When I first started writing for The Motley Fool more than two decades ago, the GSK (LSE: GSK) share price was a FTSE 100 shining light.
In my recollection, GlaxoSmithKline, as it was known then, even outshone pharmaceutical sector rival AstraZeneca (LSE: AZN). It’s a different story today.
A tale of two pharma stocks
Since taking the helm in October 2012, CEO Pascal Soriot has transformed AstraZeneca into the UK’s biggest company. Last summer, its market-cap topped £200bn. Although today it’s down to £166bn.
Since the start of the Millennium in January 2000, AstraZeneca’s share price has soared from 2,395p to 10,775p, an impressive increase of around 350%. And that’s before accounting for dividends.
By contrast, GSK’s journey has been more turbulent. From a high of 1,767p in January 2000, its share price has dipped to 1,482p today. While dividends have cushioned the blow, it’s a stark comparison to AstraZeneca’s meteoric rise.
GSK’s dividend, once seen as a stellar source of income with a typical yield of between 5% and 6%, isn’t what it was. It was frozen at 80p from 2014 to 2021, as CEO Emma Walmsley diverted shareholder cash into R&D, in a bid to replenish the group’s ailing drugs pipeline.
Dividends have slipped
It was then reduced to 57.75p in 2022 following the Haleon spin-off. In 2024, it edged up to 61p, offering a yield of 4.1%.
Now there’s a glimmer of hope. GSK’s recent Q1 2025 results, published on 30 April, reignited investor interest, pushing the share price up by 7.5% over the past week. Although it’s still down 11% over 12 months.
The company reported sales of £7.52bn, a 4% increase year-on-year. Specialty Medicines were the standout, with sales up 17%, including a 28% rise in Respiratory, Immunology, and Inflammation, and a 53% surge in Oncology.
Operating profit jumped 50%, while cash generated from operations exceeded £1bn, with free cash flow of £700m.
GSK expects to pay a full-year dividend of 64p per share, up almost 5%, and announced a £2bn share buyback, with £273m repurchased in Q1.
The company also reaffirmed its full-year guidance, anticipating 3-5% turnover growth and a 6-8% rise in core EPS.
Different stocks, different values
AstraZeneca’s Q1 results, released a day earlier, showed a 10% increase in total revenue to $13.6bn and a 21% rise in core EPS to $2.49. Market reaction was muted, perhaps due to the high expectations set by its recent performance. The AstraZeneca share price is up 3.5% in a week, but like GSK, is down 11% over 12 months.
I don’t hold AstraZeneca shares. Last year, I deemed them too pricey. Instead, I placed my bets on GSK, viewing it as an undervalued opportunity.
So far, that decision has left me about 20% down, not helped by concerns over potential US tariffs on pharmaceutical imports. Walmsley believes the company can navigate these challenges through AI integration and supply chain adjustments. We’ll see.
As a contrarian investor, I’m inclined to stick with GSK. There’s potentially more value here, with a price-to-earnings ratio of just over eight, less than half AstraZeneca’s P/E of 17. The recent uptick is encouraging, but there’s still a long road ahead. I’m hoping Walmsley’s masterplan will start paying off, but despite the recent jump, I suspect there’s a long way to go.
