GlaxoSmithKline (NYSE:GSK) – In The Middle Of A Crises Or Just the Routine Restructuring?

GlaxoSmithKline (NYSE:GSK), one of the leading British pharmaceutical companies, had not witnessed a great year in 2014. The United States payers declined to pay for the reimbursement of the respiratory drug of the company. The sales of the company fell greatly, especially in its Breo Ellipta and Anoro segment.

This was not the only problem that the company faced this year. GSK was allegedly involved in a bribery case in China. The company was charged with a fine of $500 million. This scandal gave rise to certain other allegations related to bribery in some of the emerging markets where GlaxoSmithKline (NYSE:GSK) had started operating. The company is under investigation in these markets, and chances are that it will go down even further.

The cancer vaccine of the company, MAGE-A3, did not clear its second trial stage. The drug was designed to kill the small cells that cause lung cancer. After this mega failure, the company put its oncology unit aside. It is important to mention here that the oncology department was responsible for bringing in revenues of $1.5 billion during the year 2013. This unit also gave rise to a net income of around $9 billion.

On top of that, the major investors of the company have abandoned it at this time of financial crises, giving rise to huge declines in the stock price.

What is interesting to note here is the fact that the management of the company has not altered its dividend distribution plan even at this time of crises. The company will pay a dividend of $2.45 for each share in the year 2015. The company is one of the highest paying stocks in the healthcare industry right now, with a yield of 5.72 percent. On the other hand, the average yield of the industry has recorded to be ay 2.22 percent.

GlaxoSmithKline (NYSE:GSK) has changed its business plan in order to move forward. The management of the company wants to focus more on the consumer healthcare and the vaccines. The management of the company expects these units to see a 40 percent increase in the revenues for the year 2016. At present, the company’s total revenues from these 2 units come at a total of 35 percent.

The company is also planning to arrange its first initial public offering in its HIV segment. The HIV segment is co-owned by GSK, Pfizer and Shionogi.

According to the market experts, the company is heading towards a direction that will not be very profitable. The most profitable segment in healthcare industry is oncology. GSK, on the other hand, has closed down that unit and is focusing on vaccines. Where the initiative is worth appreciation, it is a fact that the vaccines’ segment do not offer as high margins as oncology products.

The stocks of GlaxoSmithKline (NYSE:GSK) are currently trading in the range of $42.66 and $42.99. The total market capitalization of the company is recorded to be at $105.87 billion with a P/E (price to earnings) ratio of 16.07.