American Home Takes Fen-Phen Charge, Beats Estimates

Third-quarter results include a massive charge to settle diet-drug lawsuits.
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American Home Products

(AHP)

announced a staggering third-quarter loss Monday, but Wall Street was ready and American Home's shares barely budged.

The pharmaceutical giant said it lost $2.8 billion, or $2.20 a diluted share, for the third quarter, after taking one charge to settle lawsuits and another to restructure part of its agricultural business.

Excluding the charges, profits actually rose 2% to $633 million, or 48 cents a diluted share, edging out the predictions from analysts surveyed by

First Call/Thomson Financial

by a penny. In the year-ago quarter, earnings were $618 million, or 46 cents a diluted share.

The settlement charge covers costs associated with settling lawsuits from people who took the once-popular fen-phen diet drug combination. The company opted to take its fiduciary medicine right away, recording a $4.75 billion charge for the settlements alone.

The settlement offer is open to anyone who took Redux or Pondimin, components of the fen part of the combination. It still requires judicial approval, and AHP can pull the offer if too many plaintiffs opt out of the class action.

AHP shares were up fractionally at midday. The company plans to meet with analysts in New York Monday afternoon.