Bernstein maintains GSK at Outperform and raises target price to 3,010 GBp

Overview

This is a Bernstein company research report on GSK plc. Its core argument is that the transformation and increased R&D investment proposed by new CEO Luke Miels are underestimated by the market. The report believes GSK can achieve accelerating growth after 2031 through more durable HIV cash flows, late-stage R&D investment, and the Nuvalent acquisition, creating room for long-term EPS and valuation re-rating.

Core views

Bernstein believes consensus underestimates three points: first, the resilience of the HIV business during the 2028-2030 patent expiry period for dolutegravir tablets, particularly the first-mover advantage of long-acting injectables in the treatment market; second, the potential improvement in R&D productivity and catalyst density after GSK reinvests most of the £1.9bn in savings into the late-stage pipeline; and third, the potential for Nuvalent's ALK/ROS1 NSCLC assets to generate longer treatment durations and benefit from GSK's global commercialization network, with better safety and long-term sales and EPS contributions exceeding market expectations.

Analysis framework

The report explains the target-price increase through top-down sales and EPS forecasts, comparisons with Bloomberg consensus and European pharmaceutical peers, a review of pipeline catalysts, strategic analysis of the Nuvalent transaction, and a valuation framework combining DCF with 2027-2029e EV/EBITA.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  The report uses DCF as part of the target-price methodology. WACC is maintained at 8%, while the terminal growth rate is raised from 0% to 1% due to increased R&D investment, lifting the DCF valuation to £31.57.

• Relative valuationEV/EBITA

  2027-2029e EV/EBITA multiple method

  The report uses 2027-2029e EV/EBITA multiples as the other component of valuation and reduces the 5% premium versus European peers to parity to reflect dilution from Nuvalent.

• Earnings forecastsComparison of EPS and sales forecasts

  Comparison of Bernstein forecasts with Bloomberg consensus and European peers

  The report compares GSK's 2027-2036e adjusted EPS with Bloomberg consensus and believes that contributions from HIV and Nuvalent could result in long-term EPS being as much as 50% above consensus.

• Pipeline analysisClinical catalyst and risk contribution analysis

  Product, pipeline, and 2035e EBIT sensitivity

  The report uses assets including HIV, Blenrep, Shingrix, bepirovirsen, and efimosfermin to assess the sources of upside and downside to 2035e EBIT.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• GSK.LN

  Covered company

  Strengths

  HIV cash flows are considered more durable, R&D investment is increasing, the company has a global commercialization network, and it has diversified businesses across vaccines, oncology, and immuno-inflammation.

  Weaknesses

  The company faces pressure from dolutegravir patent expiry in 2028-2030, the Nuvalent transaction will dilute EPS in the short term, and certain pipeline programs such as camlipixant have been discontinued.

  Comparison

  The report believes GSK's 2026-2036e sales and EPS CAGRs are higher than those of European pharmaceutical peers, while its valuation remains inexpensive under a global large-cap pharmaceutical EV/sales regression analysis.

  Risks

  HIV resilience falls short of expectations, R&D productivity does not improve, Nuvalent integration or clinical commercialization fails, or peer multiples contract.

• NUVL.US

  Nuvalent Inc, the proposed acquisition target of GSK

  Strengths

  It has potential best-in-class NSCLC ROS1 inhibitor zidesamtinib and ALK inhibitor neladalkib, with patent protection extending into the early 2040s; the potential for longer treatment duration is considered underestimated.

  Weaknesses

  The company was established relatively recently, its ex-US infrastructure is weak, and its assets remain dependent on clinical, regulatory, and commercial execution.

  Comparison

  The report believes Nuvalent's drugs may be differentiated from Alecensa, Lorbrena, Ibtrozi, and Augtryo in terms of safety, selectivity, or treatment duration.

  Risks

  The transaction is not completed on schedule, FDA approval uncertainty, Phase 3 results fall short of expectations, or returns are insufficient after GSK pays a premium.

• AstraZeneca

  Peer reference and strategic analogy

  Strengths

  The report compares GSK's increased R&D investment and Cambridge R&D hub strategy with AstraZeneca's R&D transformation since 2013.

  Weaknesses

  It is used only as a reference, and the report does not provide a complete investment-rating analysis of AstraZeneca.

