Legal liabilities put Glaxo dividend in doubt

The hit will take Glaxo's legal provisions to 4.03bn in 2010, and as a result the City consensus for full-year pre-tax profits is 4.61bn, sharply down from 7.89bn in 2009. Sales are expected to have trod water at 28.38bn.

Jeremy Batstone-Carr, analyst at broker Charles Stanley, said in a note that the uncertainty on the fourth-quarter dividend meant the results this Thursday would "be awaited with a high degree of trepidation by investors". He said: "We note that the company has already paid 46p in quarterly dividend payouts over 2010 but may pass its final payout despite the historic commitment to a progressive policy."

The new legal provisions follow allegations last year that use of Avandia was associated with cardio-vascular side-effects. US regulators put restrictions on the drug's labelling, while the product was withdrawn in Europe.

Glaxo also faces ongoing legal action by the US Attorney's Office in Colorado related to its anti-depressant drugs Paxil (known as Seroxat in Britain) and Wellbutrin.

Batstone-Carr said: "Whilst Glaxo's operating outlook is less opaque than those facing a substantial off-patent cliff (when rivals can launch generic products after a drug is out of patent], we cannot be certain that the company will not face further legacy-related litigation issues in future."

Citigroup said the prospect of further litigation costs was "likely to overshadow the operational prospects of the business", and that there were also worries Glaxo's share buyback programme would be put on hold. This followed earlier speculation that the programme would be restarted in 2011.

"We view this as very unlikely and see 2012 as the earliest that cash can be meaningfully returned to shareholders," it said.