Glaxo Plans $2.36 Billion Charge for Legal Issues
GlaxoSmithKline, the British pharmaceutical company, said Thursday that it would take a second-quarter charge of $2.36 billion related to legal cases involving its drugs Avandia and Paxil.The company, based in Brentford, England, made the announcement a day after an American medical advisory panel recommended that Avandia, a controversial diabetes drug, should either be withdrawn from the market or have sales severely restricted because it increases the risks of heart attacks.
The company said that the charge announced Thursday, which will amount to about $2.1 billion after taxes, “includes provisioning for settled cases and an estimate for those cases which we have received and are still outstanding.”
GlaxoSmithKline reported a profit of £5.5 billion, or about $8.4 billion, for 2009.
In addition to Avandia, the charge partly resulted from the settlement of product liability and antitrust litigation relating to Paxil, a drug for anxiety and depression, for which the company had been fighting a rival, Apotex, over a generic competitor. It said it had settled “the vast majority of product liability cases” relating to Paxil and “the substantial majority” of those relating to Avandia.
The company also said it had reached an agreement in principle with the United States attorney’s office in Massachusetts and the Department of Justice to pay $750 million to settle the investigation of its manufacturing plant in Cidra, Puerto Rico. The company had closed the factory in 2007, after regulators censured the company over quality-control problems.
GlaxoSmithKline’s shares rose 1.6 percent in London morning trading.
“The charge we have announced today reflects the company’s ongoing efforts to resolve certain long-standing legal cases,” the general counsel, Dan Troy, said in a statement. “This represents a substantial proportion of G.S.K.’s outstanding litigation. This progress is helping us to reduce financial uncertainty and risk for shareholders.”
In the hearing Wednesday, GlaxoSmithKline had argued that Avandia was a safe, and needed, option in treating diabetes. But panel members voiced skepticism about the company’s trustworthiness after questions were raised about its clinical trials. Internal documents showed that the company for years kept crucial safety information about Avandia from the public.
Avandia, once the biggest-selling diabetes medicine in the world, saw its sales abruptly decline in 2007 after a study by Dr. Steven Nissen, a Cleveland Clinic cardiologist, found that it increased the risk of heart attacks.
Gardiner Harris reported from Gaithersburg, Md., and David Jolly from Paris.
Source: NY Times
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