IHS Global Insight Perspective | |
Significance | The deals will see AstraZeneca pay out a total of US$198 million to 17,500 claimants in the Seroquel litigations. The firm was defending over 10,000 lawsuits, with 176 more filed recently in the United States. |
Implications | The move follows speculation over a potential agreement for 5,500 cases in early August 2010. The payout is a smaller amount than other recent product-liability lawsuits involving big pharma firms, and the U.K. major will be relieved to have made the settlement. |
Outlook | The firm has not made financial provisions reflecting the payout, and maintains an unchanged core earnings-per-share guidance of US$6.35–6.65. With Seroquel being one of the top three drugs in revenues for AstraZeneca, the benefits of this latest deal will be significant in the near term. |
AstraZeneca today announced that it had reached agreements in principle on monetary terms with 17,500 product liability claimants in the United States. The total payout from the deals is reported to be US$198 million. The deals itself are now subject to agreement on unspecified non-monetary terms, the firm said. The agreements refer to the firm's drug Seroquel (quetiapine fumarate)—its second largest drug, after Crestor (rosuvastatin)—which has been linked to an increased risk of diabetes. The product-liability-lawsuit plaintiffs alleged that the firm did not adequately warn patients of the diabetes risk. The company maintains that the drug labelling reflects the risks associated with the drug, particularly diabetes.
The settlement announcement will potentially bring to an end more than 10,000 lawsuits in which AstraZeneca was involved with respect to the drug as of 30 June 2010, according to the Financial Times. Furthermore, 175 lawsuits have been filed but not served, the source adds. AstraZeneca said that about 2,900 additional cases have been dismissed by order or agreement, and the only jury trial ended in favour of the company by the end of June. The firm has maintained that it will continue to participate in the mediation process in both federal and state jurisdictions.
Seroquel was first approved in 1997 for the treatment of schizophrenia, and in 2004 for the acute treatment of manic episodes associated with bipolar 1 disorder, both as a monotherapy and as an adjunct to lithium or divalproex. The franchise includes Seroquel XR (extended release), and has together garnered US$1.35 billion in global sales during the second quarter, ending 30 June 2010.
Outlook and Implications
The agreement will bring a sense of resolution to the series of litigations that AstraZeneca faced relating to Seroquel in the United States. The price tag of US$198 million also seems to imply a better financial result for the U.K. pharma major, given the recent product liability lawsuits that have been resolved by global pharma majors in the United States. The other dimensions that may have contributed to the resolution are the fact that the drug loses its United States patent exclusivity in March 2010 (for paediatric coverage), while the main patent expires in October 2011, according to the orange book. That leaves just 18 months of marketing exclusivity for the firm with respect to Seroquel. Hence, the announcement of such a resolution represents potentially the best result for the firm, particularly in the short term, ensuring revenues continue from its second largest drug franchise. Since its launch in 1997, the drug has garnered close to US$19 billion for AstraZeneca.
The company has, however, been firm in its guidance for the rest of year by not confirming any provisions for the US$198 million charge.
The wider implication of such a deal reflects on the overall trend in the industry, particularly with respect to product liability suits in the United States; big pharma have continued to resolve such litigation through financial settlements. This effort is primarily in a bid to limit the potential impact on the drug's revenues, particularly blockbuster drugs, at a time when patent challenges and generic competition are already shrinking revenue streams. GlaxoSmithKline announced the settlement of 190 Paxil (paroxetine) litigation cases in June 2010 (see United States: 29 June 2010: GSK to Settle Paxil Litigation Cases).