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18 Oct, 2021 11:32

Berenberg says GSK 'undervalued' but pipeline underwhelms

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NIH Medical Research Scholars ProgramNIH (PD)

Analysts at Berenberg reduced their target price for shares of GlaxoSmithKline from 1,625.0p to 1,540.0p, but stood by their 'buy' recommendation on the shares, pointing out that the company's exit from its Consumer healthcare division was now closer and arguing that the stock remained "fundamentally undervalued".

On the flip side, the pharmaceutical giant's pipeline had not played out as hoped in 2021.

Berenberg also saw stasis on returns from GSK's investments in research and development.

The analysts estimated that the company would generate a return from R&D investment of 6%, which was below its 8% cost of capital and in line with the previous two historical cohorts.

"Time is running out for management to deliver positive pipeline progress. Without Consumer Healthcare from mid-2022, "New GSK" will be increasingly exposed to its pharma R&D fortunes," they added.

They also expected investors at the company's next results presentation on 27 November to be keen for reassurance on demand in the US for Shingrix.

Among the key pipeline readouts that still lay ahead in 2021 were Blenrep and GSI combination data and full phase three data for daprodustat.

They were to be followed, all in 2023, by data on the RSV older adult vaccine, GSK'8836 and otilimab.


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Pilling and Co Stockbrokers Ltd. is not responsible for the content or accuracy of third party news articles and we may not share the views of the author or publisher.

We provide third party news for your convenience and information only and make no representation or endorsement whatsoever and hereby exclude all liability for any loss or damage that may be incurred by you as a result of your access or use. Please note that third party content may be subject to terms and conditions imposed by the third party owner of that content.