Shares in pharmaceutical company GlaxoSmithKline (GSK) surged more than 6% after the company revealed it had reached a settlement of up to $2.2bn (€2.01bn) to end tens of thousands of lawsuits in the US in connection with its heartburn medicine Zantac. The drug, which has now been discontinued, had faced several allegations of causing cancer.
The settlement covers some 93% of the cases faced by GSK, accounting for approximately 80,000 claimants.
Another $70m (€64m) will be paid to bring to an end a whistleblower allegation by the US independent laboratory Valisure, which claims that GSK committed fraud against the US government by hiding the possibility that Zantac could cause cancer.
The whistleblower deal is a "Qui Tam" settlement, which is a Financial Conduct Authority (FCA) settlement that allows whistleblowers to file lawsuits on behalf of the US government.
Zantac's rise and fall
Zantac, first sold in the US in 1983, was one of the best-selling medicines globally, bringing in more than $1bn (€0.91bn) in sales per year. It was also sold by Sanofi, a French drug company, Pfizer, another major US pharmaceutical company, and Germany-based Boehringer Ingelheim.
In recent years, however, the drug's popularity declined. This was due to increasing fears that its main active ingredient, ranitidine, could potentially turn into a carcinogen, N-nitrosodimethylamine (NDMA), if the medicine was left on shop shelves for too long, or stored at a higher temperature.
This led to some UK ranitidine manufacturers voluntarily recalling the drug back in 2019, with Australia and the European Union also doing the same. Zantac was also recalled by the US Food and Drug Administration (FDA) in 2020.
GSK has robustly refuted these claims, and still maintains that it is not to blame, also saying that expert testimonies about Zantac's cancer risks could not be relied upon.
Regarding the settlement, GSK said in a press release: "While the scientific consensus remains that there is no consistent or reliable evidence that ranitidine increases the risk of any cancer, GSK strongly believes that these settlements are in the best long-term interests of the company and its shareholders as they remove significant financial uncertainty, risk and distraction associated with protracted litigation.
"GSK expects to recognise an incremental charge in its Q3 Results for 2024 of £1.8bn (€2.15bn) in relation to the State Courts Settlement, the Qui Tam Settlement, and the remaining 7% of pending state court product liability cases, partially offset by expected reduced future legal costs.
"The costs of these settlements will be funded through existing resources. There are no changes to GSK's growth agenda or investment plans for R&D as a result of these settlements."