GSK, the British pharmaceutical giant, saw its shares plummet by 9% on Monday after a Delaware judge ruled in favour of allowing more than 70,000 lawsuits claiming that their discontinued heartburn drug, Zantac, caused cancer. This decision dealt a significant blow to GSK, wiping out nearly $8.9 billion of its market value.
Despite GSK's disagreement with the ruling and immediate appeal, the market reacted negatively, with shares falling to their lowest point since August 2022. Analysts at J.P. Morgan predict that GSK's potential liability resulting from this litigation could exceed the $2 billion to $3 billion figure previously estimated by the market.
The ruling allows expert witnesses to testify in court regarding the potential link between Zantac and cancer, despite arguments from former Zantac manufacturers, including GSK, Pfizer, Sanofi, and Boehringer Ingelheim, claiming that these opinions lacked scientific support.
Zantac-related lawsuits have been a persistent issue for GSK, causing significant market value losses in the past. While Citi analysts estimate potential settlement costs of $3 billion, Redburn analysts expect a lower settlement range of $1 billion to $1.5 billion.
Despite this setback, GSK has recently settled a series of Zantac-related lawsuits, including several in California. Additionally, last month, a jury in Chicago ruled in favour of GSK, rejecting a claim that Zantac caused colon cancer in an Illinois woman.
Analysts suggest that the company's recent legal victory in Illinois may incentivise settlement negotiations in the ongoing Zantac litigation, rather than pursuing multiple trials. However, the potential financial implications of these lawsuits remain a significant concern for GSK and its investors.
