GSK takes $3.4B hit over U.S. Avandia woes

GlaxoSmithKline (GSK) is expecting to record a legal charge for the fourth quarter of 2010 of £2.2 billion ($3.4 billion USD), primarily related to additional provisioning in respect to the investigation by the U.S. Attorney's Office for the District of Colorado into its U.S. sales and promotional practices and for product liability cases regarding rosiglitazone (Avandia).

Regarding Avandia, in July 2010 the London-based GSK took a provision for product liability cases relating to the product that had been settled or received at that time. GSK said it continues to receive new product liability cases regarding Avandia in the U.S., and it has received a “substantial” number of new claims. This assessment includes these additional cases and an estimate of likely future claims.

"We recognize that this is a significant charge, but we believe the approach we are taking to resolve long-standing legal matters is in the company's best interests,” said P.D. Villarreal, senior vice president of global litigation at GSK. “We have closed out a number of major cases over the last year and we remain determined to do all we can to reduce our litigation risk."

GSK said ultimate liability for legal claims may vary from the amounts provided and is dependent upon the outcome of litigation proceedings, investigations and possible settlement negotiations. The “position could change over time, and there can, therefore, be no assurance that any losses that result from the outcome of any legal proceedings will not exceed the amount of the provisions reported in [GSK's] financial accounts by a material amount,” the company said.