Few things strike fear into pharmaceutical investors like legal action in the US. The spectre of a costly settlement haunts the process, but a stock often sustains serious damage well before any payout is determined. This is because litigation in the country can be fiendishly complex, with claims heard across a mixture of state and federal courts, and outcomes are difficult to predict. Analysts rarely agree on the scope of a company’s potential liabilities.
- Stronger drug pipeline
- Vaccine expansion
- Cheap versus peers
- Ongoing litigation risk
- Exposure to US healthcare reforms
GSK (GSK) has been battling a wave of class action lawsuits concerning its heartburn drug Zantac for the past two years. Although the company has now settled with plaintiffs in several jurisdictions, the saga is still very much ongoing. Shore Capital analyst Dr Sean Conroy estimated last week that a “worst case" $30bn (£24bn) litigation scenario remained priced into GSK’s shares.