Investing in GSK (LSE: GSK) has turned into a nightmare for shareholders, with little relief in sight. The pharmaceutical giant’s share price has plunged by 10.18% over the past five years, and the downward trend persists, with a 5.97% fall just last week. This grim reality paints a stark contrast to the previous glory days of GSK being hailed as a top buy-and-hold growth and income stock.
So, what has led to this dramatic decline in GSK’s performance, and why are its shares continuously plummeting? One key factor is the expiration of patents on several blockbuster drugs, which has allowed generic competitors to erode GSK’s revenue streams. Unlike AstraZeneca, GSK has struggled to replace these lost revenues with new, high-profit products.
Despite CEO Emma Walmsley’s efforts to boost GSK’s drug pipeline, the company has faced challenges in this regard. The decision to spin off its consumer healthcare division as Haleon in 2022 was intended to sharpen GSK’s focus on pharmaceuticals and vaccines. However, this move has only highlighted the company’s weaknesses to investors.
Furthermore, ongoing US litigation related to GSK’s discontinued heartburn drug Zantac poses a significant risk to the company’s financial health. The decision by a Delaware judge to allow over 70,000 lawsuits alleging a link to cancer has cast a shadow over GSK’s future prospects.
On a more positive note, analysts remain optimistic about GSK’s future, setting an average one-year share price target of 1,905.5p. This forecast represents a potential increase of 24% from the current share price of 1,535p. Additionally, GSK’s dividend yield of 3.61% aligns with the FTSE 100 average, although it has decreased from previous levels.
Despite GSK’s reassurances about the pending litigation, uncertainties persist, leading many investors to adopt a wait-and-see approach. While selling GSK shares may not be the best course of action, the looming legal issues make it challenging to justify further investment at this time.
In conclusion, the turbulent journey of GSK’s share price reflects the challenges faced by the pharmaceutical industry as a whole. While the company strives to overcome these hurdles and regain investor confidence, the road ahead remains uncertain. Shareholders, like myself, may find themselves in a holding pattern, awaiting clarity on GSK’s future trajectory.
