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AstraZeneca Q2: $593M Seroquel Legal Bill Taps Out Insurance; Income Charges Expected

AstraZeneca said its Seroquel litigation costs have exceeded $593 million, and that it has tapped out the extent of its liability insurance. With no more insurance available to cover its bills, the company said it will take charges on its income statement in upcoming quarters.

The news comes as AstraZeneca also gave an update on the scale of the litigation filed against it: 10,381 cases are pending.

AstraZeneca said its insurers may dispute the $593 million the company believes it is owed:

The insurers that issued the applicable policies for 2003 have reserved the right to dispute coverage for Seroquel-related product liability claims on various grounds, and AstraZeneca currently believes that there are likely to be disputes with some or all of its insurers about the availability of some or all of this coverage.

This amount is approximately equal to the maximum insurance receivable that AstraZeneca will recognise under applicable accounting principles at this time with respect to the applicable insurance policies. Accordingly, beginning in the second half of 2009, management anticipates defence costs and damages, if any, that may be incurred in connection with Seroquel-related product liability claims will result in a charge to the income statement. There can be no assurance that additional coverage under the policies will be available or that the insurance receivable we have recognised as of 30 June 2009 will be realisable in full.

The suits claim that AstraZeneca failed to warn patients that the antipsychotic drug caused weight gain and diabetes. AZ gave this current breakdown of the war (see page 28):
  • Suits pending: 10,381
  • Additional cases dismissed: 2,556
  • Of those, dismissed with prejudice: 1,535
  • Federal multi-district litigation cases dismissed: 2
AZ has put down 20 percent of claims filed against it so far; it has lost no verdicts. The victories come at an average cost of $232,003, suggesting that settlements so far have been small.

Seroquel continues to gain in sales, AZ reported in its Q2 2009 earnings statement. The drug made $1.2 billion, up 12 percent. Overall, revenues were flat at $7.9 billion; net income saw a 5.6% increase to $1.7 billion.