Why GSK and Shire could be the perfect pharmaceutical partnership!
I has been a very mixed year so far GSK and Shire. GSK were involved in a bribery case in China and with weak sales of their blockbuster drugs has seen the GSK share price fall by about 14% this year. On the other hand it has been a good year in terms of share price for Shire as they have seen the price rise by 43% and this could have turned out to be even better if US rival AbbVie hadn’t pulled out of an acquisition deal for Shire.
Looking at the future and what’s in the pipeline for both companies, you would say they both have very bright futures and so a combination of both companies could become a great merger and here is why.
So what are prospects of potential income? Well GSK would take some beating, the company currently yields 5.8% which is significantly higher than any other stock which is on the FTSE 100. GSK do also look after there shareholders and are very generous when it comes to increasing its dividends, with them rising more than 27% on a per share basis during the past four years. Even though the thought of next years rise of only being 1.5%, which could seem very disappointing following previous years, it is still ahead of inflation.
Currently Shire only yields 0.4% however the pharmaceutical company has huge growth potential. While the AbbVie deal was on, Shire presented to the investment community and stated that it had plans to target doubling of sales between now and 2020. if this feet were to be achieved that would be a staggering rate of growth and also how much potential Shire has in its medium to long term pipeline. Shire is currently forecasting to grow it’s bottom line by 28% this year and by a further 10% in the next, both of which highlight its very strong growth potential.
With both companies looking to have very strong futures and the potential of US suitors looking across the pond at the moment due to new tax inversion laws. A merger between GSK and Shire shouldn’t be deemed as a crazy idea.
Both companies would compliment each other will with the potential to become one of the strongest pharmaceutical companies in the world. With the financial strength of GSK and Shire’s potential this could be a story that we do see in the headlines in the future.
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