GSK, Sanofi resolve key Zantac overhang, but analysts point to state lawsuits (update)
DWithers

Update 11:10am: Adds comment from CFRA analyst.
Shares of GSK (NYSE:GSK), Sanofi (NASDAQ:SNY) (OTCPK:SNYNF), and Haleon (HLN) rose in European trading on Wednesday after a federal judge in Florida dismissed thousands of lawsuits related to claims that recalled heartburn medication Zantac caused cancer.
Wall Street welcomed the decision, while some analysts noted that the judgment in multi-district litigation (MDL) would not have much impact on similar cases pending in state courts.
âAlthough we see this as positive for GSK, the key question is whether MDL cases refile elsewhere in state courts,â Bank of America wrote, raising concerns on cases pending in California, which is âgenerally thought of as a more plaintiff friendly jurisdiction.â
The analysts led by Graham Parry wrote that the decision tossed out about a third of all Zantac claimants and added that most of the remaining cases are pending in Delaware State Court, where the team sees further dismissals due to weaker evidence.
Arguing that the decision halved its base-case Zantac-related liability in the model for GSK (GSK), the analysts raised the price target on the stock to $36.20. However, Bank of America maintains the Underperform rating on GSK due to multiple factors, including a weak pipeline and an upcoming patent cliff.
Meanwhile, Guggenheim analyst Seamus Fernandez and the team said they would continue to watch how the cases play out in California. However, with no Zantac liability modeled in their estimates, the analysts keep their forecasts for Neutral rated GSK (GSK) and Buy-rated (SNY) unchanged.
The analysts acknowledge that the decision removed a key overhang for both stocks and would have a positive readthrough to AstraZeneca (AZN), which also faces litigation related to the heartburn drug Nexium.
Commenting on the judgment, SVB Securities wrote: âAt first glance, this looks like a best-case scenario for the companies in question and largely removes a key overhang.â While noting that the dismissal looks compelling, the analysts donât rule out appeals to the judgment or state court proceedings.
âThat said, we are not attorneys and are not rendering any legal opinions,â SVB wrote, reiterating the Outperform rating on Sanofi (SNY).
CFRA legal analyst Michael Gordon wrote in a note that while the federal court ruling is not binding for state courts, it may serve as a "persuasive precedent" in those jurisdictions. 
"Notably, the five MDL Designated Cancers were the ones that plaintiffs' counsel believed the evidence was best on (others were dropped from the MDL with suits filed in state courts)," Gordon wrote. "If the evidence here wasn't enough, the plaintiffs are likely to have a tough time in state courts too."
Meanwhile, GSK (GSK) announced Wednesday that the company would continue to defend itself, including against all state-level Zantac-related claims.