Analysts at Citi have lowered their price target for GSK PLC (LSE:GSK, NYSE:GSK) to 1,545p from 1,975p to reflect the limited visibility investors have over the ultimate magnitude of Zantac ulcer drug liabilities.
This is coupled with negative prior expectations for the bellwether Zantac case in Oakland, California, scheduled for February 2023, they added.
The US bank's analysts said their DCF-derived NPV (excluding potential liabilities) for GSK moves to around 1,800p reflecting the impact of recent pipeline failures such as Blenrep and otilimab.
They noted that their forecasts for the drugs giant now include anticipated impact of IRA price negotiation on GSK's affected assets (ie Trelegy).
The current share price is therefore reflecting a Zantac settlement of around £15bn on their forecasts, the analysts added.
"While we view this as a likely material over-estimate, we continue to see better near-term opportunities elsewhere," they concluded.
The Citi analysts repeated a 'neutral' rating on GSK and said they prefer AstraZeneca PLC, Bayer, Roche, and Novartis in Europe, and Abbvie, Eli Lilly and Co and Bristol-Myers Squibb Co amongst the US majors, which are all 'buy'-rated.
GSK shares currently trade at 1,412p in London.