GSK shares rise as Berenberg upgrades to Buy on stronger drug pipeline

British pharmaceutical company GSK saw its shares rise as Berenberg broker upgraded the stock to a "Buy" rating from "Hold." The broker raised its price target to £22 per share, up from a previous £20 target, citing stronger drug pipeline and dealmaking as key factors boosting GSK's growth outlook. GSK's shares opened at £18.62 in early London trading on Tuesday.

Berenberg's analysis shows GSK trades at 9.6 times adjusted earnings for the year 2027, which is a 23% discount compared to its European pharmaceutical peers, which have an average price-to-earnings ratio of 12.4 times. The broker believes this discount is no longer justified due to the improved pipeline breadth and better returns on research and development.

GSK's recent business development activities have helped replenish its pipeline, making the current stock valuation discount to its European pharmaceutical peers too deep. Ten of GSK's 11 novel Phase 3 assets were sourced externally, with six of those late-stage assets potentially generating at least £2 billion in peak annual sales, according to the broker.

Berenberg expects the pipeline to help offset the impact of patent erosion on GSK's blockbuster HIV drug dolutegravir, forecasting 2031 sales of about £39 billion, which is higher than the current consensus of roughly £36 billion and closer to GSK's own guidance of over £40 billion. The broker highlights new products, such as Exdensur and Blenrep, as well as potential from bepirovirsen for hepatitis B and bepirovirsen from Nuvalent, oncology antibody-drug conjugates by GSK and Hansoh, and contributions from other upcoming Phase 3 programs.