Though British drugmaker GlaxoSmithKline
In part because of the impact of generic competition on former blockbusters Paxil and Wellbutrin, Glaxo reported a 1% decrease in revenue for the fourth quarter. Trading profit, which is similar to operating income, was down about 2% net of currency effects. Free cash flow for the year came in at about $3.1 billion.
As it should be with the second-largest drug company in the world, sales were broadly distributed across many drugs and drug categories. While Advair remained the biggest drug for Glaxo and was up 13% for the fourth quarter, no drug made up more than 15% of total pharmaceutical sales.
This year should be a very important one for Glaxo. Management hopes to launch Boniva soon: This osteoporosis drug could be a major contributor for the company. The company also hopes to launch Avandaryl before the end of the year -- a combination of Glaxo's successful diabetes drug Avandia and Sanofi-Aventis'
Glaxo's pipeline looks strong. The company has at least 148 projects in development (37 of which are product line extensions) and expects clinical data on at least 15 important phase 2 studies during the year.
Looking a little further ahead, the company's Ceravix cervical cancer vaccine looks to be especially promising, since it has shown 100% efficacy against HPV types 16 and 17 (which are related to about 70% of cervical cancer diagnoses). Other drugs such as Rotarix for rotavirus, lapatinib for cancer, Allemist for rhinitis, and Trexima for migraine are also intriguing, and all look to be on target for filings in 2005 or 2006.
Glaxo has certainly suffered from generic competition but has weathered the storm better than most. Trading at less than 17 times trailing earnings, the stock is cheaper than the average pharmaceutical company, yet still boasts high operating margins and one of the highest dividend yields in the industry.
Drug companies will always face risks such as generic competition, patent challenges, drug liability, and failed clinical trials. That said, investors who are comfortable with the general industry risks and are looking for a relatively "clean" pharmaceutical company should do some research on Glaxo shares.
Merck is a Motley Fool Income Investor recommendation.
Fool contributor Stephen Simpson, a chartered financial analyst, doesn't have any ownership interest in any stocks mentioned.