GSK optimistic about HIV, but long-term challenges remain – analyst

GSK PLC (LSE :GSK,NYSE :GSK) is showing a strong growth rate and increasing confidence in its HIV treatment, according to Jefferies analysts. However, they have cut their target share price due to long-term costs and risk concerns.

Jefferies maintained its rating of ‘hold’ and suggested that a 2022 price target at 1,575p be set. This is a drop of 4% from the original targets but still a higher price than its current price of 1,415p.

Jefferies stated that a lower target is due to higher costs starting at the end of 2022. He also mentioned that there were several factors Jefferies pointed out, such as the need to increase “commercial opportunity” through a series vaccine launches and an estimated charge between PS50mln and PS60mln for redeemed bonds of PS1.6bn in mid-November.

Analysts added that while GSK offers strong double-digit earnings growth through 2028, longer-term fundamental challenges “keeps us on the sidelines at an “Hold” rating.”

Jefferies stated that there are still setbacks in oncology, and the need for new licences, and bolt-on acquisitions, due to the expiration of its HIV patents.

Jefferies predicted GSK’s sales would rise 5% year-on-year, but pre-tax earnings should have increased by more than 10% when GSK reports its full-year results on February 1.

Jefferies stated Tuesday that after an event hosted by Emma Walmsley, chief executive, Jefferies believed: “GSK’s confidence in pipeline ultra-long-acting forms or self-administration has clearly grown that the potential to rapidly change the (existing treatment paradigm.

Walmsley spoke on Tuesday and stated that two-thirds the firm’s development portfolio is derived from HIV treatment. This was a suggestion that these markets are “attractive and growing,” with a total value of over PS100bn annually.

The CEO stated that these treatments also contributed 50% to GSK’s first nine months of 2022 sales.