July 13 (Bloomberg) -- GlaxoSmithKline Plc agreed to pay about $460 million to resolve a majority of lawsuits alleging the company’s Avandia diabetes drug can cause heart attacks and strokes, people familiar with the accords said.
Glaxo, the U.K.’s biggest drugmaker, agreed to settle about 10,000 suits for an average of at least $46,000 apiece, the people said. The company had been facing more than 13,000 suits alleging Glaxo hid the drug’s heart-attack risk, according to a UBS AG analyst. The settlements come as Glaxo is set to face its first Avandia trial in federal court in Philadelphia in October.
“This is exceptionally good news given the market has discounted $6 billion in liability,” for Avandia litigation, Gbola Amusa, an analyst at UBS in London, said in an interview. “We had outlined an absolute worst-case scenario where $500,000 per case would have to be paid.”
Glaxo, the U.K.’s largest drugmaker, is settling Avandia claims as a U.S. Food and Drug Administration advisory panel met today to consider whether Avandia’s ability to control blood-sugar levels outweighs a possible increase in heart attacks, strokes and deaths from cardiovascular disease. Mary Anne Rhyne, a spokeswoman for Glaxo, declined to comment.
Glaxo’s American depositary receipts rose 1.7 percent, or 60 cents, to $35.72 in New York Stock Exchange composite trading. Each ADR represents two ordinary shares. In London, Glaxo shares gained 21.5 pence, or 1.9 percent, to close at 1176.5 pence.
Avandia generated $1.1 billion last year for Glaxo, only about a third of the revenue it had before researchers linked the medicine in 2007 to a 43 percent increased risk in heart attacks. Avandia was once the world’s best-selling diabetes pill, generating $3 billion in annual revenue for London-based Glaxo.
A former FDA official said Glaxo withheld from regulators a study showing Avandia may cause heart attacks, according to two people familiar with her deposition in a lawsuit against the drugmaker.
Dr. Rosemary Johann-Liang, a former manager in the FDA’s drug-safety unit, told lawyers suing Glaxo that the 2001 study found Avandia posed a greater heart-attack risk than rival medicines, the people said. Glaxo also didn’t turn over an e-mail from researchers who concluded Avandia “strengthens the signals” of heart ailments, she testified in a pre-trial deposition last month, according to the people.
Johann-Liang’s deposition may be considered by the FDA advisory panel, the people said. They declined to provide a transcript of the testimony.
FDA Commissioner Margaret Hamburg told regulators weighing Avandia’s risks at today’s hearing to “keep an open mind.” Her remarks followed an agency analysis showing division among regulators about the pill’s safety.
Glaxo disputes Johann-Liang’s claims that it didn’t turn over a 2001 review of Avandia’s health risks to federal regulators, Rhyne, the company spokeswoman, said last week in an e-mailed statement.
An FDA panel agreed in 2007 that the drug carried risks though it should remain available. Almost a dozen more clinical trials and studies have been completed in the past three years, prompting the agency to re-examine the issue.
The panel could recommend Glaxo pull Avandia from the market. A withdrawal of Avandia “might prompt a limited number of additional suits but liability should be limited,” Amusa said.
The FDA review was a factor in the decision by Glaxo officials to start negotiating with lawyers for former Avandia users, the people familiar with the settlements said.
During a first round of settlements of Avandia cases, Glaxo agreed to pay about $60 million to resolve more than 700 suits filed by attorneys such as Houston-based litigator Mark Lanier and Philadelphia-based plaintiffs’ lawyer Sol Weiss, the people said.
Among lawyers settling Avandia cases in the second round of resolutions are Michael J. Miller, an Alexandria, Virginia-based attorney who represents about 1,500 consumers who took the drug, the people said. J. Paul Sizemore, a Los Angeles lawyer with more than 1,000 Avandia cases, also has agreed to resolve the claims, the people said.
Neither Miller nor Sizemore returned calls seeking comment on the settlements. On his law firm’s website, Miller said the advantage of the accords is that they provide a “prompt resolution” of claims that have taken three years to get to the pre-trial stage.
“It’s a compromise that allows both sides to put this behind them and move on,” Miller said in a note to clients.
Avandia claimants’ cases generated individual settlements ranging from $46,000 to almost $70,000, depending on the strength of the claims, the people said.
The settlements add more support to the idea that Glaxo may be able to resolve its Avandia liability for about $1.1 billion, said Amusa. He and other industry analysts have previously said that the company might pay as much as $6 billion to resolve all Avandia litigation.
Glaxo set aside 2.3 billion pounds ($3.5 billion) for “legal and other disputes” as of the end of March, the company said April 28. It didn’t specifically mention litigation relating to Avandia.
There are still at least 3,000 Avandia claims pending, either on court dockets or subject to so-called tolling agreements, the people said. These accords allow lawyers to stockpile claims without filing lawsuits while they investigate the cases or negotiate with the company.
Lawyers representing former Avandia users who are pushing ahead with claims against Glaxo include Denver-based litigator Joseph Zonies and Kansas City, Missouri-based plaintiffs’ attorney Thomas Cartmell, the people said. Neither lawyer returned calls seeking comment.
The case is In Re Avandia Marketing, Sales Practices and Products Liability Litigation, 07-01871, U.S. District Court for the Eastern District of Pennsylvania (Philadelphia).
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