Sanofi, GSK lose $40 billion on Zantac concerns

Since Tuesday's close, Sanofi, GSK Plc and Haleon Plc have lost a combined $40 billion in market value due to concerns surrounding the recalled heartburn drug Zantac.

Sanofi fell by about 13% on Thursday, taking its two-day decline to 20%, the steepest drop since that timeframe. In London, GSK fell 6.9%, while its recent spinoff Haleon fell 12%, taking its drop to 19% since Tuesday.

GSK declined to comment on stock moves and ongoing lawsuits around Zantac, while Haleon said it was not a party to the litigation proceedings and that it never marketed the drug in any form in the US, either as Haleon or as GSK Consumer Healthcare. Sanofi didn't respond immediately to requests for comment.

Zantac is a popular antacid that has been the subject of a flurry of US personal injury lawsuits alleging it causes cancer. Sanofi, GSK and Boehringer Ingelheim GmbH are accused in the lawsuits of failing to warn users about the over-the- counter product's health risks.

Deutsche Bank analyst Emmanuel Papadakis warned on Thursday that the issues could be a short-term headwind for both GSK and Sanofi, given the upcoming Illinois case on August 22 and key court trials in early 2023.

According to analysts at Morgan Stanley, the damages could reach between $10.5 billion and $45 billion, based on similar litigation settlements in the past. There is considerable uncertainty surrounding the potential financial impact of the Zantac litigation, they wrote.

Zantac was withdrawn from the market in 2019 after the US Food and Drug Administration said it appears to produce unacceptably high levels of a cancer-causing chemical when exposed to heat for as little as five days.

Laura Sutcliffe, UBS Group AG analyst, warned that some investors are avoiding Sanofi until there is more clarity. She downgraded her rating to neutral from buy, saying the litigation could become an overhang for the stock in early 2023.

Sanofi has downplayed the risks of the litigation, with executives saying last month that there is no reliable evidence that Zantac causes cancer and that plaintiffs won't be able to prove their claims.

In a prospectus ahead of listing its shares in London last month, Haleon said it has certain indemnification obligations to GSK and Pfizer, which may include liabilities related to OTC Zantac. That was while Credit Suisse analysts flagged Haleon's involvement in Zantac litigation.

Facebook is not making Billions as Zuckerberg hits the Panic Button.