GSK, Sanofi, Haleon slump on Zantac litigation concerns

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LONDON (Reuters) -Shares in GSK, Sanofi (NASDAQ:SNY) and Haleon fell sharply on Thursday, following declines earlier this week, amid growing investor concerns about U.S. litigation focused on a heartburn drug that contained a probable carcinogen.

Around 1400 GMT, GSK shares were down 6.8%, Sanofi’s were down 6.9% and Haleon’s down 5.6%.

GSK and Sanofi at various points sold the drug – originally branded as Zantac – which U.S. regulators ordered off the market in 2020. Haleon, spun out as an independent listed company last month, comprises consumer health assets once partly owned by GSK.

The prospect of impending litigation is not new. Among other disclosures, the recently-listed Haleon had highlighted the risk of such lawsuits in its prospectus.

The topic has “arrived in investor consciousness in recent days it seems, but been rumbling on in the background for a few years,” Deutsche Bank (ETR:DBKGn) analysts wrote in a note.

Zantac became the world’s best selling medicine in 1988 and one of the first-ever drugs to top $1 billion in annual sales.

However, concerns around the compound – known chemically as ranitidine – containing potential cancer-causing impurities started to emerge in 2018, well after generic versions of the medicine had been launched by a variety of manufacturers.

Now, more than 2,000 legal cases related to Zantac have been filed in the United States, analysts say, with the first trial beginning later this month.

“It is very possible we may see a liability of some $bn (billion) magnitude,” the Deutsche Bank analysts wrote.

HALEON SAYS IT’S ‘NOT PRIMARILY LIABLE’

“Investor feedback has been absolutely uniform that the stock selloff is in relation to concerns over the size of a potential settlement between the players,” Barclays (LON:BARC) analyst Emily Field told Reuters via email.

Uncertainty over the issue has sparked fears of a worse-case scenario where costs run into the billions of dollars, as happened in cases involving Merck & Co’s painkiller Vioxx and Bayer (OTC:BAYRY)’s glyphosate-based weedkiller.

Shares in Haleon – GSK’s recently spun off consumer health unit – fell as much as 12% on Thursday, meaning $5 billion had been knocked off its value so far this week.

It recovered some of those losses after a spokesperson told Reuters the company was not primarily liable for any claim.

“We have never marketed Zantac in any form in the U.S., as Haleon or as GSK consumer healthcare,” the person said.

Zantac, originally marketed by an erstwhile version of the company now called GSK, has been sold by several companies since the late 1990s including Pfizer (NYSE:PFE), Johnson & Johnson (NYSE:JNJ) (J&J), Boehringer Ingelheim and Sanofi.

That “may make third parties liable ahead of any Haleon exposure,” the Haleon spokesperson added.

“Pfizer, which has not sold a Zantac product in more than 15 years and did so only for a limited period of time, will continue to defend itself vigorously,” a Pfizer spokesperson told Reuters via email.

Pfizer’s shares were down about 3% in early U.S. trading. GSK, J&J, Boehringer Ingelheim and Sanofi did not immediately respond to requests for comment.

GSK and Pfizer have each served Haleon with notice of potential claims of indemnification – but indemnification has not yet been determined between the parties, the Haleon spokesperson said.

In 2018, after U.S. and European regulators said they were reviewing Zantac’s safety – some manufacturers voluntarily took their version off the shelves.

By 2020, the U.S. Food and Drug Administration requested makers of all versions of the treatment to withdraw their products from the market.

Given Haleon was formed in 2019 and became an independently listed business only last month, the company “is not primarily liable for any claim,” the Haleon spokesperson added.

By 1340 GMT, the two-day rout had wiped as much as $46 billion off the market values of GSK, Haleon and Sanofi combined.   

Trading volumes were heavy and traders spoke of panic selling from a broad range of investors. Sanofi volumes were last more than three times the 90-day average, while GSK volumes were almost twice the average.