Why GSK Stock Rocketed Nearly 6% Skyward on Wednesday

Thanks largely to news of a crucial legal settlement, GSK (NYSE: GSK) was one of the better-performing big pharma stocks on Wednesday. Relieved investors showed their appreciation by collectively bidding the company's shares up by 5.8% on the day, a performance that easily eclipsed the 0.7% rise of the benchmark S&P 500 index.

$2.2 billion-plus in settlements

That news concerns a discontinued version of GSK's blockbuster heartburn drug Zantac, which was the focus of a series of lawsuits alleging that its active ingredient caused cancer. GSK announced Wednesday that it has agreed to a settlement with 10 plaintiffs' law firms representing around 80,000 Zantac cases -- 93% of the total number. The agreement will see the pharmaceutical company make a maximum aggregate payment of $2.2 billion to resolve all of those cases.

GSK added that other terms of the settlement were confidential. The company wrote that it expects the settlement to be fully implemented by the end of the first half of 2025.

Additionally, GSK has agreed in principle to settle a whistleblower lawsuit brought by Valisure, a laboratory based in Connecticut, with a $70 million payment. Similar to the cases in the other settlement, Valisure had accused the company of concealing the risks of cancer associated with Zantac.

Not admitting liability

At one point, the heavily marketed Zantac was the best-selling drug in the world. First approved in the U.S. in 1983, its long run ended in 2020 when the Food and Drug Administration asked its makers to remove it from the market. This was on concerns that the active ingredient, ranitidine, could degenerate into a carcinogenic substance under certain circumstances.

In its press release on the settlements, GSK stressed that it has not admitted liability in either instance.

It added, "While the scientific consensus remains that there is no consistent or reliable evidence that ranitidine increases the risk of any cancer, GSK strongly believes that these settlements are in the best long-term interests of the company and its shareholders, as they remove significant financial uncertainty, risk, and distraction associated with protracted litigation."

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends GSK. The Motley Fool has a disclosure policy.