Money: Are GlaxoSmithKline plc and GW Pharmaceuticals plc simply too expensive? - - PressFrom - United Kingdom
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Money Are GlaxoSmithKline plc and GW Pharmaceuticals plc simply too expensive?

16:30  09 august  2016
16:30  09 august  2016 Source:   fool.com

Should you buy GlaxoSmithKline plc after today’s results?

  Should you buy GlaxoSmithKline plc after today’s results? Will a return to growth make GlaxoSmithKline plc (LON: GSK) a screaming buy?It was always going to take a few years for earnings growth to resume, and at the end of 2015, chief executive Sir Andrew Witty told us that 2016 would be the year in which the firm expected “EPS percentage growth to reach double-digits“.

GW Pharmaceuticals was founded in 1998 to develop cannabis-based pain relief products. The company listed on AIM in 2001 with initial target Too expensive ? So, we have a company whose peak annual revenue to date is £33.1m and whose one commercial product has generated £26m

How much should you pay for GlaxoSmithKline plc (LON: GSK ) and GW Pharmaceuticals plc (LON:GWP)? I don’t believe this valuation is too expensive , and rate Glaxo a buy. If you want to know what too expensive looks like, consider Glaxo ’s all-time high of over 2,000p — 15 years ago

GlaxoSmithKline scientist © Provided by Fool GlaxoSmithKline scientist

However much we may like a business, paying too much for the shares will lower our profits at best and lose us money at worst.

Today, I’m looking at whether FTSE 100 pharma giant GlaxoSmithKline(LSE: GSK) and AIM-listed cannabis products specialist GW Pharmaceuticals(LSE: GWP) are simply too expensive.

GlaxoSmithKline

After four years of earnings declines, largely caused by a spate of patent expiries, Glaxo is set to return to growth this year. New product sales are kicking in and half-year results last month showed strong momentum in all three of the group’s divisions of pharmaceuticals, vaccines and consumer healthcare.

GlaxosmithKline teams up with Google sister firm in bioelectronics venture

  GlaxosmithKline teams up with Google sister firm in bioelectronics venture GlaxoSmithKline PLC (LON:GSK) is teaming up with a subsidiary of Google owner Alphabet Inc (NASDAQ:GOOG) to develop bioelectronic medicines. The drug giant is setting up a new company, Galvani Bioelectronics, with Verily Life Sciences LLC, formerly known as Google Life Sciences. They will invest a total of up to £540mln over seven years in the company, in which GSK will hold a 55% stake and Verily 45%. Bioelectronic medicine aims to tackle a wide range of chronic diseases using miniaturised, implantable devices that modify electrical signals that pass along nerves in the body, including irregular or altered impulses that occur in many illnesses. GSK has been active in this field since 2012 and believes certain chronic conditions such as arthritis, diabetes and asthma could potentially be treated using the technology. Galvani will initially work to establish clinical proofs of principle in inflammatory, metabolic and endocrine disorders, including type 2 diabetes, where substantial evidence already exists in animal models; and developing associated miniaturised, precision devices. GSK’s global vaccines chairman Moncef Slaoui said: "Many of the processes of the human body are controlled by electrical signals firing between the nervous system and the body’s organs, which may become distorted in many chronic diseases.

How much should you pay for GlaxoSmithKline plc (LON: GSK ) and GW Pharmaceuticals plc (LON:GWP)?Today, I’m looking at whether FTSE 100 pharma giant GlaxoSmithKline (LSE: GSK ) and AIM-listed cannabis products specialist GW Pharmaceuticals (LSE: GWP) are simply too expensive .

GW Pharmaceuticals is Honored to be Named As One of TIME’S 50 Genius Companies For Its Work in Advancing Cannabinoid Science. GW Pharmaceuticals plc Reports Financial Results and Operational Progress for the Second Quarter Ended June 30, 2019.

At a current share price of 1,680p, the 12-month forecast price-to-sales (P/S) ratio is 3, the price-to-earnings (P/E) ratio is 16.8 and the dividend yield is 4.8%. I don’t believe this valuation is too expensive, and rate Glaxo a buy. If you want to know what too expensive looks like, consider Glaxo’s all-time high of over 2,000p — 15 years ago — when the P/S was 6, the P/E 28 and the dividend yield less than 2%.

