The Laziness Premium

I spent last Tuesday afternoon on a call with a fund manager who runs $3 billion and couldn’t explain to me why his team was avoiding GSK (GSK).

Something about HIV competition and patent cliffs and the usual hand-waving you get from analysts who haven’t actually dug into the numbers.

I let him finish his pitch, thanked him for his time, and immediately pulled up GSK’s quarterly filing because when smart money is avoiding something for dumb reasons, that’s usually where the opportunity lives.

Second quarter revenue came in at $10.58 billion, beating consensus by $153.5 million. Non-GAAP earnings hit $1.24 per share, up 12% year-over-year.

Now here’s the part that made me sit up straight. These numbers are happening while two of their major products are actively failing.

Their PARP inhibitor Zejula is getting crushed by AstraZeneca’s (AZN) Lynparza and AbbVie’s (ABBV) Elahere in ovarian cancer. Their RSV vaccine Arexvy, posted a miserable $88 million in Q2, down 11% from the prior quarter, while Pfizer’s (PFE) competing product is growing nicely at $143 million.

When a company beats earnings by $0.06 while dragging two anchors, you need to figure out what’s actually working because that’s where the real story is.

Everyone is focused on Ojjaara, their myelofibrosis treatment, doing $183 million in Q2 with 71% growth. Fine. That’s the obvious play.

But I’m interested in three assets that most are too lazy to model correctly because they require actually understanding how drugs get prescribed in the real world, instead of just reading the press releases.

We’re talking about Jemperli in oncology, Cabenuva in HIV, and an antibiotic called gepotidacin that just became the most important gonorrhea drug nobody’s heard of.

Start with Jemperli. This checkpoint inhibitor is competing against Keytruda, Opdivo, Imfinzi, Tecentriq, and Libtayo. To describe this market as overcrowded is an understatement.

Except Jemperli just posted $262 million in Q2 with 91% year-over-year growth and 19% sequential growth. Those represent a wholesale shift in how oncologists are treating endometrial cancer.

The drug became the first immuno-oncology regimen approved with chemotherapy for advanced endometrial cancer last August, and the uptake is faster than anything I’ve seen in this space in years.

What everyone’s missing completely is the pipeline of data readouts coming through 2028 for rectal cancer, head and neck cancer, and colorectal cancer.

Each of those indications adds hundreds of millions in peak sales, and the Phase 2 data suggests GSK has a genuinely differentiated asset in the dMMR setting. Most investors can’t even tell you what dMMR means, which is precisely why this opportunity exists.

Now Cabenuva is where things get really interesting. This HIV treatment did $454 million in Q2, up 46% year-over-year, beating my estimates by $36 million. I was completely wrong about this drug.

Gilead (GILD) got FDA approval in June for Yeztugo, the first twice-yearly pre-exposure prophylaxis with over 99.9% efficacy in trials. That should have destroyed demand for a monthly treatment. Except it didn’t.

Cabenuva keeps growing because the theoretical advantages you see in clinical trials don’t always translate to real-world prescribing patterns. Adherence, side effects, insurance coverage, and physician comfort levels all create friction that takes years to overcome.

ViiV Healthcare, which GSK owns 76.5% of, built a moat that’s deeper than anyone realizes. While everyone writes obituaries for the HIV franchise, this thing is quietly becoming a cash machine.

Then there’s gepotidacin, which won FDA approval in March for urinary tract infections and just got Priority Review status in August for gonorrhea. This antibiotic matched the standard treatment in Phase 3 trials with a 92.6% success rate.

At the J.P. Morgan conference, management said peak sales for their three anti-infective drugs could exceed $2.5 billion. Most investors heard that and filed it under aspirational corporate nonsense.

I’m treating it as conservative because drug-resistant gonorrhea is becoming a genuine public health crisis, and gepotidacin is the first new mechanism of action we’ve seen in this indication in decades.

Physicians will prescribe it not because they want to but because they’re running out of options. That’s the best kind of demand there is.

CFO Julie Brown said something at the Bank of America conference in September that confirmed what I suspected. She pointed out that earnings growth is running well ahead of revenue growth because of margin expansion from their specialty portfolio and better operational efficiency.

When a company tells you they’re simultaneously launching blockbusters and getting better at making money, you pay attention. They just raised 2025 sales guidance from low-double digits to low-teens growth, and they’re stacking catalysts through 2026 with Nucala in COPD, depemokimab approval, and Blenrep’s PDUFA date hitting October 23.

The stock trades at a 10.39x forward P/E that compresses to 8.04x by 2029. There’s a gap on the chart between $41.10 and $41.70 that might give us a cleaner entry if we get October volatility, but I’m not waiting around for perfection here.

Management just committed $30 billion to US operations, which tells you everything you need to know about their confidence level. Analysts are modeling 6.21% revenue growth for Q3, which strikes me as conservative given what’s happening with Jemperli and Cabenuva.

As for that fund manager running $3 billion? He’s going to call me in six months with some version of “I can’t believe we missed this,” and I’m going to be polite enough not to say I told you so.

The consensus on GSK is outdated, the valuation is stupid cheap, and the catalysts are stacking up. Sometimes the best trades are just sitting there waiting for someone to notice the obvious. Buy the dip.