GSK expressed its disagreement with the Zantac lawsuits ruling and announced plans to appeal immediately.

GSK litigation

Analysts indicated that GSK’s potential liability from the litigation could exceed the $2 billion to $3 billion that the market had anticipated.

The judge’s decision on the GSK lawsuit, issued late Friday, permits expert witnesses to testify that Zantac may cause cancer. GSK, along with former Zantac manufacturers Pfizer, Sanofi, and Boehringer Ingelheim, had contested the scientific validity of the expert testimonies.

According to multiple reports, Superior Court judge Vivian Medinilla ruled late last week that the some 75,000 plaintiffs were not relying on bad science in their arguments. She noted that experts have reached different conclusions, and that a jury should be the one to determine the merits of a technical debate among opposing scientists.

Litigation reduced market value

The litigation has been a significant concern for GSK, contributing to a nearly $40 billion reduction in the combined market value of GSK, Sanofi, Pfizer, and Haleon in a span of about a week in August 2022. This was amid fears of extended legal battles and potential compensation costs.

“While the ruling is only a determination of admissibility of expert evidence and, importantly, does not constitute a determination that the judge agrees with expert conclusions, it is a negative for GSK, likely to see share price downside, in our view,” analysts said in a note.

Cost of lawsuit settlement

They noted that GSK faces significant risks from unpredictable jury trials potentially awarding damages over $2 billion unless it successfully appeals or settles. The cost of settling claims is now estimated between $2 billion and $8 billion, leaning towards the higher end due to the ruling, analysts added.

“We think the outcome is worse than expected by market with stock having rallied 22% this year partly due to hope of near-term Zantac resolution in GSK’s favor.”

Unlike GSK, Sanofi’s exposure is seen as relatively low, with settlement costs unlikely to exceed 2% of its market capitalization in the worst-case scenario and potentially even lower.

GSK on lawsuit

GSK announced that it will immediately seek an appeal of the ruling. It said that “there is no consistent or reliable evidence” that Zantac increases the risk of any cancer. It added that the Delaware ruling “contradicts the Federal Court’s (Multidistrict Litigation) ruling under the same legal standard, which dismissed all cases alleging five cancer types, in December 2022.”

GSK noted that despite the court decision, its capital allocation priorities remained unchanged, and it will have no impact on the firm’s investment plans for growth.

GSK stock plunges

GSK shares tumbled 9.3% to a price of $40.63 as of 11:45 a.m. ET Monday. Though the GSK stock remain up about 10% for the year.

The shares of Sanofi were little changed, but Pfizer shares were about 2% higher.

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