Citi estimates Zantac settlement costs at US$3 billion
GSK shares plunged in the wake of a court ruling that the UK drugmaker, alongside others including Sanofi, must face trials over whether the former heartburn treatment Zantac causes cancer.
The ruling is a blow to GSK, paving the way for multiple trials in Delaware state court. The stock fell as much as 10 per cent in London trading, wiping about £7 billion (S$12 billion) from GSK’s market value. The drop is the worst since another Zantac-related rout in August 2022.
The drop wipes out roughly half the stock’s gain this year just as the company was showing signs of improvement.
Zantac was a once-popular antacid that has drawn a flurry of US personal-injury lawsuits alleging it causes cancer.
Sanofi has said it faces about 25,000 cases in Delaware – significantly fewer than the roughly 69,000 in which GSK is named as a defendant. The French drugmaker’s shares fell about 1 per cent in Paris trading.
Unlike a federal judge in Florida who rejected the cancer evidence as unreliable in 2022, Superior Court judge Vivian Medinilla on Friday (May 31) concluded that consumers were not relying on flawed science to support allegations that Zantac caused a variety of cancers.
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The decision, while procedural, exposes GSK to over 70,000 cases, Citi analyst Peter Verdult wrote in a note to clients. He put total Zantac settlement costs at US$3 billion.
GSK is set to appeal the ruling, it said. The drugmaker emphasised that the decision “does not mean that the court agrees with plaintiffs’ experts’ scientific conclusions, and it does not determine liability”. GSK has consistently denied that Zantac causes cancer.
Another rout
Under chief executive officer Emma Walmsley, GSK has successfully rolled out the first vaccine for a common respiratory virus and fended off activist investor Elliott Investment Management, but Zantac litigation has posed a continued threat.
Initial concerns sparked the 2022 sell-off that wiped out gains made since Walmsley took charge. It took the stock more than a year to recover.
Plaintiffs have argued drugmakers knew ranitidine – Zantac’s active ingredient – turned into the potential carcinogen NDMA under certain conditions. In 2020, the US Food and Drug Administration asked companies to remove all ranitidine-based drugs from the US market. Medinilla cited the FDA recall in her decision to allow consumers’ experts to testify.
The companies and consumers will get a chance for their experts to present to juries, who will make the final call on Zantac’s cancer risks, the judge noted. “This dispute presents a classic battle of the experts,” Medinilla wrote. The companies “can take up their challenges” to plaintiffs’ scientific evidence on cross-examination at trial, she added.
Zantac hit the US market as a prescription drug in 1983 before transforming into an over-the-counter heartburn treatment in 1995. GSK and Warner Lambert developed it as part of a joint venture, and the drug was owned by several companies through the years before Sanofi acquired it in 2017.
Sanofi shares dropped 1.7 per cent in Paris trading. BLOOMBERG
