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American Home Products Meets Expectations; Sets Huge Fen-Phen Charge

Earnings Scorecard
Actual Estimated* Year-Ago
$0.53 $0.53 $0.46

Drug maker American Home Products (AHP) reported fourth-quarter earnings Thursday that matched Wall Street's expectations.

The maker of pharmaceuticals, consumer health care and agricultural products reported earnings of $704.3 million, or 53 cents a share, compared with $602.7 million, or 46 cents a share, in the same quarter one year before. The results matched a consensus estimate of 19 Wall Street analysts polled by First Call/Thomson Financial.

However, the Madison, N.J.-based company also said it would take a higher-than-expected charge of $7.5 billion due to a lawsuit settlement for Fen-Phen, a popular slimming drug that has been linked with certain pulmonary and heart problems. The company originally estimated that the lawsuit would cost the company $4.75 billion.

"Although it will cost more than we originally expected, we believe it is clearly in the best interest of AHP shareholders to resolve the diet drug litigation quickly," the company said in a press release. "We are confident that no further charges will be required and that the strength of our business will enable us to meet earnings targets and all other business targets despite higher interest costs."

The company's stock closed at $54.75 Wednesday on the New York Stock Exchange.

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