Wednesday, April 29, 2015
Takeda Pharmaceutical Co. said Wednesday that it agreed to pay up to $2.4 billion to settle U.S. suits charging that the drug maker hid the cancer risk of its Actos diabetes drug.
Japan’s biggest drug maker by revenue said the move is expected to resolve the “vast majority” of product liability lawsuits pending in the U.S., although it will likely cause the company to post an annual loss for the first time since it was listed in 1949.
Takeda said it would take a $2.7 billion charge against earnings in the fourth quarter of the fiscal year ended March 31 to cover the settlement and the costs associated with defending remaining cases and handling other related litigation.
As a result, the company expects to record a net loss of ¥145 billion ($1.22 billion) in the fiscal year compared with its earlier forecast for ¥65 billion in net profit.
The settlement is expected to be split among about 9,000 people, according to Paul Pennock, one of the plaintiffs’ attorneys in the case. That would average out to about $267,000 per claimant.
The plaintiffs primarily alleged that their use of Actos caused or contributed to the development of bladder cancer and that Takeda didn’t adequately warn of the risk.
Takeda stood by the drug and said its benefits outweighed the risks.
The company said it believed the plaintiffs’ claims were without merit and it didn’t admit liability. It said it agreed to the settlement to “reduce financial uncertainties” and allow it to focus on developing new medicines.
Eli Lilly & Co., which co-promoted Actos with Takeda from 1999 to 2006, will be released from liability under the terms of the settlement, according to Mr. Pennock. A Lilly spokeswoman couldn’t immediately be reached.
“This is a fair settlement plan for the vast majority of plaintiffs,” said Mr. Pennock.
The settlement is among the largest involving liability claims against a drug maker. Merck & Co. in 2007 settled most claims involving its Vioxx painkiller for $4.85 billion.
The deal allows Takeda’s chief executive, Christophe Weber, to clear away an issue that had been hanging over the company for years. Mr. Weber, who is French, joined Takeda last year and became chief executive on April 1, one of the few non-Japanese to lead a major Japanese company.
Even before the Actos settlement, Takeda was facing a sharp falloff in profits because it lost patent protection on several of its major drugs, including Actos, and hadn’t come up with enough new blockbusters to replace them.
A year ago, a jury in federal court in Louisiana ordered Takeda to pay $6 billion and Lilly to pay $3 billion in punitive damages to a New York state man, Terrence Allen, and his wife, who alleged Mr. Allen’s use of Actos caused his bladder cancer.
The jury, which concluded the companies failed to provide adequate warnings about a risk of bladder cancer associated with Actos, also awarded $1.48 million in compensatory damages, of which Takeda and Lilly were ordered to pay 75% and 25%, respectively.
The drug makers challenged the awards. In an October ruling, a federal judge said the $9 billion was excessive, and reduced the amounts to $27.7 million against Takeda and $9.2 million against Lilly. The judge cited previous U.S. Supreme Court rulings establishing constitutional limits on punitive damages. Compensatory damages were reduced to $1.3 million.
One legal expert said some plaintiffs may not agree to participate in the settlement.
“I think there will be a substantial number of holdouts because somebody who has a more serious case may believe they are likely to receive more,” said Erik Gordon, a professor at the University of Michigan Ross School of Business. “The people most likely to get the big verdict are not likely to take this money. And that’s why Takeda put $300 million in charges above the $2.4 billion set aside for settlements.”
Takeda said the settlement will become effective if 95% of current litigants and claimants opt into it.
wsj.com
