GSK share price: Pfizer JV good for balance sheet

Written by: Tsveta van Son
March 11, 2020

Hargreaves Lansdown argues that GlaxoSmithKline’s (LON:GSK) deal with Pfizer should take a strain off the balance sheet, Citywire reports. The comments came after the UK groups surprised investors yesterday, announcing that it was creating a consumer healthcare joint venture with the US pharma giant, laying the foundation for a split in three years.

Investors reacted positively to the news, sending GSK’s share price 3.78 percent higher at 1,503.00p, to the top of the benchmark FTSE 100 index which ended trading 0.96 percent higher at 6,765.94 points. The shares have retreated this morning, having given up 1.85 percent to 1,475.20p as of 08:06 GMT, as compared with a 1.37-percent fall in the Footsie.

HL weighs in on GSK

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Citywire quoted Hargreaves Lansdown analyst George Salmon as commenting yesterday that while the spin-off followed in the footsteps of others in the sector, it was ‘still a surprise’.

“The separation will take away the steady cashflows of the consumer business, meaning there’s more pressure on the men and women in white coats to deliver the next generation of blockbusters,” he pointed out, adding, however, that the “potential to shift significant amounts of debt onto the cash generative consumer business should take the strain off the balance sheet, and thus buy valuable time for the pipeline to deliver”.

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Other analysts on group

Shore Capital reaffirmed GSK as a ‘buy’ yesterday, without specifying a price target on the shares, while Goldman Sachs, which is also bullish on the group with a ‘buy’ rating, set a valuation of 1,900p on the stock. Liberum meanwhile continues to see the pharmco as a ‘hold,’ with a 1,700p price target. According to MarketBeat, GSK currently has a consensus ‘hold’ rating and an average price target of 1,530.34p.

As of 08:00 GMT, Thursday, 20 December, GlaxoSmithKline plc share price is 1,478.80p.