Avandia restrictions hit GlaxoSmithKline Q3 profit

AP News
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Posted: Oct 21, 2010 6:06 PM
Avandia restrictions hit GlaxoSmithKline Q3 profit

Pharmaceutical company GlaxoSmithKline reported a 3.5 percent drop in third-quarter earnings Thursday due to generic competition and a European ban on its diabetes drug Avandia, which was also restricted in the United States.

For the three months ending Sept. 30, GSK reported a net profit of 1.29 billion pounds ($2.03 billion), compared to 1.34 billion pounds a year earlier. Revenue rose 0.8 percent to 6.8 billion pounds on a reported basis, but were up 2 percent when not counting shifts in currency values.

The company raised its third-quarter dividend by 7 percent to 16 pence.

GSK shares, however, were down 1.6 percent at 1,272 pence following the report.

In September, European regulators ordered Avandia off the market and the U.S. Food and Drug Administration placed stringent restrictions on its use in the United States, in both cases because of a heightened risk of heart attack associated with the drug.

Glaxo disclosed in a regulatory filing that federal and state law enforcement officials in the U.S. are investigating its development and marketing of Avandia.

The company said it received a subpoena from the Department of Justice as well as requests for information from attorneys general in several states.

Glaxo Chief Executive Andrew Witty said on a call with analysts that the company also faces new lawsuits from patients who took Avandia, though he did not specify the number.

GSK booked a one-time charge of 147 million pounds related to Avandia, including the expected return of 65 million pounds worth of the product. GSK says future global sales of its once-blockbuster drug will be minimal.

The Avandia rulings and generic competition for Valtrex herpes medication drove GSK sales down 8 percent in the United States and 9 percent in Europe, the company said.

In the United States, GSK reported a 32 percent increase in vaccine sales, a 34 percent rise for cancer drugs and a 20 percent boost for Lovaza, its fish oil pill to control triglyceride fats in the blood.

Witty said the group estimated that third-quarter revenue was reduced by 2 percent because of U.S. health care reform and European government spending cuts.

(This version CORRECTS Corrects spelling of CEO Witty.)