June 1, 2010 / 5:57 PM / 8 years ago

UPDATE 1-Glaxo settles first Avandia case due for trial

* Case due to go to court in Philadelphia on June 1 settled

* Glaxo says settlement terms remain confidential

* First U.S. Avandia liability case now expected in October

* Multi-district litigation still pending in federal court

(Recasts and adds further Glaxo comment, paragraphs 3-4)

By Ben Hirschler

LONDON, June 1 (Reuters) - GlaxoSmithKline Plc (GSK.L) has settled more lawsuits alleging its Avandia diabetes drug caused heart attacks, heading off the first trial in the United States concerning the medicine.

The company said on Tuesday that terms of the settlement remained confidential. It declined to specify how many claimants were involved.

“We can confirm that the case that was scheduled for the first trial in state court in Philadelphia, for June 1, 2010, has been settled,” company spokeswoman Claire Brough said in an emailed statement.

“The next case scheduled for trial is in that court and is scheduled for October 2010. GSK has not settled the multi-district litigation pending in federal court.”

The latest move follows reports by plaintiff lawyers last month that about 700 cases had been settled for around $60 million.

Analysts estimate that Glaxo had faced a total of 13,000 claims for damages involving Avandia, of which they speculated around 5,000 were consolidated in Philadelphia, and there had been fears it could face damages of up to $6 billion.

However, last month’s relatively modest settlement deal and the latest settlement in Philadelphia suggests the amount paid out by the British-based drugmaker is likely to be a lot lower, analysts said.

“This implies that close to half of the cases have now been settled and should ease some fears about Vioxx-type liabilities,” said Deutsche Bank analyst Mark Clark.

He believes the cost is likely to be comfortably covered by the company’s 2 billion pounds ($2.9 billion) of litigation provisions.

And the total could be a lot less than that. Assuming the average pay-out rate of around $86,000 per claimant for the first 700 cases was applied to all 13,000, the amount would be just over $1.1 billion.

Glaxo has never confirmed the numbers involved in the different cases.

Merck & Co Inc (MRK.N) agreed a $4.85 billion settlement with plaintiffs in 2007 after its arthritis pain drug Vioxx was pulled from the market in 2004.

Commercially, Avandia is no longer a major product for Glaxo, with sales declining sharply following controversy over the drug’s heart risks in 2007, and the medicine is set to lose exclusivity in the United States in 2012.

But worries about liability claims have spiked since February, when two U.S. Senators published a highly critical report on Avandia. A Food and Drug Administration advisory panel will consider possible further restrictions on the drug in July.

In the first quarter of 2010, Glaxo reported increased legal costs of 210 million pounds, up from 51 million in the year-ago period, which it said reflected progress towards settling a number of cases. Glaxo has consistently defended the safety record of Avandia and says it acted properly in communicating with regulators and physicians about the medicine’s potential cardiovascular risks. ($1=.6852 Pound) (Editing by Jon Loades-Carter and Will Waterman)

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