GSK slips as Jefferies downgrades on Zantac overhang

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American Depository Shares of GSK (NYSE:GSK) inched lower in the morning hours Thursday after Jefferies downgraded the U.K. pharma giant, citing uncertainty related to ongoing litigations over the heartburn medication Zantac.

Zantac was withdrawn from the U.S. market in 2020 amid concerns over the unacceptable levels of potential human carcinogen, N-nitrosodimethylamine (NDMA).

However, the users of the drug have filed lawsuits over its carcinogenic effects against drugmakers, including Sanofi (SNY) (OTCPK:SNYNF) and GSK (GSK), the shares of which have come under pressure in recent weeks.

Projecting $3 – 34B of shared liability over Zantac claims, Jefferies analysts led by Peter Welford argue that while the selloff of SNY seems excessive, GSK has a "worst" case scenario "which cannot be excluded as unreasonable."

The analysts retain the Buy rating on SNY and, despite its improving fundamentals, downgrade GSK to Hold from Buy, arguing that the uncertainty overhang could persist until at least 2H 2023.

However, the team lowers the price target on SNY to $54.50 from $69.00 and the GSK's target to $34.00 from $50.50.

Read: In August, GSK and SNY recovered after Citi projected a limited impact from Zantac claims.