GSK shares rise after £1.7bn Zantac settlement
GSK shares have spiked today after the pharmaceutical giant agreed to pay as much as $2.2bn (£1.68bn) to settle lawsuits alleging one of its heartburn drugs had caused cancer.
The discontinued version of the drug, Zantac, had triggered 80,000 lawsuits from 10 different law firms in the US and has hung over the FTSE 100 drugmaker in recent months.
However, the settlement, which was announced yesterday, is expected to cover around 93 per cent of the claims and has settled nerves over the financial liabilities facing the firm.
Shares in the firm rose beyond five per cent today as investors welcomed the news.
AJ Bell’s Russ Mould said “investors would have been pleased to see the company get this monkey off its back almost regardless of the cost”.
Earlier estimates by Morgan Stanley suggested the UK-based pharmaceutical company could have faced as much as $27bn (£20bn) in liabilities.
“While some cases are outstanding it is a small proportion of the total and GSK will now seek to tidy up the loose ends,” Mould added.
Whilst GSK agreed to the payout, it has denied any wrongdoing by pointing to the lack of “consistent or reliable evidence” which links the Zantac drug to cancer.
The firm has also said it will pay up to $70m (£53m) towards a whistle-blower lawsuit which accused the company of consciously hiding Zantac’s risks from the US government.
GSK’s deal places the company in a strengthened financial position after its performance exceeded expectations in recent quarters.
Zantac was approved for sale in the US pharmaceutical market in the late 1980s.
Quickly becoming a best seller, Zantac’s annual sales surpassed the $1bn (£764m) mark.
It was then taken off the shelves during the pandemic as ‘precautionary measure’ amid concerns over carcinogenic impurity.
Major pharmaceuticals such as Pfizer and Sanofi, who were granted supreme court hearings in Zantac lawsuits, have also settled cases related to Zantac.