GSK to pay $2.2bn to settle Zantac lawsuits

10th Oct 2024 07:37

(Sharecast News) - GSK has agreed to pay $2.2bn to settle about 80,000 Zantac lawsuits in the US.

In a statement released after the close of markets on Wednesday, the pharmaceuticals firm said it had reached an agreement with 10 firms who represent 93% of the Zantac (ranitidine) state court product liability cases pending against it in the US.

GSK also said it had agreed to pay $70m to resolve a whistleblower complaint by a laboratory called Valisure, which alleged that the pharmaceuticals company defrauded the US government by concealing the cancer risks of heartburn drug Zantac for decades.

GSK has not admitted any liability in either settlement.

"While the scientific consensus remains that there is no consistent or reliable evidence that ranitidine increases the risk of any cancer, GSK strongly believes that these settlements are in the best long-term interests of the company and its shareholders as they remove significant financial uncertainty, risk and distraction associated with protracted litigation," the company said.

GSK expects to recognise at £1.8bn charge relating to these settlements in the third quarter, and said this will be funded through existing resources. The charge also covers the remaining 7% of outstanding claims.

Zantac was removed from the US market in 2020 amid fears over low levels of the contaminant N-nitrosodimethylamine (NDMA), which can increase with time and temperature and pose a risk of cancer.

At 0955 BST, the shares were up 5.5% at 1,538.50p.

Russ Mould, investment director at AJ Bell, said: "The company has not accepted liability and today's news is welcomed by the market for two big reasons. First, investors would have been pleased to see the company get this monkey off its back almost regardless of the cost. Second, while clearly a lot of money, estimates of how much GSK might have been on the hook for were substantially higher.

"Since Morgan Stanley estimated GSK's liability could run to $27 billion in 2022, nearly £30 billion has been wiped off its market value.

"While some cases are still outstanding, it is a small proportion of the total and GSK will now seek to tidy up the loose ends.

"The company will hope the market is now of a mind to give it credit for the strategic progress it has made under chief executive Emma Walmsley. The underlying business has beaten expectations in three of the last four quarterly periods and is set to report its third quarter results at the end of this month."