Credit Suisse upgrades GSK, downgrades AstraZeneca

The bank upped GSK to ‘neutral’ from ‘underperform’ but cut the price target to 1,430p from 1,630p, as it said the valuation provides support despite Zantac uncertainty. CS said the target price now includes an assumption of $5bn base case Zantac liability costs.

CS said recent underperformance in GSK shares has been driven by Zantac concerns, which are likely to remain an overhang for some time, with any outcome of litigation likely to take some years to play out.

"As the originator of Zantac and based on cumulative sales, we expect it is likely that GSK would bear a significant proportion of any liability in the event of a settlement," it said. "However, the circa $12bn wiped off GSK’s market cap on Zantac concerns is much higher than what we might expect to be GSK’s share of any settlement if settled at c.$100k/case as suggested by our recent expert call (GSK Zantac litigation; expert call notes)."

The bank downgraded AstraZeneca to ‘neutral’ from ‘outperform’, keeping the price target at 11,000p. It said AstraZeneca continues to score well in its 'PharmaValues 2023 Strategic Analysis'.

"AZN has a leading score for pipeline Replacement Power, Growth 2021-25 and portfolio Marketing Burden," CS said. "However, following strong year-to-date stock price performance, EV/NPV valuation is less attractive."

Credit Suisse said this underpins its view that investors are now familiar with many of the positive near-term drivers including Enhertu and lung cancer drug DS-1062.