Glaxo takes £2.2bn legal charge for fourth quarter

17th Jan 2011 14:59

GlaxoSmithKline (GSK) will take a legal charge of £2.2bn for the fourth quarter of 2010, mostly linked to an investigation into US sales and promotional practices and for product liability cases regarding diabetes drug Avandia.The British company had already flagged a charge of £1.57bn for the second quarter, but it has continued to receive new product liability cases regarding Avandia in the United States.Patients across America have filed lawsuits against Avandia amid reports of an increased risk of heart attack, heart failure, osteoporosis and other potentially serious side effects.Glaxo warns the number of new claims received is "substantial" having now completed its assessment of the extra cases and an estimate of likely future claims. The after tax cost is put at £1.8bn."We recognise 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 senior vice-president and head of global litigation PD Villarreal."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." But the final cost could be even higher. "There can 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 the group's financial accounts by a material amount," Glaxo said.