Following the revelation of a $2.2 billion settlement pertaining to US lawsuits claiming that GSK’s discontinued heartburn treatment, Zantac, caused cancer, the company’s shares (GSK.L) shot up as much as 6.5% on Thursday.
The settlement was much smaller than expected; JP Morgan had previously estimated that it might have cost $3.5 billion. The deal was announced on Wednesday.
Regarding the final settlement amount, Barclays analysts called the result the “best case scenario”.
Ninety-three percent (80,000) of the outstanding Zantac-related lawsuits in the US are now resolved because to this agreement. The deal reduces a lot of the uncertainty that has been hanging over GSK’s shares for more than two years, according to analysts from Jefferies and other businesses.
“The timing was earlier than expected, and the $2.2 billion settlement is less than the $3.5 billion that the market had predicted.
The Zantac problem is getting better, and GSK should be able to swiftly settle the few instances that are left,” stated Lucy Coutts, an investment director at JM Finn, a wealth management company that owns shares in GSK.
GSK has consented to pay $70 million to settle a separate whistleblower action brought by a Connecticut laboratory, in addition to the larger settlement.
GSK has stated that the deals are in the company’s long-term interest to avoid the risks involved with protracted litigation, although it has not acknowledged any wrongdoing or liability in these settlements.
The settlements are expected to result in a 1.8 billion pound ($2.4 billion) hit for the corporation in its third quarter earnings; however, this will not affect its investment plans. On October 30, it will release the third quarter’s earnings.
Zantac was one of the first medications to reach $1 billion in yearly sales and the best-selling medication worldwide in 1988 after being certified by US regulators in 1983. At various points in time, GSK, Pfizer, Sanofi, and Boehringer Ingelheim all sold the medication.
Due to worries that ranitidine, which was marketed under the Zantac brand name, may eventually break down into the carcinogen NDMA or when exposed to heat, it was taken off the market in 2020. Many lawsuits were filed in response to the recall.
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