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This week PharmaTell had Eyes On: Heartburn – the kind caused by the upcoming Zantac litigation & resulting market jitters. What About Zantac? During the week of August 8, the market values of GSK, Haleon, Pfizer, and Sanofi took a hit – with the companies losing a combined market value of over $40 Billion. A week later, only Pfizer seems to have recovered. [Note – Sanofi was also hit by pipeline issues later in the week, which may have contributed to further decline] Many analysts attribute the loss of market value to investor worries about the Zantac litigation. Remind Me About the Zantac Litigation Around 2017 the presence of increased levels of nitrosamine impurities in human drugs became an issue. Companies began testing for the levels of nitrosamine impurities in pharmaceuticals likely to produce them. NDMA, a nitrosamine impurity, is present in low levels in food (bacon, cheese) and water. However, exposure to higher levels over time is thought to possibly increase the risk of cancer, though the exact levels have not been determined. Independent labs and the FDA confirmed a high level of NDMA in some of the Zantac/ranitidine-containing products on the market at the time. They also found that levels increased during storage – particularly for those stored at higher temperatures. In April 2020, the FDA and European regulators requested that all ranitidine-containing products be removed from the market. Shortly thereafter, thousands of Personal Injury Lawsuits & Class Action suits were filed against the producers/sellers of ranitidine products. Why is it an Issue Now? With the recall over 2 years ago, why is the market so volatile now? Shouldn’t this risk already be incorporated into the company valuations? Some industry experts attribute the sell-off to the increased noise/chatter about the Zantac litigation going on right now. The first personal injury case was set to begin this month (see below) and some analysts recently published scenarios showing the potential impact of settlements on the companies involved. Some estimates are upwards of $40 Billion dollars. Additionally, Haleon noted in their prospectus (published June 7, 2022) that a potential risk to the newly formed company is the indemnification to GSK for any future product liabilities – implicating them as possible defendants in the Zantac litigation(see more below). We also noticed, during the recent round of quarterly results calls, that participants asked several of the companies about the upcoming litigation and the potential impact on their bottom line. These lawsuits and the potential impact of payouts of some type are clearly on the minds of investors. Who’s at Risk? ▸ GSK since Zantac was developed and marketed by GSK legacy companies that sold it until ~ 1998 when it went generic. ▸ Pfizer, Sanofi, and Boehringer Ingelheim (or their legacy companies) each marketed Zantac at some point after it was generic and/or available over-the-counter. ▸ Johnson and Johnson had rights to Zantac in their purchase of Pfizer’s OTC business – but divested it to BI as part of the deal. ▸ Haleon is the new GSK spin-out consumer health company that may have some indemnification to GSK that brings them into the Zantac Litigation risk. What do they say?
Most of the companies have issued statements that there is no link between ranitidine and cancer and stressed that nothing has changed in the past 2 years. ▸ GSK has published a statement on the Zantac (ranitidine) litigation: ○ FDA & EMA have concluded there is no evidence of a causal association between ranitidine therapy and the development of cancer. ○ Substantial scientific evidence supports the FDA & EMA conclusion. ○ Plaintiff litigation inconsistent with scientific consensus, GSK will vigorously defend all claims. ▸ Pfizer statement issued on 11 August 2022: ○ As disclosed in our filings with the U.S. Securities and Exchange Commission since February 2020, a number of lawsuits have been filed against many defendants, including Pfizer, involving Zantac. Pfizer sold Zantac only between 1998 and 2006, and the withdrawal of Zantac products from the market in 2019 and 2020 did not involve any Pfizer products. Pfizer has significant defenses to this litigation and there are significant legal and factual issues that remain to be addressed by the courts. Pfizer also has substantial indemnification claims against others, which have been acknowledged by several manufacturers in their disclosures. As a result, we believe at this time that the outcome of the litigation is not likely to be material to Pfizer. ▸ Haleon statement issued 11 August 2022: Haleon notes the recent volatility in its share price and is aware of market speculation on Haleon’s potential liability in respect of Zantac product liability litigation. ○ Haleon is not aware of any material developments in relation to the Zantac litigation since the Haleon prospectus was issued on 1 June 2022. ○ Haleon is not a party to any of the Zantac claims. ○ Haleon never marketed Zantac in any form in the U.S. ○ Haleon is not primarily liable for any OTC or prescription claims. ○ To the extent GSK and/or Pfizer are held liable in respect of OTC Zantac during the periods outlined below, Haleon may be required to indemnify GSK and/or Pfizer, only if the following conditions are met: ° GSK and/or Pfizer are unable to recover in respect of OTC Zantac from any third parties who are ahead of Haleon and who have given indemnities under previous transfers of rights to OTC Zantac; and ° Haleon is determined to be liable under the indemnification provisions among Haleon, Pfizer and GSK. ° Additional Note: The US proceedings are at an early stage and relate to both prescription and OTC Zantac. All rights and marketing of OTC Zantac in the US from 1996-1998 were through a joint venture between GSK and Warner Lambert until 1998, when the joint venture was terminated and, following which, Warner Lambert retained the exclusive rights to the OTC product. In 2000, Warner Lambert was acquired by Pfizer, and Pfizer marketed OTC Zantac from 2000-2006 when Johnson & Johnson acquired Pfizer’s OTC business. ▸ J&J immediately divested Zantac to Boehringer Ingelheim in 2006 when buying Pfizer’s OTC business. ▸ Boehringer Ingelheim (private) declined to comment on the litigation, saying only that serving patients and their safety is the company’s top priority and it will “defend any allegations otherwise.” ▸ Sanofi issued a press release on 11 Aug 22, reaffirming what they said earlier: ○ The science does not support the plaintiffs’ claims in this litigation. There is no reliable evidence that Zantac causes any of the alleged injuries under real-world conditions, and Sanofi remains fully confident in its defenses. Given the strength of our case and the uncertainty of future proceedings, no contingencies have been established. ○ Sanofi only obtained the marketing rights in 2017, meaning it has only earned a fraction of Zantac’s lifetime revenues. What’s more, Boehringer Ingelheim continued to manufacture Zantac during the time when Sanofi marketed the drug. “Potential historical brand liability was not all passed to Sanofi upon its acquisition of Zantac,” Sanofi said. They are currently in arbitration with Boehringer Ingelheim related to this matter. ▸ Generics manufacturers such as TEVA, Dr. Reddy’s, Sun Pharma, Perrigo have also been included in the litigation. See below for recent details. Keep Your Eyes On … ▸ The Personal Injury Trials as they may indicate the direction and validity of the class action suits. ○ Note, on Aug 17, 2022, the first plaintiff – Joseph Bayer – agreed to drop his case due to “personal health reasons.” His attorney says he has the right to refile within a year. ° GSK and BI said they had not paid anything in exchange for the voluntary dismissal. ° Pfizer said this reflects what they have always said: this litigation is without merit. ° Bloomberg announced on the same day that some generic companies agreed to settle with Mr. Bayer for a total of more than $500K before the case was set to go to trial. (Note some firms denied the accuracy of this report). ▸ The Indemnity Clauses – they are complex, and arbitration is ongoing to decide who may be liable for what damages or settlement amounts should they be incurred. ▸ Ranitidine vs NDMA as the cancer-causing agent and how that plays into the prosecution & defense strategies. ▸ Testing procedures and sensitivity changes for the NDMA quantification. ▸ Manufacturing & Storage pre- and post-generics and implications to NDMA formation. Generic manufacturers & CDMOs will be under scrutiny regarding the quality of their APIs and manufacturing practices (see FDA note below). What thoughts do you have? Was the market reaction overdone – or is it about time the company valuations reflect the risks associated with the litigations? Were the investors spooked by blue sky analyst scenarios? It will be interesting to see the science/data regarding ranitidine and NDMA and the implications for long-term exposure as these lawsuits move forward. Some of the key references for this post: BioPharmaDive, FDA Reference, NDMA Overview, First Case Settlement, Bloomberg, PharmaTell, PharmaTell, Pharmatell, PharmaTell, PharmaTell, PharmaTell Tip of the Week This week’s tip is a reminder to our new(ish) users that help is easily accessible on the PharmaTell Studio Dashboard. We have included an Introduction Video that provides an overview of all the functionality available in Studio. We also have a Presentation with screenshots and mark-ups to walk you through some of the search options. And as always – please send a note to the Helpdesk with any other questions you may have. If you haven’t activated your PharmaTell Studio account, or can’t access the links, or if you are interested in a free trial of PharmaTell, please send us an email to helpdesk@pharmatell.com, and we will be happy to assist you.