Time for a rethink on GSK after results spur 8% rally?

In the UK pharmaceutical space there are two big names that dominate: AstraZeneca and GSK. Only one of these, however, has really unlocked value for shareholders in recent years. Whilst Astra’s star has risen to become the most valuable listed company on the FTSE 100, GSK’s stock has spent several years floundering. That is until the announcement of a new CEO last September as Emma Walmsley made way after a difficult few years at the helm. Shares of GSK are up about 37% since.

So is it time for a rethink?

GSK delivered strong full-year results with earnings in Q4 surpassing earnings and revenue estimates.

This was the first set of financials for the new chief executive and Luke Miels. And it looks like his approach of zeroing in on higher-margin specialist medicines from an improved product pipeline is resonating with investors. Shares jumped 8% after the release, signifying investor sentiment, which has been warming towards the stock, is shifting once more. There is a sense that if GSK execute well this year it could have room to run - many remain sceptical it can achieve its $40bn annual sales target by 2031.

Underlying profit before tax increased 11% to £9.78bn, helped by a 1.1 per cent uptick in operating margin, with growth accelerating markedly in Q4 to 18%.

Within this, we can see the impact from the speciality medicines. Specialty Medicines sales hit £13.5 billion, rising 17% year-on-year, while General Medicines sales declined –1% to $10bn. There will strong contributions across the suite of products - Respiratory, Immunology & Inflammation £3.8 billion (+18%); Oncology £2.0 billion (+43%); HIV sales £7.7 billion (+11%). Vaccines sales rose 2% to £9.2 billion (+2%); with shingles vaccine Shingrix sales rising 8% to £3.6 billion, meningitis vaccines sales up 12% to £1.6 billion, and sales of its respiratory illness vaccineArexvyalso up 2% to £0.6 billion.

Core operating profit +11% and core EPS +12% reflected Specialty Medicines and Vaccines growth, better administrative and marketing productivity, higher royalty income and disciplined increased investment in R&D portfolio progression in Oncology and Vaccines, management said. GSK forecast specialist medicines will grow by low double-digits in 2026, with a forecast for core operating profit growth of 7-9% on sales rising 3-5%.

Management reiterated their 2031 target for sales to exceed £40 billion, which looks increasingly more achievable than it ever has.

Pipeline vs LOE

GSK has over 50 products in its pipeline, which augurs well for the coming years, particularly as many are in Phase III – ie late stage requiring final regulatory clearance. Two major products are expected to be approved this year. Management pointed to 5 major FDA approvals in the last year, including the blood cancer drug Blenrep and Exdensur, a twice-yearly drug for treating severe asthma. Each of these are seen generating peak annual sales of $3bn.

However, loss of exclusivity (LOE) looms large for GSK. The firm will start to lose exclusivity over its Doluetgravir family of HIV medinces from 2028, with the full impact by 2030. In 2025 these drugs generated $5.65bn in sales – about one-sixth of total revenues. Replacing these volumes won’t be easy, let alone achieving the $40bn target for annual sales. GSK also faces headwinds from its vaccines business, whic make up close to a third of sales, from Trump administration pushback.

This makes acquisitions important, in addition to the pipeline. GSK recently acquired RAPT Therapeutics for $2.2bn billion, which provides access to the growing market of food allergy sufferers. Last year it bought a liver drug from Boston Pharmaceuticals and set out plans to develop drugs with China’s Hengrui Pharma. And there was the $1.2bn acquisition of cancer biotech IDRx.

2025 saw GSK deliver five major new drug approvals; 2026 is now a test of how the business can commercialise and execute these drugs. A few more approvals from the pipeline wouldn’t harm it either.
AstraZeneca reports full year results on 10 Feb.