GSK Shares Inch Higher After Slumping on Heartburn Drug Litigation Worries

By Scott Kanowsky 

Investing.com -- Shares in GSK plc (LON:GSK) rose on Friday, paring back some heavy recent losses, as the British pharmaceutical giant responded to a bout of speculation around lawsuits over the heartburn drug Zantac.

GSK shares moved higher by over 3%, after slumping by more than 10% since the end of trading on Tuesday.

The company said on Thursday that in-house research, as well as studies from the U.S. Food&Drug Administration and the European Medicines Agency, have all found no evidence of a causal link between ranitidine - the active ingredient in Zantac - and the development of cancer in patients.

Zantac was the world's top-selling medicine in 1988 and become one of the first to have annual sales worth more than $1B, according to Reuters.

Concerns around the treatment gained traction in 2018 after years of marketing by several drugmakers, including GSK and rivals Sanofi SA (EPA:SASY) and Pfizer (NYSE:PFE). Sanofi recalled the compound from the U.S. in 2019 following the start of an FDA investigation into the level of nitrosodimethylamine, or NDMA - which has been found to lead to cancer in humans - in it.

The FDA concluded that the drug did have a high amount of the chemical and subsequently requested it be taken off the market in 2020.

More than 2,000 personal injury cases purporting a connection between Zantac and cancer have been filed, with claimants accusing - among others - GSK, Sanofi and Pfizer of not adequately warning customers. The first trial over one of these cases is set to begin in the U.S. state of Illinois later this month.

"It seems very possible parties [...] will incur the risk of some degree of shared liability with the only real questions being what that magnitude of liability may be and when the market feels it can get a handle on it," Barclays analysts said in a note.

"Precedents would suggest a high five/low six figure average settlement per case in these types of product tort cases, implying a shared liability (based on precedent and extrapolation of present caseload) in the $5-10bn range."

Sanofi shares edged higher on Friday after they had fallen sharply throughout the week. Pfizer have also seen U.S.-listed shares slide, along with GSK's consumer health spin-off Haleon plc (NYSE:HLN), which warned in a prospectus last month that it is not yet able to assess the liability it has in any Zantac lawsuits.

A Pfizer spokesperson told Reuters that the company had not sold the product in more than 15 years and "did so only for a limited period of time."

Meanwhile, Haleon said it was "not a party to Zantac litigation proceedings," adding that it never sold the product in the U.S. as neither Haleon nor GSK Consumer Healthcare.