GlaxoSmithKline is a research-based pharmaceutical and healthcare company based in the United Kingdom. Co. is engaged in the development, manufacture and marketing of pharmaceutical and consumer health-related products. Co.'s principal pharmaceutical products include medicines in the following therapeutic areas: respiratory, central nervous system, anti-virals, anti-bacterials, metabolic, vaccines, cardiovascular and urogenital, oncology and emesis. Co. operates principally in three industry segments: Pharmaceuticals (prescription pharmaceuticals); Vaccines (vaccines for infectious diseases); and Consumer Healthcare (over-the-counter medicines, oral healthcare and nutritional healthcare).
Glaxo’s moat is dug on the basis of patents, a powerful distribution network, economies of scale, and diverse operations. Similar to other pharmaceutical companies, Glaxo's branded drugs hold patent protection that keeps competitors at bay for several years, while the company can charge prices that enable returns on invested capital above its cost.
GlaxoSmithKline completed its deal with Novartis in early March. The deal saw an asset swap where Glaxo's oncology business went to Novartis for $16 billion, and Novartis' vaccine unit went to Glaxo for $7 billion. At the same time, the two companies agreed to form a joint venture in consumer health. In the drug pipeline current estimates suggest that Advair could lose 20% of its U.S. sales this year as cheaper generics continue to flood the market. Generic pressures and a slow-developing pipeline will continue to be significant drags on analyst’s outlook for Glaxo. We believe there is decent upside over the 2018-2020 period. The equity holds some appeal for investors seeking a lower-risk dividend play.
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Leadership position in global respiratory and vaccines markets
Internal R&D capabilities driving portfolio and pipeline expansion
Strong sales and marketing infrastructure across the globe
Health care fraud settlement and bribery charges against GSK may dent its brand image
Healthcare cost containment pressures leading to drug pricing controls
Generic competition could put pressure on profit margins
Agreement with Novartis likely to help GSK drive its growth and rebalance its business mix
Product launches likely to strengthen the company’s business in metabolic and respiratory therapeutics area
Continued cost savings from internal restructuring initiatives
Further expansion in emerging markets
Business consolidation initiatives likely to help GSK further increase its focus on its core products and markets
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