GSK shares jump after landmark £1.68bn heartburn drug settlement
The pharmaceutical giant has settled the vast majority of cases around its drug Zantac in the US, boosting investor confidence in the company.
Shares in drugmaker GSK surged on Thursday after it struck a 2.2 billion US dollar (£1.68 billion) settlement to resolve tens of thousands of lawsuits in the US over its discontinued heartburn drug Zantac.
The company said it had settled with about 80,000 people who brought cases against it in the US – about 93% of all claimants – who alleged that the drug caused cancer.
The sum is seen as a major victory for GSK, after some analysts had estimated the figure would be far higher. JP Morgan’s prediction had been 3.5 billion dollars (£2.68 billion).
GSK has faced a long-running saga around Zantac, which is the brand name for the drug ranitidine.
The product reduces the amount of acid the stomach makes, and was a best-seller in the UK and US in the early 1980s in treating indigestion, heartburn and acid reflux.
It was the first drug to achieve so-called blockbuster status by generating more than a billion dollars in revenue.
But, in 2019, a laboratory in Connecticut reported that it had found “extremely high levels” of NDMA – a substance found in cigarettes and processed foods – when it heated ranitidine.
The drug was discontinued in the UK and the US as a precaution the next year. Other pharmaceutical giants like Pfizer and Sanofi have already reached settlements over similar products.
GSK has since pointed to subsequent research by the US Food and Drug Administration and the European Medicines Agency which has failed to find a causal link between the drug and cancer.
GSK did not accept any liability.
The FTSE 100 drugmaker’s share price was up 6% on Thursday morning as investors cheered the lower-than-expected settlement.
GSK said in a Wednesday evening statement that it will pay for the settlements with existing financial resources, and that it will not bring any change to the company’s “growth agenda or investment plans” for research and development.
Derren Nathan, head of equity research at Hargreaves Lansdown, added that the decision represents a “giant leap towards drawing a line under the long-running legal battle”.
He added that it is a “significantly better outcome than initially expected” and that the settlements “substantially de-risk the investment case for GSK shares which are trading at a hefty discount to the sector”.
