GSK PLC (LSE:GSK, NYSE:GSK) shares got a shot in the arm this morning after Jefferies took a more positive view of the pharmaceuticals giant.
The US investment bank upgraded its rating to ‘buy’ from ‘hold’ and increased its price target to 1,900p from 1,550p as the shares look "deeply discounted" based on current net present value.
Analysts said they believe long-acting HIV injectables, vaccines and new pipeline launches from GSK will mean profits "likely face a 'blip' not 'cliff'" as 2028 HIV drug patents expire.
"We argue given this underappreciated growth profile, the shares offer attractive risk-reward ahead of potential Zantac class action settlement and misplaced concerns on 2024 growth," Jefferies said, adding that the new price target assumes a "more normalised" 20% discount to the sector from 40%.
Jefferies also moved AstraZeneca PLC the other way to ‘hold’ from ‘buy’ and cut its price target to 11,000p from 12,500p.
Overhangs for the stock have "somewhat cleared", referring to dato-DXd and Tagrisso, "but margin concerns now weigh on the shares".
The bank argues AZ is "primarily a top-line growth and pipeline story," with 2024 having "fewer major pipeline catalysts, with much needed dato DXd approval unlikely until nearer year-end, at best", hence the downgrade.
AZ still has its supporters among City analysts today though, with those at UBS reiterating a ‘buy’ rating and Barclays an ‘overweight’ rating.
UBS noted AZ's December US$1.2 billion deal for China's Gracell Biotechnologies, a company developing innovative cell therapies for the treatment of cancer and autoimmune diseases, which adds a "promising" lead asset to AstraZeneca's cell therapy pipeline.
The drug candidate, GC012F, is being evaluated in a Phase Ib/II trial as a treatment for relapsed or refractory multiple myeloma (RRMM) in the US, an investigator-initiated trial evaluating GC012F for the treatment of refractory systemic lupus erythematosus (rSLE) is underway, and an IND application to study GC012F in rSLE had been cleared by the FDA.
Gracell will operate as a wholly owned subsidiary of AstraZeneca with operations in China and the US.
Jefferies' European pharma team also reiterated 'buy' ratings on Sanofi and Novartis, a 'hold' for Roche and an 'underperform' stance on Novo Nordisk (NYSE:NVO), .