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GlaxoSmithKline today swallowed a £1.57 billion charge to settle legal wrangles including litigation over its blockbuster diabetes drug Avandia, after winning a reprieve over a potentially reputation-ruining safety scandal.
Britain's biggest drugs firm said the fee would cover the “substantial majority” of settlements with Avandia patients as well as “the vast majority” of product liability lawsuits against Paxil, an anti-depressant which patients allege has links to suicidal behaviour and birth defects.
The payout also covers a £500 million settlement with the US government over its investigation into alleged quality-control problems over drugs made for the US market at Glaxo's manufacturing site in Cidra, Puerto Rico.
Glaxo closed the factory last year, and today said the final settlement was “subject to the negotiation and execution of definitive agreements”.
Another part of the legal charge went on resolving competition litigation with generic drugmaker Apotex, over its copycat version of Paxil.
But the total value of the legal spring-clean — which Glaxo will take in its second-quarter results, to be announced on Wednesday — was less painful than expected, sending the Brentford-based firm's shares up 2% to 1200½p.
Although Glaxo did not reveal how much it was setting aside to pay off the Avandia litigation, analysts said it was about £650 million — far less than early estimates of up to £4 billion.
City brokers said uncertainty around the drug giant had lifted, especially after the judgment made by the US medicine watchdog the Food and Drug Administration yesterday.
It undertook an investigation into the drug after research suggested Avandia put users at a 60% greater risk of heart failure, but decided to keep the drug on the market.
It could have been a very different result for Glaxo, which has faced a massive backlash over the drug's safety allegations in the US.
Some predicted the British firm could become a victim of a BP-style reputation and share-price battering if the FDA withdrew its backing of Avandia.
Earlier this year, Swiss bank UBS said withdrawing the drug would cost the firm up to $6 billion (£3.9 billion) in potential legal costs.
Avandia was once one of Glaxo's top-selling drugs with sales worth $3 billion a year, but its popularity plunged — with sales down to $1.2 billion last year — after researchers linked it to a higher risk of heart failure.
