Glaxo is hit with a subpoena in the US

Steve Dinneen
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GlaxoSmithKline yesterday admitted it has received a subpoena from the US government over its controversial Avandia diabetes drug.

The drugmaker has already taken a charge of £147m on the treatment after it was linked to increased risk of heart attacks.

European regulators suspended it and severe restrictions were placed on its sale in the US. The subpoena relates to the development and marketing of the drug.

Glaxo reported earnings of £1.44bn, marginally beating analyst predictions. Revenue edged up one per cent to £6.81bn. Analysts had forecast £6.85bn.

However, shares in the firm fell amid fears of a legal battle and a warning of European price cuts.

Glaxo Chief executive Andrew Witty warned yesterday drug price cuts in Europe could average about five per cent in 2011, up from 3.5 per cent to four per cent this year.

However, he attempted to put a positive spin on the announcement, saying: “Despite the challenging environment we face, I remain confident that our outlook continues to improve.”

S&P Equity Research analyst Sho Matsubara said: “We are wary of margin pressure resulting from generic erosion of Glaxo’s high-margin brands and unfavourable product mix, while we believe the legal costs have already been provisioned in its book. In our view Glaxo will remain low growth, low risk and with moderate margins in the medium term.”