Equities UK Pharmaceuticals & Health

GSK share price subdued as Morgan Stanley resumes coverage

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GSK’s share price (LON:GSK) has fallen marginally into the red in London in today’s session as Morgan Stanley resumed coverage of the blue-chip drugmaker with an ‘underweight’ rating. Proactive Investors quoted the broker as commenting that the company was ‘very much work in progress’.

As of 14:23 BST, GSK’s share price had given up 0.16 percent to at 1,581.80p, largely in line with losses in the broader UK market, with the benchmark FTSE 100 index currently standing 0.09 percent lower at 7,338.89 points. The group’s shares have added more than one percent to their value over the past year, as compared with about a near four-percent fall in the Footsie.

Morgan Stanley ‘underweight’ on GSK

Morgan Stanley initiated coverage of GSK with an ‘underweight’ rating, with a price target of 1,520p on the shares. Proactive Investors quoted the analysts as commenting that the blue-chip pharmco is “very much a work in progress” and that they are not convinced that there is much money to be made by investing in the drugmaker right now.

The broker argues that while the recent acquisition of Tesaro gives GSK “greater critical mass” in oncology, commercial risk in the field remains high, while there are also long-term challenges associated with building an innovative pipeline. The FTSE 100 group is also set to hive off its consumer health business after striking a JV with US peer Pfizer and Morgan Stanley reckons that this integration will have to go well to paper over short-term pressures in GSK’s HIV arm, which is seeing a drop in prices and new treatment start share.

Other analysts on blue-chip drugmaker

Goldman Sachs, which is bullish on the FTSE 100 pharmco with a ‘buy’ rating, set a target on the GSK share price of 1,900p last week. According to MarketBeat, the blue-chip drugmaker currently has a consensus ‘hold’ rating and an average valuation of 1,534.57p.

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In recent months there have been major steps taken to seriously improve the pipeline outlook and there is good reason to believe the stock to be not over priced at £19 per share. Recent headwinds have depressed the stock and long term holders will have heard promises before. But the new talent at GSK and the partnerships they have embarked upon give this stock very exciting prospects, plus a very respectable dividend.

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