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Morgan Stanley doesn’t think there’s much money to be made by investing in GSK

GSK is in the middle of some big changes: it is bedding in a multi-billion-dollar acquisition; rebuilding its drugs pipeline; and merging its consumer healthcare division with one of its rivals

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There’s a lot of work going on behind the scenes at GSK right now

GlaxoSmithKline PLC (LON:GSK) is “very much a work in progress” according to Morgan Stanley, and analysts at the US investment bank aren’t convinced there is much money to be made by investing in the drugmaker right now.

The number crunchers have resumed their coverage of GSK with an ‘underweight’’ recommendation – essentially advising punters to limit the amount of stock they hold in their portfolio.

READ: GSK gets green light for asthma treatment

That’s alongside a price target of 1,520p, slightly below where the shares currently find themselves.

Unsurprisingly, GSK was down 0.3% to 1,579p in early-afternoon trading on Monday.

Much of Morgan Stanley’s cautiousness stems from the fact that GSK is going through some big changes at the moment.

The FTSE 100 group is in the process of bedding in Tesaro, which it recently bought for more than US$5bn to help grow its presence in the lucrative cancer space.

That is part of a wider plan to rebuild its pipeline, which has slipped behind many of its rivals in recent years.

Pound could also dent performance

Although the tie-up gives GSK “greater critical mass” in cancer, the analysts noted that “commercial risk in oncology will remain high”, while there are also long-term challenges associated with building an innovative pipeline.

The drugs giant is also about to hive off its consumer health business, which includes brands such as Sensodyne and Nicorette, after striking a joint venture deal with US rival Pfizer Inc (NYSE:PFE).

Morgan Stanley argues that this integration will have to go well to paper over short-term pressures in GSK’s HIV arm, which is seeing a drop in prices and new treatment start share.

Compounding the difficulties is the Great British pound, which the chin scratchers expect will head up to US$1.45 over the next 18 months, hitting dollar-denominated sales somewhat.

Quick facts: GlaxoSmithKline PLC

Price: 1478.128 GBX

Market: LSE
Market Cap: £74.11 billion

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