Shares in Pfizer, GSK, Sanofi and Haleon fell Thursday amid concerns of the companies’ exposure to litigation over the heartburn medicine Zantac, which was withdrawn from market in the U.S. and other countries in 2020 due to contamination with a likely carcinogen.
The stock decline was steepest for GSK, shares of which dropped by about 7% on the New York Stock Exchange. Sanofi, Haleon and Pfizer also fell by multiple percentage points Thursday, erasing billions of dollars in market value.
GSK, Pfizer and Sanofi, along with Boehringer Ingelheim, have been named as defendants in federal litigation in the U.S. related to their marketing of Zantac, or products containing its active ingredient ranitidine. GSK and Pfizer were previously partnered on a consumer health joint venture that GSK spun out into a new standalone company, now called Haleon and traded on U.S. and London stock exchanges.
While Haleon doesn’t sell Zantac, the company noted in a recently filed prospectus that it might have liabilities related to litigation under a requirement it indemnify GSK and Pfizer for certain claims.
In a lengthy statement released Thursday afternoon, GSK rebutted claims made in the lawsuits arrayed against it. “The overwhelming weight of the scientific evidence supports the conclusion that there is no increased cancer risk
associated with the use of ranitidine,” the statement said. “Suggestions to the contrary are therefore inconsistent with the science, and GSK will vigorously defend itself against all meritless claims alleging otherwise.”
A Pfizer spokesperson noted in an email the company has not sold a Zantac product for more than 15 years and only then for a limited time. Pfizer will “defend itself vigorously,” the spokesperson added.
Sanofi said in a statement that it “remains confident in its legal defenses” and noted that there have no “material developments” in Zantac-related litigation. The company acquired marketing rights in 2017 from Boehringer Ingelheim, which continued to manufacture the product for Sanofi.
Approved as a prescription and then over-the-counter antacid, Zantac was widely used until 2019, when regulators around the world began probing contamination with a probable carcinogen called N-Nitrosodimethylamine, or NDMA.
While NDMA is present at low levels in food and water, exposure to higher levels over time is thought to possibly increase the risk of cancer in humans. An investigation by the Food and Drug Administration — prompted by warnings from outside laboratories — confirmed the presence of NDMA in ranitidine-containing products. Notably, it also found that levels increased during storage, particularly for product stored at higher temperatures.
Companies, including Sanofi and GSK, pulled Zantac from markets and in April 2020 the FDA followed up by requesting all ranitidine products be withdrawn. Regulators in Europe recommended the same.
Thousands of personal injury lawsuits have followed, which were consolidated in multi-district litigation for the U.S. District Court for the Southern District of Florida. Other lawsuits are pending in state courts as well, with a trial in Illinois set to begin this month and another in California in February.
While these cases aren’t new, they’re beginning to get more attention from analysts and investors. Both GSK and Sanofi were pressed on recent earnings calls about potential impact from the litigation. According to a report from Bloomberg, analysts at Morgan Stanley recently warned damages could reach into tens of billions of dollars, although they acknowledged “considerable uncertainty.”
GSK executives did not comment on the litigation in answering an analyst question on their earnings call. Sanofi’s head of consumer healthcare, meanwhile, pushed back on questions, saying the company “contends that the plaintiff will be unable to prove that Zantac causes any type of cancer.”
Along with concerns over legal exposure, Sanofi this week revealed it’s pausing testing of a closely watched drug for multiple sclerosis to review safety data, a move that could also be pressuring company shares, according to SVB Securities analyst David Risinger. In a note to clients, Risinger described the litigation risk related to Zantac as “overblown.”