4 Reasons Why Glaxo (GSK) Stock Can be a Great Pick in '18

GlaxoSmithKline plc GSK focuses on three core businesses – Pharmaceuticals, Vaccines and Consumer Healthcare. Glaxo enjoys strong fundamentals in the form of its diversified base and presence in different geographical areas.

This UK-based company reshaped its business, following the completion of the three-part, inter-conditional transaction with Novartis NVS in March 2015. Under the deal, Glaxo sold its oncology assets to Novartis and acquired Novartis’ Vaccines business (excluding influenza vaccines).

Here are four reasons why you should invest in the stock this year.

Good Rank and Solid VGM Score: Glaxo carries a Zacks Rank #2 (Buy) and a favorable VGM Score of A. Back-tested results show that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rising Share Price and Estimates: After underperforming the broader industry in 2017, Glaxo’s shares have picked up this year. Glaxo’s stock has risen 5.4% this year so far, which compares favorably with a flat trajectory for the industry.

Meanwhile, estimates for 2018 and 2019 rose 1.4% and 1.7%, respectively in the past 30 days.

This pharma giant has been consistently beating earnings expectations. Its earnings surpassed expectations in three of the last four quarters, with an average positive surprise of 2.12%.

New Drugs/Vaccines Doing Well: Glaxo’s newer respiratory/HIV drugs and vaccines are all doing well and will continue to boost revenues. These new products generated 22% of Glaxo’s Pharmaceuticals and Vaccine sales in 2016 and 30% in 2017 and should continue to boost revenues significantly.

Glaxo had expected the new pharmaceutical and vaccine products including contributions from Shingrix to deliver sales of £6 billion per annum by 2020.  However, these products almost reached the £6 billion target in 2017.

Significant Progress with Pipeline: Glaxo has made significant progress with its late-stage pipeline. In 2017, Glaxo received approvals for three key new drugs, Shingrix vaccine for shingles, which enjoys preferential recommendation from ACIP; Trelegy Ellipta, which provides three medicines in a single inhaler to treat COPD and Juluca (dolutegravir and rilpivirine), the first 2-drug regimen, once-daily, single pill for HIV.  Back-to-back approvals of three new products have strengthened Glaxo’s competitive position.

Juluca has been developed by Glaxo and partner Pfizer, Inc.’s PFE HIV-focused company, ViiV Healthcare, in partnership with Johnson & Johnson JNJ.

Glaxo is also working on expanding the label of marketed products like Nucala into additional indications

Conclusion

Glaxo faces its share of challenges like stiff competition, genericization and pricing pressure along with slowing growth in emerging markets.Meanwhile, its top-selling respiratory product, Advair is also expected to face generic competition in the United States this year, which will hurt sales.

However, it looks like Glaxo’s strong pipeline, consistent outperformance of new HIV drugs and vaccines, three new products, and cost cuts can bring it back on track this year.

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