in the U.S. District Court, District of Connecticut, in order to recover damages caused by Teva Pharmaceutical Industries LTD and certain officers, which acted in violation of the Securities Exchange Act for misstatements and omissions in Teva’s public statements between February 6, 2014 and August 3, 2017 concerning the company’s financial performance, business growth strategy, competitive factors, as well as its failure to disclose that state attorneys general and U.S. Department of Justice (DOJ) were investigating it for participating in a vast industrywide price-fixing conspiracy.
Cohen Milstein litigated these cases and briefed and argued multiple rounds of motions to dismiss the actions. Cohen Milstein ultimately settled the cases privately with Defendants for confidential sums in December 2022.
Case Background
After suffering a series of financial setbacks in 2012 – 2013, including a $519 million fine to the SEC and DOJ for alleged violations of the Federal Corrupt Practices Act, Teva, an Israel-based global pharmaceutical company and leading generic drug company in the United States, needed to reinvent itself. In January 2014, Teva announced the appointment of Erez Vigodman, as its new President and CEO, and, upon his arrival in February, immediately undertook a turnaround plan that included an “accelerated” cost reduction plan and “a much better, efficient generic machine” in order to improve its profits and share price as a part of a larger growth-through-acquisition strategy.
Plaintiffs claim that Defendants consistently attributed Teva’s financial success and performance during the period from February 6, 2014 to August 3, 2017, to fundamental business strategies, like cost cutting and good product management. In reality, however, Teva’s reported financial growth was a result of its strategy to systematically raise generic drug prices across a large portion of Teva’s generic drug portfolio, starting in early 2013, with a first batch of price increases taking place in July and August 2013. Plaintiffs also claim that during the relevant period, Teva imposed price increases at least 76 times, involving at least 55 separate drugs, and by as much as 1,700%. As a result of these huge price increases, Teva’s U.S. generic segment revenues increased by nearly 15% from $4.18 billion in 2013, to $4.79 billion in 2015. Share price increased from just over $37 per share in September 2013 to more than $70 per share by July 2015.
Plaintiffs further claim that these price increases were considered and approved by Teva’s senior officers, who tracked the profits generated on a daily, weekly and quarterly basis, and yet concealed from investors that Teva’s rapid growth was driven by its price-hike strategy, falsely claiming that it was not increasing prices and that the Company’s increased profitability was in fact due to other, more sustainable factors including aggressive cost-cutting and improved operational efficiency. Even Wall Street analysts, intimately familiar with Teva’s business and disclosures, had no way of knowing whether Teva was profiting from systematic price increases.
Furthermore, Plaintiffs claim that Teva’s price-hike strategy in 2013 influenced similar price increases by others in the U.S. generic drug market, which ultimately led to investigations into price collusion by state attorneys general and DOJ, about which Teva also failed to inform investors.
Finally, Plaintiffs claim that Defendants’ fraudulent statements permitted the company to mislead the market and to complete a $40 billion acquisition of the Actavis generic drug division from Allergan plc in 2016.
Just two days after the closing of the Actavis transaction, on August 4, 2016, Teva reported second quarter 2016 financial results that reflected a $434 million decline in revenues in its U.S. generics segment compared to the second quarter of 2015. Teva also revealed for the first time that it was the subject of DOJ and state AG investigations into price collusion.
As Teva’s financial condition deteriorated and the scrutiny surrounding the AG and other allegations mounted in the latter half of 2016, Teva’s stock price precipitously declined. In relatively short order, key executives responsible for the U.S. generics business left the Company or were fired, including Vigodman. On August 3, 2017, Teva announced a $6.1 billion write down of its entire U.S. generics business.
From July 2015 through the end of the Relevant Period, the price of Teva’s American Depositary Shares (“ADS”) collapsed from an all-time high of $72 per share to just over $20 per share, causing Teva’s market capitalization to decline from more than $70 billion to just over $20 billion. As a result of Defendants’ acts and omissions, and the substantial decline in the market value of Teva’s securities, the Plaintiffs suffered significant damages.
Case Names: Public School Teachers’ Pension and Retirement Fund of Chicago v. Teva Pharmaceuticals Industries Ltd., et al., Case No. 3:19-CV-00175 (D. Conn.) and Oregon, et al. v. Teva Pharmaceutical Industries LTD., et al., Case No. 3:19-cv-00657 (D. Conn.)