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Haleon stock price in 5 years: Can GSK spin-off HLN navigate Zantac litigation headwinds?

By Nicole Willing

Edited by Valerie Medleva

15:27, 5 October 2022

Doctor working on a virtual screen behind the structure of medical icons on a blurred background.
Is HLN a long-term buy? Photo: iQoncept / Shutterstock

British consumer healthcare firm Haleon (HLN) was listed on the London Stock Exchange (LSE) on 18 July as a spin-off from GSK, formerly known as GlaxoSmithKline. The listing was the largest in Europe for more than a decade.

The HLN share price initially traded higher but fell in August as investors became increasingly concerned about litigation in the US surrounding heartburn drug ranitidine, branded as Zantac, and claims it contained a probable carcinogen. 

GSK and French pharmaceutical company Sanofi (SNY) sold Zantac at various times from its launch in 1988. European and US regulators began to review Zantac's safety in 2018 and US regulators removed it from the market in 2020.

Haleon, which was formed as a joint venture (JV) between GSK and US pharmaceutical company Pfizer (PFE) in 2018, has rejected indemnification claims as neither company sold Zantac in the US or Canada at the time.

What is the outlook for the Haleon stock price in 5 years? 

In this article, we look at the latest news on the company and potential long-term share price forecasts.

What is HLN?

Haleon was formed from the consumer healthcare business of GSK, which held a 68% stake, and Pfizer, which held a 32% stake. The JV was formed with the intention of spinning off and listing Haleon within three years. Both GSK and Pfizer had been looking to offload their consumer businesses to focus on prescription medicines and vaccines.

By combining the two businesses, Haleon has become the world’s largest standalone consumer healthcare company.

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Haleon price falls post-listing

GSK rejected a £50bn offer for Haleon from UK consumer goods giant Unilever in January this year, on the basis that they “fundamentally undervalued the Consumer Healthcare business and its future prospects”.

However, the drop in the share price since July has seen Haleon’s market capitalisation fall to £25.78bn, as of 3 October, from around £30.5bn when it debuted on the LSE at £3.30 a share.

HLN price chart

The Haleon stock price rose from £3.08 on 18 July to £3.17 on 22 July, but then dropped below the £3 level to £2.92 at the end of the month. The price rebounded to £3.11 on 2 August, but fell to £2.66 on concerns around the Zantac litigation. 

The plaintiff in the first Zantac trial dropped their case voluntarily, according to announcements on 16 August, but the HLN share price continued to decline, closing on 19 August at £2.56. The stock traded up to £2.69 on 24 August, but then dropped to a new low of £2.46 on 5 September. 

The HLN share price turned higher in September, rising to £2.86 on 26 September, but was unable to hold onto the gain and opened at £2.78 on 3 October.

Haleon stock was also listed on the New York Stock Exchange (NYSE) in July in the form of American Depositary Shares (ADSs). Each Haleon ADS represents two ordinary shares in the company.

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In its prospectus, Haleon had included the Zantac litigation as a potential risk to the business in its stock exchange listing prospectus. But in its results for the first half of the year, the company stated: 

“Haleon is not a party to any Zantac claims. Haleon has notified GSK and Pfizer that it rejects their requests for indemnification on the basis that the scope of the indemnities set out in the joint venture agreement only covers their consumer healthcare businesses as conducted when the JV was formed in 2018. At that time, neither GSK nor Pfizer marketed OTC Zantac in the US or Canada.”

In the first six months of 2022, Haleon reported a 13.4% year-on-year increase in revenue to £5.2bn, from £4.58bn in the first half of 2021. The company’s profit after tax rose by 5.3% to £517m and earnings per share by 5.7% to £0.056. 

Brian McNamara, Haleon’s CEO, said that company gained or maintained market share in most of its businesses “even in difficult market conditions” and “we delivered margin expansion in the first half despite significant cost inflation and absorption of standalone costs for the business”.

With free cash flow rising to £553m, from £364m, the company expects to reduce its £10.7bn debt “quickly over the coming years”. McNamara added:

“Whilst navigating the current macro-economic challenges and uncertainties, positive momentum in our business has continued into the second half. This combined with the strength of the business reinforces our confidence that we are well positioned to deliver on guidance this year and over the medium term.”

Haleon expects its full-year revenue to grow by 6-8%. “Adjusted operating margin in FY2022 is expected to be slightly down at constant currency on last year (FY21: 22.8%). Strong growth, the Pfizer synergies, pricing and ongoing supply efficiencies, will largely offset Haleon standalone costs (£175-£200m), continued investment, inflationary cost pressure and the impact of Russia and Ukraine,” the company said.

How do analysts expect the stock to perform in the future? Is Haleon a suitable investment as a long-term portfolio holding? 

Below, we look at the potential for the Haleon stock price in 5 years.

Haleon stock price in 5 years: What is HLN’s long-term outlook?

The average 12-month forecast from six analysts that have issued a price target for Haleon stock was £3.21 at the time of writing (5 October), according to data compiled by MarketBeat, with a low of £2.50 and a high of £3.68. Two of the analysts have issued buy ratings, with three hold and one sell recommendation. 

Credit Suisse initiated coverage of the stock on 19 July with an outperform rating and a price target of £3.68 a share. But on 21 September, analysts at Deutsche Bank reiterated their hold rating on the stock with a £3 price target, and analysts at JP Morgan reiterated their underweight rating with a £2.50 price target. 

Wallet Investor’s Haleon long-term forecast indicated that the stock could be a non-viable investment. The algorithm-based forecasting service predicted that the share price could fall to £2.21 by the end of 2022 and decline throughout 2023 to trade at just £0.09 by the end of the year. The stock could effectively fall to zero by 2024, according to WalletInvestor’s forecast for the Haleon stock price in 5 years.

The Haleon stock 5-year forecast from Gov Capital similarly estimated that the American Depositary Receipts (ADRs) for Haleon listed in the US could drop to zero, but by November 2023.

Are you looking for a forecast for the Haleon stock price in 5 years to decide whether to add it to your investment portfolio? It’s important to keep in mind that analysts and algorithm-based forecasters can and do get their long-term predictions wrong. In the highly volatile stock markets, it is impossible to accurately predict what HLM stock price could be in 5 years.

We recommend that you always do your own research. Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.

FAQs

Is HLN stock a buy?

Whether you buy HLN stock is a personal decision only you can make depending on your risk tolerance, investing strategy and portfolio diversification. You should do your own research to take an informed view of the company and the stock’s potential.

Will HLN stock pay a dividend?

Haleon is planning to pay dividends to shareholders. In its H1 earnings report, the company expected the initial dividend to be at the lower end of a 30%-50% pay-out ratio, subject to board approval.

How many shares of Haleon will GSK shareholders get?

When HLN was listed on the stock market, GSK shareholders received one Haleon share for each GSK share they owned on 15 July.

Markets in this article

GSKl
GSK
15.245 USD
-0.115 -0.750%
PFE
Pfizer Inc (Extended Hours)
30.03 USD
0.18 +0.610%
SNY
Sanofi
50.73 USD
0.29 +0.580%

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The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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