GlaxoSmithKline profits to be hit by £1.57bn legal bill - Herald Scotland | Business | Markets & Economy: "Drugs giant GlaxoSmithKline’s second-quarter results on Wednesday will see a huge £1.57bn provision for legal disputes put a significant dent in profits.
The bill comes on top of the £2.3bn which the firm has already put aside and represents a “substantial proportion” of its legal cases.
Glaxo has agreed a £500m settlement with the US Government after its probe into a factory in Puerto Rico after allegations that it was not following proper manufacturing procedures.
The provision will also go towards settling claims over drugs such as its diabetes treatment Avandia, which has been under a cloud since 2007 amid claims – denied by Glaxo – that it increased the risk of heart attacks.
Before news of the legal bill, analysts were expecting underlying profits of £1.98bn for the second quarter, down from £2.25bn a year earlier.
Analysts said the move represented an attempt to clear the decks and bring down the quarterly volatility in its legal costs.
But the drugs giant has also received some good news on Avandia after an advisory committee of the Food and Drugs Administration voted to recommend keeping the drug on the market – albeit with additional warning labels over potential side-effects. A final FDA decision is expected soon.
Charles Stanley analyst Jeremy Batstone-Carr said: “This news removes a significant impediment to investor sentiment towards the business and the share price which has struggled to make much headway.”
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