AstraZeneca Resolves Most Suits Relating to Seroquel Drug for $647 Million
AstraZeneca Plc (AZN) has settled almost all lawsuits that claimed its antipsychotic drug Seroquel causes diabetes in some users for a total of $647 million.
AstraZeneca, the U.K.’s second-biggest drugmaker, has set aside the $647 million to resolve 28,461 suits alleging it knew Seroquel could cause diabetes in some users, the company said in its second-quarter earnings report. The reserve includes money that may be used to settle about 250 unresolved cases, company officials said in the report.
AstraZeneca’s ability to settle the Seroquel liability for less than $1 billion “may well be a positive surprise for investors,” Les Funtleyder, a health strategist and portfolio manager at Miller Tabak & Co. in New York, said in a telephone interview. “That’s a real bargain when you look at what competitors such as Lilly have paid in settlements over a similar drug.”
Eli Lilly & Co (LLY), maker of the antipsychotic drug Zyprexa, has paid at least $1.2 billion to resolve lawsuits alleging the drug caused diabetes in some users. That’s on top of $1.42 billion in fines the drugmaker paid the U.S. government to resolve claims that it illegally marketed Zyprexa.
AstraZeneca, based in London, announced last summer it had resolved about two-thirds of the 26,000 Seroquel suits that had been filed in courts around the U.S. at the time. The company won the first jury trial over Seroquel in March 2010.
250 Cases Left
“AstraZeneca is aware of about 250 Seroquel product- liability claims in the United States that have not been settled in principle,” Tony Jewell, a U.S.-based spokesman for AstraZeneca, said in an e-mailed statement today.
“We remain committed to a strong defense effort, but will continue to participate in good faith in the court-ordered mediation process for the remaining cases,” he added.
Seroquel, with 2010 sales of $5.3 billion, is the company’s second-biggest seller, after the cholesterol-reducing drug Crestor, according to earlier company filings. Of that number, $3.75 billion in sales were from the U.S., the filings said. AstraZeneca trails only London-based GlaxoSmithKline Plc (GSK) among U.K. drug companies.
AstraZeneca officials said in the earnings report that second-quarter profit fell because of increased generic competition and government price cuts.
Profit excluding restructuring and other one-time costs declined to $1.73 a share from $1.79, the company said today in a statement. That matched the $1.73 mean estimate of 21 analysts surveyed by Bloomberg.
AstraZeneca’s American depositary receipts, each representing one ordinary share, rose 29 cents, or 0.6 percent, to $49.10 at 12:21 p.m. in New York Stock Exchange composite trading.
AstraZeneca officials said in the filing that the company had paid a total of $749 million in legal fees and expenses to defend against Seroquel claims as of this month. Of that total, about $134 million is covered by insurance, AstraZeneca said. In addition, the company agreed last year to pay $520 million to resolve U.S. allegations that it illegally marketed Seroquel for unapproved uses.
The $647 million reserve for Seroquel litigation includes money “to account for the current and anticipated future settlement costs regarding the Seroquel product liability claims, past and future defense costs associated with defending the claims since the fourth quarter 2010,” AstraZeneca said in the earnings report.
The reserve also includes provisions for suits filed by state attorneys general over the company’s Seroquel marketing, according to the report. AstraZeneca agreed in March to pay $68.5 million to resolve claims that it deceptively marketed Seroquel in 37 states.
Earlier this month, a judge rejected AstraZeneca’s bid to throw out a case brought by Arkansas Attorney General Dustin McDaniel alleging the drugmaker hid the health risks of Seroquel when selling it to residents covered by the state’s Medicaid program.
The cases were gathered together as part of the Multi- District Litigation program intended to save money by streamlining document exchanges and avoiding duplication. The judge overseeing the federal cases asked Stephen Saltzburg, a George Washington University Law School professor, to serve as mediator in hopes of reaching settlements.
Michael Kelly, a Wilmington, Delaware-based lawyer for AstraZeneca who served as the drugmaker’s lead negotiator in the settlements, didn’t return a call seeking comment. Perry Weitz, a New York-based lawyer representing some former Seroquel users, declined to comment on the settlements.
The case is In Re Seroquel Products Litigation, 06-MD- 01769, U.S. District Court, Middle District of Florida (Orlando).
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