Jefferies has warned that GlaxoSmithKline’s (LO:GSK) plans to bid for rival Pfizer’s consumer healthcare business are a bad idea, Citywire has reported. The comments came as the British drugmaker signalled last week that it was interested in the assets which include a string of over-the-counter treatments, including painkiller Advil.
GSK’s share price lost ground yesterday, shedding 1.09 percent to 1,357.50p, underperforming the broader UK market, with the benchmark FTSE 100 index ending the session marginally higher. The group’s shares have lost more than 16 percent of their value over the past year, and are down by some 13 percent in the year-to-date.
Jefferies lowers valuation
Jefferies reiterated its ‘buy’ rating on GSK yesterday, while lowering its price target on the shares from 1,700p to 1,540p, arguing that speculation that the UK pharma giant might bid for Pfizer’s consumer healthcare business has undermined confidence in the FTSE 100 pharmco’s dividend.
“‘Investors fear it could be sacrificed to acquire Pfizer’s consumer business,” the broker’s analyst Jeffrey Holford commented, as quoted by Citywire. “We think the dividend is too important to too many GSK shareholders for management to pursue this strategy.”
Holford further pointed out that recent consumer deals “have not been successful”.
GSK share price could rebound
The analyst, however, also noted that despite the broker’s “reservations on GSK, the stock price has fallen too much in our view and we believe it can rebound to £15.40 on earnings support alone”.
The FTSE 100 pharma group recently updated investors on its quarterly performance posting a rise in overall revenue but also revealing flat sales at its Vaccines segment.
Kepler Capital Markets, which sees GSK as ‘reduce,’ meanwhile lowered its price target on the shares from 1,520p to 1,340p yesterday. According to MarketBeat, the pharmco currently has a consensus ‘hold’ rating and an average price target of 1,624.74p.