Citi cuts GSK target price after Arexy disappointment, but stays at 'buy'

Shares took a tumble last week after a ruling by a US health agency narrowed usage recommendations for all respiratory syncytial virus (RSV) vaccines, restricting the addressable market for GSK's Arexvy product.

The US Advisory Committee on Immunisation Practices (ACIP) said it was tightening its recommendations for adults in the 60-74 age category to those at risk of severe RSV, following feedback from the medical community. The ruling replaces the prior blanket "60+" years recommendation. Meanwhile, a decision to extend the usage of RSV vaccines to those aged 50-59 was postponed pending more safety data.

Citi said the decision "delivered a blow" to Arexy, as it removed its own revaccination assumptions (previously assumed at 5-10%) and its reduced peak sales estimate to £2.2bn (previously £2.9bn).

Meanwhile, ongoing litigation concerns related to formed heartburn drug Zantac continue to weigh on the stock, as the company continues to work through tens of thousands of personal injury claims.

"We had previously argued GSK had set itself up to beat and raise through 2024, based on the vaccine/oncology launches and HIV/respiratory dynamics, which now seems less likely," said analyst Peter Verdult.

"Although the £7bn market cap loss on rising Zantac litigation concerns feels harsh (our price target assumes a £2.4bn settlement), the resulting sentiment overhang will weigh on the shares."

The bank remains optimistic over the long term but has cut its price target to 1,900p from 2,120p.

GSK's shares were up 0.8% at 1,522.5p by 0927 BST.