- Court ruling appeal process begins
- GSK ‘strongly’ disagrees with prior ruling
- Shares weighed down by litigation worries
GSK (GSK) confirmed it has taken steps to appeal a Delaware judge’s decision (31 May) to allow 70,000 cases to go to trial and present expert testimony in ongoing litigation claims that its discontinued heartburn drug Zantac caused cancer.
The company said it ‘strongly’ disagrees with the Delaware Superior Court ruling and has filed an application with the court of appeal to the Delaware Supreme court for review.
GSK stated: ‘While reviews are granted in exceptional circumstances, GSK believes such circumstances are present here and that it is important to raise these matters now to the Delaware Supreme Court.’
Fellow defendants Sanofi (SAN:EPA), Pfizer (PFE:NYSE) and Boehringer Ingelheim are all parties to the application, given their involvement in selling Zantac.
GSK and Sanofi shares gained 1% on the news, while Pfizer shares ticked up 0.2% in pre-market trading in the US.
FTSE 100 drugs giant GSK said a decision on the appeal would be expected sometime later this year.
LITIGATION DISPROPORTIONATELY WEIGHING ON THE SHARES?
So far, only one case has made it to trial and GSK was victorious after a Chicago court dismissed the plaintiff’s claim that Zantac had caused her colorectal cancer.
Yesterday (10 June), GSK announced that a plaintiff dropped her case shortly before it was due to go to trial in Illinois state. The company said it did not settle with the plaintiff.
Shore Capital’s healthcare analyst Sean Conroy argues that litigation has disproportionately weighed on the shares, noting recent settlements by Sanofi and Pfizer were made at the equivalent of $25,000 per claimant which is a ‘far cry’ from the $200,000 he estimates the market initially priced into the shares.
‘We still believe that a worst case, up to circa $30 billion downside scenario for litigation has been priced into the share.
‘We still view the current discount to peers as unwarranted and largely attributable to misguided assumptions around the potential cost of Zantac litigation’, concluded Conroy.
