GSK Shares Plunge After US Court Ruling on Zantac Lawsuits

GlaxoSmithKline (GSK) experienced a significant blow as its shares dropped over 9% due to a court decision in Delaware, U.S., allowing over 70,000 lawsuits to proceed against the pharmaceutical giant regarding the heartburn medication Zantec. This ruling wiped out most of the company's gains for the year, leading to a loss of over £6 billion in market value. The litigation concerns the claim that Zantac, a drug once manufactured by GSK, Pfizer, and Sanofi, may cause cancer. The Delaware Superior Court, under Judge Vivian Medinilla, decided that expert witnesses could testify that Zantac could potentially lead to cancer, citing a reluctance to interfere in the technical debate between opposing scientific viewpoints.

Despite this setback, Deutsche Bank maintained a "buy" rating on GSK, highlighting the company's long-term potential and setting a share price target offering a 21% premium over the current price. The investment bank acknowledged the challenges posed by the litigation but appeared optimistic about GBS’s ability to refocus on its core business and growth opportunities post-litigation.

The controversy around Zantac began after it was discovered that the drug could potentially produce NDMA, a probable human carcinogen, leading to its recall and discontinuation in European and U.S. markets between 2019 and 2020. The companies involved have been defending against claims that they failed to warn consumers about the cancer risk associated with Zantac. GSK, in response to the ruling, stated that it plans to appeal, emphasizing that the Delaware decision does not reflect an agreement with the plaintiffs' scientific conclusions nor does it determine liability. Similarly, Pfizer and Sanofi expressed their intentions to contest the decision, with Pfizer noting a prior settlement of a substantial number of cases where it was named as a defendant.

Adding to the complexity, the legal landscape saw a partial victory for GSK and Boehringer Ingelheim in Illinois, where a jury found the companies not liable for colorectal cancer in the first Zantac case to reach trial. Analysts speculate that GSK, being the most exposed to the lawsuits, could face settlement costs ranging from $1 billion to over $3 billion. This wave of litigation and the accompanying market response underscores the ongoing challenges pharmaceutical companies face when safety concerns emerge regarding their products.