Broker snap: Glaxo shares to enter catch-up mode

11th Jun 2009 11:05

The share price of drugs giant GlaxoSmithKline has moved sideways since the start of March and has some catching up to do in relation to the share price performance of its European peers, reckons Morgan Stanley.The US bank has upgraded its rating on the stock from 'underweight' to 'equal weight' and set a price target of 1320p as part of a review of the European pharmaceutical sector. GSK's shares have underperformed the European pharmaceuticals sector by 12% in the year to date.'Longer-term, we continue to strongly endorse the chief executive's dynamic strategy in moving towards a diversified healthcare model, which we believe will create significant shareholder value long-term,' said Morgan Stanley analyst Andrew Baum. 'In the near term, the recent US government order for H1N1 pandemic flu vaccine with a novel adjuvant may suggest there is some hope for approval of Glaxo's Cervarix in the second half,' Baum added.Morgan Stanley's current earnings forecasts assume that Cervarix will not launch in the US for another five years. 'We anticipate Glaxo will continue to build out its emerging-market infrastructure and bolster its consumer-health business as with recent deals to date,' Baum said.Baum believes the European pharmaceutical sector offers attractive investment opportunities. 'We think current valuations capture both near-term U.S. political uncertainty and growing economic pressure,' Morgan Stanley said.