GSK and Sanofi Stock Price Changes With Growing Zantac Litigation; Concerns Look Like Overreaction

Shares of GSK and Sanofi are under pressure due to increasing concerns regarding legal cases related to a potential cancer side effect from the over-the-counter heartburn medicine Zantac, according to several news sources. We view the pressure as overdone, as we do not expect major legal settlements regarding the medicine. We are not changing our fair value estimates for the companies as we have already factored in minor payouts related to drug liabilities for both companies. Also, we do not expect this ongoing litigation to have an impact on the moats of GSK or Sanofi, which are much more related to strong innovation with prescription drugs that should not be affected by the Zantac legal issues.