Berenberg says GSK 'undervalued' but pipeline underwhelms

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.