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GSK will pay up to £1.7bn to resolve allegations that its heartburn drug Zantac caused cancer. (Pictured: Emma Walmsley, head of GSK)
GSK shares rose more than 5 percent on Thursday after the The pharmaceutical giant said it will pay up to £1.7bn to settle thousands of legal cases claiming its heartburn drug Zantac caused cancer.
Ending a saga that has plagued it for half a decade, the British company has reached an agreement with ten law firms representing 93 percent of the pending cases in the United States.
The legal dispute has weighed on the company’s shares over fears it may have to pay more than £20bn in compensation.
All eyes will be on the London stock market when trading resumes today after GSK shares rose in New York last night following the historic upgrade.
GSK and rivals such as Pfizer and Sanofi have been at the center of a legal storm after Zantac was pulled from shelves in 2019 amid concerns that one ingredient, ranitidine, caused cancer.
A research note from Morgan Stanley analysts in 2022 said the move could cost the industry up to £35bn, with GSK facing liabilities of between £2.3bn and £20.7bn. A more recent analysis by Bank of America estimated an impact of £6 billion.
The company also agreed yesterday to pay £53.6m to settle a separate complaint brought by laboratory company Valisure, which is subject to final approval by the US Department of Justice.
GSK has not accepted liability in any of the agreements. It expects to report a £1.8 billion (£1.37 billion) hit to its third-quarter results.
“While there remains scientific consensus that there is no consistent or reliable evidence that ranitidine increases the risk of any type of cancer, GSK firmly believes that these agreements are in the best long-term interests of the company and its customers. shareholders, as they eliminate significant financial uncertainty, risk and distraction associated with protracted litigation,” he said.
‘The costs will be financed with existing resources. There are no changes to GSK’s growth agenda or R&D investment plans as a result of these agreements.’
Zantac was approved in 1983 and developed by GSK, becoming the world’s fastest-selling drug in 1988 and one of the first to surpass $1 billion in annual sales.
GSK and other companies pulled it from the market in 2019 after studies found that ranitidine created toxic levels of a substance called NDMA. NDMA is a chemical byproduct of many industrial processes, including rocket fuel production.
It is also common in small amounts in many foods, such as cured or smoked meats, fish, and beer, as well as in tobacco smoke.
NDMA is a “forever chemical,” meaning it does not degrade or break down naturally in the environment or in bodies.
Over time, it accumulates and human exposure increases. According to the World Health Organization, there have been no cases of cancer officially linked to Zantac, although thousands of patients claim otherwise.
The U.S. Food and Drug Administration ordered all ranitidine products off shelves in 2019 and urged patients to stop taking medications containing the ingredient.
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