UBS has revised its stance on two major UK-listed pharma companies – GSK PLC (LSE:GSK, NYSE:GSK) and AstraZeneca PLC (LSE:AZN) – with an upgrade for the former and a downgrade for the latter.
GSK is moved from 'sell' to 'buy,' while the investment bank's call on AZ moves in the opposite direction.
Positivity over GSK stock is underpinned by optimistic projections for Shingrix, its shingles vaccine, where UBS anticipates sales will outperform consensus expectations, driven by a new market opportunity in China.
Positive trends observed in Merck's Gardasil in China are seen as indicative of Shingrix's potential in the region.
Additionally, UBS foresees a higher rate of HIV treatment switching to oral doublet and long-acting regimens, extending GSK's patent protection till 2029 or 2030.
Despite UBS's 2024 estimates being slightly conservative, it views GSK's current valuation as an attractive entry point for investors.
Conversely, AstraZeneca is marked down primarily due to its exposure to the US Medicare Part D reform, anticipated to impact sales growth from 2025.
These significant changes are set to impact the Anglo-Swedish giant's oral oncology portfolio, which includes drugs such as Tagrisso, Lynparza, and Calquence.
The resulting effective price cuts, combined with anticipated pressures from Pharmacy Benefit Managers (PBMs), have led UBS to position its core earnings before interest and taxes (EBIT) estimates for AZ approximately 5% below the consensus for 2025 and 2026.
Despite these challenges, UBS said its view of the mid-stage pipeline is slightly more optimistic than the consensus by 2028/29.