Lilly Gets a Lift from Zyprexa News

The drugmaker expects to pay less than $500 million to settle lawsuits connected with the anti-psychotic compound

Eli Lilly (LLY) expects to settle thousands of lawsuits over how it marketed the anti-psychotic drug Zyprexa for less than $500 million, the Indianapolis pharmaceutical company said on Jan. 4.

Lilly is the latest pharma player to come under lawyers' fire in recent months for its business practices. The recent agreement settles more than 18,000 claims that Lilly hadn't displayed enough information in its package inserts about the risk of hyperglycemia and diabetes associated with Zyprexa. But most of the lawsuits make their claims that this took place before September, 2003, when the Food and Drug Administration had required label changes about the relationships between these medicines and diabetes.

"The change in Zyprexa's label in September 2003, as ordered by the federal Food and Drug Administration, makes less viable, on statute of limitations grounds, such future cases," said Jack Weinstein , the judge supervising the Zyprexa multidistrict litigation for the Federal District Court for the Eastern District of New York, according to Lilly's press release.

In June, 2005, Lilly had settled more than 8,000 related claims for $700 million. The charge for the additional 18,000 claims announced on Jan. 4 will show up in Lilly's fourth quarter 2006 statements.

"While we remain confident that these claims are without merit, we took this difficult step because we believe it is in the best interest of the company, the patients who depend on this medication, and their physicians," said CEO Sidney Taurel in a press release Jan. 4. "We wanted to reduce significant uncertainties involved in litigating such complex cases."

Lilly's earnings rely heavily on Zyprexa, which generated 30% of total 2005 sales and an even greater share of operating income, according to the investment research firm Morningstar.

Investors bid up the company's shares 0.02% to $52.26 in early trading on the New York Stock Exchange.

Lilly faces other legal battles. People in New York, California, New Jersey and Connecticut are suing Lilly and eight other drug companies for overtime pay, explaining that they were wrongly classified as overtime-exempt, according to the Associated Press on Dec. 27.

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