July 22 (Bloomberg) -- AstraZeneca Plc agreed to pay $2 million to settle more than 200 cases over its antipsychotic drug Seroquel in the first resolution of lawsuits alleging the medicine causes diabetes, people familiar with the accords said.
The settlement, which provides an average payout of more than $10,000 per case, came as the result of a U.S. court-ordered mediation involving 26,000 cases filed against London-based AstraZeneca over Seroquel, the people said.
“It should come as no surprise to investors and we’ve seen Eli Lilly settle on the very same issue with their competitor product, Zyprexa,” Gbola Amusa, an analyst at UBS AG, said yesterday in an interview. “The amount of the settlement implies a very low liability, much lower than the $1 billion to $2 billion range we expected a couple years ago.”
AstraZeneca’s decision to begin settling Seroquel claims comes as the U.K.’s second-largest drugmaker’s London shares surged to a three-year high last month after a judge upheld a patent on the company’s Crestor cholesterol pill. U.S. District Judge Joseph Farnan in Delaware concluded June 30 the patent on Crestor’s active ingredient is valid and enforceable until 2016.
AstraZeneca officials declined to comment on the settlement of the 200 Seroquel cases or the mediation ordered by a federal judge in Florida who was overseeing all federal-court litigation over the antipsychotic drug.
‘In Good Faith’
“AstraZeneca continues to participate in good faith in the court-ordered mediation process,” Tony Jewell, a company spokesman, said in an interview. “The mediator has asked the parties to maintain the confidentiality of those discussions. AstraZeneca will honor the mediator’s request.”
Lawrence J. Gornick, a San Francisco lawyer who represented the more than 200 former Seroquel users whose cases are being settled, didn’t return calls for comment on the accords.
AstraZeneca’s American depositary receipts, each representing one ordinary share, rose 98 cents, or 2 percent, to $49.21 at 12:32 p.m. in New York Stock Exchange composite trading. The company’s London share rose 37.5 pence, or 1.2 percent to 3,223 pence today.
Some of Gornick’s cases were filed in state courts in New Jersey and Delaware while others had been consolidated with other federal suits before U.S. District Judge Anne Conway in Orlando, Florida, the people familiar with the settlements said.
Since 2006, Conway has overseen the federal cases during pre-trial evidence gathering, part of the Multi-District Litigation program intended to save money by streamlining document exchanges and avoiding duplication.
In November, Conway said she would recommend that the panel of judges who oversaw case consolidations return the suits to their home courts. The panel has issued several orders over the past two months to send the cases back, according to court filings.
AstraZeneca won the first Seroquel case to go to trial after a New Jersey jury ruled in March that the drugmaker properly warned a Vietnam veteran’s doctors about the diabetes risk posed by the antipsychotic drug.
A Delaware judge also has thrown out three Seroquel cases that were set for trial, saying plaintiffs can’t produce enough credible evidence that Seroquel causes diabetes to present their claims to a jury.
Conway also ordered lawyers for AstraZeneca and former Seroquel users in November to meet with Stephen Saltzburg, a George Washington University Law School professor, who is serving as a mediator in the case.
Saltzburg noted in a February court filing AstraZeneca faces as many as 26,000 lawsuits over the antipsychotic drug and that a global settlement of the claims wasn’t in the cards.
“I wish there were a magic wand that could be waved to settle all Seroquel cases instantly,” Saltzburg said in the filing. “Such wand does not exist.”
Gornick met with Saltzburg earlier this month to discuss settling cases and agreed to resolve them for an average of more than $10,000 apiece, the people said.
The settlement indicates some plaintiffs’ lawyers are questioning the strength of their Seroquel claims, Carl Tobias, a professor at University of Richmond Law School who teaches classes on mass-tort law, said in an interview.
“It also may be a reflection of the difficulty the plaintiffs are having in getting these cases to trial,” Tobias said. “The plaintiffs have to be asking themselves after the New Jersey trial whether they can win one of these.”
‘Seeking More Cases’
Lawyers for former Seroquel users counter studies show the drug causes diabetes and the progression of the disease increases the potential damages in the cases.
“We are actively seeking more cases and will be litigating these cases for years to come,” Paul Pennock, a Manhattan-based lawyer who represented the Vietnam veteran whose claims were rejected in the first Seroquel trial earlier this year, said in an e-mailed statement.
The average recoveries in other product-liability settlements have been much more lucrative, Tobias noted.
Lawyers representing families claiming GlaxoSmithKline Plc’s Paxil antidepressant caused birth defects in children recovered more than $1 billion in settlements for more than 800 cases, people familiar with those accords said earlier this week.
That generated an average recovery of more than $1.2 million per family, the people said.
Lilly, who makes the competing antipsychotic drug Zyprexa, has paid more $2.9 billion so far to settle more than 30,000 suits alleging the medicine causes diabetes and government allegations that Lilly illegally marketed the pills for off-label uses and downplayed side effects.
In April, AstraZeneca agreed to pay $520 million to resolve federal regulators claims the company illegally marketed Seroquel for off-label uses.
Under U.S. law, a doctor can prescribe a medicine for any condition so long as it’s approved by the U.S. Food and Drug Administration for one ailment. Drug companies, however, aren’t allowed to promote a drug for uses other than those specified by regulators.
The consolidated Seroquel case is In Re Seroquel Products Litigation, 06-MD- 01769, U.S. District Court, Middle District of Florida (Orlando).
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