Takeda Pharmaceutical Co. and Eli Lilly & Co. (LLY) were ordered to pay a combined $9 billion after a federal court jury found they hid the cancer risks of their Actos diabetes medicine in the first U.S. trial of its kind.
Takeda, based in Osaka, Japan, was ordered to pay $6 billion in punitive damages by the jury yesterday in Lafayette, Louisiana. Its shares fell as much as 8.8 percent in Tokyo today before trading 8 percent lower at 4,434 yen at 1:29 p.m. local time, headed for the biggest decline since March 2009. Indianapolis-based Eli Lilly, Takeda’s partner, was ordered to pay $3 billion.
“I hope Takeda executives in Japan heard what this jury had to say loudly and clearly,” Mark Lanier, a lawyer for former Actos user Terrence Allen, said after the verdict. The jury earlier awarded $1.5 million in compensatory damages to Allen, who blamed the drug for his cancer.
Takeda, Asia’s largest drugmaker, faces the Actos claims after it scrapped development of another diabetes drug this year when research linked it to liver damage. More than 2,700 Actos suits have been consolidated before U.S. District Judge Rebecca Doherty in Louisiana for pretrial information exchanges, according to court dockets. Doherty presided over Allen’s trial.
The $9 billion jury award, the seventh-largest in U.S. history based on data compiled by Bloomberg, is almost certain to be reduced because the U.S. Supreme Court has said punitive verdicts must be proportional to the awards of compensatory, or actual damages that underlie them. The country’s highest court has said that in some cases, punitive awards that amount to ten times a compensatory award would be acceptable.
Of the 10 largest U.S. punitive verdicts previously awarded against corporations, all were either reversed or substantially reduced. None were paid at the amounts assessed by the juries.
“Takeda respectfully disagrees with the verdict and we intend to vigorously challenge this outcome through all available legal means, including possible post-trial motions and an appeal,” Ken Greisman, general counsel for Takeda’s U.S. unit, said in an e-mailed statement.
“We also believe we demonstrated that Takeda acted responsibly with regard to Actos,” Greisman said.
Ed Sagebiel, spokesman for Eli Lilly, declined to comment on the verdict. Bruce Parker, a lawyer who represented both Eli Lilly and Takeda in the two-month trial, declined to comment as he was leaving the courtroom.
Allen sued both Takeda and Eli Lilly over Actos. Lilly served as Takeda’s U.S. partner in selling and marketing the drug over a seven-year period starting in 1999. While that partnership ended in 2006, Lilly continued to have rights to sell Actos in parts of Asia and Europe, as well as in Canada and Mexico.
Lanier said evidence presented in the trial showed Takeda agreed to indemnify Lilly for any legal liability tied to Actos. That means that Takeda will probably be on the hook alone for whatever the final amount turns out to be.
The Louisiana jury is the fourth panel to have weighed allegations that Takeda marketed Actos knowing it could cause cancer and failed to properly warn doctors and consumers about the risks.
Last year, state juries in California and Maryland ordered Takeda to pay a total of $8.2 million in damages to former Actos users. Judges in both states threw out the verdicts. Jurors this year in state court in Las Vegas rejected claims the company failed to properly warn consumers about the risks of Actos.
Actos sales peaked in the year ended March 2011 at $4.5 billion and accounted for 27 percent of Takeda’s revenue at the time, according to data compiled by Bloomberg. Actos has generated more than $16 billion in sales since its 1999 release, according to court filings. Takeda now faces generic competition from Ranbaxy Laboratories Ltd.
The verdict comes as both companies battle rising competition from cheaper generics. Takeda has seen earnings decline due to generic competition on Actos, once the world’s best selling diabetes medicine, and Lilly has seen treatments for pain and schizophrenia lose market share to lower priced copies.
Takeda, which traces its origins to a medicine wholesale business opened in Osaka in 1781, has been making acquisitions and hiring senior executives from overseas to globalize its business in recent years.
It has hired French national Christophe Weber as chief operating officer and plans to name him chief executive next year, which would make him the first non-Japanese leader in Takeda’s history. Takeda in February predicted net income will fall 24 percent to a 15-year low of 100 billion yen ($971.5 million) for the year ending March 2014, on revenue of 1.69 trillion yen. Lilly in January reported that fourth quarter sales fell about 2 percent to $5.81 billion.
The consolidated Actos cases in Louisiana are In Re Actos (Pioglitazone) Products Liability Litigation, 11-md-02299. Allen’s case is Allen v. Takeda Pharmaceuticals North America Inc., 12-cv-00064, both in U.S. District Court, Western District of Louisiana (Lafayette).