GSK shares drop 9% as US judge allows juries in Zantac lawsuits

On Monday, GSK's shares experienced a significant drop of up to 9%, resulting in a loss of over £6 billion ($7.6 billion) from the company's valuation. This downturn came as investors reacted to a U.S. judge's decision to allow approximately 75,000 lawsuits related to Zantac (ranitidine) to proceed to trial. Similarly, shares in Sanofi, another defendant in many of these cases, saw a nearly 2% decline.

The ruling came from Delaware judge Vivian Medinilla who, on May 31, concluded that the evidence presented by the plaintiffs could be considered legitimate and thus fit for a jury trial. Central to these lawsuits are claims that GSK, Sanofi, and other companies that marketed Zantac were aware that the drug’s active ingredient could convert into NDMA, a potential carcinogen, under certain conditions.

GSK and its co-defendants had hoped that Medinilla would take a cue from a federal judge in Florida who, in 2022, dismissed the cancer evidence as unreliable. Nonetheless, Medinilla emphasized that regulatory bodies had ordered the withdrawal of Zantac from the market due to NDMA being identified as a “substance that can cause cancer.” She characterized the dispute as a “classic battle of the experts,” stating that the companies could contest the plaintiffs’ scientific evidence during cross-examination at trial.

Underestimated Liabilities

Analysts from J.P. Morgan have suggested that the potential financial liability GSK might incur from the litigation is likely higher than the $2 billion to $3 billion the market had initially estimated. Previously, analysts projected that GSK, along with the other defendants including Boehringer Ingelheim, Pfizer, and Sanofi, could face a combined liability of up to $10 billion.

Medinilla pointed out that Delaware law shows a strong “deference for the role of juries as the ultimate fact finders,” and Delaware courts typically avoid intervening in technical disputes between opposing scientific experts. As of now, no trial date has been set for these cases.

Appeals on the Horizon

In response to Medinilla’s ruling, GSK announced it would “immediately seek an appeal,” emphasizing that the decision pertains only to the reliability of the plaintiffs' scientific methodologies and not to the agreement with their scientific conclusions. The company aims to challenge the admissibility of the plaintiffs’ evidence at trial.

Sanofi, named in around 25,000 of the lawsuits, also intends to appeal the decision. Pfizer, implicated in a smaller portion of the Delaware cases, plans to appeal as well, stating that it foresees no significant impact from the Zantac litigation.

This recent judicial decision has set the stage for a protracted legal battle involving scientific expertise and significant financial stakes for the companies involved. As the litigation progresses, the pharmaceutical giants will continue to navigate the complex landscape of legal and financial repercussions linked to Zantac.

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