GSK share price is imploding: is it safe to buy the dip?

The GSK share price has been in a strong freefall after peaking at 1,785p in September. Most recently, the GSK stock retreated for five consecutive weeks and reached its lowest level since October last year. It has dropped by 27% from the year-to-date high.

Good news from GSK

The GSK share price rose slightly after the company announced positive result for its linerixibat, a drug that will be used to treat relentless itching caused by primary biliary cholangitis (PBC).

This is a notable development since PBC is a common rare disease that can lead to liver failure among patients. GSK is now in the third phase of this trial, which is known as GLISTEN. In this trial, the company said that the drug helped to reduce itching over a 24 weeks compared to a placebo.

GSK is also carrying more trials in its pipeline. Some of the drugs in the third phase are gepotidacin, which will be used to treat urogenital gonorrhoea, bepirovirsen (Chronic hepatitis B virus infection), linerixibat (Cholestatic pruritus in primary biliary cholangitis), and mepolizumab nucala for chronic obstructive pulmonary disease.

GSK earnings and RFK jr

The GSK share price has slumped after Donald Trump nominated Robert Kennedy Jr to be the next head of the DHS. This is a notable appointment because Kennedy, who has no medical training, has spent decades raging against the pharmaceutical industry.

Kennedy believes that many of these companies, including GSK, have misled the public and worked in conjunction with health officials to promote vaccines. He has become one of the top promoters of the theory that vaccines are not good.

Still, it is unclear whether Kennedy will get the required votes to become the head of the department. Besides, pharmaceutical companies, including GSK have contributed money to legislators. Data shows that the company donated $564,138 in the last political season. It sent $30,885 to the National Republican Senatorial Committee. 

Meanwhile, GSK reported relatively weak financial results. Its total revenue dropped by 2% to £8 billion during the quarter.

This decline happened as vaccine sales plunged by 15% because of the waning demand for COVID-19 vaccines. This drop was offset by specialty drugs sales whose revenues rose by 19%, oncology (94%), and HIV (12%). General medicines revenue rose by 7%.

Some of this growth was mostly because of its acquisitions. It acquired Aiolos Bio earlier this year in a $1 billion deal. It will also need to pay $400 million per future milestones. 

GSK also bought Sierra Oncology for $1.9 billion, a deal that gave it access to momelotinib, a drug that treats anemia. GSK’s operating profit dipped by 86% as its cash from operations jumped to £2.5 billion. 

Read more: GSK jumps 6% after $2.2B Zantac settlement: why analysts see more upside

GSK share price analysis

The weekly chart shows that the GSK stock price has been in a strong bearish trend in the past few months. It has fallen from the year-to-date high of 1,782p to 1,300p as concerns about its slow growth continued. 

GSK has dropped below the 50-week and 200-week Exponential Moving Averages (EMA), meaning that bears are now in control. It is also attempting to drop below the psychological level at 1,300p.

GSK has also dropped below the 38.2% Fibonacci Retracement level. The Relative Strength Index (RSI) and the Stochastic Oscillator have all pointed downwards. 

Therefore, the GSK share price will likely continue falling as sellers target the 50% retracement level at 1,250p, which is about 5% below the current level. A drop below that level will point to more sell-off to the 61.8% retracement point at 1,123p. On the flip side, a move above the psychological level at 1,375p will invalidate the bearish view.

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