Why Glaxo Looks More Robust

Drug Synergy
Big pharma, besieged by generic rivals, is hardly a Street favorite. But GlaxoSmithKline (GSK ) may be an exception. Its top six products, including Advair for asthma and Coreg for cardiovascular disease, are seeing sales growth of 25% to 35% a year, and they account for 43% of total sales. Glaxo's stock, now at 50, is trading at historically low levels, along with its peers. "But Glaxo stands apart because of its above-average sales and earnings growth," says Kavita Thomas of First Global Securities, who rates it "moderate outperform." Devising new drugs is always a challenge, but Glaxo has eight in late-stage trials. Kevin Wilson of Citigroup (C ), which has done banking for Glaxo, rates it a "buy" with a target of 58. Wilson, who owns shares, sees Glaxo earning $3.19 on its American depositary receipts in 2006 on sales of $40.9 billion, and $3.43 in 2007 on $42.5 billion.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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