GlaxoSmithKline (GSK) stock forecast: Is now the time to buy?
UK multinational pharmaceutical and biotechnology firm GlaxoSmithKline (GSK) has underperformed the market in the past year as it faces US litigation and high inflation driving up costs.
The GSK share price has fallen by 14% in the past year, compared with a 1% rise in the FTSE 100 Index (UK100), a 38% gain for UK rival Astrazeneca (AZN) and a 34% rise in the share price for US pharmaceutical firm Eli Lilly (LLY).
The company has undergone significant change in the past year, spinning off its consumer healthcare unit as Haleon (HLN), which began trading on the London Stock Exchange (LSE) in July 2022. GSK rebranded from GlaxoSmithKline in May 2022.
GSK has cut its dividend to account for the spinoff of Haleon, which will pay its own dividend. It offers investors an attractive yield of 4.7%. So, is GlaxoSmithKline a buy, hold or sell right now?
In this GSK stock analysis, we look at the company’s recent announcements, share price performance and the long-term GSK stock forecast.
GSK focuses on development
GSK traces its beginnings to Plough Court Pharmacy in London in 1715. In 1856, the pharmacy was renamed Allen & Hanburys and was later acquired by Glaxo Laboratories.
Meanwhile, in 1830, the Smith & Gilbert drug wholesaler opened in Philadelphia, US. Gilbert left the business, and by 1870 Mahlon Kline had joined as partner, forming Smith, Kline & Co., which acquired French, Richards & Co. to form Smith, Kline & French Co. in 1891.
In 1989, SmithKline Beckman merged with Beecham Group to form SmithKline Beecham. In 1995, the Wellcome Trust sold the Wellcome Foundation to Glaxo, forming Glaxo Wellcome, the world’s largest pharmaceutical company.
Glaxo Wellcome merged with SmithKline Beecham to form GlaxoSmithKline in January 2000.
GSK’s legacy companies developed medicines and vaccines including “15 first-in-class or combination vaccines and first-of-their-kind medications in respiratory, antibiotics, antivirals and oncology”, according to its website.
Those form the basis of today’s company, which has grown from a group of individual business founders to a multinational firm with over 70,000 employees.
Having spun off its consumer healthcare division, GSK has two remaining divisions, pharmaceuticals and vaccines. The company has more than 60 vaccines and medicines in development, which could drive revenue and profit growth in the future.
In December, GSK announced a strategic collaboration with Wave Life Sciences to advance oligonucleotide therapeutics that can modify RNA to treat chronic diseases. Additionally, GSK’s Covid-19 booster vaccine, developed with Sanofi, was approved for use in Britain, following its approval by the European Commission in November.
GSK faces litigation
In February 2022, GSK’s majority-owned ViiV Healthcare subsidiary, a specialist HIV company, settled the case against Gilead Sciences (GILD) concerning its patents relating to dolutegravir, which is used with other medicines to treat HIV. US-based Pfizer (PFE) and Japanese pharmaceutical company Shionogi & Co (4507) are also shareholders in ViiV Healthcare.
As part of the settlement, GSK, Shionogi and Gilead negotiated a patent licence agreement under which Gilead has a worldwide licence to use “certain ViiV Healthcare patents relating to dolutegravir”. Gilead made the $1.25bn payment in the first quarter of 2022, and will also pay a 3% royalty on the future US sales of its Biktarvy treatment.
GSK’s shares came under pressure in 2022 as litigation in US courts claimed that the heartburn drug ranitidine, sold by GSK under the brand Zantac, caused cancer. On 6 December, a US district court dismissed the claims as providing insufficient evidence. However, there are still tens of thousands of state-court lawsuits pending.
“GSK will continue to defend itself vigorously, including against all claims brought at the state level in the U.S.,” the company stated.
GSK’s share price remains under pressure
GSK live price chart
The GSK share price has yet to fully recover from the collapse in share prices at the beginning of the Covid-19 pandemic in March 2020. The stock traded up to £18.46 in January 2020 – its highest level since November 2001.
