GSK's Zantac settlement should give stock a boost, says Jefferies

GSK's $2.2bn payment to settle 93% of outstanding Zantac lawsuits in the US was close to the "best case scenario", according to Jefferies, which said the announcement should remove a significant weight on the share price.

The broker reiterated a 'buy' rating and 2,000p target price for the stock, which was up 5.6% at 1,539.5p by 1045 BST.

GSK said on Thursday that it has now settled about 80,000 Zantac lawsuits in the US after reaching an agreement with 10 firms who represent 93% of the Zantac (ranitidine) state court product liability cases pending.

Jefferies said that the settlement equated to around 40p per share, at came in at the bottom end of its previous $2-3.5bn estimate.

"Dismissal of 93% of cases for $2.2bn nears our best case scenario, and should remove the majority of Zantac overhang on the stock. Importantly we believe the settlement cost is also well below most figures we have heard from investors," the broker said.

Jefferies reckons that the stock should rise around 10% from the removal of most of the Zantac uncertainty.