Teva Pharmaceutical Industries Limited (TEVA) shares rose more than 5% after Gabelli upgraded the stock to Buy days before the beginning of a key opioid trial in Ohio. Analyst Kevin Kendra is optimistic about reports that Teva proposed giving away $15 billion worth of drugs to settle its opioid litigation. The analyst believes that the negative impact on EBITDA could be as low as $250 million per year, although using free product could disrupt the generic drug industry since it's "hard to compete against free drugs."

Other analysts are a bit more cautious. Guggenheim's Dana Flanders said in a note that it's hard to call the news a positive or negative without knowing the details. For example, he notes that none of the reporting indicates how the value of the free drugs would be calculated and whether the giveaways would cannibalize its base generics business. Teva hasn't responded to requests for comments about the reports as the negotiations continue.

Chart showing the share price performance of Teva Pharmaceutical Industries Limited (TEVA)

From a technical standpoint, Teva stock broke out from its 50-day moving average at $7.11 following a volatile session on Wednesday. The relative strength index (RSI) edged higher to 56.22 but remains in neutral territory, while the moving average convergence divergence (MACD) continues to move largely sideways. These indicators provide few technical hints about where prices could be headed over the coming sessions.

Traders should watch for a breakout toward reaction highs of $8.50 or $10.00 following positive developments surrounding Teva's opioid exposure. If the news turns bearish, the stock could move lower to retest its prior lows of around $6.00 in future sessions. With negotiations in progress, traders should expect volatility over the coming sessions until a definitive settlement is announced that could reprice the stock.

The author holds no position in the stock(s) mentioned except through passively managed index funds.