Eli Lilly & Co. said its former marketing partner, Takeda
Pharmaceutical Co., has told Lilly it may not cover the
Indianapolis company's share of a recent U.S. jury verdict ordering
the companies to pay $9 billion in damages in a product-liability
lawsuit over the diabetes drug Actos.
A jury in federal court in Louisiana earlier in April 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. The
plaintiffs alleged Mr. Allen's use of Actos caused his bladder
cancer. The jury also awarded $1.48 million in compensatory
damages, of which Takeda and Lilly were ordered to pay 75% and 25%,
respectively.
Immediately after the verdict, Lilly said its marketing
agreement with Takeda called for Takeda to indemnify it against
losses and expenses in the Actos litigation. But Takeda has
notified Lilly that it was reserving its right to challenge any
obligations to defend and indemnify Lilly in the case, Lilly said
Thursday.
A Takeda spokeswoman confirmed the move and cited "contractual
agreements."
"We fully expect and believe they are obligated to indemnify
us," Lilly Chief Financial Officer Derica Rice said in an interview
Thursday.
The companies plan to appeal the verdict. The amount of damages
also is likely to be reduced because the U.S. Supreme Court has set
certain limits on punitive damages in a series of decisions.
Some 3,000 people have alleged in lawsuits that use of the drug
caused or contributed to their development of bladder cancer, and
that the companies didn't adequately warn of the risk. The
companies have denied the allegations.
Lilly previously co-promoted the Type 2 diabetes treatment with
Japan-based Takeda from 1999 to 2006.
Separately, Lilly said its first-quarter profit fell 53% to
$727.9 million from a year earlier, while sales dropped 16% to
$4.68 billion, as the company recently lost patent protection for
two important drugs, the antidepressant Cymbalta and the
bone-building drug Evista, triggering generic competition.
Lilly expects 2014 to be a year of declining sales and profit
because of the patent losses, but it could return to growth next
year, helped by new products including a stomach-cancer drug,
Cyramza, approved earlier this week by the U.S. Food and Drug
Administration. Lilly said Thursday the drug would cost about
$6,120 per infusion, or $24,480 per patient for a standard course
of treatment.
Lilly agreed earlier this week to acquire the animal-health
business of Novartis AG for about $5.4 billion.
Write to Peter Loftus at peter.loftus@wsj.com
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