ALEX BRUMMER: Litigation risk of finding cures in life sciences
Emma Walmsley will have had better weeks. Having successfully re-engineered GlaxoSmithKline (GSK) and steered its consumer health care arm Haleon to the London market, the company itself – along with other big pharma groups – is in the spotlight over involvement in the blockbuster ulcer and heartburn drug Zantac.
Share prices of both GSK and Haleon fell heavily late in the week, leading both companies to release statements to the market.
We have become used to reporting the speed and brilliance of innovation in life sciences in the pandemic.
Forging ahead: The life science industry ploughs on regardless with R&D and innovation
But it is easily forgotten that often new vaccines and compounds can have a long tail of litigation risk. Zantac was first approved for use by the US Food & Drug Administration way back in 2004 and has been sold over the counter by pharmacists across the globe since 2017.
It has taken a time for an alleged cancer risk to be noticed by analysts and traders.
In thin August markets there has been a seismic movement in share prices with a combined £33billion wiped off the value of GSK, Sanofi, Pfizer and Haleon in the last week before a minor rally in latest trading.
Questions about Zantac have been around for some time. GSK reports, in a lengthy statement, that studies have shown even though the drug contains a complex, potentially harmful ingredient, known in shorthand as NDMA, it has been tested to distraction by drug approval agencies in the US and Europe.
The amounts of NDMA contained in Zantac (medical name ranitidine) were found to be no more than in grilled and smoked meats. Moreover, no ‘consistent signals’ emerged of an association between ranitidine and cancer risk.
Hints of a potential problem were buried in the litigation risks listed in the July Haleon prospectus. It noted it was not yet possible to quantify lawsuits related to Zantac. It is in the nature of the beast that prospectuses are riddled with legal uncertainties and the healthcare industry is particularly vulnerable.
Johnson & Johnson talc users and investors are learning this to their cost.
When Easyjet was brought to the market by Stelios Haji-Ioannou more than 20 years ago there was a warning he and members of his family had an outstanding manslaughter charge relating to a shipping accident. Needless to say, it never materialised.
Haleon points out that it is not a party to any litigation over Zantac nor has it marketed the product in the UK since it was spun out or when it was part of GSK.
What appears to have excited the analysts and the markets is that the first bunch of 2,000 Zantac-related class action suits will hit the courts in Illinois this month.
The fuss reminds us why drug regulators on both sides of the Atlantic often take several years to approve new compounds.
The great exception was Covid when technology, science, resourcing and mass testing were brought together in search of a vaccine (and subsequently anti-virals) preserving, and still saving, countless lives.
There should be no doubt that there will be litigation fuelled by the anti-vaxxers.
But the life science industry ploughs on regardless with R&D and innovation. AstraZeneca continues its good run with oncology. It has won approval in the US for a new treatment for adult patients, with certain forms of lung cancer, after it and its partner Sankyo demonstrated 57.7 per cent effectiveness.
That is potentially a huge number of lives rescued from a deadly disease.
Bit player
It has been a terrible year for crypto currencies. Bitcoin has plummeted from peaks of $66,000 to $23,739 in value, specialist Singapore-based crypto fund Three Arrows Capital collapsed and the value of crypto exchange Coinbase, which rose to $86billion on flotation, is now worth $22billion (£18.1billion).
Even so, there’s residual interest from central bankers and established financial firms in the block chain accounting technology behind computer-generated currencies.
After a recently lamentable performance it is not surprising to find Abrdn looking for an edge in competitive fund management marketplace.
To this end it has taken a stake in Archax, the first digital exchange to be regulated by the Financial Conduct Authority.
Adventurous stuff from chief executive Stephen Bird. With so much change going on at Abrdn the fund manager might be better off focusing on retaining clients.
