Zantac Legal Ruling Represents a Major Win for GSK and Sanofi, in Line With Our Expectations

Consistent with our expectations, the Multidistrict Litigation, or MDL, Zantac ruling dismissed cases claiming the drug caused cancer. While we don't expect any changes to our fair value estimates for GSK, Sanofi, and other drug firms that have sold the gastroenterology drug Zantac, the market's overreaction in late summer appears to have largely reversed course based on this ruling, and the shares have largely recuperated the over $30 billion in market capitalization lost when significant investor concern over Zantac litigation emerged in August. Even with the rebound, we continue to view the stocks as undervalued, with the market not fully appreciating the growth potential of the firms and their wide moats.