The settlements come as ajudge in Oklahoma is set to rule on whether Johnson & Johnsonmust pay as much as $17 billion to reimburse the state for taxdollars spent fighting the opioid epidemic. (Photo:Shutterstock)

(Bloomberg) –Endo International Plc agreed to an $11 millionsettlement to avoid going to trial in the first federal court casestargeting opioid makers and distributors over the public-healthcrisis caused by the painkillers.

Endo said Tuesday it will pay $10 million and donate $1 millionof diabetes and allergy drugs to resolve claims by two Ohiomunicipalities that the company helped fuel the U.S. opioidepidemic by illegally marketing its Opana painkiller. The dealresolves only two cases set for trial in October and leaves intactlawsuits against Endo filed by more than 2,000 local governmentsover its handling of Opana. The October trial will still proceedagainst other drugmakers.

Related: Judge poised to approve possible opioidsettlement

The settlements come as a judge in Oklahoma is set to rule nextweek on whether Johnson & Johnson must pay as much as $17billion to reimburse the state for tax dollars spent fighting theopioid epidemic. The case is the first designed to hold a drugmakerliable for the fallout from opioid addiction and overdoses.

Endo officials said the Ohio settlement didn't reflect what itexpects to pay to resolve the other opioid suits. "The cash portionof the settlement approximates the estimated cost to Endo ofproceeding through trial," Matthew Maletta, Endo's executive vicepresident and chief legal officer, said in an emailedstatement.

News of the settlement rallied Endo shares, sending them higherby as much as 33% in New York trading Tuesday. The company's stockclosed up more than 18 percent to $3.02. Other companies named inother opioid suits, including Allergan Plc, Teva PharmaceuticalIndustries Ltd. and Mallinckrodt Plc also gained. Endo's bonds due2025 and 2023 spiked on the news, rising between 4 and 6 cents onthe dollar to 62 and 67.75 respectively on Tuesday, according toTrace bond trading data.

Representatives for Teva and Mallinckrodt didn't immediatelyrespond to requests for comment on potential settlements. The WallStreet Journal reported Monday that Irvine, California-basedAllergan was in talks to settle the two Cleveland cases for about$5 million. Allergan officials declined to comment on thenewspaper's report.

Frank Gallucci, a Cleveland-based lawyer representing one of thecounties whose cases are coming to trial in October, said in aninterview Tuesday there is a tentative settlement agreement withAllergan. He declined to provide any details.

The local governments' cases are consolidated before U.S.District Judge Dan Polster in Cleveland, who has pushed opioidmakers such as Endo and J&J, and distributors such as McKessonCorp. and Cardinal Health Inc., to settle.

Bloomberg News reported last year Dublin, Ireland-based Endo wasseeking to negotiate a global settlement of all opioid claimsagainst it. Those negotiations were separate from settlementefforts by rival opioid makers and distributors, people familiarwith the talks said.

San Francisco-based McKesson and Dublin, Ohio-based CardinalHealth, along with fellow drug distributor AmerisourceBergen Corp.,have proposed paying a total of $10 billion to resolve all opioidcases against the companies, according to people familiar with thetalks. Lawyers for state attorneys general made a counter-proposalto settle the cases for $45 billion, the people said earlier thismonth.

A global settlement covering all opioid manufacturers anddistributors may end up costing the companies a combined $30billion to $55 billion, according to analysts at Nephron Research,an independent health-care investment research firm. Wells Fargoanalyst David Maris said a final tally could be even higher, atalmost $100 billion.

Lawyers for local governments were willing to allow Endo to getout of the Cleveland cases because they aren't seen as a deeppocket in the opioid litigation, said Richard Ausness, a Universityof Kentucky law professor who teaches about mass personal injurylitigation. Endo — dealing with $8 billion in debt — may be one ofthe companies forced into bankruptcy to avoid being engulfed by thesuits, Ausness said.

"Bankruptcy has always been the elephant in the room when itcomes to opioid settlement talks," he said. "Some of the smallercompanies like Endo may have no choice if the plaintiffs don'toffer reasonable global settlement proposals. "

Allowing Endo to resolve the two counties' claims for arelatively modest $11 million also allows the municipalities to get"some of the smaller players out of the way" in a trial that couldhave more than 20 defendants, Ausness added.

The majority of Endo's debt — racked up in a deal-making spree —comes due four years from now in 2023. Executives have beenslashing costs and jobs as part of an internal reorganization. InMarch, the company refinanced bonds to push out debt maturities andgive the company more flexibility.

Attorneys for cities and counties suing to recoup tax dollarsspent battling the opioid epidemic want to streamline the casesbeing brought by Cuyahoga and Summit counties in Ohio to make theOctober trial more manageable, said Carl Tobias, a University ofRichmond law professor who teaches about product liability.

"Trying to lay out a case against 20 defendants in a way that ajury can understand is an incredibly difficult task," Tobias said."That's why they are willing to let minor players like Endo settle.They want to winnow down the number of defendants to a manageablelevel."

At the heart of the suits against Endo and other manufacturersare claims they downplayed the health risks of opioids and oversoldtheir benefits through hyper-aggressive marketing campaigns.Distributors, considered to have the deeper pockets by plaintiffs'lawyers, are accused of ignoring red flags about misuse of thepainkillers and illegally flooding states with pills.

The case is In Re: National Prescription Opiate Litigation,17-md-2804, U.S. District Court, Northern District of Ohio(Cleveland).

Read more: 

• Lawyers in opioid suit seek nationwide classcertification
• New lawsuit unveils scope of Purdue's'extraordinary efforts' to push opioids
• Opioid manufacturers: A publicnuisance?

Copyright 2019 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.