It then fell to £14.03 in March 2020, and while it bounced to £16.88 in April 2020, it subsequently declined to £11.91 in February 2021.
The development of Covid-19 vaccines brought the share price higher, trending up to £16.23 at the end of 2021.
GSK fell to £15.04 in March 2022 as financial markets dropped in response to Russia’s invasion of Ukraine.
The price rose to £18.69 in April 2022, but again turned lower, falling to £16.47 in early August. The share price then dropped to £14 on 11 August in response to news of the Zantac litigation.
GSK stock continued to trade lower, reaching £12.96 on 22 September, before turning higher to trade around £14 again. The stock has been unable to breach the £15 mark, ending 2022 at £14.38 a share.
Despite the external pressure on the share price, GSK reported strong third-quarter revenue growth on 2 November. Total sales rose by 9% to £7.8bn, including a 24% increase in revenues from speciality medicines, a 5% rise in revenue from vaccines and a 1% increase in general medicine sales.
The company raised its full-year 2022 guidance, calling for sales growth of 8% to 10% and growth in adjusted operating profit of 15% to 17%. The guidance excludes any contribution from Covid-19 solutions.
GSK spins off consumer healthcare business
The Haleon spinoff debuted on the LSE at £3.30 on 18 July 2022, after GSK had rejected three unsolicited offers from consumer goods company Unilever (ULVR) for the business – the most recent a £50bn offer.
GSK previously stated it expected the new firm to be a “world leader” in consumer healthcare, offering the prospect of attractive organic sales growth, operating margin expansion, and consistent high cash generation.
Over the medium term, GSK expects increased revenue from oral care, vitamins, minerals and supplements (VMS), and pain relief; increasing innovation in the US and China; and extended growth in emerging markets to continue driving sales higher.
Products in Haleon’s portfolio include leading brands such as Sensodyne, Voltaren, Panadol and Centrum.
The business was a joint venture with Pfizer, with GSK holding a majority 68% stake, while Pfizer owned 32%. Following the demerger, Haleon’s total issued ordinary share capital means that GSK shareholders jointly own 54.5% of the business. Pfizer will continue to hold 32%, GSK will hold 6%, and 7.5% will be held by Scottish limited partnerships that provide funding to GSK pensions.
Pfizer is expected to reduce its stake in Haleon following the company’s initial public offering (IPO) and the lock-up period.
What does the GlaxoSmithKline stock forecast look like after the spinoff and amid the ongoing litigation?
GlaxoSmithKline share price forecast: How do analysts view the stock?
As of 11 January 2023, the average GlaxoSmithKline stock forecast from nine analysts that have issued a price target was £15.19, ranging between a low of £12.45 and a high of £19.10, according to MarketBeat. There were four buy ratings and five hold recommendations, with none recommending selling the stock.
On 3 January, JP Morgan Chase issued a GlaxoSmithKline stock forecast at £13.50 a share. On 5 January, Jefferies Financial Group set a GSK stock price target of £15.75, while the following day, Credit Suisse set its GSK share price prediction at £15.10.
On 9 January, UBS Group predicted that the share price could fall to £12.45. And on 10 January, Barclays issued a GlaxoSmithKline share price forecast of £14.50.
Economic data provider Trading Economics’ GlaxoSmithKline stock forecast for 2023 indicated that the price could fall to £13.89 by the end of this quarter and £12.78 in a year, based on its global macro model projections and analysts’ expectations.
Algorithm-based forecast service WalletInvestor estimated that GSK price could stabilise over the next couple of years and then edge lower over the longer term. The site’s GlaxoSmithKline stock forecast for 2025 showed the price ending the year at £14 per share, little changed from £14.02 at the end of this year, then moving down to £13.89 by January 2028.
When looking at any GSK stock forecast, you should remember that analysts and algorithm-based forecasters can and do get their predictions wrong.
We recommend that you always do your own research before making any investment decisions and remember that past performance is no guarantee of future returns. You should never invest money that you cannot afford to lose.