Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) may have to pay the compensation to Pfizer Inc. (NYSE: PFE; LSE: PFZ) and Takeda Pharmaceutical Co. Ltd. (TSE: 4502) out of its own pocket. Although Teva believes that is eligible for up to $560 million insurance coverage on the $1.6 billion payout, its insurance company appears to have other ideas. The payment is for the settlement of the patent infringement case brought against Teva for its at-risk launch of Pfizer's Protonix acid-reflux drug in 2007.
Reports from the US say that Illinois Union Insurance Co. has sued Teva with the US District Court for the Eastern District of Pennsylvania claiming that it does not have to cover the payout on the grounds that it was never properly notified of the suit. This is presumably not the last word, and Teva will not easily forego the indemnification it believes that is due it.
Teva has already recognized a $670 million write-off for the Pfizer lawsuit, and is due to recognize a further $930 million write-off in the financial report for the second quarter of 2013. Following the settlement, Moody's downgraded Teva's rating outlook from "Stable" to "Negative", saying that Teva would draw on part, or even all, of its credit facility from the banks.
In response Teva said, "Teva is reviewing the insurance company's claims and will respond as appropriate."
Published by Globes [online], Israel business news - www.globes-online.com - on July 4, 2013
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