- Californian Zantac cases agreed
- Volatility likely until all cases are settled
- GSK bags £885.6 million from Haleon sale
Shares in global pharmaceutical company GSK (GSK) hit a new 12-month high on Wednesday, rising 2% to £15.43, after the firm reached a confidential Zantac litigation settlement in California.
The drug maker said it had also settled three remaining breast cancer bellwether cases in the sunshine state, removing all related pre-trial hearings.
The shares are slowly regaining the ground lost following the emergence of litigation cases against its heartburn treatment Zantac in August 2022, when the shares were trading around £18.
The latest settlement follows a landmark decision in December 2022 by a Florida Multi-District litigation federal court which dismissed roughly 50,000 claims and a Canadian Supreme Court decision in May 2023 to dismiss a class action suit.
WHAT DOES IT MEAN FOR SHAREHOLDERS?
Healthcare analyst Sean Conroy at Shore Capital estimates the current share price reflects potential liabilities of around $30 billion.
Conroy believes GSK is facing around 4,500 cases at state and federal level covering 130,000 claimants which implies individual settlements per claimant of circa $225,000.
Conroy notes this seems ‘towards the higher end of prior payouts made in talc or glyphos cancer-related suits.’
Moreover, it ignores settlements already made and the fact GSK is not the only defendant in the Zantac litigation suits. Fellow healthcare companies Sanofi (SAN:EPA), Pfizer (PFE:NYSE) and Boehringer Ingelheim are also named defendants.
However, Conroy concludes: ‘‘Volatility in the share is likely to persist until this issue is fully resolved, but we continue to feel that a worst-case scenario has been priced into the share and the improving growth outlook at GSK is being overlooked.’
SELLING DOWN HALEON STAKE
Last week, GSK sold 270 million Haleon (HLN) shares, raising gross proceeds of £885.6 million and reducing its holding in the consumer healthcare company to 7.4% of the shares, worth around £2.4 billion at current prices.
In May this year, GSK bagged around £840 million from selling a stake in Haleon which was originally spun off in July 2022.
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