GSK, the second largest pharmaceutical company in Britain, has agreed to pay up to $2.2billion to settle 80,000 US court cases involving its blockbuster drug Zantac.
GSK announced after the London stock exchange closed that it had reached a settlement with ten companies representing 93 percent of all Zantac cases brought against the FTSE 100 firm.
GSK is embroiled in a protracted legal battle in the US, which is its largest market, regarding allegations that heartburn drug causes cancer.
Investors were first concerned about the possibility of much larger liabilities in August 2022. Since then, this has created a significant overhang on the share price.
The settlements under which GSK does not admit any liability triggered an uptick in the trading of its American Depositary Receipts in New York, Wednesday night. They were up 8 percent, to $41.
When the London Stock Market opens on Thursday morning, it will be all about the shares.
GSK said that it also reached an agreement with a Connecticut laboratory called Valisure to pay $70 million in total to settle a complaint.
Ranitidine (marketed as Zantac) helped fund GSK’s global expansion. It was one of the world’s first blockbusters and generated more than $1 billion annually in sales. The drug works by reducing the amount of stomach acid produced by the cells. It was popular for treating heartburn.
GSK stated that the settlements were in the long-term interest of the company as well as its shareholders, since they removed the financial uncertainty, risks and distractions associated with prolonged litigation.
It is expected to record a $2.3billion charge in its third quarter results scheduled for October 30. This will include the settlements and the remaining 7% of state court product liability claims. “Partially offset by anticipated reduced future legal expenses”, it says.
GSK has said that it will fund the settlements with existing resources. It also added that there have been “no changes in GSK’s R&D investment plans or growth agenda as a consequence of these agreements”.
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