London Daily

Focus on the big picture.
Thursday, Jul 24, 2025

City analysts come out in support of Glaxo plan

City analysts come out in support of Glaxo plan

Brokers say shares are undervalued compared with New GSK prospects

A growing number of City analysts have come out in support of GlaxoSmithKline’s restructuring plan under chief executive Emma Walmsley despite the efforts of activist investor Elliott to stir up shareholders.

Brokers Morgan Stanley, Liberum, Jefferies and Berenberg issued research notes broadly supportive of the strategy which will split off the consumer arm and focus “new” GSK on its pharmaceuticals and vaccines operations.

All said the current bombed-out share price did not reflect the true value of the business post-restructuring.

However, they stressed that GSK had to build up investors’ confidence in the strength of its pipeline of drugs in development. Key to this will be its June 23 investor day when Walmsley’s team will give more details on prospects for New GSK in the first five years of its life.

Berenberg said patent expiries meant GSK needed to get two “megabuster” new drugs to market by the middle of the decade.

Morgan Stanley said the new five-year targets expected at the event could trigger upgrades to the City’s profit forecasts but warned increased disclosure on the progress in its pipeline was needed.

Several were expecting a dividend cut to fund investment in research and development. Liberum speculated a “part-IPO” might be signalled for the consumer division.

What the analysts said:


Morgan Stanley


Price target 1550p


“We believe the that the new five year targets [unveiled on 23 June] could provide upside to consensus earnings in 2026, but incremental progress in innovation and limited long-term visibility suggest GSK could remain a “show-me” story.”

Points out that the biopharma arm is becoming a more innovation-led business, but largely because established medicines are in decline and some HIV drugs come off patent in 2027-29.

Says the 23 June meeting will focus on four areas:

1) Reprioritising established products

2) Details on how it will grow its ViiV HIV business around its Cabotegravir product

3) Putting into context how innovations in mRNA, highlighted by the Covid crisis, will disrupt GSK’s vaccines business

4) Focusing investors’ minds on six pivotal programmes in its pharmaceuticals R&D pipeline

Liberum


Price target 1700p


Suggests the capital markets event will outline forecast sales growth of “new GSK” at 6% with underlying profit growth at 10% a year for 2021-26. Both of those are slightly ahead of City forecasts.

Expects clarification on how Walmsley plans to split off the consumer arm. Debate is raging around whether it should be through an IPO or a spin-off. Some shareholders are concerned an IPO would be used to raise new money, meaning existing investors get diluted. Liberum argues a “part-IPO” looked increasingly likely.

“We continue to believe the long-term potential of New GSK is underappreciated and reiterate our BUY rating and £17 target price.

Berenberg


Price target 1570p


Expects news on growth outlook for New GSK for the next five or 10 years and on the extent of the proposed 2022 dividend cut - needed to fund R&D spend.

“Clear communication from management will be critical in order to convince many sceptical yet intrigued investors that now is the time to buy.

“We continue to believe there is deep value and view the implied negative pipeline value for GSK as unwarranted; we reiterate our Buy recommendation.”

Looking at how the management’s own performance pay is set, Berenberg predicts five year sales forecasts out to 2026 will be 5% annual growth with operating profit 10% - the latter being higher than the consensus of 8% in the City.

Says that to make up for the patent expiry at the end of 2017 of dolutegravir, an HIV/AIDS retroviral, GSK needs two “megabusters”, indications of which will require 8-10 “shots on goal” in the pipeline. Berenberg has identified “at least four” in phase II or III trials that fit the bill.

The broker assumes a 50% cut in the dividend to pay to bring in new blockbusters.

Jefferies:


Price target 1925p


Predicts dividend will be halved, broadly as expected, but thinks New GSK’s five year growth plan could be bolder than the market has factored in, with bigger sales and profit expectations.

Says a spin-off of the consumer arm is more likely than an IPO. A flotation and fundraiser would put people off holding GSK shares for a year, it says.

Key is to build belief in the pipeline, namely, in its core areas of vaccines, oncology, immunology and infectious diseases including HIV.

Says GSK could raise cash to reinvest in the business by selling off some of the pharma portfolio such as dermatology.

Highlights that its investments in biotech stakes including Vir, CureVac and 23andMe, which is floating soon, are underappreciated.

Newsletter

Related Articles

0:00
0:00
Close
TSUNAMI: Trump Just Crossed the Rubicon—And There’s No Turning Back
Over 120 Criminal Cases Dismissed in Boston Amid Public Defender Shortage
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
Trump Announces $550 Billion Japanese Investment and New Trade Agreements with Indonesia and the Philippines
US Treasury Secretary Calls for Institutional Review of Federal Reserve Amid AI‑Driven Growth Expectations
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Severe Flooding in South Korea Claims Lives Amid Ongoing Rescue Operations
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Japanese Prime Minister Vows to Stay After Coalition Loses Upper House Majority
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
CEO Resigns Amid Controversy Over Relationship with HR Executive
Man Dies After Being Pulled Into MRI Machine Due to Metal Chain in New York Clinic
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
US Revokes Visas of Brazilian Corrupted Judges Amid Fake Bolsonaro Investigation
U.S. Congress Approves Rescissions Act Cutting Federal Funding for NPR and PBS
North Korea Restricts Foreign Tourist Access to New Seaside Resort
Brazil's Supreme Court Imposes Radical Restrictions on Former President Bolsonaro
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Judge Criticizes DOJ Over Secrecy in Dropping Charges Against Gang Leader
Apple Closes $16.5 Billion Tax Dispute With Ireland
Von der Leyen Faces Setback Over €2 Trillion EU Budget Proposal
UK and Germany Collaborate on Global Military Equipment Sales
Trump Plans Over 10% Tariffs on African and Caribbean Nations
Flying Taxi CEO Reclaims Billionaire Status After Stock Surge
Epstein Files Deepen Republican Party Divide
Zuckerberg Faces $8 Billion Privacy Lawsuit From Meta Shareholders
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
SpaceX Nears $400 Billion Valuation With New Share Sale
Microsoft, US Lab to Use AI for Faster Nuclear Plant Licensing
Trump Walks Back Talk of Firing Fed Chair Jerome Powell
Zelensky Reshuffles Cabinet to Win Support at Home and in Washington
"Can You Hit Moscow?" Trump Asked Zelensky To Make Putin "Feel The Pain"
Irish Tech Worker Detained 100 days by US Authorities for Overstaying Visa
Dimon Warns on Fed Independence as Trump Administration Eyes Powell’s Succession
Church of England Removes 1991 Sexuality Guidelines from Clergy Selection
Superman Franchise Achieves Success with Latest Release
Hungary's Viktor Orban Rejects Agreements on Illegal Migration
Jeff Bezos Considers Purchasing Condé Nast as a Wedding Gift
Ghislaine Maxwell Says She’s Ready to Testify Before Congress on Epstein’s Criminal Empire
Bal des Pompiers: A Celebration of Community and Firefighter Culture in France
FBI Chief Kash Patel Denies Resignation Speculations Amid Epstein List Controversy
Air India Pilot’s Mental Health Records Under Scrutiny
Google Secures Windsurf AI Coding Team in $2.4 Billion Licence Deal
Jamie Dimon Warns Europe Is Losing Global Competitiveness and Flags Market Complacency
South African Police Minister Suspended Amid Organised Crime Allegations
Nvidia CEO Claims Chinese Military Reluctance to Use US AI Technology
×