GSK shares jump over 6% after $2.2bn cancer lawsuit settlement
GlaxoSmithKline's stock saw a more than 6% increase following the company's announcement of a settlement of up to $2.2 billion (€2.01 billion) to resolve a large number of lawsuits in the US concerning its discontinued heartburn medication, Zantac.
The drug has been the subject of numerous allegations linking it to cancer. The settlement pertains to approximately 93% of the cases against GSK, which involve around 80,000 claimants, as reported by Euronews.
In addition to this, GSK will pay $70 million (€64 million) to settle a whistleblower allegation from US independent laboratory Valisure. The allegation accused the company of defrauding the government by hiding the cancer risks associated with Zantac.
This agreement falls under the category of a “Qui Tam” settlement, enabling whistleblowers to file lawsuits on behalf of the US government in accordance with the Financial Conduct Authority guidelines.
Zantac, which was first introduced in the US in 1983, was once one of the highest-selling medications globally, raking in over $1 billion (€0.91 billion) in annual sales.
The drug was marketed by various companies, including French firm Sanofi, Pfizer, and Germany-based Boehringer Ingelheim.
However, Zantac's popularity has significantly declined in recent years due to mounting concerns that its main active ingredient, ranitidine, could potentially transform into the carcinogen N-nitrosodimethylamine (NDMA) if stored improperly or left on shelves for extended periods.
In 2019, several UK manufacturers of ranitidine voluntarily recalled the medication, followed by similar actions in Australia and the European Union.
GSK has strongly denied these allegations, insisting that it is not accountable for any harm caused by Zantac.
The company also contends that expert testimonies regarding the drug’s cancer risks are not reliable.
Regarding the settlement, GSK stated, “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.
“GSK expects to recognize an incremental charge in its Q3 Results for 2024 of £1.8bn (€2.15bn) in relation to the State Courts Settlement, the Qui Tam Settlement, and the remaining 7% of pending state court product liability cases, partially offset by expected reduced future legal costs.
“The costs of these settlements will be funded through existing resources. There are no changes to GSK’s growth agenda or investment plans for R&D as a result of these settlements.”
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