May 10 (Bloomberg) -- GlaxoSmithKline Plc agreed to pay about $60 million in the first settlements of lawsuits alleging the company’s Avandia diabetes drug causes heart attacks and strokes in some users, people familiar with the accords say.
Glaxo, the U.K.’s biggest drugmaker, agreed to resolve more than 700 Avandia suits filed by three attorneys, including Houston-based plaintiffs’ lawyer Mark Lanier and Philadelphia- based litigator Sol Weiss, the people said. The settlements come as Glaxo is set to face its first Avandia trial in state court in Philadelphia in July. The company faces about 4,000 lawsuits that have been filed so far over the drug.
“Settlement of litigation tends to be seen positively by the market because it’s minimizing risk,” Michael Leacock, an analyst at Royal Bank of Scotland Group Plc, said by phone from London today. “This all seems quite manageable.”
Mary Anne Rhyne, a U.S. spokeswoman for London-based Glaxo, said she couldn’t immediately comment on the Avandia settlements today.
Regulators approved Avandia for sale in the U.S. in 1999 and the medicine tallied annual revenue of $3 billion by 2006, including sales of a combination of Avandia and another drug.
Avandia sales plunged after a May 2007 report in the New England Journal of Medicine linked the drug to a 43 percent increased risk of heart attacks, prompting U.S. and European regulators to order Glaxo to strengthen its warnings. Avandia was the world’s best-selling diabetes pill before safety concerns emerged.
Legal Reserves
Last month, Glaxo officials reported first-quarter profit that beat analysts’ estimates. They also noted the reserves budgeted for legal matters for the quarter increased by 210 million pounds ($311.8 million) because of “the progress we are making toward settlement of existing cases,” according to a April 28 statement.
Gbola Amusa, an analyst at UBS AG in London, said in March Glaxo faces as much as $6 billion in liability on Avandia and there’s a risk that U.S. regulators may force the company to take the drug off the market.
The Food and Drug Administration is reviewing Avandia’s safety profile and will present its findings to an advisory committee in July, officials said in a March 30 letter to two U.S. senators who released a critical report about the drug.
“Avandia withdrawal from the U.S. market would tilt the liability risk towards the top end of our $1 billion to $6 billion range,” Amusa said in the March 4 note to investors. He still rates the company as a “buy.”
Status Conference
Lanier, who won the first jury verdict against Merck & Co. over its withdrawn painkiller Vioxx in 2005, resolved more than 500 Avandia cases, the people said. Weiss, who was among a group of plaintiffs’ lawyers who negotiated a $3.75 billion settlement of suits over Wyeth’s diet drugs in 2000, resolved more than 200 Avandia cases, the people added.
Weiss announced he’d settled his Avandia cases at a status conference last month in Philadelphia Common Pleas Court on the suits slated to be tried there, the people said.
Ted Oshman, a Manhattan-based plaintiffs’ lawyer, also settled a number of cases, the people said. None of the three attorneys returned calls for comment on the accords.
The case is In Re Avandia Marketing, Sales Practices and Products Liability Litigation, 07-1871, U.S. District Court for Eastern District of Pennsylvania (Philadelphia).
To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; Trista Kelley in London at tkelley2@bloomberg.net
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