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GSK needs action plan

Drugs giant GlaxoSmithKline needs to address some serious health issues to pep up its flagging top line.
January 27, 2015

Investors who watched GlaxoSmithKline (GSK) shares struggle last year will already know that next week's full-year results aren't expected to be pretty. GSK cut its full-year guidance at the interim stage due to poor pharmaceutical and vaccine sales and growing competition in the US from generic copies of its products.

IC TIP: Buy at 1,494p

However, a round of cost-cutting led to better-than-expected EPS growth in the third quarter, and the Chinese bribery scandal has now settled. That should help GSK focus on completing last year's high-profile asset swap deal with Swiss group Novartis (NOVN). Analysts at Deutsche Bank dubbed the Novartis deal a "sensible move", and with further restructuring they believe the 2015 dividend can be maintained.

That said, sales figures will be crucial in determing the trajectory of GSK's share price this year. Management has to reassure investors next week it has a plan to pep up the top line.