  Comparison

  GSK is considered to be emulating AstraZeneca's path of driving long-term growth through R&D investment and commercial expansion.

  Risks

  There is uncertainty over the effectiveness of GSK's execution in replicating AstraZeneca's experience.

• Gilead

  Competitor in the HIV market

  Strengths

  The report states that Gilead is the leader in the overall HIV treatment and prevention market.

  Weaknesses

  GSK's first-mover advantage in long-acting HIV products in the treatment market could enable it to gain share from Gilead.

  Comparison

  Bernstein believes the market underestimates GSK's opportunity to gain share from Gilead in the HIV treatment market.

  Risks

  If Gilead's competing products or commercial strategy are stronger, GSK's HIV upside could be limited.

Key data

• RatingOutperformThe report's front page lists GSK's rating as Outperform.
• Target price3,010.00 GBpThe previous target price was 2,825.00 GBp, representing a 7% increase.
• Current price1,940.00 GBpThe closing date was July 30, 2026.
• Implied upside55%Based on the current price and target price in the report's tables.
• 2026-2036e sales CAGR4%The report states that this is above the approximately 2% level for European peers.
• 2026-2036e adjusted EPS CAGR6.8%This is approximately 178-180bps higher than previously estimated and approximately 190bps above European peers.
• 2031 group sales forecast£43bnThis is above current Bloomberg consensus of approximately £37bn and management's target of >£40bn.
• Cost savings and reinvestment plan£1.9bn annual savings by 2029The report assumes that 75% of the savings will be reinvested.
• Number of Phase 3 starts20GSK now expects to start 20 Phase 3 trials this year, compared with the previous expectation of 10.
• Nuvalent transaction size$11bnGSK announced its proposed acquisition of Nuvalent on June 9, 2026, at a 40% premium to the previous closing price.
• Key Nuvalent assetszidesamtinib and neladalkibThese are ROS1 and ALK inhibitors, respectively, and both have received FDA Breakthrough Therapy and Orphan Drug Designation.
• Nuvalent approval dates2026-09-18 and 2026-11-27The report lists the FDA approval action dates for the two drugs in previously treated patients.

Impact & implications

If Bernstein's assessment is correct, GSK could transition from a traditionally undervalued defensive pharmaceutical stock to a company with stronger R&D growth characteristics, with its valuation discount potentially narrowing. The Nuvalent transaction will cause low-single-digit EPS dilution in 2026-2028, but the report believes core EPS accretion after 2029, accelerating sales after 2031, and a denser clinical catalyst calendar will improve market expectations.

Risks

• The sales resilience of the HIV business after dolutegravir tablet patent expiry may be weaker than Bernstein forecasts.
• The Nuvalent acquisition may not be completed by 3Q26, or integration, synergies, and commercialization may fall short of expectations.
• Neladalkib, zidesamtinib, and other Phase 3 pipeline programs face risks of clinical failure, approval delays, or labels weaker than expected.
• The £1.9bn savings and reinvestment plan may not be delivered on time, or the improvement in R&D productivity may be limited.
• Sales or clinical performance of key products and pipeline programs including Blenrep, Shingrix, bepirovirsen, and efimosfermin may fall below model assumptions.
• Contraction in European pharmaceutical peer valuation multiples or a decline in market risk appetite could pressure GSK's valuation.

What to watch

• Whether the Nuvalent transaction is completed as planned in 3Q26.
• The FDA approval milestones for zidesamtinib and neladalkib on September 18, 2026 and November 27, 2026.
• The 2H26 Phase 3 readout for Apretude administered three times annually for HIV prevention.
• The 2027 Phase 3 data for Nuvalent's Jideytro in first-line NSCLC patients with ROS1 mutations.
• The 2027 Phase 3 data for Cabenuva/CAB-400 administered three times annually for HIV treatment.
• Execution of GSK's plan to start 20 Phase 3 trials this year and the subsequent catalyst schedule.
• The implementation of the £1.9bn annual savings plan by 2029 and the effectiveness of reinvesting the funds into the late-stage pipeline.
• Whether 2031 group sales reach or exceed management's >£40bn target and Bernstein's £43bn forecast.