Shares in AstraZeneca PLC (LSE:AZN) and GSK PLC (LSE:GSK, NYSE:GSK) were both down over 1% on Friday, but the shares are worth buying, analysts at Shore Capital said.
Blue-chip stocks across London and Europe were lower on Friday, after Donald Trump scaled up his tariff rhetoric again.
A UK gross domestic product update for May came in lower than expected, with economists saying the drivers of weakness in the production sector included pharmaceuticals and car manufacturing, two sectors that were potentially affected by tariffs.
The pharma sector is still waiting to hear what tariff rate will be imposed by the Trump administration, though the US-UK trade agreement stated that preferential outcomes would be negotiated for UK-based pharmaceutical companies and pharmaceutical ingredients.
Another renewed risk is seen from US drug pricing reform, with a recent executive order from President Trump having revived the “Most Favoured Nation” policy, which seeks to align US drug prices with lower international levels.
Potential shots in the arm
Shore Cap reckons US drug pricing reform could be a dominant topic on Q2 earnings calls across the sector but cautions that implementation remains uncertain.
On the plus side, the broker highlighted that there are upcoming catalysts for both AZN and GSK that could provide a shot in the arm for their shares, with both companies due to report interim results at the end of the month.
For GSK, a key focus is the upcoming US regulatory decision on its blood cancer therapy Blenrep, with an advisory committee scheduled for 17 July and a potential approval by 23 July.
The broker views this as a significant regulatory milestone and believes Blenrep could generate peak year sales closer to £5 billion, well above current consensus estimates of £1.5 billion.
Second quarter numbers and half-year results, expected on 30 July, could reflect continued strength in GSK’s Specialty Medicines portfolio, the analysts said, though foreign exchange effects may limit the potential for upgrades.
AstraZeneca, which is scheduled to report on 29 July, has guided for higher R&D spend this year, now seen at approximately 23% of revenue, which may offset strong sales momentum.
Looking ahead, the broker sees at least ten key clinical readouts expected in the second half of the year.
Included on the list are the AVANZAR Phase III trial for Datroway and Imfinzi in non-small cell lung cancer, which is expected to be a focal point for investors given its potential to replace chemotherapy as a first-line treatment.
Despite political risk and higher R&D costs, both stocks remain supported by long-term pipeline strength and commercial execution, the analysts said, with GSK viewed as having greater near-term upside potential.