Glaxo Smith Kline PLC (NYSE:GSK) is one of the largest pharmaceutical companies in the world. The company is well diversified with consumer health care, pharmaceutical and vaccine lines of business. They have leadership positions in HIV and Respiratory therapeutic and their vaccine portfolio is the most comprehensive in the industry.
Current Restructuring effort
GSK is successfully restructuring the business. They've achieved 1 billion GBP of annual cost savings in 2015 with a total of 3 billion GBP expected by 2017.
GSK has also realigned their R&D to focus on new innovative drugs instead of their historic focus on incremental improvements of exiting compounds. They currently have a pipeline of up to 40 new medicines and vaccines. 80% of which they estimate could be first in class. Potential to file up to 20 by 2020.
As with all Pharma plays big risks around successful approval for their new medicines. Additionally GSK is exposed to respiratory Advair going off patent. Some of this is offset by new respiratory drugs Relvar/Breo, Anoro, and Incruse.
Approval of Nucala, their first biologic, treatment for severe asthma. Introduction of a malaria vaccine, the first vaccine against a parasite. Support for gene therapy to treat "Bubble Boy Disease" by European regulators.
GSK is currently trading at about 18X forward earnings. The consumer healthcare divisions operating profits were up 38% yoy last quarter and their HIV portfolio was up 51%. The vaccine group continues to deliver. The drug group should be flattish over the next couple years with Advair being exposed to generic competition. However, the vaccine and consumer healthcare divisions should drive growth. It's currently trading a little over the 50 day (39.98) and 200 day (40.73) moving averages.
GSK has a good pipeline, control over its costs and sports a pretty good dividend. My view is that the market is setting up to go a little lower from here, GSK is a good place to wait out the storm.
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