Proactive Investors - GSK PLC (LON:GSK) making an out-of-court settlement for a case in California alleging its Zantac heartburn medication caused cancer, is "not a full stop" for the saga, say analysts.
Paying an undisclosed amount to settle the lawsuit, which was filed in California by James Goetz and was scheduled for trial in July, "doesn’t have any direct impact on other state level cases", said analyst Dr Sean Conroy at Shore Capita.
Nor does it affect the robust Daubert ruling in December, which subsequently resulted in the dismissal of cases within the federal multi-district litigation (MDL).
GSK has reiterated that it will continue to defend itself vigorously against Zantac, said Conroy, adding that today's decision to settle "does suggest the company is willing to make settlements on a case-by-case basis to try to clear the current overhang".
While it is important for the company that it admitted no liability, said analyst Danni Hewson at AJ Bell, this "is not a full stop on the saga but is the latest punctuation point in what shareholders will hope is its final stanza".
Lawsuits claiming that Zantac, once the world’s best-selling drug, was linked with cancer have led to billions being wiped off the value of several pharma giants, including GSK, Sanofi (EPA:SASY), Pfizer (NYSE:PFE) and Boehringer Ingelheim.
Conroy said he believes the FTSE 100-listed company's share price reflects potential liabilities of up to US$30bn being priced into the valuation by investors.
"All told, we understand GSK is named in circa 4,500 cases at both a federal and state level in the US covering circa 130,000 claimants.
"Working backwards from this implies individual settlements at circa $225k which seems towards the higher end of pay-outs made in talc or glyphos cancer-related suits."
This amount assumes GSK is solely liable when he pointed out that multiple co-defendants have been named in these suits, namely the aforementioned Sanofi, Pfizer and Boehringer Ingelheim.
"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," Conroy said.
GSK will need to put this issue behind it for focus to fully turn to its efforts to catch up with its UK peer AstraZeneca (NASDAQ:AZN).
Hewson noted that over the last decade AstraZeneca has achieved a total return in excess of 300% while GSK’s own total return through this period is less than 50%, with Anglo-Swedish colossus AstraZeneca even stealing its rival's thunder in vaccines during the pandemic.
“The spin-off of its consumer health arm as Haleon (LON:HLN) should have created a more focused business and it now needs to deliver on its flagship drugs like shingles vaccine Shingrix and its next generation HIV treatments,” she said.