Shore Capital has examined the prospects of GSK PLC (LSE:GSK, NYSE:GSK)'s newly approved respiratory syncytial virus (RSV) vaccine, Arexvy, and believes it could eventually be a blockbuster several times over.
Although the broker is keeping its forecast of $1bn sales for Arexvy by 2027, it suggests the vaccine's market opportunity at the peak of it sales could be $9bn a year.
But that's a notional target rather than a real one.
Looking at the pivot table generated by Shore's analysts, this would require GSK to nab 100% of a very buoyant market, which would appear highly unlikely.
GSK itself thinks Arexvy may have the potential to emulate the success of its Shingles drug Shingrix, which suggests the peak sales opportunity is somewhere in the order of $4bn.
Shore is more circumspect. It says if the Arexvy proves to be effective over two RSV seasons, it could be adopted more widely and make peak sales of about $1.6bn. If it also lasts longer than Pfizer's RSV vaccine, it could capture a larger market share and make up to $3bn at its zenith.
Shore believes that Arexvy has a good chance of outperforming initial market expectations, much like GSK's Shingrix vaccine.
GSK also has several other promising drugs in its pipeline. The JUS Food & Drug Administration is set to decide in June whether to approve momelotinib, a drug for a bone marrow disease called myelofibrosis. If it's approved, it could be GSK's third new drug of 2023.
Meanwhile, bepirovirsen, a potential first-of-its-kind cure for Hepatitis B, is expected to produce phase IIb trial data in late 2023.
Although the data needed for approval probably won't be available until 2025, positive results from the upcoming trial could raise expectations.
GSK also recently acquired a company called Bellus, which has developed a drug called camlipixant. GSK believes this drug could make blockbuster sales into 2031 and beyond.
In terms of value, GSK shares are currently trading at a lower price-to-earnings ratio (PER) than its peers.
This means its shares are cheaper relative to its earnings. Shore is keeping its target price for GSK shares at 1,850p.
This reflects questions about GSK's long-term growth but also suggests that the shares are undervalued due to uncertainty over Zantac, a heartburn drug at the centre of a potentially damaging legal case. Shore still thinks a worst-case scenario could see GSK facing up to $30bn in litigation costs related to Zantac.