Why GlaxoSmithKline Beats AstraZeneca and Shire

Before you go, we thought you'd like these...
Before you go close icon

LONDON -- After offering my pick of our telecom companies last week, today I'm turning my attention to the FTSE 100 Pharmaceuticals and Biotechnology sector. This time there are three companies that make the top flight -- GlaxoSmithKline  , AstraZeneca  and Shire .

I'll start with a few fundamentals:

CompanyGlaxoSmithKlineAstraZenecaShire
Market cap76.9 billion pounds41.5 billion pounds10.9 billion pounds
Share price1,576 pence3,308 pence1,992 pence
Share price growth13%19%-1.3%
Historic EPS growth-1%-12%-14%
Forward EPS growth2%-18%68%
Historic P/E11.87.021.6
Forward P/E13.59.613.3
Historic Dividend5.5%6.3%0.6%
Historic Cover1.5x2.3x7.7x
Forward Dividend5.1%5.5%0.6%
Forward Cover1.5x1.9x11.8x

Share price growth is over the past 12 months, historic figures are for December 2012, forward figures are based on December 2013 forecasts.


Shire
I'm going to reject Shire, for a couple of reasons. Firstly, it isn't paying any meaningful dividends yet, and if I'm considering investing in top FTSE 100 shares, I want to see mature companies offering decent annual income.

Shire also seems a little too specialized to me, with a large proportion of its annual turnover coming from just a couple of relatively minor therapeutic areas.

The giants
That brings me to the battle of the giants, and at the moment I can see only one winner. AstraZeneca has been suffering falling earnings in recent years, largely because of the famous "patent cliff" of losing intellectual protection for some of its blockbuster drugs, and increasing competition from generic drug manufacturers.

AstraZeneca has also lagged GlaxoSmithKline in expanding into new areas of biotechnology, with its acquisition record not being a glowing success.

Last month, AstraZeneca announced a new strategy for returning to growth, and the firm's new chief executive, Pascal Soriot, does seem to be the sort of person to get things done. But to me, I thought the announcement lacked meat, and there were too many marketing buzz phrases in it -- "building a culture," "leveraging business development," "exploiting our unique combination of strengths," "maximizing the potential," and so on. The plan to expand more into specialty care products and to concentrate mainstream research on core areas sound concrete, but overall I thought I was reading "More of the same, only better."

The winner
My pick, obviously, is GlaxoSmithKline -- and I already have it in the Fool's Beginners' Portfolio. Back in June, I reckoned Glaxo had been preparing for the blockbuster drugs pipeline crunch better, and had been more successful in biotechnology expansion and acquisition.

Earnings forecasts, albeit short term, are better -- there's a 9% growth in earnings per share forecast for 2014, with AstraZeneca's still expected to be falling. And though the shares are on a higher P/E multiple, I think that rightly reflects a greater level of confidence in Glaxo's future.

Finally, if you're looking for investments that should take you all the way to a comfortable retirement, I recommend the Fool's special new report detailing five blue-chip shares. They'll be familiar names to many, and they've already provided investors with decades of profits.

But the report will only be available for a limited period, so click here to get your hands on these great ideas -- they could set you on the road to long-term riches.

The article Why GlaxoSmithKline Beats AstraZeneca and Shire originally appeared on Fool.com.

Alan Oscroft has no position in any stocks mentioned. The Motley Fool recommends GlaxoSmithKline. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners