Settling lawsuits over its controversial anti-depressant Paxil has cost Glaxo SmithKline some $1-billion in court-ordered and out-of-court settlements, Bloomberg News reports.
I don’t think this is within the boundaries of current assumptions for analysts.” Navid Malik, an analyst at Matrix Corporate Capital in London, is quoted as saying.
Another analyst, Savvas Neophytou, a Panmure Gordon analyst in London, says a $1.5 billion liability is possible.
The settlements result from suits in which people taking the drug caused them to contemplate suicide or birth defects in their children. In each of the cases, the plaintiffs allege that Glaxo knew of the dangers.
As part of the total, Glaxo, the U.K.’s largest drugmaker, so far has paid $200 million to settle Paxil addiction and birth-defect cases and $400 million to end antitrust, fraud and design claims, according to the people and court records.
The $1 billion “would be worse than many people are expecting,” said Navid Malik, an analyst at Matrix Corporate Capital in London. “I don’t think this is within the boundaries of current assumptions for analysts.
The London-based company hasn’t disclosed the settlement total in company filings. It has made public some accords. Glaxo’s provision for legal and other non-tax disputes as of the end of 2008 was 1.9 billion pounds ($3.09 billion), according to its latest annual report. This included all legal matters, not just Paxil. The company said 112 million pounds of this sum would be “reimbursed by third-party issuers.
The drugmaker has reduced its insurance coverage to contain costs, “accepting a greater degree of uninsured exposure,” the annual report states. “Recent insurance loss experience, including pharmaceutical product-liability exposures, has increased the cost of, and narrowed the coverage afforded by, insurance for pharmaceutical companies generally,” Glaxo said.
Glaxo declined to confirm the $1 billion figure. “Paxil has been on the market in the U.S. since 1993. Like many other pharmaceutical products, it has been the subject of different kinds of litigation over the years,” said Sarah Alspach, a spokeswoman for Glaxo, in an e-mailed statement. “It would be inappropriate and potentially misleading to aggregate payments in these various types of litigation.
Chief Executive Officer Andrew Witty has moved to replace revenue lost to generic versions of drugs such as Paxil. Worldwide, Paxil generated about 514 million pounds in sales last year, or 2.1 percent of the total. Glaxo closed up 5 pence to 1,303 pence in London trading Dec. 11, down 8.8 percent from a year ago.
About 450 suicide-related Paxil cases were settled. Only about a dozen haven’t been, the people said. The $1 billion total doesn’t include more than 600 claims that Paxil caused birth defects.
A Philadelphia jury on Oct. 13 found the drugmaker should pay $2.5 million to the family of Lyam Kilker, a 3-year-old boy born with a heart defect after his mother took Paxil while pregnant. Based on that outcome, an analyst estimated the company may potentially face additional verdicts in birth-defect cases waiting to be tried in Pennsylvania.
A liability totaling $1.5 billion is possible,” wrote Savvas Neophytou, a Panmure Gordon analyst in London, in a note to investors the day after the Kilker verdict. He still recommended buying Glaxo shares because a likely appeal may reduce the amount paid by the company.
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