Lilly Says Takeda May Not Cover Its Share of $9 Billion Lawsuit

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 [e-mail]

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