Bernstein: GSK earnings forecasts cut in the near term, but long-acting HIV drugs remain promising successors

Why were earnings forecasts cut, and why is Bernstein above consensus?

Bernstein raised its 2026 adjusted earnings per share forecast by 2% because of margin factors, but cut its 2027–2032 forecasts by 1%–3% because of weakness in the respiratory syncytial virus vaccine Arexvy and the general medicines business; the oncology pipeline drove increases of approximately 2%–3% in its 2035–2036 forecasts.
Following the revisions, the firm expects adjusted earnings per share to grow at a compound annual rate of 7.5% over 2026–2031, about 0.9 percentage points below its previous forecast. Its annual forecasts for 2026–2035 remain as much as 28% above the Visible Alpha consensus, mainly because of HIV and Nuvalent-related businesses. The model assumes that 75% of the savings from the 1.9 billion-pound cost reduction plan are reinvested in the business.

GSK's marketed Cabenuva is used to treat HIV and Apretude for prevention; both are injected every two months. Bernstein believes its first-mover advantage helps GSK encourage patients to switch from daily oral drugs to long-acting injections, and expects its share of the US HIV market to rise by 17 percentage points by 2040 compared with 2025.
A higher dose of cabotegravir, injected every four months, is undergoing clinical studies for treatment and prevention. The firm believes manufacturing difficulties could raise barriers to generic competition; manufacturing issues previously delayed US approval of the existing two-month formulation by 12 months.
Competition remains: Gilead held 64% of the US HIV market in 2025 and already has a product injected every six months. Bernstein also expects Gilead's oral drug Biktarvy to remain the top-selling drug in the US HIV treatment market until it loses exclusivity in 2036.

Bernstein expects cabotegravir to lose its composition-of-matter patent exclusivity in the US in 2031, while dolutegravir, an ingredient in oral drugs, will lose US exclusivity in 2029–2030. The firm expects patients to switch to long-acting drugs, but its model still shows GSK's HIV sales falling from 8.409 billion pounds in 2029 to 5.666 billion pounds in 2031.
The firm sees VH184, injected every six months, as a major driver of long-term value and expects it to launch in 2031; its composition-of-matter patent protection extends into the 2040s. The model assigns probabilities of success or launch of 80% and 40% to the four-month cabotegravir formulation and VH184, respectively.
The profit structure is also crucial: Bernstein estimates that royalties on Cabenuva amount to more than four-tenths of sales, and that margins will come under pressure in the late 2020s as its share of HIV sales rises; channel checks indicate that VH184 requires only royalty payments to Shionogi, with no similar contingent liability payments.
Clinical progress will determine whether the transition can be achieved: phase IIb data for the four-month prevention formulation are expected in the second half of 2026, and GSK says it has found no safety or efficacy issues so far; the phase III trial of the treatment formulation has completed recruitment, with data expected in the second half of 2027.

Bernstein maintained its Outperform rating and lowered its price target from 30.10 pounds to 30.04 pounds. Higher long-term earnings forecasts raised its discounted cash flow valuation to 33.18 pounds per share, but weaker medium-term sales forecasts and a contraction in peer valuation multiples lowered its valuation based on 2027–2029 enterprise value to EBITA multiples to 26.90 pounds; the price target is the average of the two.
The firm expects data from non-HIV pipelines, including oncology, in 2027–2028 to diversify the business. Its downside scenario includes failure of late-stage drug candidates, failure to improve the core EBITA margin over 2025–2030, and global vaccine business growth falling short of expectations.