Legal Problems Cut Into SmithKline Beecham Results
A continuing federal fraud investigation and a price-fixing lawsuit by drug retailers cut deeply into the fourth-quarter profit of drug maker SmithKline Beecham.
The company on Tuesday reported net income of $64 million, or 12 cents per U.S. share, after setting aside $395 million to help cover potential costs of the fraud investigation and a tentative settlement of the lawsuit. SmithKline is based in Middlesex, England; its U.S. headquarters are in Philadelphia.
The quarterly performance contrasts with a loss of $891 million, or $1.66 per U.S. share, for the same period in 1994, when the company set aside $916 million in restructuring costs after it acquired Sterling, formerly the drug division of Eastman Kodak Co.
If all one-time expenses and benefits were excluded, SmithKline said, it would have earned $414 million, or 76 cents a share, or 13% over the results for the 1994 quarter.
SmithKline also said the inspector general of the Health and Human Services Department has asserted that fraud occurred in a “substantial number of payments” made to its clinical laboratories division by federal health insurance programs. The company said it believes that substantially all of its claims were justified but that it is working with the government to resolve the matter. The claims are part of a nearly three-year investigation of several testing labs.
As for the price-fixing case, drug makers tentatively agreed recently to pay $409 million to settle a case involving 40,000 drugstore operators who claim they were unfairly denied discounts on pharmaceuticals. SmithKline’s share would be $30 million cash and $20 million worth of the generic form of its Tagamet ulcer drug. Related litigation is continuing.
At a Glance:
Liz Claiborne said its fourth-quarter earnings more than doubled to $33.6 million, or 45 cents a share, compared with profit from operations of $15.5 million, or 20 cents, for the year-earlier period. . . . One day after announcing that the company was no longer discussing a sale of its ailing Computer City division to CompUSA, Tandy said its fourth-quarter profit fell 12% to $90.2 million, or $1.39 per share, compared with earnings of $101.9 million, or $1.37 a share, in the same period of 1994. . . . Encino-based international security company Pinkerton reported better-than-expected fourth-quarter profit of $5.5 million, or 65 cents a share, contrasted with a loss of $13.6 million, or $1.64, a year earlier.
