Shares in GlaxoSmithKline (GSK.L) tumbled 14% in the past two days as investors grew more nervous about litigation over the blockbuster heartburn drug Zantac.
Analysts at AJ Bell told Yahoo Finance UK the move wiped £4.5bn ($5.5bn) off the pharmaceutical giant's market capitalisation as its share price suffered the biggest drop since 1998 on Thursday.
But the FTSE 100 (^FTSE) firm is on the rise today, up around 4.9% in afternoon trade in London.
Other pharma stocks also cratered as the first of more than 2,000 pending personal injury cases linking Zantac to cancer is poised to go to trial on 22 August. Key bellwether trials are set to start in early 2023.
GSK's recently spun-out consumer goods arm, Haleon (HLN.L) lost as much as 15% on Thursday.
Danni Hewson, financial analyst at AJ Bell, said: "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.
"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."
Big pharma firms including GSK, Sanofi, and Boehringer Ingelheim, and several other generic drugmakers, are accused of failing to warn users about the drug’s risks.
Zantac is the brand name for a drug called ranitidine that is used to relieve heartburn. It was originally invented and sold by GSK as a prescription drug in the 1980s before transitioning to an over-the-counter treatment.
The once-popular antacid is the centre of several US lawsuits over claims that the product causes cancers after regulators launched a safety review in 2019.
By 2020 the US Food and Drug Administration (FDA) and the European Medicines Agency requested all versions of the medicine be withdrawn from the market.
The FDA investigation probed the amount of N-nitrosodimethylamine, or NDMA, in the product. NDMA is commonly ingested in small amounts but can cause cancer in humans when consumed in larger quantities.
It said that Zantac appeared to produce unacceptably high levels of the cancer-causing chemical when exposed to heat and requested it be pulled from the market.
"The overwhelming weight of the scientific evidence supports the conclusion that there is no increased cancer risk associated with the use of ranitidine," GSK said.
"Suggestions to the contrary are therefore inconsistent with the science and GSK will vigorously defend itself against all meritless claims."
A spokesperson for Sanofi said the company "remains fully confident in its defences". They added: "Given the strength of our case and the uncertainty of future proceedings no contingencies have been established."
Haleon asserted that it's not a party to any of the Zantac claims, adding it "never marketed Zantac in any form in the US" and is "not primarily liable for any OTC [over the counter] or prescription claims".