The British pharmaceutical giant GlaxoSmithKline (NYSE:GSK) seemingly defied gravity last month by gaining a noteworthy 8.33%, according to data from S&P Global Market Intelligence. By contrast, the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) fell by 4.55% in May, largely due to the perception that President Trump's push for corporate tax reform -- including his proposed the tax repatriation holiday, which could unlock the overseas cash reserves of U.S. based biopharmas -- is now dead on arrival in Congress.
Glaxo's rise in May was precipitated by two catalysts. First, the drugmaker's new managerial team, headed by CEO Emma Walmsley (who took over in March), has been indicating that they might be open to accelerating the company's turnaround by spending more on M&A. That's welcome news for shareholders in light of the company's lackluster late-stage clinical pipeline. Moreover, American biopharmas and biotechs appear to be in a holding pattern while these tax issues play out -- implying that Glaxo and its non-U.S. pharma peers may have the pick of the litter, so to speak.
Second, Glaxo got a break of sorts when Gilead Sciences (NASDAQ:GILD) announced a bevy of top-line results for its next major single-tablet regimen for HIV at the end of the month. The condensed version of the story is that Gilead's experimental combination of bictegravir and emtricitabine/tenofovir alafenamide failed to outperform Glaxo's majority owned HIV medicine, dolutegravir, -- marketed as Tivicay.
This competitive threat has been looming over Glaxo's shares for awhile now, and even drove well-known investor and longtime shareholder Neil Woodford, in part, to sell his stake in Glaxo last month. So, the fact that Gilead's drug didn't provide a clear-cut efficacy advantage over dolutegravir is certainly good news for Glaxo and its remaining shareholders.
Although Glaxo's HIV franchise isn't out of the woods just yet -- Gilead's bictegravir's trials are still ongoing -- the company does appear to be heading in the right direction under its new management. Walmsley, after all, is expected to continue focusing on improving the company's profitability, and eyeing the target-rich pharma landscape for potential M&A opportunities.
While nothing is etched in stone when it comes to Glaxo's near -- or long-term -- outlook right now, this big pharma stock is arguably less risky today than it was a year ago, and a forthcoming acquisition could de-risk its shares even further. As such, dividend and value investors on the hunt for a compelling turnaround story might want to check out GlaxoSmithKline stock.
George Budwell owns shares of iShares NASDAQ Biotechnology Index. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has the following options: short June 2017 $70 calls on Gilead Sciences. The Motley Fool has a disclosure policy.