GSK soothes investors by settling first Zantac cancer lawsuit due for US trial - GSK (GSK.L) reached an agreement to settle the U.S. lawsuit alleging its discontinuation of the heartburn medication Zantac led to cancer, the British drugmaker announced on Friday.
GSK (GSK.L) reached an agreement to settle the U.S. lawsuit alleging its discontinuation of the heartburn medication Zantac led to cancer, the British drugmaker announced on Friday, stopping the first case of this kind in the United States from proceeding to trial in the coming month.
The company claimed to have signed a confidential contract to settle a confidential matter with California resident James Goetz, who alleged he suffered bladder cancer due to taking the medication. The trial was scheduled to begin on 24th July and would have been the first opportunity to see how Zantac cancer claims would be judged before jurors.
The agreement could establish the precedent for thousands of cases going to trial in the coming year. The pharmaceutical company’s (GSK.L) shares gained about 5 per cent, and it is the top performer on London’s blue-chip FTSE 100 (.FTSE).
The company faces more than five thousand similar lawsuits across California and more than 73,000 lawsuits in Delaware. There are no trials scheduled at the moment.
“It was this risk that headlined the market that had a trial just shortly that kept investors from investing in GSK,” Barclays analyst Emily Field wrote in a note.
GSK stated that the settlement reflected its intention to stay clear of distractions from lengthy litigation. GSK did not acknowledge liability and said it would be adamant in future Zantac instances.
Lawyers representing Goetz stated they were delighted that the firm “agreed to settle and end the story of Mr Goetz.”
It was initially marketed by a predecessor of GSK GSK, later by various companies, including Pfizer (PFE.N), Boehringer Ingelheim and Sanofi (SASY.PA), and generic drug makers.
Businesses facing litigation won a significant victory in December after a federal judge tossed out the majority of Zantac cases filed in U.S. federal courts after concluding that the science didn’t confirm the conclusions of experts of the plaintiffs relating Zantac to cancer.
Lucy Coutts, investment director at JM Finn, a wealth management company JM Finn, which holds GSK shares, said that the Goetz settlement could be a precedent for other settlements in similar cases.
“It will also eliminate the need to worry about any lengthy lawsuit as the company can concentrate on its pipeline for the future, which is where shareholders will generate the value.” the CEO said.
Adam Zimmerman, a law professor at the University of Southern California who researches mass tort litigation, warned the court that it is “far too soon to make anything” regarding the implications of the settlement for the broader litigation.
Bank of America analysts on Friday stated that they continue to consider the risk of litigation for Zantac as low in absolute terms. This suggests that the settlement of the Goetz case could have been a cost to GSK’s “low thousands of million” worth of dollars, even in the event of a catastrophic case.
In the note, they argued that the Delaware case would likely not proceed to trial. They pondered GSK’s plan to limit public liability by avoiding extensive damages “plaintiff-friendly judges as sensible because litigation is unpredictable”.
Pfizer and Sanofi reached an agreement with Goetz in the last quarter of last year.
The concern over lengthy legal disputes and compensations has taken nearly 40 billion off the market worth of GSK, Sanofi, Pfizer and GSK’s spin-off Haleon for about one week during August.
The first time it was approved was in 1983. Zantac was among the first drugs to reach $1 billion in annual sales.
In 2019, a few manufacturers and pharmacies stopped Zantac sales due to fears that the active ingredient, called ranitidine, was degraded over time and formed the chemical known as NDMA. While NDMA is present in small amounts in water and food items, studies have found that it can cause cancer in more significant quantities.
The FDA 2020 pulled out of the market all of the remaining brand names, Zantac or generic variations, which triggered an avalanche of lawsuits. The company involved has repeatedly denied the claim that Zantac causes cancer.
The settlement on Friday follows an unpopular decision in the case of GSK in March, in which a California judge rejected the company’s request to keep expert testimony regarding the drug’s connection to cancer from the trial.
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