The FTSE 100 closed 0.4% higher at 7,500.8 on Friday, rounding up a week of quiet progress with a 0.8% gain over the past five days.
The big news rocking the market was the massive fallout from pharmaceutical drug Zantac, which wiped £4.5 billion of GSK’s market cap after claims that the heartburn drug caused cancer.
Shares in the pharmaceutical giant plummeted 12.9% this week, however the company clawed back a 3.6% rise to 1,450.5p today.
“Fears of a multi-billion-dollar lawsuit for the companies involved with recalled heartburn drug Zantac have wiped billions off the value of GSK, Haleon and Sanofi this week,” said AJ Bell financial analyst Danni Hewson.
“Investors fear they will have to shell out big bucks if found guilty of failing to properly warn users about health risks, with allegations that Zantac causes cancer.”
“Now comes the really hard part, with the drug companies having to convince investors, the public and the courts they are not guilty.”
GSK’s spinoff group Haleon was caught in the chaos, falling 11.9% in the past week and recouping a fragment of its losses with a 1.8% uptick to 270.7p.
“It’s given GSK spin-off Haleon a terrible start to life as a standalone business, with its share price having plummeted in recent days,” said Hewson.
“Haleon says it isn’t party to any of the Zantac claims, yet GSK has served it with notice of potential claims in relation to liabilities connected to over-the-counter Zantac products.”
“With the first personal injury case going to court later this month, the healthcare companies involved will have already prepared their defence and GSK implies that the accusations do not tally with scientific consensus to date.”
Investors were warned of the potential risks linked to Zantac before the company was spun out, however it appears they missed the memo, responding in shock as the fine print was pulled into the spotlight.
“It is worth remembering this is not ‘new’ news. Regulators and experts have been looking into any links between Zantac and cancer for years, and indeed the risks were flagged in Haleon’s stock market prospectus,” said Hewson.
“However, it goes to show most investors don’t bother to read the small print, so they’ve been caught off guard after the potential liabilities hit the news.”
Flutter Entertainment
Not every investor had cause to grab the smelling salts today, as Flutter Entertainment shares flew with a 14.3% rise to 10,730p.
Revenue climbed 11% to £3.3 billion against £3 billion in HY1 2022, despite a difficult market environment.
The gambling firm linked its revenue growth to an increase in recreational players, with a 14% rise in average monthly players to 8.7 million from 7.6 million the year before.
However, Flutter Entertainment confirmed a 23% EBITDA slide to £434 million compared to £562 million, in line with management expectations.
“Flutter Entertainment took the top slot among the FTSE risers, with the shares jumping after the company said there were no signs of consumers betting less – something the market had been fearing given the cost-of-living crisis,” said Hewson.
“This reinforces the idea that people will be happy to keep betting in the hope of winning big during more difficult economic times.”
Mondi
Mondi investors had a great Friday, with shares rising 11% to 1,703 on the back of its agreement to sell its Russian Syktyvkar mill for €1.5 billion.
The move comes in line with the company’s announced shift away from Russian operations reported in early May as a result of the Ukraine war.
The proposal is currently pending approval from the Russian agreement and the firm’s shareholders.
