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The GSK (LSE:GSK) share price has fallen considerably since the company’s demerger with its consumer healthcare arm Haleon in July 2022. However, the stock did surge around 7.5% at the end of April 2025, following the release of its first-quarter results and a series of significant corporate developments.
While the company’s long-term performance has lagged behind key rival AstraZeneca, recent momentum has ignited a degree of optimism that GSK may finally be turning a corner after years of underperformance.
Uncertainty passes
In October, GSK agreed to a $2.2bn settlement to resolve about 80,000 claims — roughly 93% of pending cases — alleging that its discontinued heartburn drug Zantac caused cancer. This settlement, while a substantial financial outlay, was largely within market expectations. And this should have delivered some significant momentum. Crucially, it removed a significant cloud of legal uncertainty that has weighed on the stock for years.
However, there’s been other factors holding the stock back. This included the appointment of Robert F Kennedy Jr as US Secretary of Health — given his long-standing opposition to parts of the pharmaceutical industry — and Trump’s tariffs.
Performance improves
GSK’s Q1 2025 results have lifted sentiment somewhat. The company reported a 4% year-on-year increase in revenues to £7.52bn, with operating profits soaring 50% to £2.11bn and free cash flow reaching £700m.
Specialty Medicines were a standout, delivering a 17% sales increase driven by strong performances in HIV, respiratory, immunology, inflammation, and oncology treatments.
The company reaffirmed its full-year guidance, projecting turnover growth of 3%-5% and core earnings per share up 6%-8%. Management also declared a 16p dividend for the quarter and continued its £2bn share buyback programme, with £273m already repurchased in Q1.
More operational focus
Long-run investors will also be buoyed by the company’s improving strategic focus. GSK is sharpening its focus on innovative pharmaceuticals, particularly in specialty medicines and oncology. The acquisition of US biotech firm IDRx earlier this year is part of this pivot, aimed at bolstering its pipeline in gastrointestinal cancers and offsetting a decline in vaccine sales.
Analysts are forecasting robust earnings growth for GSK. The forward price-to-earnings (P/E) ratio is expected to fall from 10.5 times in 2025 to 8.6 times in 2026. In fact, this forward year P/E is actually a 40% discount to the healthcare global average. That’s typically a sign of undervaluation.
While challenges remain — notably in the vaccines division — investors are increasingly optimistic that GSK may be on the cusp of a sustained recovery, with the potential to narrow the gap with its more illustrious peers.
Moreover, net debt is set to fall from around £12.5bn in 2025 to around £6.5bn in 2027. That’s a really important movement. Coupled with the reduction of the Zantac risk, I believe this could be the catalyst for share price growth.
GSK hasn’t been on my watchlist for a while, but I’ll be keeping a closer eye going forward. The 4.2% dividend yield also adds to the appeal. However, I don’t have any plans to buy in the immediate future.
