GSK plc (GSK Quick QuoteGSK - Free Report) boasts a diversified base and presence in different geographical areas. The spin-off of the Consumer unit in 2022 has allowed it to focus on drug development. In July 2022, GSK de-merged its Consumer Healthcare segment into a standalone company. The independent Consumer Healthcare company was named Haleon (HLN Quick QuoteHLN - Free Report) .

Haleon was a consumer health joint venture, an over-the-counter medicines business, jointly created by GSK and partner Pfizer (PFE Quick QuotePFE - Free Report) in 2019. GSK has been regularly selling its stake in Haleon, and currently holds slightly over 4% of the issued share capital of Haleon. Pfizer held a 23% stake in Haleon and plans to sell it in a disciplined manner.

GSK strengthened its presence in oncology/hematology with acquisitions like Sierra Oncology and Tesaro. GSK also boasts a broad vaccine portfolio that targets infectious diseases like meningitis, shingles, flu, polio and many more. Its new and specialty products are doing well and have become key drivers of top-line growth. Vaccines and Specialty Medicines now represent around two-thirds of GSK’s sales compared with 46% in 2017. New products launched since 2017 contributed sales of £11 billion in 2023. Let's discuss these factors in detail to understand if GSK’s stock is worth buying now.

Strong Vaccines Business

GSK has more than 20 marketed vaccines in its portfolio. The company achieved strong vaccine growth of 25% at CER in 2023, driven by strong sales of its shingles vaccine, Shingrix and meningitis portfolio and exceptional contribution from the new RSV vaccine, Arexvy.  GSK expects continued strong sales of Shingrix in 2024 mostly to be driven by outside U.S. markets where the vaccine is now approved in 39 countries. Arexvy sales are expected to be strong in 2024 driven by further penetration in the U.S. market as well as early adoption from international launches. Over time, GSK expects Arexvy to generate more than £3 billion in annual sales.

GSK is also focusing on accelerating its vaccine pipeline, particularly the expanded use of its RSV vaccine, pentavalent vaccine and the 5-in-1 meningococcal vaccine, MenABCWY, to drive long-term growth. It has a leading suite of vaccine platform technologies, including next-generation mRNA, multiple antigens presenting system, or MAPS as well as adjuvant systems.

New Products & Pipeline Hold Key to Growth

GSK’s products in the Specialty Medicines and Vaccines segment, like Dovato, Nucala and Shingrix, are doing well and have become key drivers of top-line growth. It has some promising new products like Arexvy vaccine, cancer drugs, Ojjaara and Jemperli and new long-acting HIV medicines, Cabenuva and Apretude. These new products and those in its pipeline hold the key to long-term growth.

Promising candidates in late-stage development include gepotidacin (uncomplicated urinary tract infection [UTI] and urogenital gonorrhoea), bepirovirsen (chronic hepatitis B), depemokimab (severe eosinophilic asthma, eosinophilic granulomatosis with polyangiitis, hypereosinophilic syndrome and chronic rhinosinusitis with nasal polyps), tebipenem (complicated UTIs), camlipixant (refractory chronic cough). Its pentavalent MenABCWY meningococcal vaccine is under review with the FDA, with a decision expected on Feb 14, 2025.  GSK is also focused on developing innovative ultra-long-acting HIV regimens for treatment and prevention, which can extend the dosing intervals of the injections. GSK expects sales from its new long-acting regimens to be around £2 billion by 2026.

GSK is also working on expanding the label of marketed products like Nucala, Zejula and Jemperli into additional indications. GSK plans to prioritize the development of novel medicines to treat blood and women's cancers.

GSK plans to launch more than 20 new products/line extensions by 2026, with more than 10 having blockbuster potential.

Attractive Valuation, Rising Estimates and Stock Price

GSK’s stock has risen 14.1% in the past year against a decline of 7.6% for the industry. The stock has also outperformed the sector.

GSK Stock Outperforms Industry, Sector

Image Source: Zacks Investment Research

GSK’s stock is trading at an attractive valuation relative to the industry. The stock is also trading below its mean. Going by the price/sales ratio, the company shares currently trade at 2.03 on a trailing 12-month basis, lower than 2.41 for the industry and the stock’s mean of 2.25.

GSK Stock Valuation

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The Zacks Consensus Estimate for earnings has risen from $4.07 to $4.10 per share for 2024 and from $4.47 to $4.55 per share for 2025 over the past 60 days.

Rising Estimates

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Conclusion

GSK has its share of problems. Competitive pressure on HIV and respiratory drugs has risen.  The dolutegravir HIV franchise patent expires in the 2028-2029 period, and U.S. sales of Shingrix are slowing down. The Zantac litigations are also an overhang.

Nonetheless, GSK expects sales to grow in the range of 5-7% at constant exchange rate (CER) and earnings to increase between 9% and 11% in 2024. Continued sales growth of its key drugs and vaccines, contribution from new products and positive pipeline updates should drive the stock in the future quarters.

Consistently rising earnings estimates clearly highlight analysts’ optimistic outlook for further growth. GSK’s cheap valuation, reasonable stock price appreciation and bright sales and profit growth potential make it an attractive big pharma stock. Investors may consider investing in this Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.