Potential Lawsuits Causing Zan – GuruFocus.com


Concerns about the potential liability of a drug believed to cause cancer have knocked billions off the value of several makers of the drug over the past week. But were the cuts too deep? Opinions vary. But if the declines were out of proportion to the risk, producer shares could be a bargain.

The source of the potential investor lawsuits was agitating over the heartburn drug Zantac. What’s odd is that the potential link between ranitidine, the active ingredient in Zantac, and cancer seemed to have been put to bed years ago when the Food and Drug Administration determined it wasn’t. there was no risk.

That’s all and well. But the potential litigation is not about the drug itself, but about a nitrosamine impurity found in Zantac tablets, pharmaceutical consulting group Evaluate reported. Nitrosamine is a chemical found in tobacco products and tobacco smoke. Nitrosamines are also found in many foods, including fish, beer, fried foods, and meat. Certain nitrosamines cause cancer in laboratory animals and may increase the risk of certain types of cancer in humans, according to the National Cancer Institute.

No one really knows at what level nitrosamine may pose a cancer risk, and it’s not even known how much of this impurity Zantac contained.

Estimates of potential damage vary. Morgan Stanley analysts believe manufacturers could pay up to $45 billion. Evercore is much more optimistic, pegging the tab between $1 billion and $2 billion for each of the companies that actually sold Zantac.

The Zantac Group includes GSK PLC (GSK, Financial), Pfizer Inc. (DFP, Financial), Sanofi SA (SNY, Financial), Johnson & Johnson (JNJ, Financial) and newcomer Haleon PLC (HLN, Financial). Over the past week, shares of Pfizer were flat, while Johnson & Johnson was down 2.5%. GSK, Sanofi and Haleon were down 14%, 10% and 13%.

Investor jitters are likely caused by recent product liability regulations, particularly regarding opioids. But even the most egregious cases have failed to result in settlements amounting to nearly billions that investors wiped from the valuations of big pharma last week, Evaluate pointed out. In this reporter’s experience, the market usually overreacts to bad news and I think that might be the case here.

However, it is possible for one or more plaintiffs to convince a court that the companies were negligent and therefore developed cancer while taking Zantac OTC. The odds are not good given that GSK has pointed to scientific publications that refute a cancer link. In addition, the scope of complaints from plaintiffs has already been reduced.

Of course, where there are companies with deep pockets, attorneys are willing to take on cases that may lack merit in the hope that defendants will come up with big settlements.


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