GSK Shares Rise After Berenberg Upgrades to 'Buy' on Pipeline Strength

Shares in British pharmaceutical giant GSK (GSK) rose in London trading on Tuesday after analysts at Berenberg upgraded the stock to "Buy" from "Hold." The broker cited a stronger late-stage drug pipeline and a valuation discount that it believes is no longer justified.

Berenberg's Bullish Thesis

Berenberg raised its price target on GSK to £22 from a previous £20, signaling increased confidence in the company's growth prospects. Following the announcement, GSK shares rose 0.4% to £18.62 in early London trading, as reported by Investing.com.

The core of Berenberg's thesis is the stock's valuation. The broker noted that GSK trades at 9.6 times its estimated 2027 adjusted earnings, a 23% discount to its European pharmaceutical peers, which trade at an average of 12.4 times. Berenberg stated this discount is no longer warranted given improvements in the company's research and development returns.

Pipeline Powers Growth Outlook

Analysts highlighted that GSK's recent business development and dealmaking have successfully replenished its drug pipeline. This improved outlook is expected to help the company navigate the upcoming patent erosion of its key HIV drug, dolutegravir, starting in 2028.

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According to Berenberg's note, the pipeline's strength is supported by several key factors:

• 10 of GSK's 11 novel Phase 3 assets were sourced externally through strategic deals.
• Six of these late-stage assets are each capable of generating at least £2 billion in peak annual sales.
• Newly launched products and assets from partners like Nuvalent and Hansoh are also expected to be significant contributors.

Financial Outlook and Near-Term Catalysts

Driven by this pipeline, Berenberg forecasts GSK's 2031 sales will reach approximately £39 billion. This is notably above the market consensus of roughly £36 billion and closer to GSK's own guidance of over £40 billion.

A cost-saving program targeting £1.9 billion in annual savings by 2029 is also expected to support research spending while maintaining or improving profit margins. Investors are watching for several near-term catalysts, including U.S. regulatory decisions on bepirovirsen for hepatitis B by October 26 and neladalkib for lung cancer by November 27.