Will GlaxoSmithKline shares recover with new HIV and Covid-19 drugs?

• GlaxoSmithKline (GSK) shares up almost 1% on Monday following HIV drug approval
• Analysts downgrade GSK share price forecast to ‘sell’
• Can a new mRNA Covid-19 vaccine help GSK shares recover?

Shares in GlaxoSmithKline (GSK.L) increased by almost 1% on Monday from £12.77 to £12.87. However, the mini-revival was short-lived as shares opened down at £12.68 on 9 February. The positive move in an otherwise negative trend was thanks to ViiV Healthcare receiving authorisation for its HIV drug, Rukobia.

GSK has a major stake in ViiV, and the news means it may soon lead the way with regards to treating HIV patients who are ‘multi-drug resistant’. It’s hoped the breakthrough will be one of many over the next five years. GSK’s latest earnings report stated that there are 20 pipeline drugs in late-stage clinical trials.

As well as continued success with its shingles drug, Shingrix, GSK hopes to make its mark with myeloma therapy drug Blenrep, monoclonal antibody otilimab, and asthma therapeutic anti IL-5. The company is also planning to split over the next two years. One arm will focus on drug development, the other will tackle consumer healthcare. The split is part of a streamlining effort designed to improve efficiency and increase profitability.

What are the long-term prospects for GSK shares?

For all the positive noise, analysts are bearish on the company’s long-term prospects. Total sales for GSK were up 1% to £34.1 billion in 2020, but fourth quarter (Q4) revenue dropped 2% due to Covid-19 restrictions. With fewer patients seeking and receiving treatment for other illnesses, revenue has suffered. Delays in bringing a Covid-19 vaccine to the market have also hurt GSK.

Its collaboration with Sanofi (SASY.PA) has failed to show significant effects in the over 50s during recent trials. As such, it’s lagging behind the likes of Pfizer (PFE.N) in the race to suppress Covid-19. This has continued to have a negative effect on GSK shares in recent months. In fact, the impact of Covid-19 has been so great that Deutsche Bank analysts downgraded their GSK share price forecast to ‘sell’ following last week’s earnings report.

Will new Covid-19 vaccine reverse bearish trend?

There may, however, be hope on the horizon in the form of a new vaccine. Alongside 20 pipeline drugs, and a restructuring of the business, GSK has announced its intention to release a ‘next generation’ mRNA Covid-19 vaccine.¹ Although the company is yet to perfect its first response to the virus, executives are confident they can release a more effective mRNA vaccine by 2022. The project is being run in collaboration with CureVac (CVAC.O), and the aim is to produce 100 million doses as soon as possible.

Given that Covid-19 will, seemingly, be around for many years to come, new vaccines will be crucial. GSK may have missed the initial surge, but future efforts could pay dividends. Does that mean the GSK share price could rise in the long term? Or do recent slip-ups mean analysts are right to be bearish on this company’s future prospects?

Footnotes:
¹ GSK