The US$2.2 billion GSK PLC (LSE:GSK, NYSE:GSK) paid to settle 93% of Zantac litigation cases is almost a best-case scenario short of no payment, according to analysts, and well below most figures investors had feared.
Analysts at Jefferies had pencilled costs of between US$2-3.5 billion for the liability, adding the deal is at the bottom of its expectations.
Noting that the settlement also includes US$70 million for a complaint filed by Valisure, Jefferies said the deal should be worth around 10% onto the GSK share price.
At the time of writing, GSK shares were up 4% at 1,520p.
Plaintiff firms are unanimously recommending to clients that they accept the terms of the settlement, Jefferies added, with full implementation expected by the end of the first half of 2025.
Jefferies added that this near-best-case scenario should remove the majority of Zantac's overhang on the stock.
"Importantly we believe the settlement cost is also well below most figures we have heard from investors."
The $2.3 billion non-core charge also includes an estimated amount for the remaining 6,000 cases, noted Jefferies.
GSK told analysts that the initial strategy was to go to the larger plaintiff firms, with the remainder being quite small and deliberately left until later.
The vast majority of outstanding cases are in Delaware State Court (95+%) and no trials for these cases are currently scheduled before March 2025.
Away from Zantac, Jefferies says the near-term concerns linger over sales expectations for RSV vaccine Arexvy in the next eighteen months, while debate continues around the sustainability of Shingrix’s growth.
Buy with a 2,000p price target is Jefferies’ view.
UBS said the settlement is a clear positive, removing a major overhang and uncertainty for investors.
The settlement timing is also ahead of market expectations, which were that it would only take place after the ruling of the Delaware Supreme Court.
At $2.2bn, UBS says the total settlement value is at the lower end of expectations based on previous product litigation settlements in Big Pharma.
UBS added that GSK expressed confidence about settling the outstanding 6,000 cases and also 14,000 cases in Florida, which are not part of today’s settlement.
Like Jefferies, UBS has concerns about Arexy and Shingrix and has a 'neutral' rating and a 1,580p target.