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The GSK (LSE: GSK) share price is trading at levels last seen around a quarter of a century ago, which seems bizarre for what’s often viewed as one of Britain’s best blue-chips.
Back in March 1999, the pharmaceutical giant’s shares hit an all-time high of 2,067p as the dotcom boom sent the FTSE 100 towards the stars. Plenty of other blue-chips peaked around then, to be fair, before markets plunged. GSK ended 2003 around 1,274p. More than 20 years later, progress has been painfully slow. Today, it trades at 1,790p.
The shares have been hammered by patent expiries, drug development failures and concerns about its pipeline. And they have struggled to kick on, despite years of promises that a renewed focus on research and development would deliver a new generation of blockbuster drugs.
Where did it all go wrong?
To that end, the full-year dividend was held at 80p in 2014, and then frozen for seven years. Emma Walmsley, who became chief executive in 2017, spent years trying to turn the tanker around. GSK needed to invest heavily in R&D to replace ageing treatments as they lost patent protection. In 2022, it was rebased at 57.75p, following the 2022 demerger of consumer healthcare giant Haleon. GSK shares have struggled to kick on since.
US litigation over heartburn drug Zantac didn’t help. This was finally settled in 2024. GSK handed over $2.2bn without admitting liability.
Is it finally turning around?
There are signs of progress. GSK reported £32.7bn of sales in 2025, up 4%, while core operating profit rose 11% to £9.2bn.
Q2 results (28 July) showed sales grew 5% to £8.4bn, while core operating profit increased 7% to £2.8bn. GSK is targeting more than £40bn of annual sales by 2031 and expects 2026 core profit and earnings per share to grow 7% to 9%. So why aren’t investors more excited?
The shares have fallen about 8% in three months and are currently around 21% below their 52-week high. There are still worries about patent expiries, particularly HIV treatment dolutegravir from 2028, the huge cost and uncertainty of drug development, and whether GSK can keep producing enough blockbuster medicines to replace those it loses.
Maybe I’m being too downbeat. GSK is still up 18.8% over one year and 32% over five, and has an okay trailing dividend yield of around 3.7%. A price-to-earnings ratio of about 10.5 also looks good value.
The problem is that GSK has looked cheap ever since Haleon was carved out. This hasn’t been a catalyst for growth.
I hold GSK, having bought it two or three years ago for diversification purposes, and because I hoped it might play catch-up with sector leader AstraZeneca. So far, I’ve been underwhelmed. The dividend is respectable, but not spectacular, and the shares have been disappointing. If I didn’t own it, I’m not sure I’d consider it today. I can see more exciting growth and income stocks on the FTSE 100 today, and I’ll go after them instead….
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Harvey Jones owns shares in GSK.
This story originally appeared on Motley Fool
