GSK agreed to settle a US lawsuit alleging its discontinued heartburn drug Zantac caused cancer, the British drugmaker said on Friday, preventing the first such case from going to trial next month.
The company said it had reached a confidential deal with California resident James Goetz who alleged he developed bladder cancer from taking the drug.
The trial was due to start on July 24, and would have been the first test of how Zantac cancer claims would fare before a jury.
The deal could set a precedent for thousands of cases set to go to trial next year. The drugmaker’s shares rose nearly 5%, making it the best performer on London’s blue-chip FTSE 100.
The company still faces more than 5,000 similar lawsuits in California and close to 73,000 in Delaware. No trials are currently scheduled.
“It was this headline risk with a trial date right around the corner that was keeping investors on the sidelines in GSK,” Barclays analyst Emily Field wrote in a note.
GSK said the settlement reflected its desire to avoid distraction related to protracted litigation.
It did not admit any liability and said it would vigorously defend itself in any other Zantac cases.
Lawyers for Goetz said in a joint statement that they were pleased the company “agreed to settle and finally bring closure to Mr. Goetz.”
Originally marketed by a forerunner of GSK, the drug was later sold by several companies, including Pfizer, Boehringer Ingelheim and Sanofi, as well as generic drugmakers.
Companies facing litigation scored a victory in December, when a federal judge threw out tens of thousands of Zantac cases in US federal courts after finding that science did not back the opinions of the plaintiffs’ expert witnesses linking the drug to cancer.
Lucy Coutts, investment director at wealth management firm JM Finn, which holds GSK shares, said the Goetz settlement could create a precedent to settle other cases.
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“It also removes the distraction of any protracted litigation as the company must focus on its future pipeline which is where value will be created for shareholders,” she said.
Adam Zimmerman, a law professor at the University of Southern California who studies mass tort litigation, cautioned that it was “way too early to say anything” about what the settlement means for the broader litigation.
Bank of America analysts on Friday said they continued to see the litigation risk of Zantac to be low in absolute terms, suggesting that settling cases in California would have likely cost GSK “low hundreds of millions” of dollars in the worst case.
In a note, they predicted cases in Delaware were unlikely to progress to trial, and considered GSK’s strategy of avoiding large public damages against them in “plaintiff-friendly courts as sensible as litigation is inherently unpredictable”.
Pfizer and Sanofi settled with Goetz late last year. Concerns about protracted legal wrangling and compensation wiped almost $40 billion off the market value of GSK, Sanofi, Pfizer and GSK-spin-off Haleon over roughly a week in August.
First approved in 1983, Zantac became one of the first drugs to top $1 billion in annual sales.
In 2019, some manufacturers and pharmacies halted Zantac sales over concerns that its active ingredient, ranitidine, degraded over time to form a chemical called NDMA.
While NDMA can be present in low levels in food and water, research has found it causes cancer in larger amounts.
The FDA in 2020 withdrew from the market all remaining brand name Zantac and generic versions, triggering a wave of lawsuits.
The companies involved have repeatedly denied that Zantac can cause cancer.
Friday’s settlement follows a setback for GSK in March, when a California judge disallowed the company’s attempt to keep expert testimony on whether the drug is linked to cancer out of the trial.
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