GlaxoSmithKline: The Next Portfolio Vaccine?


  • Favorable Q4 figures bring out optimism amongst investors
  • New acquisitions and a new joint venture with Pfizer could lead to something huge
  • Higher-than-average yield also comes with its share of uncertainty

GlaxoSmithKline (GSK) has built over the years a pharmaceutical empire. R&D numbers reaching billions, new discoveries leading to newly marketed products as well as new treatment, this goes without saying, they are a big deal. From an investor point of view, it has its ups and downs. While GSK has a higher dividend yield than its peers, it also shows no real growth in the past few quarters. The company hopes to bring out new advances with their recent joint venture with Pfizer, but only time will tell if the gamble was worth it. For readers, please note that the following figures are Pound-denominated (GBP), taken from the UK-based company’s press release.

Understanding the Business

GSK is known all over the world for its intensive research-based products. In 2018, an impressive total of £30.8B sales was recorded, 56% of them coming from the pharma sector. The company splits its activities between 3 global businesses; pharmaceuticals, vaccines, and consumer healthcare. Those leading divisions brought many well-known products to the shelves. From them, consumers can find the Sensodyne toothpaste, Voltaren, the Shingrix and Infanrix vaccines and other medical treatments.

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Sales are spread around the globe. In 2017, 37.3% of them were in the US, 26.3% in the Europe area and the remaining 36.4% internationally. While pharmaceuticals might be seen as “money-hungry machines” by some, GSK returned £261.6M to local communities through donated products, time, and money.

Growth Vectors

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Source: Ycharts

GSK’s future growth plan relies on many important vectors. One of them is, of course, research. In 2018 alone, £3.89B was spent on R&D. This kind of expenditure shows how much it is important for pharmaceutical companies to have a good research-based business strategy. This leaves all the latitude needed by the management to bring new products to the market, not only to individuals but for businesses as well. In 2018, royalty income is just shy £300M.

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Disclosure: We do not hold GSK in our DividendStocksRock portfolios.

Additional disclosure: The opinions and the strategies of the author are not intended to ever be a recommendation to buy or ...

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