Recalled Heartburn Pill Zantac Sets Fire To Glaxo and Sanofi Shares As Billions In Market Value Goes Up In Smoke

Sanofi SA SNY, GSK Plc GSK, and Haleon Plc HLN have lost a combined $40 billion in market value since Tuesday's close amid litigation concerns around the recalled heartburn drug Zantac (ranitidine), Bloomberg writes.

GSK's recent spinoff Haleon said it's not a party to the litigation proceedings and has never marketed the drug in any form in the US, either as Haleon or as GSK Consumer Healthcare. Sanofi and GSK declined to comment.

In 2019, the FDA noted that Zantac produces unacceptably high levels of a cancer-causing chemical when exposed to heat for as little as five days. The product was removed from the market in 2020.

So how are these connected to Zanatc? Zantac, a once-popular antacid initially launched as a prescription drug from GSK in 1983.

In 1995 Zantac became an OTC drug. In 1998, Warner-Lambert Co and Glaxo ended their five-year-old joint venture to sell the OTC versions of Zantac, and instead, Warner-Lambert will have the sole right to market the drug in the U.S.

In 2000, Warner-Lambert merged with Pfizer Inc PFE. In 2006, Boehringer Ingelheim Pharmaceuticals acquired the U.S. rights to the OTC Zantac product line for $509.5 million in cash from Pfizer and Johnson & Johnson JNJ. 

Later in 2017, Boehringer sold its OTC business to Sanofi. The manufacturers are facing litigations claiming that the makers didn't do enough to warn customers.

A Pfizer spokesperson said the company sold Zantac only for a limited time and hasn't sold it in more than 15 years. 

Highlighting an upcoming Illinois case on August 22 and some key court trials in early 2023, the Deutsche Bank analyst warned that the issues would likely be a short-term headwind for GSK and Sanofi. According to Morgan Stanley analysts, the damages could possibly reach $10.5-$45 billion.

Bloomberg mentions that Sanofi has previously downplayed the litigation risks, as executives, on an earnings call last month, said that there's no reliable evidence that Zantac causes cancer and that plaintiffs won't be able to prove their claims.

Haleon said it has certain indemnification obligations to GSK and Pfizer, "which may include liabilities related to OTC Zantac," in a prospectus before listing its shares in London last month. 

Credit Suisse analysts flagged Haleon's involvement in Zantac litigation was limited.

Price Action: SNY shares are down 4.03% at $43.38, GSK plunged 9.32% to $34.73, and PFE stock is down 2.43% at $48.74 during the market session on the last check Thursday.