Earlier this week, GSK plc (NYSE:GSK) reached agreements with ten plaintiff firms representing approximately 80,000 Zantac product liability cases in the U.S. state courts.
These cases account for 93% of the Zantac (ranitidine) lawsuits currently pending against the company.
Under these agreements, GSK will pay up to $2.2 billion to resolve the claims, contingent upon eligibility and participation criteria.
Emma Walmsley, the CEO of GSK, may finally see relief from a major headache caused by legal cases surrounding the now-discontinued heartburn drug Zantac.
The update has reignited investor confidence. Financial Times highlighted that Deutsche Bank Research noted that this resolution makes GSK "investable again."
The report further noted that legal issues have weighed heavily on GSK's market value, particularly after a Morgan Stanley note in August 2022 projected the company's liability for Zantac-related lawsuits to be between $3 billion and $27 billion.
This worst-case scenario wiped out nearly 13 billion pounds from GSK's market capitalization.
Though the company's market value had recovered by early 2023, investor anxiety resurfaced in June when a legal setback in Delaware, where most of the Zantac cases were filed, led to a one-day 6 billion pound drop in GSK's market cap.
The report adds that investors are now shifting their focus to GSK's broader performance and long-standing concerns about its drug pipeline.
GSK has set an ambitious target of increasing its sales to over 38 billion pounds ($49.6 billion) by 2031, up from 30.3 billion pounds in 2023.
However, the market remains skeptical, especially compared to AstraZeneca Plc's (NASDAQ:AZN) 2030 sales goal of $80 billion.
Projections suggest GSK may fall short, with estimated 2030 sales of £35.7 billion. The report noted that a significant challenge facing GSK is the expiration of patents on key HIV treatments containing dolutegravir starting in 2028.
While Walmsley has pointed to the company's strength in vaccines, recent developments have cast doubt on this strategy, the FT notes. GSK's RSV vaccine, Arexy, initially achieved blockbuster status, but a U.S. health committee's decision to narrow its recommended age group has dampened expectations.
Additionally, the global performance of GSK's shingles vaccine has not offset a slowdown in the U.S.
Though the Zantac legal burden has lessened, GSK's challenges with its product pipeline remain unresolved.
Price Action: GSK stock is down 0.62% at $38.97 at last check Friday.
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