GSK Settles California Lawsuit Over Zantac, Easing Shareholder Concerns

Zantac heartburn pills are seen in this picture illustration taken October 1, 2019. REUTERS/Brendan McDermid/Illustration/File Photo Acquire Licensing Rights.

Pharmaceutical giant GSK has announced its settlement of another lawsuit in California concerning its discontinued heartburn drug, Zantac, which was alleged to have caused cancer. While GSK did not disclose the financial terms of the settlement, they described it as “non-material.” The move is part of GSK’s strategy to resolve the legal battles surrounding Zantac, which have been negatively impacting its stock.

Analysts from Citi estimated that GSK might settle all Zantac cases for around $5 billion in the first quarter of 2024. This would help eliminate a significant legal overhang and distraction for the company. Additionally, it would prevent potential losses in the California cases and higher settlement demands from plaintiffs when the larger cases in Delaware begin in January.

The settlement has prompted a positive response from investors, with GSK’s shares rising over 2% to a 10-month high. The resolution of this legal issue enables investors to focus on the upcoming launch of GSK’s new vaccine for respiratory syncytial virus (RSV), called Arexvy.

Originally approved in 1983, Zantac became a best-selling medication and one of the first drugs to achieve over $1 billion in annual sales. However, concerns emerged when it was found that the drug’s active ingredient, ranitidine, could degrade over time into a cancer-causing chemical called NDMA. Subsequently, the FDA withdrew all brand name Zantac and generic versions from the market in 2020, leading to a surge in lawsuits.

While GSK did not admit liability in these settlements, they are taking steps to address the legal challenges surrounding Zantac, thus potentially ending a costly chapter for the company and its shareholders.