FTSE 100 pharmaceuticals giant GSK (LSE: GSK) is down 9% from its April high. To me, this means that the shares are at a bargain price for four key reasons.
First, it received positive news on two new drugs in July to add to its already extensive product line.
Second, it completed an important acquisition for its respiratory products line at the end of June.
Third, in its Q1 results, it affirmed its earlier guidance for increases in turnover, profit, and earnings per share (EPS) this year.
And fourth, it gives good rewards to its shareholders.
Positive news for trailblazing products
On 24 July, it announced its Cabotegravir product had received a recommendation for marketing authorisation from the European Medicines Agency.
The new drug is aimed at reducing the risk of sexually-acquired HIV-1 infection in high-risk adults and adolescents.
GSK’s product is the first, and only, long-acting injectable option available in this context.
And on 10 July, GSK said that the Medicines and Healthcare products Regulatory Agency (MHRA) had authorised its Arexvy drug.
This is the only respiratory syncytial virus (RSV) vaccine for the elderly authorised for use in Great Britain by the MHRA.
Extensive product pipeline
GSK has 68 new products in its pipeline, although the RSV vaccine market has been a core focus recently. Analyst estimates are that the market could be worth $6bn and GSK could take around a third of it.
To expand its presence in the respiratory medicine sector, the company completed its acquisition of Bellus Health on 28 June.
GSK believes the Canadian operation has a potential world-leading treatment for chronic coughs. It expects this to be a big seller through to 2031, and to add to adjusted EPS from 2027.
Its Shingrix shingles vaccine has also continued to perform strongly, generating £833m in revenues in Q1 2023. This compared to analysts’ expectations of £829m.
At that point, GSK reaffirmed that turnover is expected to rise his year by 6%-8%. Adjusted operating profit is anticipated to increase by 10%-12%, and adjusted EPS by 12%-15%.
Another gauge of how these targets are being met will be its Q2 results due for release on 26 July.
Good shareholder rewards
The shares have also come with very healthy dividend yields in recent years. 2022 saw a dip to 3.1%, but it was 4% and 4.8% in the two previous years.
A dividend of 14p per share was also confirmed for Q1 2023, with 56.5p expected for the year.
There are risks for me in the share price, of course. Pharmaceutical companies like GSK spend much time and money on product development and if one fails then it is a huge setback.
It is also vulnerable to legal action against it if products cause problematic side-effects. This was seen recently over its Zantac heartburn medicine. However, 23 June saw an announcement from the company that it had settled the case.
I have maintained unbroken holdings in GSK for many years now and am happy to continue to do so. In my opinion, the company is likely to keep paying out healthy dividends. I also think it will recoup all its share price losses this year and extend these gains over time.
