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Strong Player but Expensive

Glaxosmithkline Pharmaceuticals has the strongest patent portfolio, but does that make it a good investment?

Glaxosmithkline Pharmaceuticals (GSK), an MNC pharma company, has one of the strongest patent portfolios in the country. Its parent, the UK-based GSK Plc has one of the world’s largest portfolios of patented products – something its Indian subsidiary falls heavily upon to keep its growth momentum buzzing.

Vaccines for this pharma major are an important growth driver and it is on a strong wicket with revenues growing by a whopping 56 per cent (y-o-y) in its most recent quarter. The company’s star vaccines include Havrix, Varilrix and Rotarix. Vaccines got a booster with the company doubling its field force in the past two years. This is one company taking its shots seriously!

The second pillar of its growth strategy – new launches – is also leading from the front. GSK launched four new products in the last quarter in gout treatment, oncology, hypertension and respiratory segments. The company hopes new launches will start paying off in the coming years.

Other segments did well too. Dermatology recorded 14 per cent growth and anti-infectives 9 per cent. GSK India is a strong player but with valuations at 30 times its TTM earnings is one of the most expensive pharma companies. Current valuations hover around 10 year highs. Huge upside movement from current levels seem unlikely. It’s only concern area would be the implementation of the New Pharma Pricing Policy (NPPP) which would seek to control prices of larger number of drugs. Hold as a defensive play till clarity emerges.