GSK Stock Declines 20% in 3 Months: Should You Buy, Sell or Hold?

GSK GSK stock has declined 20.2% in the past three months compared with a decrease of 12.3% for the industry. The stock has also underperformed the sector and the S&P 500 index, as seen in the chart below. The stock is also trading below its 200 and 50-day moving averages.GSK Stock Underperforms Industry, Sector and S&PImage Source: Zacks Investment ResearchGSK enjoys a strong position in HIV and Vaccines therapeutic areas. The spin-off of the Consumer unit in 2022 has allowed it to focus on drug development. In July 2022, GSK de-merged its Consumer Healthcare segment into a standalone company. The independent Consumer Healthcare company was named Haleon HLN. GSK is witnessing increased sales growth in the Specialty Medicines unit and sales are improving in its General Medicines.However, GSK’s Vaccine segment sales in the United States are slowing down, hitting the stock hard. The broader drug/biotech sector has also witnessed a downturn in the past couple of months.Let's discuss the aspects in detail to understand how to play GSK’s stock amid the recent price decline.GSK Specialty Medicines Unit is on a Strong FootingGSK is witnessing increased sales growth of its Specialty Medicines unit, particularly reflecting successful new launches in Oncology and long-acting HIV medicines. Sales are rising in all areas, HIV, Immunology/Respiratory as well as Oncology. Sales of Specialty Medicines unit rose 20% in the first nine months of 2024.In the segment, while products like Nucala and Dovato are key top-line drivers, new long-acting HIV medicines, Cabenuva and Apretude, as well as new oncology drugs Jemperli and Ojjaara, are also witnessing strong patient demand and contributing to top-line growth. On the third-quarter conference call, GSK raised its growth expectation for 2024 for the Specialty Medicines segment from a mid-to-high teens percentage at CER to a high teens percentage.GSK’s Promising PipelineSeveral of GSK regulatory applications seeking approval for new candidates or expanded use of marketed drugs are under review in some countries.Regulatory applications seeking approval of pentavalent MenABCWY meningococcal vaccine, gepotidacin for treating uncomplicated urinary tract infection, Blenrep combination for relapse refractory multiple myeloma and expanded use of Nucala for chronic obstructive pulmonary disease (COPD) are under review in the United States. FDA decisions on all these filings are expected by mid-2025.Promising candidates in late-stage development include gepotidacin (urogenital gonorrhoea), bepirovirsen (chronic hepatitis B), depemokimab (severe eosinophilic asthma, eosinophilic granulomatosis with polyangiitis, hyper-eosinophilic syndrome and chronic rhinosinusitis with nasal polyp) and tebipenem (complicated UTIs). GSK is also focused on developing innovative ultra-long-acting HIV regimens for treatment and prevention, which can extend the dosing intervals of the injections. GSK expects sales from its new long-acting regimens to be around £2 billion by 2026.GSK is also working on expanding the label of marketed products like Nucala, Zejula and Jemperli into additional indications.In 2025, GSK expects to launch five new products/line extensions, including Blenrep, depemokimab, Nucala for COPD, gepotidacin and MenABCWY. By 2026, GSK plans to launch more than 20 new products/line extensions, with more than 10 having blockbuster potential.GSK’s Vaccine Sales Slowing DownGSK’s Vaccine sales declined 13% in the United States in the first nine months of 2024 due to declining sales of the shingles vaccine, Shingrix and RSV vaccine, Arexvy. U.S. sales of Shingrix declined 20% in the first nine months of 2024 due to lower demand driven by challenges activating harder-to-reach consumers.Revised recommendations for RSV vaccinations issued in June 2024 by the US Advisory Committee on Immunization Practices (ACIP) hurt sales of Arexvy in the third quarter of 2024. In June, the ACIP recommended the use of Arexvy for all adults aged 75 and above. However, for adults aged 60-74, the ACIP recommended the vaccine only for those who are at increased risk of severe RSV disease. Also, the prioritization of COVID-19 vaccination in the United States and an unfavorable comparison to the vaccines’ outstanding launch last year also hurt sales.On the third-quarter conference call, the company significantly lowered its Vaccine sales growth expectations. It now expects vaccine sales to decline in a low single-digit percentage in 2024 from 2023 levels at CER versus prior expectations of growth in the low to mid-single-digit percentage. In 2025 too, GSK expects limited growth of both Shingrix and Arexvy.Meanwhile, the appointment of Robert F. Kennedy Jr., a vaccine skeptic, as head of Health and Human Services (HHS) has hurt stocks of companies making vaccines like GSK, Moderna MRNA, Sanofi SNY and others.GSK’s Valuation & Estimate MovementGSK’s stock is trading at an attractive valuation relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 8.31 on a forward 12-month basis, lower than 16.90 for the industry. The stock also trades below its 5-year mean of 11.73.GSK Stock ValuationImage Source: Zacks Investment ResearchThe Zacks Consensus Estimate for earnings has declined from $4.09 to $4.05 per share for 2024 and from $4.40 to $4.24 per share for 2025 over the past 30 days.GSK’s EstimatesImage Source: Zacks Investment ResearchStay Invested in GSK’s StockGSK has its share of problems. Competitive pressure on HIV and respiratory drugs has risen.  The dolutegravir HIV franchise patent expires in the 2028-2029 period, and U.S. vaccine sales are slowing down.Nonetheless, GSK expects sales to grow in the range of 7-9% at a constant exchange rate (CER) and earnings to increase between 10% and 12% in 2024, both maintained from previous expectations despite the huge cut in Vaccine segment growth rate. For the five-year period till 2026, GSK expects to record more than 7% sales growth. By 2031, it expects sales to be more than £38 billion. The company also resolved the vast majority of Zantac litigations this year which had long been an overhang on the stock.Though GSK is not the best large-cap drugmaker to have in one’s portfolio, we believe there is potential for its sales and profits to improve in the coming years. We suggest investors who own this Zacks Rank #3 (Hold) stock stay invested for now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Buying the stock of this fundamentally strong company at its present cheap valuation can prove prudent for long-term investors who are interested in buying blue-chip companies.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sanofi (SNY): Free Stock Analysis Report GSK PLC Sponsored ADR (GSK): Free Stock Analysis Report Moderna, Inc. (MRNA): Free Stock Analysis Report Haleon PLC Sponsored ADR (HLN): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks