GSK, Others Await Zantac Ruling Amid $45B Liability Concerns

Key Takeaway

• GSK, Sanofi, Pfizer, and Boehringer Ingelheim face legal action from ~80,000 plaintiffs over Zantac's alleged cancer risk; pivotal Delaware ruling awaited.
• Controversy centers on whether Zantac's ranitidine converts to carcinogen NDMA; companies contest findings with epidemiological studies.
• Legal battles have significantly impacted the companies' market values, with a potential $45 billion liability erasing $40 billion in value.

Legal Battle Over Zantac

Michael Caratti, a 69-year-old former IT technician, attributes his bladder cancer diagnosis to his long-term use of the heartburn medication Zantac. Caratti, who used Zantac daily from 2005 to 2018, is among approximately 80,000 individuals seeking legal action against the drug's manufacturers, including GSK, Sanofi, Pfizer, and Boehringer Ingelheim. The collective litigation has significantly impacted the companies' market values, with GSK being the most affected. The core of these cases hinges on the scientific debate over whether Zantac's active ingredient, ranitidine, breaks down into a carcinogenic substance, NDMA. A pivotal decision by Judge Vivian Medinilla in Delaware is awaited, which could either dismiss a large portion of these cases or allow them to proceed to trial based on the admissibility of plaintiffs' scientific evidence.

Scientific Evidence and Industry Response

The controversy around Zantac escalated in 2019 when a Connecticut laboratory reported finding high levels of NDMA in ranitidine under certain conditions. NDMA is recognized as a probable human carcinogen, found in various sources including cigarettes and processed foods. This discovery led to the suspension and subsequent withdrawal of ranitidine products by regulatory bodies such as the FDA and the European Medicines Agency. However, the pharmaceutical companies involved have contested these findings, pointing to other research, including 16 peer-reviewed epidemiological studies, that they argue shows no consistent evidence linking ranitidine to cancer. GSK, in particular, has emphasized that the upcoming Delaware ruling will not determine liability but merely the admissibility of evidence at trial.

Financial Implications and Market Reaction

The legal uncertainties surrounding Zantac have had a tangible effect on the involved companies' financial health and stock performance. An analyst note from Morgan Stanley in 2022 estimating potential liabilities up to $45 billion led to a swift market reaction, erasing $40 billion in value from the companies. Despite a federal court in Florida dismissing almost 2,500 cases due to "unreliable methodologies," the ongoing state court cases continue to pose a threat, particularly to GSK, whose stock remains affected. Investors and analysts are closely monitoring the situation, with some predicting a significant rebound for GSK if the Delaware ruling is favorable, citing the company's strong start to the year and recent successes, including the spin-off of its consumer health division Haleon and the blockbuster status of its new vaccine, Arexvy.

Management Quotes

• Brent Wisner, Lawyer bringing the lawsuit:

  "They are playing a very, very dangerous game because right now before the Daubert ruling there’s an opportunity for them to reach a resolution. After Daubert, if we win it’s a different world."

• GSK Statement:

  "After 16 peer-reviewed epidemiological studies . . . the resulting scientific consensus is that there is no consistent or reliable evidence that ranitidine [the active ingredient in Zantac] increases the risk of any type of cancer." "The Delaware ruling would only determine whether plaintiffs’ evidence could be presented at trial, and would neither provide a view on the merits of forthcoming cases, nor determine liability."

• Sanofi Statement:

  "Sanofi is settling these cases, not because we believe the claims have any merit, but rather to avoid the expense and ongoing distraction of the litigation. No concessions of liability have been made."