Teva Pharmaceuticals (TEVA) - Get Report  shares traded sharply lower Monday after the company received a downgrade from Morgan Stanley amid heightened "litigation risks" related to its involvement in the U.S. opioid crisis and state governments' actions against drug makers and distributors.

Shares of Teva were down more than 7% at $8.58 in early trading on the New York Stock Exchange after Morgan Stanley analyst David Risinger downgraded the Israeli company to underweight from equal weight, and shaved a 'one' off his price target, lowering it to $6 from $16.

"While all four generic stocks are exposed to opioid litigation, TEVA and (Endo International) (ENDP) - Get Report appear to face more significant risk given their historical branded opioid exposure," Risinger said in a note to clients, also citing less-supportive growth forecasts and higher net leverage ratios as reasons for the downgrade.

Oklahoma's attorney general on Monday is expected to urge a judge to find Johnson & Johnson (JNJ) - Get Report responsible for flooding the market with painkillers and fueling the U.S. opioid epidemic, as the first trial in nationwide litigation over the drug crisis wraps up. 

The case is one of more than 2,000 actions by state and local governments accusing drug manufacturers including Teva of contributing to an epidemic linked to a record 47,600 opioid overdose deaths in 2017, according to the U.S. Centers for Disease Control and Prevention.

Teva recently said it had reached an agreement with Oklahoma that includes an $85 million payment to the state, though questions concerning its exposure to additional litigation stemming from the Oklahoma trial remain.

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