MARKET REPORT: GSK given a beating by heartburn drug legal face-off

GSK shares sank like a stone amid growing concerns over a possible lawsuit relating to a heartburn and stomach ulcer treatment called Zantac.

The stock tumbled 10.1 per cent, or 156.6p, to 1400p following reports of a court case in the US later this month where GSK will stand accused of not providing sufficient warning about the health risks of the over-the-counter drug.

GSK recalled Zantac in 2019 because it had an active ingredient that had been identified as a risk factor in the development of certain cancers.

More trials of similar nature are scheduled for the early part of next year. Credit Suisse reckons there are more than 2,000 legal cases related to the medicine filed in the US and has warned that the shadow is likely to hang over the GSK share price for some time.

The damages from Zantac litigation could possibly reach $10.5billion to $45billion, according to analysts at Morgan Stanley.

Haleon, which was spun off from GSK in July, was caught up in the crossfire and shares lost 4.9 per cent, or 13.7p, to 265.8p, despite the company saying it did not believe it will suffer any fall-out from the court cases.

The news comes as another blow to GSK boss Emma Walmsley following the disappointing share price performance of Haleon over the past few weeks.

Haleon, which owns brands including Sensodyne and Panadol, has seen its share price fall around 19 per cent since its debut, taking its market value below City predictions ahead of the split.

A string of court cases is the last thing embattled Walmsley needs as she strives to repel activist investors fed up with the share’s underperformance. The underperformance of Haleon’s shares will also provide more ammunition to the activists, some of whom previously said the consumer business should have been sold rather than listed on the stock market.

The share price weakness of GSK and Haleon contributed to a fall for the FTSE 100 of 0.55 per cent, or 41.2 points, to 7465.91.

The FTSE 250 was also in the doldrums, down 0.26 per cent, or 52.57 points, to 20,245.43.

Also weighing on the FTSE 100 were energy and oil companies after energy companies were told to use ‘huge’ profits to help households with the rising cost of living or risk further windfall taxes.

Boris Johnson unexpectedly joined a meeting of big energy producers this morning to emphasise that they had to do more to help people with bills.

Chancellor Nadhim Zahawi told electricity giants that the cost of living crisis was ‘not just the government’s problem’ and challenged them to come up with ways to ease the impact of rising bills, urging a ‘spirit of national unity’. 

The possibility of extending a windfall tax levied on oil and gas companies to electricity generation was ‘implied’ if action was not sufficient. Centrica fell 2.2 per cent, or 1.76p, to 77.76p although SSE did recover to finish up 0.4 per cent, or 6.5p, at 1773.5p.

GSK’s plight would not seem so bad were it not for the continued success of rival AstraZeneca, although it was also out of favour, shedding 2.9 per cent, or 312p, to 10506p after it announced the completion of the takeover of biotech group TeneoTwo for $100million upfront.

The cost of the deal for the blood cancer drug maker could rise to $1.27billion if certain development milestones are met.

Antofagasta, the Chilean copper miner controlled by the Luksic family, dipped 2.2 per cent, or 26p, to 1167p as its half-year profits halved to $1.2billion.

Production was hit by a concentrate pipeline and a water shortage at its Los Pelambres mine but the company expects output will improve quarter on quarter in the second half of the year.