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He GSK (LSE:GSK) share price has fallen. Therefore, it may be a good time to do your research and consider the stock opportunity.
I think the global biopharmaceutical company has been full of promise for a while and looks like a growth-focused proposition for its shareholders.
A portfolio of R&D candidates
The company has ambitions to achieve operational advancements through its research and development (R&D) efforts. So could it still function as its peer? AstraZeneca What have you done over the last decade? Maybe.
GSK's news flow has been accelerating. It is common for the company to post positive updates about its drugs and treatments in development.
However, unlike AstraZeneca, the company has not yet made sufficient progress in commercializing new drugs. However, it could affect some of the best sellers in the future and incoming cash flow could start to increase. My hope is that that operational progress will drive the stock higher.
This is what the stock price chart looks like.
At the moment, GSK is still working on legacy issues. For example, in October the directors announced an agreement to spend $2.27 billion to resolve litigation cases in the United States.
The deal should address about 93% of the well-reported legal proceedings related to the company's former heartburn drug. Zantac. Therefore, the move will leave a large part of the problem behind the business, allowing it to move forward.
The growth agenda is not affected
It is a costly result. But the company said it can finance the costs of the deals with existing resources. This means that there will be no changes to the growth agenda or R&D investment plans.
These types of legal battles are not unusual for companies the size of GSK. When I read the endnotes of the financial reports of large companies in various industries, the list of ongoing legal issues is often long.
Many types of business operations can be risky and legal activity is often part of what is needed to keep things moving forward. However, one of the specific uncertainties for GSK shareholders is that another drug in its group could lead to litigation.
Another risk is that the company's research and development portfolio could disappoint and fail to produce top-selling drugs.
However, CEO Emma Walmsley was upbeat in October's third-quarter earnings report. The R&D portfolio is strengthening and so far 11 positive phase three trials have been carried out in 2024. In addition, the company plans five new “product approval opportunities” next year.
A positive outlook and dividends now
Directors stick to previous forecasts for 2024 and Walmsley is “even more confident” about the outlook for next year onwards.
Meanwhile, City analysts expect normalized earnings to advance around 11% this year and around 8% in 2025.
But one of the main things I like about GSK is the decent dividend for shareholders. With the share price close to 1,333 pence, the expected return for 2025 is around 4.8%.
Given the multi-year growth potential of the business, I think the level of performance suggests a strong valuation worth considering for investors.
