Hate to go against the market but just couldn't resist at this level - I'm in |
 On a positive side
Hargreaves: Buy GSK before Zantac discount goes
GSK (GSK) is drawing a line under its Zantac litigation with a bumper payout which ‘substantially derisks’ the investment case, says Hargreaves Lansdown.
Shares in the Citywire Elite Companies AAA-rated pharmaceutical giant climbed 3.2% to £15.05 yesterday after it confirmed it had paid $2.2bn to settle 80,000 cases in US courts over claims that a version of its heartburn treatment Zantac caused cancer. The payment covers 93% of claims but GSK accepts no wrongdoing. It will also pay $70m in a separate but related action.
Analyst Derren Nathan said the outcome was ‘significantly better’ than expected, with some estimates as high as $45bn.
‘Looking ahead, GSK’s operational performance should be the key driver of investment,’ he said. ‘Execution has been impressive of late, with two upgrades already in the bag this year.’
It has faced headwinds in key vaccine programmes but overall, ‘recent clinical progress elsewhere in the portfolio has also seen a bigger share of successes than failures’.
‘The upcoming Zantac settlements substantially derisk the investment case for GSK shares which are trading at a hefty discount to the sector, meaning this could be an opportune time to consider increasing exposure to the stock,’ he said. |
GSK update eases investors’ fears as focus turns to vaccines
FTSE 100 pharmaceutical giant resolves legal case over Zantac drug as concern shifts to uptake of firm's key vaccines.
Relief for GSK investors after the drugs giant moved to end two years of Zantac litigation uncertainty was today balanced by near-term worries over the uptake of key vaccines.
GSK shares reached early afternoon 5% or 70p higher at 1528p, below the initial 10% uptick predicted by Jefferies analysts following last night’s disclosure.
Jefferies said the settlement of 93% of Zantac liability cases for $2.2 billion is equivalent to about 40p a share and compared with its own $2 billion-$3.5 billion estimate.
GSK, which admitted no liability, intends to fund the costs from existing financial resources and said there will be no impact on its “growth agenda or investment plans”. Its dividend policy for a payout equivalent to 40%-60% of earnings is unchanged, it told City analysts.
Having noted higher previous product liability settlements in the pharma industry, UBS said the value of the GSK agreement should be a positive surprise to investors. It said: “We see the settlement as a clear positive, removing a major overhang and uncertainty for investors.”
The bank pointed out that the remaining 7% of cases were outstanding because the company had chosen to approach the 10 largest plaintiff firms as a priority. The process is set to conclude by the end of the first half of 2025.
Like counterparts at Jefferies, UBS warned that other factors may continue to hang over GSK’s valuation despite the removal of Zantac uncertainty.
UBS said these near-term challenges included weak uptake for the respiratory syncytial virus (RSV) product Arexvy and increasing competition in long-acting HIV prevention.
It also flagged slower-than-expected uptake of shingles vaccine Shingrix in China.
Launched in the third quarter of 2023 and available in major retail pharmacies, Arexvy generated £244 million in sales in the first six months of the year.
It had two-thirds of the retail vaccination share in the second quarter, but demand decreased overall in line with anticipated respiratory virus seasonality patterns.
UBS has a Neutral stance and price target of 1,580p, while Jefferies had a price target of 2,000p prior to yesterday’s legal developments.
The US bank said: “Concerns linger over sales expectations for RSV vaccine Arexvy in both the second half and 2025 given recent slow US RSV vaccine uptake and data supporting an every three year re-vaccination schedule.
“In addition, investors continue to debate the sustainability of the Shingrix franchise, given US sales declines and potential concerns around uptake in China.”
GSK is due to post third-quarter results on 30 October, having upgraded full-year guidance in July as new launches in oncology boosted sales growth in its Specialty Medicines division.
Turnover is now expected to grow by between 7% and 9% and core earnings per share in the range of 10% and 12%. It recently paid a 15p a share quarterly dividend as part of plans to distribute 60p a share across the year.
Shore Capital points out that shares trade on a forward looking multiple of 8.1 times, a significant discount to peers and below the 12 times that GSK has historically commanded. It believes shares deserve to be at 2,200p.
Analyst Sean Conroy expects that the Zantac developments will serve as a clearing event for GSK and be broadly well received.
He added: “This now provides an excellent opportunity for the shares to properly re-rate and allow people to refocus their attention on the improving growth outlook GSK has been delivering since the demerger of Haleon" |
I have just now topped up.Buy and hold.Good news and glad I waited until this afternoon on the dip. Good to see major Good news with gsk.Hopefully this will set them free to move north |
Senior executives at GlaxoSmithKline, including the CEO and CFO, have acquired ordinary shares as part of the company's Share Reward Plan. The transactions, which took place on the London Stock Exchange, involved acquisitions at a price of £14.5185 per share. |
Exited have we trader? |
Dive dive dive |
Not much chance of that. £16-£17 tops if the market behaves itself. I’d be quite happy with that. |
Always quick to dive and slow to go up, sane for virtually all shares. Barring any more unforeseen catastrophes (never a given with GSK) we should see £19-20 within 6 months. |
Some peoples cup is half full even with a hole in the bottom. Odd. |
abdulla - it seems that your cup is always half empty when for others, theirs is half full ;o) |
Nearly 40p down from the HIGH of today |
Yep - we need to get the budget out of the way.
Confidence is knackered and Starmer & co haven't got a clue.
Suet |
Look at liontrust. Money is being pulled from the UK daily |
Well I guess that's the end of the litigation Can you offset the litigation costs against your tax liability? |
Yes, should be a lot higher. I suspect a lot of short term traders may take profit but moving forward this is only going in one direction now the shadow of litigation has been removed. |
Why a "gamble on court cases"? (The litigation is virtually over and the price depression was a direct result of the Zantac debacle). The pipeline is strong and the time is long overdue to return to fundamentals. Target: 2000p. |
Feels more like a gamble on court cases rather than an investment in drugs. I think this has a long way to go to get it back to a drugs valuation. |
I think its a disgrace that we have to stump up such a huge amount as there is no proper evidence whatsoever that Zantac causes cancer. Having said that the settlement itself is pragmatic and is the right thing to do. Its way less than many predicted and it stops GSK having their name and reputation dragged through the mud in a never ended series of courts. |
Great settlement for GSK
$2.2bn
A bargain
"Worries had mounted over how many billions GSK might have to pay, with analyst estimates reaching $8 billion last year and even $45 billion in 2022.
That has weighed heavily on its share price, with tens of billions of dollars wiped off the market value of companies linked to the drug. Shares recovered as the cases were eventually settled. Bloomberg |
Yes now good value, investors hate uncertainty, now settled, good news. |
Even with today's settlement news and 6% jump in share price (so far), GSK continues to be seriously undervalued and remains an outstanding BUY. |
GSK's investment case has significantly improved following its settlement of liability cases related to its discontinued Zantac drug, Deutsche Bank analysts Emmanuel Papadakis and Niall Alexander say in a note. The resolve is a surprising and positive twist to the investment case as it came sooner than expected and should ease investors concerns that had weighed on the shares, they say. Even with the share boost following the news, the pharma giant still seems undervalued based on its projected earnings for 2025, they add. |
Anyone re-investing their GSK dividend (paid today)? |
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