GSK’s old foe, uncertainty, comes back to haunt it
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Sunday should have been a triumphant moment for Emma Walmsley’s GSK.
At a key oncology conference in Chicago, GSK presented fresh data on a myeloma medicine it withdrew from the US market in 2022. The UK pharma group hopes recent study data could aid Blenrep’s reintroduction. Instead, investors’ attention was drawn by an unwelcome development further east: a ruling by a judge in Delaware that will expose GSK to jury trials in the state in cases involving its heartburn treatment Zantac.
Concerns over liabilities related to Zantac litigation have dogged GSK’s shares for the past two years, ever since a Morgan Stanley note estimated a product liability of as much as $27bn for GSK. Although analysts’ estimates have come down significantly since, the uncertainty is an unwelcome old foe that chief executive Walmsley can ill-afford, even as she makes progress on the group’s other key challenges.
The Delaware judge ruled that scientific evidence presented by lawyers acting on behalf of plaintiffs who claim a link between the drug and various cancers would be admissible in trials. It does not determine liability or imply the court agrees with the science. But Delaware accounts for about 70,000 of GSK’s remaining 80,000 cases relating to Zantac.
Investor hopes had been high that the decision would go the other way and would in effect neutralise the threat of these cases. GSK insists there is no reliable evidence that the active ingredient in Zantac increases the risk of any cancer. Prior to Friday’s ruling, published on Saturday, GSK’s shares had gained nearly a fifth year to date. They had even touched levels last seen before August 2022, when the Morgan Stanley note on Zantac shook the market.
News of the Delaware ruling caused GSK’s shares to drop nearly 10 per cent, wiping more than £6bn off GSK’s market capitalisation. Taking Citi’s assumption of $3bn of settlement costs related to Zantac, that might seem an overreaction. Yet the litigation is only one of several doubts about GSK that Walmsley still needs to overcome.
True, the success of its respiratory syncytial virus vaccine Arexvy — which achieved blockbuster status this year — has helped to soften concerns over GSK’s pipeline. GSK earlier this year upgraded its 2031 sales target by £5bn to more than £38bn, versus sales of £30.3bn in 2023. That target is unchanged by developments in Delaware.
GSK plans to seek an appeal against the Delaware ruling but that process could take eight to 12 months. European pharma companies without obesity drug candidates find it hard these days to compete for investor attention. Without a resolution to the Zantac overhang in sight, Walmsley’s task has just become harder.
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