GW Pharmaceuticals

GW Pharmaceuticals was founded in 1998 to develop cannabis-based pain relief products. The company listed on AIM in 2001 with initial target markets of multiple sclerosis (MS) and cancer pain. Its only commercial product to date — Sativex for the treatment of MS spasticity — has been selling for over 10 years. Trials continue for a number of other products, with the most advanced being Epidiolex for childhood epilepsy.

3 stocks set to soar after today’s news flow?

  3 stocks set to soar after today’s news flow? Should you pile into these three stocks right now?The total investment in Galvani over the next seven years could be as much as £540m and the deal represents an important step forward in GlaxoSmithKline’s bioelectronics research. This should help to further diversity its business model, with its appeal for investors seeking out a resilient, robust and relatively consistent healthcare company remaining high at a time when the outlook for the wider index is highly uncertain.

GlaxoSmithKline Pharmaceuticals Ltd (BSE: 500660 NSE: GSKCONS) is an Indian subsidiary of GlaxoSmithKline plc , one of the world's leading research based pharmaceutical and healthcare companies. It is one of the oldest pharmaceuticals companies in India.

GW Pharmaceuticals is a British biopharmaceutical company known for its multiple sclerosis treatment product nabiximols (brand name, Sativex)

The table below shows some key financials for the past 10 years.

Total revenue (£m)Sativex product sales revenues (£m)Net cash flow from operating activities (£m)Earnings per share (p)
201528.54.2(46.5)(18.1)
201430.04.4(12.6)(7.0)
201327.32.2(7.5)(3.0)
201233.12.51.81.9
201129.64.42.42.1
201030.72.84.33.6
200924.11.71.21.2
200811.81.3(7.4)(6.8)
20075.71.1(1.5)(8.8)
20062.01.3(3.3)(11.2)

The majority of group revenue has come from research and development fees from partners, with Sativex product sales revenues representing a small proportion of the total. After early growth in both Sativex and total revenue, no real headway has since been made. However, cash-burn has  increased rapidly in the last few years as the company pushes to get further products approved and to market.

Q3 results released at noon today show a continuation of this trend. Total revenue for the nine months to 30 June came in at £8.6m, with Sativex product sales revenues at £3.7m. Operating cash-burn accelerated to £57.2m. On the plus side, GW has stacks of cash on the balance sheet, largely thanks to the enthusiasm of US investors (there have been a number of fundraisings since an IPO of American Depositary Shares on the NASDAQ Global Market in 2013).

FTSE Moves: London market hits a 13-month high driven by miners and Barclays

  FTSE Moves: London market hits a 13-month high driven by miners and Barclays Top flight shares jump to highest since June last year before easing back in afternoon trading.But earlier in the session the blue chip index hit 6,814.87 points, boosted by miners and Barclays, its highest level since June last year.

GW Pharmaceuticals plc Sovereign House Vision Park, Histon Cambridge CB24 9BZ United Kingdom Tel: +44 (0) 1223 266800 Fax: +44 (0) 1223 235667.

GW Pharmaceuticals PLC (NASDAQ:GWPH) made history in June when it won FDA approval for Epidiolex in treating Dravet syndrome and GW Pharmaceuticals ' market cap currently stands at close to .2 billion. Investors are clearly counting on Epidiolex to deliver because the company has

Too expensive?

So, we have a company whose peak annual revenue to date is £33.1m and whose one commercial product has generated £26m sales revenue over a period of 10 years. How much is GW worth?

The shares are trading at around 600p, valuing the business at over £1.8bn. Taking the peak annual revenue to date of £33.1m gives a P/S of 54 and peak earnings per share of 3.6p gives a P/E of 167. Wow! Remember Glaxo’s P/S and P/E when it was expensive?

GW’s valuation looks crazy to me. It’s priced as if its new childhood epilepsy product Epidiolex is already an approved drug and a nailed-on blockbuster. As such, I can only see this as a stock to avoid on the grounds that it’s simply too pricey.

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G A Chester has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Is Hikma Pharmaceuticals plc the best FTSE 100 healthcare stock to own after today’s update? .
Edward Sheldon looks at Hikma Pharmaceuticals plc's (LON: HIK) interim results statement and examines whether the long-term growth story is still intact. Super growthBased in Jordan, Hikma operates across three broad divisions; generic, branded and injectable medicines, and sells its products in the US, Europe and the MENA region.A newcomer to the FTSE 100 last year, Hikma’s market cap of £5.5bn is significantly smaller than GlaxoSmithKline (£81.5bn) and AstraZeneca (£63.9bn). But don’t be put off by size.

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