AstraZeneca Settles Two-Thirds of Seroquel Lawsuits

AstraZeneca to pay $198 million in its Seroquel suit
AstraZeneca Plc's Seroquel schizophrenia medication is arranged for a picture. Photographer: JB Reed/Bloomberg

AstraZeneca Plc will pay about $198 million to settle 17,500 lawsuits, or about two-thirds of the total cases alleging its antipsychotic drug Seroquel causes diabetes in some users.

The settlements resulted from court-ordered mediation, the London-based drugmaker said in a statement today. AstraZeneca previously agreed to pay at least $55 million to resolve more than 5,500 cases alleging the company knew Seroquel could cause diabetes and failed to adequately warn patients, people familiar with those settlements said. These earlier agreements are part of the 17,500 settlements, the company said.

AstraZeneca, the U.K.’s second-biggest drugmaker, is closer to wiping out the 26,000 total Seroquel cases and at a lower cost than expected, analysts said. Average payments are $10,000 to $11,000 for former Seroquel users, according to previous announcements and people familiar with earlier accords. The settlements are “probably lower than the worse-case estimate,” according to Jeremy Batstone-Carr, an analyst at Charles Stanley & Co Ltd.

“The nagging uncertainty has been hanging over the share price and what’s interesting is the extent to which Astra has been trying to draw a line in the sand to put these legal cases in the past,” Batstone-Carr, who rates the shares “accumulate,” said in an interview. “The market will regard $198 million as being positive even if for no other reason than it removes the uncertainty.”

Forecast Unchanged

AstraZeneca gained 50 pence, or 1.5 percent, to 3,305 pence in London trading today. The stock has climbed 13 percent this year. The drugmaker’s American depositary receipts, each representing one ordinary share, rose 17 cents to $52.47 at 12:56 p.m. in New York Stock Exchange composite trading.

The settlement doesn’t change AstraZeneca’s 2010 earnings guidance of as much as $6.65 a share, the company said. Seroquel, its second-biggest seller after ulcer pill Nexium, generated 15 percent of AstraZeneca’s total revenue last year, or $4.87 billion.

“While the terms remain confidential and are subject to non-monetary agreements, we believe it was in the best interest of the company to explore resolving these cases through the mediation process,” Tony Jewell, AstraZeneca’s spokesman, said in an e-mailed statement. “We remain committed to a strong defense effort, but will also continue to participate in good faith in court-ordered mediation.”

26,000 Suits

Lawyers for the company and former Seroquel users met last week with Stephen Saltzburg, a George Washington University Law School professor who is the mediator in the case, the people familiar said. Saltzburg said in a February court filing that AstraZeneca faces as many as 26,000 suits over Seroquel and a global settlement wasn’t likely.

AstraZeneca’s earlier Seroquel settlements provided average payouts of more than $10,000, the people familiar with those accords said earlier. The settlements announced today, negotiated with 16 law firms, provide average payments of more than $11,000 for former Seroquel users.

“AstraZeneca has negotiated settlements with a number of firms to resolve claims in the aggregate,” Jewell said in an e-mailed statement.

Company officials said earlier this month that lawyers for other former Seroquel users are scheduled to meet Saltzburg to see if their claims can be resolved.

Michael Kelly, AstraZeneca’s lead lawyer in the mediation, wasn’t immediately available to comment on how many more sessions were scheduled.

Ken Bailey, a Houston-based lawyer representing former Seroquel users who hasn’t settled his cases, said he was encouraged that AstraZeneca was willing to talk about resolving patients’ claims.

‘Our Day in Court’

“They started with the lawyers who hadn’t really engaged in the litigation process up to this point,” Bailey said. “We’ve been working for four years to get our cases ready for trial and we’re eager to get our day in court.”

AstraZeneca won the first trial over Seroquel in March, when a New Jersey jury found that the company properly warned a Vietnam veteran’s doctors about the diabetes risk posed by the drug.

AstraZeneca said earlier this year that it had paid about $656 million to defend itself in Seroquel cases. In addition, the company agreed in April to pay $520 million to resolve U.S. allegations that it illegally marketed Seroquel for unapproved uses.

Diabetes Warning

The settlement comes on the heels of U.S. Food and Drug Administration’s July 29 demand AstraZeneca stop using a promotional letter for Seroquel XR, an extended-release version of the medicine, that doesn’t contain a legally required diabetes warning.

Former Seroquel users contend research has shown patients have developed diabetes while on the drug and AstraZeneca’s own researchers acknowledged the link in internal documents.

Those studies prompted the FDA in 2003 and 2004 to require AstraZeneca and competitors selling similar antipsychotic medicines to include warnings about weight gain and diabetes risks in the drugs’ labels. Eli Lilly & Co.’s Zyprexa and Johnson & Johnson’s Risperdal compete against Seroquel in the antipsychotic market.

‘Omits Material’

In their July 29 letter to AstraZeneca, FDA regulators noted that the so-called “leave behind” sheet, distributed to doctors, about Seroquel XR “omits material information from a number of risks associated” with the drug, including diabetes.

The letter also warned the promotional leaflet overstated the effectiveness of Seroquel XR in treating depression in conjunction with other drugs.

“AstraZeneca is committed to providing accurate information to health-care practitioners and patients about all of our medicines,” Jewell said in an e-mailed statement about the FDA letter. “We are taking steps to address the contents of the letter and update our promotional materials as appropriate.”

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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