GSK Shares Fall 10% After Zantac Lawsuits Permitted

Shares of GlaxoSmithKline (GSK) fell by 10% in London trading on Monday following a Delaware state court's decision to permit scientific evidence in a multitude of lawsuits concerning the discontinued heartburn medication Zantac. The court ruling allows expert testimonies from plaintiffs to be presented in cases against Zantac's manufacturers, which include GSK, Sanofi, Pfizer, and Boehringer Ingelheim. Initially launched as a prescription drug by GSK in the 1980s, Zantac later became available over the counter in the succeeding decade.

According to Bloomberg, Sanofi is confronted with around 25,000 cases in Delaware, while GSK faces approximately 69,000 lawsuits. In 2019 and 2020, Zantac was withdrawn from both European and U.S. markets after the FDA requested its removal. This decision followed investigations revealing potential contamination of ranitidine products by N-nitrosodimethylamine (NDMA), a compound classified by the FDA as a probable carcinogen, which indicates it "could" cause cancer. Although NDMA is commonly found at low levels in water and food, its elevated concentrations in Zantac over time, especially when stored at higher temperatures, raised concerns.

GSK expressed disagreement with the Delaware court's decision, announcing its intention to "immediately seek an appeal." The company argued that this ruling contradicts a December 2022 decision by a federal court's Multidistrict Litigation (MDL) that dismissed all cases alleging that ranitidine caused five specific types of cancer. GSK maintains that no consistent or reliable evidence links ranitidine to an increased cancer risk and vowed to continue vigorously defending itself.

The litigation surrounding ranitidine has been a significant issue for GSK in recent years. In April 2024, Sanofi agreed to settle 4,000 ranitidine-related cancer lawsuits in U.S. courts. While the terms of this settlement were not disclosed, Sanofi stated it had no liability in the matter.

The recent drop in GSK's stock resulted in an approximate $8.9 billion loss in market value. Despite this setback, GSK asserted that the ruling would not affect its growth investment plans. In May 2024, the company announced its intention to divest its remaining stake in consumer health spinout Haleon, a move expected to raise around $1.52 billion.

In summary, GSK's stock plummeted following a court ruling that permits scientific evidence in numerous lawsuits concerning the discontinued drug Zantac. This decision affects several pharmaceutical giants and has led to ongoing legal and financial challenges for the company.