RE: Pre-planned departure.30 Sep 2025 16:22
Commentary from Hargreaves Lansdown.
"Investors reacted positively to news of a forthcoming change of leadership at GSK. Luke Miels looks to be a safe pair of hands, and we think Emma Walmsley’s strategic actions leave him a strong platform to build on.
With 15 major pipeline launches planned by 2031 we think GSK’s prospects are strong. In the more immediate future, recovering vaccine sales should support sales growth in 2025 of around 5%.
Elsewhere, the group also has a strong presence in HIV treatments which make up about 20% of total revenues. Its newer HIV treatments are a key part of the story, and they’re seeing some impressive growth. A strong clinical pipeline of next generation HIV therapies should further help bolster GSK’s market position.
Respiratory disease is another key therapeutic focus. Here, GSK has its sights set on improving outcomes for sufferers of COPD, the third leading cause of death worldwide. Meanwhile, Cancer treatment, although relatively small in terms of current sales, is growing rapidly. Recent approvals and launches in new markets mean there are strong growth drivers for the existing portfolio. The development pipeline looks promising.
Net debt has been coming down and currently sits at about 1.3x forecast cash profits, which we don't see as a major concern. Improving underlying cash generation helps support a prospective dividend yield of 4.5% and share buybacks, but remember, no payouts to shareholders can be assured.
Investor sentiment toward the pharmaceutical industry has been damaged this year by rapidly changing and unclear policy in the United States. The most recent twist saw the US slap a 100% levy on imported branded medicines, with the exception of companies building manufacturing facilities in America. We think GSK’s substantial stateside investment commitments should shield investors from this threat.
Pressure on drug pricing looks to be bigger risk but there’s plenty of obstacles to clear if Donald Trump’s proposals are to become law. But the continuing uncertainty means volatility could be higher than usual.
The valuation is significantly less demanding than many of its peers, reflecting relatively modest forecasts and perceptions around its ability to commercialise its research efforts. We see some upside potential if GSK continues to close in on its longer-term ambition. CEO designate Luke Miels has a promising set of products and pipeline assets to help him on his way, but given the risks involved in drug discovery, there can be no guarantee"
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