ShoreCap stays at 'buy' for GSK, points to significant discount versus peers
By Alexander Bueso
Date: Tuesday 22 Nov 2022
(Sharecast News) - Analysts at ShoreCap reiterated their 'buy' recommendation for shares of GSK despite news that its Blenrep treatment against multiple myeloma was set to be withdrawn from the US Market.
According to the analysts, the news had already largely been anticipated and they had already reduced their sales forecast for the treatment from approximately $500m to about $150m to reflect its failure in the Phase 3 DREAMM-3 clinical trial.
Safety concerns related to Blenrep's apparent ocular toxicity and the potential sight-threatening keratopathy seen in trials might tilt the risk-benefit tradeoff in earlier settings against it, due to the background of entrenched options available.
Indeed, they went on to add that: "DREAMM-3 failing to meet its primary endpoint and with this now resulting in a withdrawal will likely compound low sentiment for the drug and GSK's capabilities in oncology."
Even so, the shares were trading on an estimated 2023 financial year price-to-earnings multiple of around 10.1, resulting in a "significant" discount against rivals in its sector on 16.3.
Furthermore, ShoreCap's blended valuation methodology yielded a fair value estimate for the shares of 18,500p for a forwards P/E multiple of 13.3.
The remaining discount reflected the lingering questions around the company's long-term growth, while "encompassing our view of the value disconnect that currently exists between the share price and the near-term growth prospects of the business."
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