Investor Alert

Aug. 17, 2022, 7:09 a.m. EDT

Zantac lawsuit drop ‘not as significant as it appears’ for GSK stock, analysts say

By Anviksha Patel

The withdrawal of the plaintiff in the first lawsuit over GSK’s heartburn drug Zantac may not be “as significant as it first appears” for the company’s shares, say analysts from RBC Capital Markets.

Shares in the London and U.S.-listed drugmaker (LON:UK:GSK) (NYS:GSK) fell 1.4% on Wednesday, a day after it noted the plaintiff’s counsel in the first of the U.S. lawsuits over the discontinued heartburn drug plans to file a notice of voluntary dismissal .

Those shares have been taking a hit in recent weeks — down 20% in the past month — due to investor concerns surrounding thousands of lawsuits over alleged links between Zantac and cancer. Other companies with potential exposure who have seen shares decline include GSK spinoff Haleon (LON:UK:HLN) (NYS:HLN) , which wasn’t directly involved in the case, along with Pfizer (NYS:PFE) and Sanofi (NAS:SNY) (PAR:FR:SAN) , who at some point each sold Zantac.

Shares of Haleon and Sanofi were each down 4% in London and Paris trading, while Pfizer slipped 0.6% in U.S. premarket trading.

Analysts from RBC said the stock impact of the plaintiff’s withdrawal seems initially positive, but it was neutral for the parties involved.

Reuters reported on Tuesday that the plaintiff Joseph Bayer couldn’t proceed with the trial due to “personal health reasons” and voluntarily dropped his case, to which the pharmaceutical giant maintained that it didn’t settle Bayer’s claim and hasn’t paid for the dismissal.

Bayer filed a lawsuit, which has been scheduled to begin next Monday in Illinois, alleging that he had developed esophageal cancer from taking Zantac. “GSK did not settle Mr. Bayer’s claim and hasn’t paid anything in exchange for the voluntary dismissal,” the firm said in a statement.

“This is positive at first glance and indeed helped the shares yesterday when it was originally known that the plaintiff pulled out, and might move the shares more today after an official announcement, in our view,” said James Edwardes Jones and Emma Letheren, RBC Europe analysts in a note to clients on Wednesday.

“However, that initial enthusiasm should be tempered as: the plaintiff couldn’t proceed due to personal health reasons; GSK’s statement merely says that GSK itself hasn’t settled; none of the other parties to the claim are mentioned and a quick Google search suggests that several other parties have settled.

“So our view is that this development neither helps nor hinders any of the positions of the parties involved. The next case is due in February 2023,” said the analysts.

Link to MarketWatch's Slice.