12th Aug 2022 11:42
(Alliance News) - Shares in GSK PLC and its consumer healthcare spin-off Haleon PLC have seen a rough couple of days in London, as the pair, alongside peers Pfizer Inc and Sanofi SA, stare down a daunting litigation claim.
The pharma giants have come under pressure that heartburn treatment Zantac causes cancer. On Thursday evening and Friday morning, though, Pfizer and Haleon came out swinging.
GSK was up 3.7% in London on Friday at 1,451.71 pence, whiel Haleon advanced 1.5% to 269.65p. Over the past 5 days, however, the pair have slid 12% and 13%, respectively.
Pfizer shares closed 3.3% lower at USD48.29 each in New York on Thursday. In Paris, Sanofi was up 0.9% on Friday at EUR85.48 but is down 11% this week.
Analysts at Shore Capital said: "The two-day fall in GSK's share price reflects USD10 billion in market capitalisation with the movements of other publicly listed manufacturers under the spotlight taking this to about USD35 billion - discounting other dynamics, so seems somewhat overdone, in our view. Litigation analysts from Bloomberg have indicated a settlement value could fall between USD5 billion to USD7 billion, with GSK potentially liable for about 30%, which could be roughly USD2 billion."
Pfizer late Thursday said it has "significant defences" against the litigation, while Haleon revealed it is "not a party" to any claims.
Pfizer sold Zantac products between 1998 and 2006. By the time there was a withdrawal of Zantac products from the market in 2019 and 2020, Pfizer had already stopped selling it, the company explained.
"Pfizer has significant defences to this litigation and there are significant legal and factual issues that remain to be addressed by the courts," it said.
"Pfizer also has substantial indemnification claims against others, which have been acknowledged by several manufacturers in their disclosures. As a result, we believe at this time that the outcome of the litigation is not likely to be material to Pfizer."
Zantac was withdrawn after the US Food & Drug Administration in 2019 warned that the product contained levels of NDMA, a probable human carcinogen - a substance which has been linked to cancer.
"Many people consider healthcare companies to be saviours of the world, with their products helping to ease the pain of countless individuals. What's often forgotten is when something goes wrong with one of their products, the fallout can be catastrophic," Danni Hewson, financial analyst at AJ Bell, said.
"Fears of a multi-billion-dollar lawsuit for the companies involved with recalled heartburn drug Zantac have wiped billions off the value of GSK, Haleon and Sanofi this week. Investors fear they will have to shell out big bucks if found guilty of failing to properly warn users about health risks, with allegations that Zantac causes cancer."
Ranitidine, sold under the brand Zantac, was originally manufactured by GSK, and French pharmaceutical firm Sanofi bought the rights to branded over-the-counter US sales back in 2017.
Haleon said it is not aware of any material developments in relation to Zantac since the start of June. The spin-off of Haleon from GSK was completed in mid-July; the consumer healthcare business previously had been run as a joint venture with Pfizer, which owned just under a third.
AJ Bell's Hewson continued: "Now comes the really hard part, with the drug companies having to convince investors, the public and the courts they are not guilty.
"It's given GSK spin-off Haleon a terrible start to life as a standalone business, with its share price having plummeted in recent days. Haleon says it isn't party to any of the Zantac claims, yet GSK has served it with notice of potential claims in relation to liabilities connected to over-the-counter Zantac products."
Haleon said that it is "not primarily liable" for any over-the-counter or prescription claims involving Zantac.
However, it cautioned it may need to eventually compensate both GSK and Pfizer should the duo come into the legal cross-hairs.
"With the first personal injury case going to court later this month, the healthcare companies involved will have already prepared their defence and GSK implies that the accusations do not tally with scientific consensus to date," Hewson added.
Shore noted the first trial is scheduled to start on August 22 with the first "bellwether" trial due to start February 13.
Hewson continued: "It is worth remembering this is not 'new' news. Regulators and experts have been looking into any links between Zantac and cancer for years, and indeed the risks were flagged in Haleon's stock market prospectus. However, it goes to show most investors don't bother to read the small print, so they've been caught off guard after the potential liabilities hit the news."
In late 2019, Sanofi recalled the over-the-counter treatment in the US and Canada over possible contamination fears. By April 2020, the FDA had ordered the drug and all its generics be withdrawn from drug store shelves.
Sanofi said that as of August 1, it was aware of 2,850 personal injury plaintiffs in the US. When factoring in additional Zantac cases that do not include Sanofi, this number rises to 3,450.
Sanofi noted that there are other potential personal injury claimants who, in lieu of filing a court case, have instead joined a registry of "unfiled" claims.
"Over time, the number of unfiled claims alleging either Rx and/or OTC use and implicating a variety of defendants in these actions has exceeded 150,000 – a significant number of these claims, however, do not implicate Sanofi," it said.
GSK, meanwhile, said it has been named as a defendant in around 3,000 filed personal injury cases in US federal and state court and "numerous" unfiled claims. Class actions have also been filed, it said.
Outside the US, there are "several class actions and in excess of 100 personal injury cases" pending against GSK in Canada, along with a class action in Israel.
By Paul McGowan; [email protected]
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