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GSK share price: Analysts weigh in on Tesaro deal

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Liberum is ‘not convinced’ by GlaxoSmithKline’s (LON:GSK) deal to buy US oncology specialist Tesoro, Proactive Investors has reported. The comments came after the blue-chip group unveiled that it would pay the Massachusetts-based group for $5.1 billion (£4.0 billion), arguing that the acquisition would boost its oncology pipeline.

GSK’s share price tumbled in the previous session, giving up 7.62 percent to 1,498.00p. The shares underperformed the broader market rally which saw the benchmark FTSE 100 index gain 1.18 percent. This morning, the pharmco’s stock has regained some ground, trading 0.36 percent higher at 1,503.40p as of 08:10 GMT, compared with a 0.24-percent gain in the Footsie.

Liberum ‘not convinced’

Liberum reaffirmed GSK as a ‘hold’ yesterday, with a price target of 170p on the shares. Proactive Investors quoted the analysts as saying that the pharmco’s deal with Tesoro was expected to be mid-to-high earnings, dilutive in the first two years following completion, before being accretive by 2022. The broker further noted that  GSK continues to expect to pay 80p per share in dividends for 2018 even though net debt is forecast to increase.

“There is no doubt that GSK needs to bolster its pipeline but given the competition Tesaro faces with other PARP inhibitors and the relative lack of synergies with GSK’s existing oncology pipeline we are not convinced that this is the best way to do so,” Liberum pointed out.

Analyst ratings update

Goldman Sachs, which is bullish on GSK with a ‘buy’ rating, set a price target of 1,900p on the shares yesterday. According to MarketBeat, the blue-chip pharmco currently has a consensus ‘hold’ rating and an average price target of 1,527.84p.

The deal with Tesoro came as the blue-chip drugmaker also announced yesterday that it had agreed to sell its nutrition business to Unilever (LON:ULVR).

As of 08:11 GMT, Tuesday, 04 December, GlaxoSmithKline plc share price is 1,502.80p.

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