Glaxo faces US legal action over Zantac claims

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GLAXO, the British pharmaceuticals giant, is facing possible legal action from the Food and Drug Administration, the US industry regulator, that could force the company's best-selling drug, Zantac, off the market.

The move follows a seven-year campaign by the FDA to stop the company from using allegedly misleading sales methods to promote Zantac, which provides almost half the company's profits.

Glaxo admitted yesterday that it received a warning letter from the FDA in January accusing it of using 'false or misleading statements, suggestions or implications' in advertisements and brochures that promote unapproved uses for the drug.

The disclosures are almost certain to hit Glaxo's shares, which have slumped from a peak of 943p last year to 660p last week amid growing uncertainty about US healthcare reforms and the potential of Glaxo's new generation of drugs.

The FDA is demanding that Glaxo write to US doctors and publish new advertisements in leading medical journals to correct any misleading statement about Zantac, which is used to treat ulcers.

The authorities appear to have been particularly concerned about claims that Zantac is superior to Tagamet, a rival product manufactured by SmithKline Beecham.

Glaxo is the second British company to have fallen foul of the FDA's tough drug industry rules in the last 12 months.

Last year the FDA forced Fisons to suspend sales of two of its key medicines because it was unhappy with production standards at the company's UK plants. The move pushed the company into deep financial problems from which it has yet to recover. The ban has prompted Fisons to withdraw Imferon, the blood iron treatment, from the market permanently, while Opticrom, an eye remedy, has yet to be reapproved for sale by the FDA.

Glaxo said it was working with the FDA to resolve its problems.

Zantac is the world's biggest-selling drug, with total sales of about dollars 3bn ( pounds 2.1bn) a year, of which half are estimated to stem from the US. However, it is expected to face stiffer competition with the expiry of Tagamet's US patent rights. That is likely to trigger production of cheaper generic products that could, in turn, put Zantac's high profit margins under pressure.

Earlier this month, the company reported a better-than-expected first-half result, with taxable profits up 16 per cent to pounds 819m for the six months to 31 December, largely due to the continued success of Zantac. Panmure Gordon, the stockbroker, is forecasting an increase in pre-tax profits from pounds 1.4bn to pounds 1.75bn for the full year to 30 June.

In a formal statement the company said yesterday: 'The contents of the warning letter from the FDA in respect of claims for Zantac have been a matter of public record since they appeared in the US and UK pharmaceuticals trade press last month.

'In its letter the FDA said that in its view, certain promotional claims for Zantac are not justified and it is required that Glaxo correct them in a letter to US physicians.

'Glaxo has since met the FDA and is co-operating with the agency in the hope of settling the issue soon. The safety and effectiveness of Zantac have not been called into question. Zantac meets an important medical need for many US patients and will continue to do so, and the company's confidence in the product remains undiminished.'