Shire AstraZeneca GlaxoSmithKline – Where Would You Put Your Money?

With pharmaceutical companies hitting the headlines with a large amount of takeovers, who would you invest in?

Pharmaceutical companies have been big in the news and grabbing a lot of the headlines due to takeovers and share prices being taken on roller coaster rides. With Pfizer’s attempted takeover of AstraZeneca raising their share price while
share price has been falling and took a recent hammering after the company released a profit warning. During all this mayhem Shire has seen a increase with its share price doubling over the past year.

But which company will do the best financially in the future, here is a forecast over the next year.

AstraZeneca’s big game changer is chief executive Pascal Soriot, who started in October of 2012. He pledged to bring the company back to its roots of scientific leadership in mainstream drug development. Soriot has had a big impact in refocusing and investing into beefing up the development pipeline. It seems that his hard work is paying off with the company currently having 14 projects at phase III, which up 8 from the previous year, with a number of new cancer drugs looking very promising.

As for AstraZenecas shares they haven’t fallen that much since the failed bid from Pfizer earlier this and there share price stands at 4,117p which is a 25% increase over the past year. Also on a positive note with a price earning ratio (p/e) of nearly 16 and with the potential that AstraZeneca possesses, this doesn’t sound to bad of a picture at all.

Shire, registered in Jersey and have their headquarters based in Ireland. The company has seen quite a surge over the past few years, with earnings per share (EPS) growing by 77% in the last year. We are clearly looking at a great success story with the Shire shares doubling to 4,735p in a year, so what is holding Shire back?

Well, AbbVie are currently in the process of taking over Shire in a deal that will provide Shire shareholders with  £24.44 in cash and 0.896 in new AbbVie shares. This now values Shire at around £53 a share, making Shire a bad move for long term investors to consider.

In the table above GlaxoSmithKline looks to be showing the most attractiveness to a potential investor however does it tell the full story baring in mind that its just a forecast.

With the profit warning being issued, suggestions are that the earnings per share is going to be broadly similar to 2013, which is very disappointing. Although it doesn’t tell the true story, the pound has strengthened significantly over the past year and is up 9% against the US dollar and so this would hurt any multinational company that reports in sterling.

Dividend cover looks like it’s getting a little stretched, but EPS is erratic in this business and the big players can easily cope with low cover for a couple of years, in fact in 2010 GSK paid out a dividend of 65p even though EPS was recorded at only 54p that year. It’s a slight concern, but not a big worry.

GlaxoSmithKline and AstraZeneca both look very attractive but with GSK’s forecast of growing dividends, lower P/E valuation, more developed pipeline and lower uncertainty make it an ideal pick for an investor however with rumours of more corruption emerging each week about GSK it surely would be a risky investment.

Alex Carson

PiR Resourcing leaders in senior life science resourcing. For more news and information, you can follow us on Twitter and LinkedIn  For all our latest roles in the Life Science sector please click here.

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