GlaxoSmithKline plc (LON: GSK) triumphs over AstraZenenca plc (LON: AZN) and Shire PLC (LON: SHP) in the pharmaceuticals sector battle.
After offering my pick of our telecoms 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 (LSE: GSK) (NYSE: GSK.US), AstraZeneca (LSE: AZN) (NYSE: AZN.US) and Shire (LSE: SHP).
I'll start with a few fundamentals:
|Market cap||£76.9 bn||£41.5 bn||£10.9 bn|
|Share price growth||13%||19%||-1.3%|
|Historic EPS growth||-1%||-12%||-14%|
|Forward EPS growth||2%||-18%||68%|
Share price growth is over the past 12 months, historic figures are for December 2012, forward figures are based on December 2013 forecasts.
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 specialised to me, with a large proportion of its annual turnover coming from just a couple of relatively minor therapeutic areas.
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.
AstraZenenca 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 buzzphrases in it -- "building a culture", "leveraging business development", "exploiting our unique combination of strengths", "maximising the potential", and so on. The plan to expand more into speciality 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".
My pick, obviously, is GlaxoSmithKline -- and I already have it in the Fool's Beginners' Portfolio. Back in June 2012, 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.
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> Alan does not own any shares mentioned in this article.