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On Friday, Citi adjusted its price target for GlaxoSmithKline (NYSE:GSK:LN) (NYSE: GSK) shares to GBP 19.00, down from the previous GBP 21.20, while still recommending a Buy rating for the stock. The revision follows a recent decision by the Advisory Committee on Immunization Practices (ACIP) that has impacted the market prospects for GSK's Arexvy vaccine.
The ACIP's decision last week has significantly narrowed the eligible age group for Arexvy, targeting a smaller population of 60-74 year-olds, which now represents less than 40% of the previous estimate.
Additionally, the reimbursement for individuals aged 50-59 has been postponed. This development led Citi to modify its forecast for Arexvy, eliminating the possibility of revaccination, which was previously estimated at 5-10%. Consequently, the peak sales expectation for Arexvy has been lowered to £2.2 billion, a reduction from the earlier £2.9 billion and below the market consensus of £3 billion.
Despite the reduced sales forecast for Arexvy, Citi's scenario analysis suggests a potential £3 per share increase in value if Arexvy's peak sales eventually reach £3 billion after 2028.
The analysis by Citi had earlier posited that GlaxoSmithKline was on track to exceed financial expectations through 2024, bolstered by vaccine and oncology launches, as well as HIV and respiratory treatments. However, the recent developments indicate that surpassing and upgrading these forecasts may now be less feasible.
The pharmaceutical company has also been affected by rising concerns over Zantac litigation, which has led to a £7 billion loss in market capitalization. While Citi's price target accounts for a predicted £2.4 billion settlement, the negative sentiment surrounding the litigation is expected to exert pressure on GlaxoSmithKline's stock performance. The projected earnings per share (EPS) have been adjusted to reflect changes ranging from a positive 2% to a negative 14%.
In other recent news, GSK has secured exclusive rights to develop, manufacture, and commercialize mRNA vaccines for influenza and COVID-19 from CureVac. The deal involves an upfront payment of €400 million with potential future payments totaling €1.05 billion, based on various milestones.
The agreement expands on a collaboration initiated in 2020 and leverages GSK's expertise to advance these vaccine candidates, currently in phase II and phase I clinical development.
In a related development, GSK reported a 100% response rate in a rectal cancer study with Jemperli, a potential new treatment option that could lead to complete tumor regression. However, the company is facing a lawsuit from Valisure over allegations related to the concealment of cancer risks associated with its heartburn medication Zantac.
Goldman Sachs has initiated coverage on GSK, issuing a Neutral rating and highlighting the company's transition to focus on specialty medicines and vaccines. Lastly, the CDC's recent decision to limit the use of RSV vaccines to a narrower age group could potentially impact the projected market for GSK's Arexvy RSV vaccine, according to analysts at JPMorgan. These are among the recent developments concerning GSK.
InvestingPro Insights
Amidst the backdrop of Citi's revised price target for GlaxoSmithKline, current data from InvestingPro provides additional context for investors considering GSK's stock. The company's market capitalization stands at a robust $78.64 billion, and with a P/E ratio of 13.73, GSK appears to be valued reasonably in the market. The InvestingPro Tips highlight that GSK has a high shareholder yield and a strong free cash flow yield, which are positive indicators for investors seeking value. Moreover, the stock is currently in oversold territory according to the RSI, suggesting potential for a rebound.
Furthermore, the stability of GSK is underscored by its low price volatility and its status as a leading player in the pharmaceutical industry. Importantly, GSK has maintained dividend payments for 24 consecutive years and is expected to remain profitable this year, with a dividend yield of 3.83% as of the most recent data. These factors may offer some reassurance to investors amidst the uncertainty surrounding the Arexvy vaccine's market prospects and the ongoing Zantac litigation.
For those seeking more in-depth analysis, there are additional InvestingPro Tips available, including insights on GSK's liquidity position and its ability to cover interest payments with cash flows. Subscribers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing access to a comprehensive suite of investment tools and data. With these resources, investors can make more informed decisions and navigate the complexities of the pharmaceutical market with greater confidence.
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