GSK Set for 2.2 Billion Pound Legal Charge
GSK Set For Pound(S)2.2bn Legal Charge [Herald, The (Scotland)]
From Herald, The (Scotland) (January 18, 2011)
GLAXOSMITHKLINE will record a legal charge of pound(s)2.2 billion for the fourth quarter, effectively wiping out its profit, as it settles further claims related to Avandia and sales practices.
The charge equates to an after-tax cost of pound(s)1.8bn, more than the pound(s)1.45bn the drug maker had been expected to make in net income during the three months to December, according to Thomson Reuters consensus forecasts.
Shares in Britain’s biggest pharmaceuticals group fell 1.6% on the news.
"We believe the approach we are taking to resolve long-standing legal matters is in the com-pany’s best interests," the firm’s head of global litigation, PD Villarreal, said in a statement.
The charge comes after a pound(s)1.57bn hit taken in the second quarter, which was also related in part to claims surrounding GSK’s controversial diabetes pill Avandia.
"The fact that this has come two quarters after the previous one will make people worry ... but it doesn’t change the underlying progress the company is making," said Dominic Valder, an analyst at Evolution Securities, who rates the stock a "buy".
"There is a new CFO (chief financial officer) just starting and there is a clear trend change in the underlying profitability of the company as a new portfolio of products starts to dominate growth."
Goldman Sachs investment banker Simon Dingemans will succeed Glaxo’s current chief financial officer, Julian Heslop, when he retires in March.
Avandia was once Glaxo’s second-biggest drug, with sales of around pound(s)1.8bn a year. Since 2007 it has been in decline after it was first linked to heart attacks.
It sold pound(s)755m in 2009 but sales are expected to tumble to insignificant levels following curbs on its use and a decision by the company to stop promoting the medicine.
Posted: January 2011