LONDON: Shares in GSK, Sanofi and Haleon fell sharply on Thursday, following declines earlier this week, amid growing investor concerns about U.S. litigation focused on a heartburn drug that contained a probable carcinogen.

GSK shares were down just over 10%, Sanofi's stock had sagged about 3.3% and Haleon's shares had slipped nearly 5% at the close of trading on Thursday.

GSK and Sanofi at various points sold the drug - originally branded as Zantac - which U.S. regulators ordered off the market in 2020. Haleon, spun out as an independent listed company last month, comprises consumer health assets once partly owned by GSK.

The prospect of impending litigation is not new. Among other disclosures, recently listed Haleon had highlighted the risk of such lawsuits in its prospectus.

The topic has arrived in investor consciousness in recent days it seems, but has been rumbling on in the background for a few years, Deutsche Bank analysts wrote in a note.

The litigation has just started to be talked about more by investors and written about in the media, Barclays analyst Emily Field said in an email. "I think the panic ... really comes down to market psychology as opposed to having learned anything new."

Zantac became the world’s best selling medicine in 1988 and one of the first-ever drugs to top $1 billion in annual sales.

However, concerns around the compound - known chemically as ranitidine - containing potential cancer-causing impurities started to emerge in 2018, well after generic versions of the medicine had been launched by a variety of manufacturers.

More than 2,000 legal cases related to Zantac have now been filed in the United States, analysts say, with the first trial beginning later this month.

"It is very possible we may see a liability of some $bn (billion) magnitude," the Deutsche Bank analysts wrote.

New consumer healthcare giant Haleon worth £31 bn

Uncertainty over the issue has sparked fears of a worse-case scenario where costs run into the billions of dollars, as happened in cases involving Merck & Co's painkiller Vioxx and Bayer's glyphosate-based weedkiller.

Not primarily liable

A decline of as much as 12% in Haleon shares on Thursday meant some $5 billion had been knocked off its value this week. It recovered some of those losses after a spokesperson told Reuters the company was not primarily liable for any claim.

"We have never marketed Zantac in any form in the U.S., as Haleon or as GSK consumer healthcare," the person said.

Zantac, originally marketed by a forerunner of GSK, has been sold by several companies since the late 1990s, including Pfizer, Boehringer Ingelheim and Sanofi.

That "may make third parties liable ahead of any Haleon exposure," the Haleon spokesperson added.

A Pfizer spokesperson said in an email: "Pfizer, which has not sold a Zantac product in more than 15 years and did so only for a limited period of time, will continue to defend itself vigorously."

Pfizer shares were down nearly 4% on Thursday afternoon in U.S. trading.

GSK did not immediately respond to requests for comment.

A Boehringer spokesperson said via email the company would defend itself against any allegations, while Sanofi issued a statement saying it remained confident in its legal defenses and that there had not been any material developments regarding the U.S. Zantac litigation.

GSK and Pfizer have each served Haleon with notice of potential claims of indemnification - but indemnification has not yet been determined between the parties, the Haleon spokesperson said.

After U.S. and European regulators said they were reviewing Zantac's safety in 2018, some manufacturers voluntarily took their version off the shelves the following year.

By 2020, the U.S. Food and Drug Administration requested makers of all versions of the treatment to withdraw their products from the market.

Apart from Zantac, Haleon's recent share performance could also be linked to fears about the company's growth prospects in a world where cash-strapped consumers can shun big name brands in favour of cheaper, supermarket own-brand products, Danni Hewson, financial analyst at AJ Bell, wrote in a note.

By 1340 GMT on Thursday, the two-day rout had wiped as much as $46 billion off the market values of GSK, Haleon and Sanofi combined.

Trading was heavy, with Sanofi volume reaching more than three times the 90-day average. GSK volume was almost twice the average.