There is a “value disconnect” in GSK PLC (LSE:GSK, NYSE:GSK) shares, said broker Shore Capital, after “hugely positive” detailed data was published on results from the Phase III clinical trial of its respiratory syncytial virus (RSV) vaccine candidate.
The FTSE 100 company’s vaccine candidate demonstrated overall vaccine efficacy at circa 83%, with a circa 94% reduction in severe disease, which appears to be slightly ahead of the numbers posted by Pfizer for its RSV vaccine in August.
GSK had guided that around 50% vaccine efficacy would have been considered clinically meaningful, a preventive rate near 70% would be considered very good and more than 80% would be outstanding.
With regulatory submissions on track to be submitted by the end of the year, Shore Cap noted that GSK has touted that the RSV opportunity has the potential for sales to exceed £3bn in the older adult population.
“We highlight that the adult RSV vaccine market needs to be established and thus the overall market potential could be widened by multiple entrants seeking to educate decision makers and the eligible populations at risk of RSV that could benefit from vaccination,” said analyst Dr Susie Jana in a note on Thursday.
“The commercial potential for this RSV market rests on revaccination frequency (seasonality), pricing/payors, and ultimately uptake.”
The analyst said that “vaccine fatigue” might be an issue for older adults, given this is the population targeted for influenza, COVID-19, pneumococcal and shingles vaccines as well – but a 94% reduction of severe disease “makes this vaccine more compelling, in our view”.
With GSK shares trading at 9.9 times 2023 earnings, versus peers at an average of 14.8 times, Jana said she put GSK’s fair value at £18 per share, around 32% upside.
“Still at a discount, reflecting the lingering questions around long-term growth but encompassing our view of the value disconnect that currently exists between the share price and the near-term growth prospects of the business.”
Credit Suisse also published a note on GSK on Thursday, where it saw the shares trading on a 2023 p/e ratio of 11.3x, a 20% discount to peers, while its ratio of enterprise value to net present value is 0.71 versus peers at 0.91 – though this NPV assumes an incremental US$5b of debt over to reflect a potential Zantac liability.