GlaxoSmithKline (GSK), the European leader in the Pharmacy has know an outbreak of fever in recent weeks on the stock exchange in London, which in the course of an iron bar to 1,300 pence, the performance of the action is not good for long. Shortly after the merger, December 27, 2000, between two British Glaxo Wellcome and SmithKline Beecham Laboratories, the financial community could hope performance through the synergies of the approximation. Disillusion was rapid. The course wins mid-2001 in a general movement of falling stock markets and the pharmaceutical sector in particular. It has been divided by two in one year. Since mid-2002, the action negotiated around 1,200 pence in a band between 1,000 and 1,400 pence.
Can the title finally get out of the tunnel It is not safe. In terms of PER, enhancement of the Group remains close to those of other European laboratories (17.3 times EPS 2005, against 18.4 times on average). And quarantine offices selected by Bloomberg, 36 recommended course, at the end of may, the value for the purchase, but 46 felt the need only keep it while 18 advised instead to sell it.
The market remains cautious, even if the current portfolio of drugs appears to be relatively strong. Thus, the sales of Seretide-Advair asthma products have won 19 last year, to 2.5 billion, and those of the anti-diabetic drugs Avandia Avandamet 32 to $ 1.1 billion. Double-digit growth rates were also recorded on the Lamictal (for epilepsy), Valtrex (herpes), (cardiovascular) Coreg and vaccines. A portfolio which helped the group to generate a comfortable operational profit of 6.09 billion pounds in 2004 for total sales 20.4 billion, a margin of 30, in constant growth since 2001 (it was then only 23). The cash flow generated by operating activities reached the result amount of 6.53 billion pounds in 2004.
Redemption of shares
In these conditions, this "machine to cash" can launch of share buyback programmes aimed to support the market. In the month of October 2002, the Group thus announced the renewal of a plan relating to the repurchase of 4 billion pounds of shares. On this overall envelope, 980 million were used in 2003 and $ 1 billion less last year.
Another force: the policy of strict cost control, which allows to improve profitability. Thus, on the year 2004, at constant exchange rates, selling, General and administrative expenses declined 2 while the Group recorded a growth in its turnover of 1. These assets allow GlaxoSmithKline to predict an increase of at least 10 of its earnings per share (EPS) this year.
But the market still doubt. It is true that it was seriously polls by competition from generics, largely to the origin of the diving course in mid-2001. At the time, patents of the Augmentin, then antibiotic features of GSK, were questioned in justice by several laboratories. In 2003, are two other lighthouses drugs attacked by generics, the antidepressant Paxil and Wellbutrin. In addition, the first of these drugs has been other setbacks, such as attacks on the increase in the risk of suicide among young people in the summer 2004 or the judgment, in March 2005, the production of Paxil CR and Avandamet of its plant in Puerto Rico following a review of the Food & Drug Administration (FDA) accusing him of ignoring public health standards. Since then, things have returned in the order and Paxil CR production could resume in the workplace of the year. Remaining sales of antidepressants-stars, as well as those of the Augmentin seriously declined last year and the first quarter of this year.
A few disappointing products
Another major problem, that of the potential of the "pipeline", drugs in development. The company could certainly avail early in the year of 195 projects, including 140 clinical studies phase: 88 new chemical entities, 32 20 vaccines and product extensions. "The quality of the projects in a pipeline is at least as important as the quantity." "In the past, the Group was sometimes disappointed and abandoned projects that it had put forward," said Philippe Lanone, Ixis securities. Most analysts expect not large drug launch before 2007.
If the R & D of GlaxoSmithKline has been completely redesigned beginning 2001 7 autonomous units around the world, each specializing in a therapeutic area, this new organization seems not yet produced the expected results.
"GlaxoSmithKline pipeline is very rich but especially in projects even at an early stage of clinical development and less advanced phase." "The market will be prepared to develop this potential when he will see clinical results of phase convincing III from which he can anticipate the realization of their launches and its effect on the growth prospects of GlaxoSmithKline", said Marie-Hélène Leopold of Société Générale.
Analysts expect lot of Cervarix, a vaccine to treat cancer of the cervix one of the most common in women. Credit Switzerland First Boston has credited this treatment of potential sales of 4 billion per year to its peaks.
The strength of the pound
After positive data announced at the Conference on HPV early may in Vancouver, Morgan Stanley felt that the prospects of penetration of the Cervarix had increased and forecasts of a Summit of sales at 1 billion dollars on this vaccine seemed it now of more conservative. But the Cervarix may suffer from competition from a product developed by Merck, Gardasil, the request for placing on the market could be end of 2005, before that of GlaxoSmithKline.
Major hopes are also worn on the Allermist (rhinitis), already in phase III. As regards the Lapatinib, a promising treatment, also in phase III, against breast cancer, the market has recently been disappointed by the announcement of the delay of at least one year of the request for placing on the market in late 2006 or early 2007. Merrill Lynch estimated early may, after the resolution of the problems of GSK on his Puerto Rico site, that the Group would look back on a promising pipeline. According to the Bank, the laboratory had then 18 products to, current 2005, or generate data of phase II, either switch to phase III. In any case, if the pipeline does not meet expectations, some speculate to default on a fusion of GlaxoSmithKline with compatriot AstraZeneca (read below).
Last worry, the strength of the pound sterling, which is appreciated by a third against the greenback in the course of the past three years, even if this phenomenon is to calm down. But GSK publishes its accounts in British currency while it performs half of its turnover in the United States and only 30 in Europe.