UPDATE: GLAXOSMITHKLINE

A line drawn under the China Saga

 

• Been a serial underperformer in the sector for good reasons
• The announcement to pay GBP297m in fines to end the China corruption probe is a major positive, as there was is no ban on China business
• This draws a line under the whole China saga that has weighed on the stock the past year
• We see this as a catalyst for the stock to start outperforming and provides a great entry point
• The stock is very cheap historically with a great pipeline and massive exposure to biotech which is not even looked considered in valuation
• GSK however has many options to unlock value; from reorganisation to spin-offs
• Maybe Witty will move aside and if the Pzier/AZN completes, this will leave GSK as the only pure pharma play in the FTSE and other indices
• We would not discount GSK being a target for an inversion deal themselves
• Buy here at an attractive entry point with very limited downside as the pharma bull market marches on

 

Wed, 23 Jul 2014 16:04

Flow Rida

 

GSK look pretty painful and has been for us (-8%) but to year end it is a good trade. Talk of divi under pressure post call is unfounded as verified on the CC by CEO. SHP deal gets done and when that is followed by AZN attention will turn to GSK and they will re-rate.

We buy more here.

 

Mon, 05 May 2014 16:21

Flow Rida

 

• Reading a piece from Exane on the AstraZeneca and the index implications.
• They are saying the new entity as most people think will be UK incorporated holding company and to be listed on the New York Stock Exchange. If the deal goes ahead Astra will leave most of the European Indices. (FTSE UK (FTSE All Share, 350 and 100), FTSE All World Europe, MSCI Standard Europe, STOXX Europe 600.)
• If the deal completes EAFE, European and UK Index fund managers (i.e. not being exposed to US stocks) are likely to sell their shares, which could create a significant supply on AZN shares that would materialise at the UK close.
• I think the deal will complete as it is very accretive to Pfizer. They will bump the deal in overall terms or through increasing the cash component. I actually think they will end up doing both.
• This will leave GSK as the only pure pharma play in the FTSE and other indices.
• GSK is trading where it is due to awful sentiment and rightly so due to Corruption issues and the recent manufacturing issues at the Irish API plant.
• GSK however has many options to unlock value from reorganisation to spin-offs. An article in the Economist even mentions a take over from Novartis. Although unlikely it just shows what options they have.
• There is not much positive noise around GSK right now but when the AZN/PFE deals go through eyes and flows will turn back to GSK. It will not take much to make them attractive again. Sentiment is low.
• The money will go somewhere and GSK has to be the number 1 candidate. This with the continued pharma bull market, multiple options open to GSK and a 5% yield makes GSK very attractive right now.