Shares of the UK-based pharma giant GlaxoSmithKline PLC (GB:GSK) soared over 6% after the company announced a settlement of up to $2.2 billion for Zantac lawsuits in the U.S. The settlement addresses 80,000 cases, accounting for 93% of the pending lawsuits against the company in the U.S. GSK has not acknowledged any liability in connection with any settlement. The company further stated that this settlement will not impact its growth agenda and investment plans for research and development (R&D).
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Based in the UK, GlaxoSmithKline is a global pharmaceutical company with a presence in roughly 80 countries.
GSK’s Settlement Signals End of the Zantac Saga
Zantac was a blockbuster drug for GSK but was withdrawn from the U.S. market in 2020 after the FDA (Food and Drug Administration) requested its removal over concerns that it contained NDMA, a recognized carcinogen. Since then, GSK has encountered thousands of personal injury lawsuits in federal and state courts. This litigation also led to significant volatility in GSK’s stock price.
However, analysts view this settlement as a positive outcome, bringing an end to the company’s prolonged legal challenges. Additionally, the settlement amount is lower than the $8 billion figure estimated by Bank of America analysts earlier this year for resolving all cases. It also prevents a series of unpredictable jury trials, which could have caused litigation costs to escalate.
About its latest settlement, GSK stated that it expects to report a £1.8 billion charge in its upcoming Q3 results for 2024. The company will cover the expenses associated with these settlements with its existing resources.
GSK also announced that it would pay $70 million to settle a whistleblower complaint brought by the Connecticut-based laboratory Valisure.
Is GSK a Good Stock to Buy?
Following the settlement news, GSK stock has received four ratings, including two Buy and two Sell recommendations. Analysts from Citi and Deutsche Bank project over 20% upside potential in the company’s share price, while Bank of America and J.P. Morgan reaffirmed their Sell ratings with no upside potential.
Overall, GSK stock has a Moderate Buy consensus rating on TipRanks. This rating is backed by six Buy, six Hold, and two Sell recommendations. The GSK share price forecast is set at 1,733.50p, indicating a projected increase of 12.8% from the current level.
