GSK Share Price Trading Near 2024 Lows Leading Into Q3 Financials

UBS has revised its earnings per share (EPS) predictions for pharmaceutical giant GSK PLC, slicing estimates by 5% for the fiscal years 2024 and 2025. With GSK due to report it's latest financials next week (Weds 30th), we will get a formal update from the firm sooner rather than later. The adjustment by the investment bank and financial services company reflects concerns over the slower-than-expected uptake of GSK's shingles vaccines, primarily Shingrix, in the United States.

Shingrix, a key product in GSK's vaccine portfolio, has experienced a 27% dip in US sales year-to-date. Despite efforts to broaden its use, a significant portion of the target demographic remains untreated. Approximately 63% of US citizens over the age of 50, who are the primary candidates for the shingles vaccine, have yet to receive it, marking a challenge for GSK in capitalizing on this potential customer base.

In addition to the sluggish vaccine uptake, GSK's bottom line is expected to feel the pressure from the fallout of the £1.8 billion settlement for Zantac litigation. The legal settlement has led to an increase in net debt, which in turn plays a part in UBS's decision to mark down the EPS forecast for the company. Whilst this was initially seen as a positive by markets, in that the uncertainty had been removed, GSK's share price has followed that with a dip that sees it trading around 2024 lows.

Nonetheless, it's not all gloomy predictions for GSK. UBS maintains a positive outlook, upholding a target price of 1,580p for GSK shares. This stable target price factors in the resolution of the Zantac litigation which, despite the settlement cost, does provide a degree of closure and allows GSK to move forward without the cloud of legal uncertainty.

This morning's price action has GSK shares changing hands around 1454p, 0.58% lower on the day. This dip reflects a cautious but not overly alarmed investor sentiment regarding GSK's near-term prospects.

The scenario underscores the pivotal role of vaccine sales in pharmaceutical companies' financial health. For GSK, the task ahead is clear: increase the uptake of their shingles vaccine in a substantial and currently unserved segment of the US market. The company's performance in the coming months will likely be measured against their ability to execute strategies aimed at reversing the decline in vaccine sales, alongside managing the financial implications of their recent legal settlement

While the EPS revision signifies a bump in the road for GSK, the corporation's resilience and strategic pivots in the face of these challenges will be critical determinants of its future financial trajectory. UBS's steady target price serves as a reminder that, despite setbacks, there may be room for optimism in GSK's ability to steer through these headwinds.