After an encouraging begin to 2024, the GSK (LSE: GSK) share price has endured a fairly terrible few weeks, largely on account of ongoing litigation considerations referring to its heartburn drug Zantac.

However issues have simply acquired worse, inflicting the inventory to fall some extra.

What’s occurred?

The most recent slide has come following a call made within the US relating to one of many firm’s new vaccines that it’s hoping will show to be a long-term earnings winner.

Yesterday (27 June), it was introduced that an advisory committee of the Facilities for Illness Management and Prevention had postponed a vote on whether or not the corporate’s Arexvy vaccine needs to be used for individuals aged 50-59 on security grounds.

On high of this, the advice was made that the vaccine ought to solely be used on these at-risk sufferers within the 60-74 age vary.

Recent blow

Having solely been launched final yr, decreasing Arexvy‘s addressable market is a blow to the FTSE 100 pharma big.

Arexvy targets the respiratory syncytial virus (RSV). Because it sounds, the latter causes infections of the respiratory tract, resulting in flu-like signs. It’s the main reason for pneumonia in very younger kids and older adults.

Up till lately, the vaccine had been a money-spinner with the US being GSK’s greatest buyer. Gross sales hit £1.2bn in 2023, simply outperforming rival Pfizer and its model of the jab.

However this growth has left some analysts predicting an enormous drop in income.

Low cost inventory

On a extra optimistic observe, it’s exhausting to disclaim that the corporate’s funding in its pipeline over current years is now bearing fruit. Shingles vaccine Shingrix, for instance, has been an enormous success. Elsewhere, GSK lately revealed that its Jemperli drug had lowered the danger of dying in sufferers with endometrial most cancers by virtually one third when used alongside chemotherapy.

With this in thoughts, there’s an argument that the inventory’s price tag now seems compelling.

Based mostly on analyst forecasts, the shares will be picked up for rather less than 10 occasions FY24 earnings. That appears low-cost relative to each the healthcare sector and the market as an entire. It’s additionally considerably beneath 15 occasions earnings — GSK’s common valuation throughout the final 5 years.

Passive earnings

However there’s extra.

As issues stand, the inventory provides a dividend yield of 4%. That is larger than I’d get from a FTSE 100 tracker. It’s additionally more likely to be lined over twice by revenue as issues stand.

That ‘as things stand’ is essential. Clearly, quite a bit will rely on the end result of trials referring to Zantac and whether or not it’s proved that ranitidine — an energetic ingredient — will increase the chance of creating most cancers.

A unfavourable consequence for GSK would doubtless contain paying substantial damages to these affected. And that would presumably result in dividends being lower.

On the fence

Thursday’s information and the next market response may have doubtless knocked the boldness of present GSK holders. But it surely does arguably supply me a sexy entry level to start constructing a place in a significant participant in a sometimes defensive sector. That is assuming the corporate is ready to overcome its present woes.

Till there’s extra readability with regard to its authorized battles, nevertheless, I’m ready to look at from the sidelines.