Companies covered this week:
- GSK - shares surge after Zantac litigation thrown out
- Vodafone - Nick Read to step down as CEO
- Games Workshop - trading update
GSK: Relief in Zantac litigation
GSK (LON:GSK) shares surged on Tuesday after a court in Florida threw out 2,500 lawsuits which claimed its heartburn medicine, Zantac (which is also sold under the generic name, ranitidine), causes cancer. US district judge Robin Rosenberg said that the lawsuits were based on “flawed science”, and that the only reliable test of the medicine showed an “unprovable risk of cancer”.
GSK is still facing thousands of personal injury lawsuits in state courts, but the likelihood of exorbitant payouts to the 77,000 claimants (cancer patients who believe Zantac caused their illness) has been reduced following the ruling by the district litigation. In August when the lawsuits were first filed, analysts suggested damages could reach $45bn. In the third quarter alone, GSK spent £45m on legal fees relating purely to the Zantac case.
GSK’s many investors will be relieved by this ruling - the lawsuits have weighed on the share price for the last six months - but it still serves as a reminder of what a mucky business pharmaceuticals can be.
Zantac is not a new medicine. It was first approved in 1983 and was one of the first drugs in the world to generate over $1bn in annual sales. It has since changed owners many times and, following the expiration of its patent, has been manufactured and sold by generic pharma companies as well. Until 2020 - when cancer claims forced the FDA to advise it be removed from the market - it was sold over the counter and as a prescription medicine.
Claims that Zantac contains a carcinogen were picked up in 2019 by Valisure, a laboratory in Connecticut which specialises in independent drugs safety testing. The company claims (fairly) that during the drug approval process, the FDA relies on safety data from the pharmaceutical companies themselves, rather than tests conducted by an independent lab. It aims to change that. In addition to the Zantac case, Valisure’s findings have forced a product recall of Johnson & Johnson’s sunscreen due to Benzene (another carcinogen) contamination.
Scandals and lawsuits are nothing new in the big pharma industry. These are big businesses which tend to have legal budgets big enough to fight off small labs…
