GSK’s Nuvalent deal tackles HIV cliff to win cautious backing from analysts Proactive uses images sourced from Shutterstock
GSK PLC’s (LSE:GSK, NYSE:GSK) $10.6 billion (£8bn) acquisition of US biotech Nuvalent has achieved something unusual in large pharmaceutical M&A: analysts broadly agree it makes sense.
The debate is less about whether the deal is strategically sound and more about how much upside remains after shelling out a chunky amount for two relatively mature assets.
The transaction brings two late-stage lung cancer medicines, neladalkib and zidesamtinib, both targeting genetically defined forms of non-small cell lung cancer and both expected to face regulatory decisions within months.
For GSK, the immediate attraction is to further swell the oncology franchise that former boss Emma Walmsley spent years rebuilding to help calm investor worries over the eventual loss of exclusivity on its HIV portfolio.
UBS called the acquisition a “strong strategic fit”, arguing the drugs could generate combined peak sales of $3.75 billion and help smooth the earnings drag from HIV patent expiries between 2028 and 2031.
Shore Capital was even more enthusiastic, describing the deal as laying the foundations for a lung cancer franchise while further weakening the bear case centred on the HIV patent cliff.
Deutsche Bank was more measured, with analyst Emmanuel Papadakis noting that GSK is paying roughly three times consensus peak sales forecasts for assets targeting well-understood markets. That looks reasonable rather than cheap.
The central question is whether GSK is buying future growth or merely bringing forward revenue it could already see coming.
“It is hard to make a case for much hidden value in the acquisition,” said Papadakis.
He said the two main assets bring “relatively derisked and imminent oncology revenue streams”, though the targets are in “familiar if somewhat derivative and crowded spaces”.
Pluses for Papadakis are the “modest premium” paid to accelerate the oncology rebuild and nudge towards the 2031 revenue target.
“In that regard, the acquisition seems totally reasonable overall and we also thought the company did a reasonably cogent job of outlining the case for some asset differentiation,” he said, before countering that the key ALKAZAR trial “will not read out for some years to fully prove the deal”.
Deutsche’s ‘hold’ and 1,900p target were unchanged, as were UBS’s ‘neutral’ rating and 1,940p target.
Shore Cap’s Sean Conroy raised his target price to 2,600p from 2,500p and reiterated his ‘buy’ recommendation, saying the shares on his revised numbers imply a 13 2027 P/E ratio, “which looks undemanding considering where peers trade” and keeping GSK as his preferred UK pharma name, over AstraZeneca.