Lilly to take $1.4 billion charge over Zyprexa
NEW YORK (Reuters) - Eli Lilly and Co will record a $1.4 billion charge because of probes into past marketing of its top-selling Zyprexa schizophrenia drug and is in advanced talks to resolve the investigations, the company said on Tuesday.
Lilly will record the charge, which totals $1.29 a share, in the third quarter. Analysts are expecting profit of $1.02 a share before special items for the period, according to Reuters Estimates.
The company has faced long-running accusations that it improperly marketed Zyprexa to patients who were not approved users and that it played down side effects such as weight gain, which can increase the risk for diabetes.
The U.S. Attorney's Office in Philadelphia launched a probe into the matter in early 2004, and Lilly received a grand jury subpoena for Zyprexa-related documents this past November, the company said.
The Medicaid fraud control units of more than 30 states are coordinating with federal prosecutors in the investigation of any claims related to the health insurance program for the poor.
If the discussions are successfully concluded, the company expects they would settle the Zyprexa-related federal claims as well as the Medicaid-related claims of states, Lilly said. It said the $1.4 billion charge reflected the company's "currently estimable exposure" with respect to these matters.
Eleven states, including Pennsylvania, Connecticut and Mississippi, have filed lawsuits over Zyprexa and are not participating in the coordinated investigation, Lilly said.
"The government's investigation of Zyprexa has been ongoing for five years, and we now have a heightened sense of responsibility to all our stakeholders to intensify efforts to resolve these issues," Lilly General Counsel Robert Armitage said in a statement.
Zyprexa, introduced in 1996, is Lilly's biggest product, with global sales of $4.76 billion in 2007. Earlier this month, the company announced plans to acquire ImClone Systems Inc for $6.5 billion.
Also in October, Lilly agreed to pay $62 million to settle claims by 32 states and the District of Columbia related to past sales and marketing of Zyprexa. In March, it entered into a $15 million settlement with Alaska, which ended a trial involving various issues surrounding the medication.
Lilly said it had adopted a revised compliance program to ensure that its marketing and promotional practices fully comply with all laws and regulations.
The company's shares were unchanged at $34.10 in early New York Stock Exchange trade.
(Reporting by Martha Graybow, editing by Dave Zimmerman and Lisa Von Ahn)