GlaxoSmithKline (GSK), based in London, is a global healthcare company engaged in the discovery, development, manufacture and marketing of pharmaceutical and consumer healthcare products, notes Jasper Hellweg, analyst with Argus Research.

The company’s leading products include treatments for asthma and COPD; products for HIV infection; and a range of vaccines. It has taken aggressive steps to leverage its strengths in consumer products, vaccines, and anti-infectives, resulting in sales growth in each segment over the past two quarters.

GSK has also focused on responding to the pandemic, both in terms of developing therapeutic options and multiple adjuvanted COVID-19 vaccines.

Most recently, it announced that its monoclonal antibody, sotrovimab, retained in vitro activity against the mutations found in the spike protein of the Omicron variant. It also announced a contract to supply the U.S. government with approximately $1 billion of sotrovimab, with the potential for additional sales to the government next year.

GSK is working with a range of partners to bring adjuvanted COVID-19 vaccines to market. These include a plant-derived vaccine developed by Medicago. GSK has also developed a protein-derived vaccine with Sanofi (SNY).

GSK is also partnering with SK Bioscience on a self-assembled nanoparticle vaccine candidate that will be administered with its adjuvant. GSK has announced plans to support the manufacturing of up to 100 million doses of CureVac’s first-generation COVID-19 vaccine, as well as up to 60 million doses of the Novavax (NVAX) vaccine.

The shares appear attractively priced. The shares are also trading at a relative strength index of 59, suggesting that they have significant room to advance before becoming overbought.

From a fundamental standpoint, we are valuing the stock based on P/E, price/sales, and yield. Glaxo’s projected 2021 P/E of 14 is below the average of 21 for its peer group. We see value in GSK shares, which are trading at below-industry-average P/E multiples. GSK also carries an attractive dividend with a yield of about 4.9%.

Given the company’s strong pipeline in multiple therapeutic markets, the promising outlook for its vaccine business, and the stock’s above average yield, we believe that GSK merits valuation multiples closer to industry averages. Our target price of $48, raised from $45, implies a projected 2021 P/E of 15 and a total potential return, including the dividend, of 17% from current levels.

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