Pharma groups lose £30bn of value on heartburn drug lawsuit worries

About £30bn has been wiped off the market capitalisation of large pharmaceutical companies in the past two days as investors have grown nervous about lawsuits over the blockbuster heartburn drug Zantac.

Shares in GSK have lost 14 per cent of their value since Tuesday’s market close, with shares in its recent Haleon spin-off down 15 per cent. Sanofi was down 12 per cent and Pfizer declined by 3.4 per cent after analyst notes flagging the potential liabilities.

The first of thousands of pending personal injury cases linking Zantac to cancer is expected to go to trial in Illinois this month.

A UBS note on Sanofi flagged a “potential overhang” from the Zantac lawsuit on Tuesday, adding that even though the evidence of a link was debatable, some investors may avoid the stock until there was clarity.

But David Risinger, an analyst at SVB Leerink, said the risk appeared to be “overblown”, given that Sanofi only marketed the drug for about two years, compared with between three and 11 for other companies.

Sanofi started a voluntary recall of Zantac from the US market in 2019 after the US Food and Drug Administration started investigating the amount of N-nitrosodimethylamine, or NDMA — which is commonly ingested in small amounts but can cause cancer in humans when more is consumed — in the product. In 2020, the FDA said the drug appeared to produce unacceptably high levels of the cancer-causing chemical when exposed to heat and requested it be pulled from the market.

There are more than 2,000 personal injury cases pending against a number of pharma companies that previously sold Zantac. Risinger said Sanofi marketed the drug in the US from 2017 to 2019. Before that, it was marketed by the private drugmaker Boehringer Ingelheim from 2006 to 2017, Pfizer from 2000 to 2006, and GSK from 1995 to 1998.

In the prospectus for Haleon, the consumer health joint venture that was spun off from GSK last month, the company warned that it was not yet possible to meaningfully assess the potential liability from any lawsuits related to Zantac.

Haleon’s share price recovered some of its losses after it said on Thursday: “Haleon is not a party to Zantac litigation proceedings. We’ve never marketed Zantac in any form in the US as Haleon or GSK Consumer Healthcare.”

Sanofi said it remained confident in its legal defences despite the “recently highly speculative news flow”. 

“Since 2019, the medical, scientific and regulatory communities have extensively evaluated the safety of Zantac’s active ingredient ranitidine, and the data shows there is no evidence of consumer harm from real-world use of Zantac,” it said. “The science does not support the plaintiffs’ claims in this litigation.” 

It added that Sanofi’s sales of Zantac were a very small proportion of total sales over 35 years.

GSK said that the company, the FDA and the European Medicines Agency had all independently concluded that there was no evidence of a causal association between the active ingredient in Zantac and the development of cancer in patients.

“The overwhelming weight of the scientific evidence supports the conclusion that there is no increased cancer risk associated with the use of ranitidine,” it said. “Suggestions to the contrary are therefore inconsistent with the science, and GSK will vigorously defend itself against all meritless claims alleging otherwise.”

Pfizer did not respond to requests for comment.