GSK shares tumble after Delaware court ruling on Zantac

GSK shares dropped almost 10 per cent on Monday after a ruling from a Delaware judge left the UK drugmaker exposed to US jury trials over its allegedly carcinogenic heartburn treatment Zantac.

Judge Vivian Medinilla ruled that scientific evidence presented by lawyers in more than 70,000 cases was admissible, meaning scientists would be able to testify that there is a link between the plaintiffs’ cancers and their exposure to NDMA, a probable human carcinogen, through Zantac.

GSK won US approval for Zantac in 1983 and it became the first pharmaceutical “blockbuster” by generating more than $1bn in revenue. Pfizer, Boehringer Ingelheim and Sanofi all later acquired the rights to sell the drug after GSK’s patent expired.

Exposure to Zantac litigation has dogged GSK’s share price since the summer of 2022, when analysts estimated the potential costs to be as much as $45bn, wiping a combined $40bn off the market capitalisation of large pharmaceutical groups linked to the drug in days.

GSK and the other drugmakers that sold Zantac dispute these claims. The London-listed group said it planned to appeal against the Delaware ruling.

Shares in GSK were down 9.5 per cent on Monday while shares in French pharma group Sanofi, which sold the drug from 2017, fell 2 per cent.

Medinilla delivered her judgment on Friday, having heard plaintiffs’ scientific evidence in January. The judgment was published on Saturday.

The judgment came as a “surprise”, wrote Citi analyst Peter Verdult, given that a Florida federal court decided in 2022 that other scientific experts’ findings about the carcinogenic nature of Zantac were based on “unreliable methodologies”.

Verdult estimated the company’s potential settlement costs to be about $3bn in a note on Monday.

The vast majority of outstanding cases are being heard in Delaware. In seeking to prevent the plaintiffs’ scientists from testifying, GSK had hoped to draw a line under the vast majority of outstanding cases. Although Medinilla’s ruling does not endorse the plaintiffs’ claims, it enables their cases to advance to jury trials.

Brent Wisner, the co-lead counsel in cases brought by plaintiffs in Delaware and California state courts, said Friday’s ruling recognised “the central role juries must play in holding companies accountable”.

GSK said: “[The] scientific consensus is that there is no consistent or reliable evidence that ranitidine increases the risk of any cancer and GSK will continue to vigorously defend itself against all claims,” referring to the generic name for the drug.

The ruling is also a blow to chief executive Emma Walmsley’s efforts to turn around the company. GSK has had recent successes in the launch of a vaccine for respiratory syncytial virus last year that delivered more than $1bn in sales in around nine months.

Over the weekend, it also presented positive late-stage trial data for a blood cancer drug Blenrep at an oncology conference in Chicago. The Blenrep results “should have been a straightforward positive for GSK. Unfortunately the market will . . . fret over Friday’s Delaware ruling,” said Verdult.