Heartburn lawsuits could cost pharma billions

Investors in pharma stocks prepare themselves for billions in litigation charges related to heartburn drugs.

Overview

• Investors are worried about potential U.S. litigation charges related to popular heartburn drug Zantac this week, so shares of GSK, Sanofi and Haleon fell sharply.
• The issue has been simmering for years, but investor concern exploded this week as the first legal action was scheduled.
• This saga brings back memories of Bayer Roundup for a lot of investors and analysts.

 

This week, GSK, Sanofi and Haleon all lost tens of billions in market value amid investor fears over potential U.S. litigation.

In the lead-up to Aug 22’s first scheduled legal proceeding, investor concern exploded this week.

What is Zantac?

GSK invented and sold Zantac as a prescription drug in the 1980s before it became an over-the-counter medication.

As a result of the safety review, manufacturers voluntarily pulled the drug from shelves in 2019. FDA and EMA want all versions off the market by 2020.

More than 2,000 lawsuits have been filed since then alleging Zantac causes NDMA.

Several key bellwether cases will start in early 2023 after the first trial starts Aug. 22.

Due to so many pharma players involved in the drug, the litigation is complicated.

Several manufacturers, retailers and distributors of the drug are named as defendants since the patent expired in 1997.

Since 1998, multiple companies have owned the OTC rights in the U.S., including GSK, Sanofi, Pfizer, and Boehringer Ingelheim.

Haleon, the consumer health division spun off from GSK last month, is not primarily responsible for the claims, but may be tangentially involved.

Company responses

Haleon, Sanofi, and GSK all released statements defending themselves following this week’s wild stock moves.

Friday morning, drugmakers’ stock prices stabilized.

“The overwhelming body of scientific evidence supports the conclusion that ranitidine doesn’t increase your cancer risk”: a GSK spokesperson said… Any claims to the contrary are inconsistent with the science, so GSK will vigorously defend itself.”

“There’s no reliable evidence that Zantac causes any of the alleged injuries under real-world conditions,” said a Sanofi spokesperson. Our case is strong, and future proceedings are uncertain, so we don’t have any contingencies.”

It’s harder to tell where Haleon fits in and whether it’s liable.

“We have never marketed Zantac in any form in the U.S.,” Haleon says. “We are not primarily liable for any OTC or prescription claims.”

Under certain conditions, Haleon may be required to indemnify GSK and/or Pfizer if they’re found liable for OTC Zantac, according to GSK’s prospectus.

According to Pfizer, the outcome of the lawsuit won’t matter to the company.

Since February 2020, a number of lawsuits have been filed against many defendants, including Pfizer, involving Zantac, according to Pfizer filings with the Securities and Exchange Commission.

During 1998-2006, Pfizer sold Zantac, but the Zantac withdrawal did not involve any Pfizer products. There are significant legal and factual issues that need to be addressed by the courts in this litigation, and Pfizer has significant defenses. As well as indemnification claims against others, Pfizer has several manufacturers acknowledging them in their disclosures,” it said.

A spokesperson for Boehringer told Reuters the company would defend itself against any allegations.

What do analysts think?

Credit Suisse’s European pharma team said in a note that there are considerable uncertainties, especially in this case where four companies have been involved in Zantac rights ownership over the years.

It’s likely that GSK will be on the hook for the bulk of the liability, instead of OTC manufacturers.

There are multiple manufacturers of the drug as well as retailers and distributors named as defendants, so there might not be an absolute impact at the company level.

According to Deutsche Bank Research’s pharmaceuticals team, Sanofi’s stock recommendation has been upgraded from hold to buy because “the Zantac knee-jerk looks overdone.”

“Maintaining a Sell at these levels feels egregious,” says the German bank.

“Both GSK/SAN now seem to present a classic conundrum: ensnared by anxiety over an impending liability overhang.

What’s the potential settlement?

Whether the court sees a link between NDMA and cancer and any evidence of wrongdoing depends on Credit Suisse.

Based on evidence of wrongdoing, previous drug settlements have ranged from $30,000 to $270,000 per claimant.

The number of claimants is currently over 2,000, but as the trials go on, it’s expected to go up.

Bayer, Monsanto comparison

This ordeal brings back memories of Bayer Roundup, for many investors and analysts.

Following Bayer’s acquisition of Monsanto in 2018, Roundup-related lawsuits quickly piled up, costing Bayer billions and causing years of uncertainty.

GSK flagged the Zantac litigation as a key risk for Haleon in its June prospectus, just like Bayer did with its acquisition of Monsanto.

“The Group has indemnification obligations in favour of the GSK Group and the Pfizer Group, which could have a material adverse effect” on the company’s finances, GSK warned in the nearly 500-page document.

While Bayer faced 130,000 glyphosate-related lawsuits, Zantac has been withdrawn by regulators worldwide. Plus, there have been more than 2,000 claims related to Zantac and other ranitidine products.

In a report from Deutsche Bank, they say “we don’t think this is another glyphosate, but we may see a liability of about $bn.”

If you or a loved one has been consuming Zantac and has developed liver cancer, kidney cancer, gastric cancer or colorectal cancer then you should consider joining or filing a lawsuit to receive compensation.

Our team at Oppenheim Law recognizes the emotional burden these illnesses can have on families. That’s why our firm is committed to representing our clients, providing the best team of professionals to represent them.

Please feel free to contact us at 954-384-6114 so we can inform you of your legal rights so you can obtain the compensation to which you are entitled.