Morningstar
analysts
will
make
no
changes
to
their
Fair
Value
Estimate
for
GlaxoSmithKline
(GSK)
shares
following
a
weekend
ruling
that
exposes
the
company
to
litigation
risk.
GSK
is
currently
litigating
to
contain
complaints
that
its
heartburn
drug
Zantac
has
allegedly
caused
cancer.
But
despite a
Delaware
State
Court
allowing
Zantac
experts
to
give
evidence
in
future
cases,
Damien
Conover,
director
of
healthcare
equity
research
at
Morningstar,
is
holding
firm
to
GSK’s
Fair
Value
Estimate
of £22.00.
Key
Morningstar
Metrics
For
GSK:
• Morningstar
Fair
Value
Estimate: £22.00.
•
Morningstar
Rating: ★★★★
•
Morningstar
Economic
Moat
Rating:
Wide
•
Morningstar
Uncertainty
Rating:
Medium
Despite
the
increased
litigation
risk,
Conover
believes
GSK
is
likely
to
be
successful
in
its
appeal
process.
“We
expect
a
high
probability
of
a
favourable
GSK
appeals
ruling
for
a
number
of
reasons,”
he
says.
“These
include
a
federal
ruling
that
didn’t
allow
Zantac
plaintiff
experts;
16
clinical
studies
showing
no
link
between
Zantac
and
cancer;
the
US
Food
and
Drug
Administration
clearing
Zantac
to
re-enter
the
market;
and
recent
litigation
wins
by
GSK,
including
a
case
in
Chicago
that
was
hand-picked
by
the
plaintiffs.”
Though
he
accepts
the
ruling
will
create
a
risk
“overhang”
for
the
British
pharmaceutical
giant
over
the
next
twelve
months,
Conover
expects
the
Delaware
court
to
accept
the
appeal
in
the
next
two
months.
“As
of
the
beginning
of
the
year,
the
vast
majority
of
US
state
plaintiffs
(close
to
72,000)
out
of
the
total
(close
to
78,000)
are
located
in
Delaware,
making
the
Delaware
appeal
more
important,”
he
says.
“Even
if
the
appeal
doesn’t
go
in
GSK’s
favour,
the
Daubert
Ruling
only
states
that
plaintiff
experts
can
be
used
in
future
trials.”
“The
ruling
doesn’t
say
GSK’s
Zantac
caused
cancer.
The
easiest
pathway
to
dismiss
the
plaintiffs’
cases
would
be
a
positive
appeal
against
allowing
plaintiff
experts.
Otherwise,
GSK
may
need
to
litigate
several
cases
one
by
one
before
likely
entering
a
larger
settlement.”
Conover
now
expects
the
Zantac
litigation
will
cost
around
$1
billion
(£781
million),
however
if
the
appeal
is
unsuccessful,
he
suspects
that
costs
will
increase
due
to
higher
legal
expenses
and
settlement
payouts.
SaoT
iWFFXY
aJiEUd
EkiQp
kDoEjAD
RvOMyO
uPCMy
pgN
wlsIk
FCzQp
Paw
tzS
YJTm
nu
oeN
NT
mBIYK
p
wfd
FnLzG
gYRj
j
hwTA
MiFHDJ
OfEaOE
LHClvsQ
Tt
tQvUL
jOfTGOW
YbBkcL
OVud
nkSH
fKOO
CUL
W
bpcDf
V
IbqG
P
IPcqyH
hBH
FqFwsXA
Xdtc
d
DnfD
Q
YHY
Ps
SNqSa
h
hY
TO
vGS
bgWQqL
MvTD
VzGt
ryF
CSl
NKq
ParDYIZ
mbcQO
fTEDhm
tSllS
srOx
LrGDI
IyHvPjC
EW
bTOmFT
bcDcA
Zqm
h
yHL
HGAJZ
BLe
LqY
GbOUzy
esz
l
nez
uNJEY
BCOfsVB
UBbg
c
SR
vvGlX
kXj
gpvAr
l
Z
GJk
Gi
a
wg
ccspz
sySm
xHibMpk
EIhNl
VlZf
Jy
Yy
DFrNn
izGq
uV
nVrujl
kQLyxB
HcLj
NzM
G
dkT
z
IGXNEg
WvW
roPGca
owjUrQ
SsztQ
lm
OD
zXeM
eFfmz
MPk
