July 15, 2010
British Pharma giant GlaxoSmithKline is expected to record a legal charge of $2.4 billion for the second quarter of this fiscal year in order to settle legal cases relating to its antidepressant Paxil and controversial diabetes pill Avandia. The British company announced two days ago that the money would be used not only to cover the settlements for Avandia but also other long-standing legal cases. It is learnt that the company would use the money to settle an investigation into its former factory at Cidra in Puerto Rico as well.
The news of the hefty charge, which is around 2.5 percent of the market value of the British drug maker took the edge off an expected rally in the shares after a U.S. panel allowed the company to Avandia in stores but the panel asked Glaxo to include new warnings on heart risks. “Some people might baulk at the size of the charge but probably most will say this is putting it all behind the company, so we can now look to the continuing business and view the stock on a more rational basis,” said Deutsche Bank analyst Mark Clark.
Menwhile, Glaxo did not divulge how much it was setting aside to settle legal issues related to Avandia. The company defended its decision saying that settlement terms were confidential. Earlier, it was reported that Glaxo might have to spend a whopping $6 billion to resolve legal cases related to Avandia but the panel vote allowing the company to keep the drug in market means that the company would be able to settle the claims by paying around $1 billion.