(GSK) GlaxoSmithKline – Bear of the Day

January 23rd, 2010

GlaxoSmithKline (GSK) reported third quarter income of $0.92 per American Depository Share (ADS), 3 cents below the Zacks Consensus Estimate. The company reported earnings of $0.94 in the year-ago period. Third quarter revenue increased 3%.

While the company’s diversified base and presence in different geographical areas should help support revenues, we remain concerned about future growth prospects given the patent challenges being faced by several of Glaxo’s products. With several products expected to lose exclusivity and the swine flu opportunity likely to miss expectations, we expect the company’s topline to remain under pressure in the coming quarters.

Glaxo’s pipeline needs to deliver in order to make up for lost revenues and any development or regulatory setbacks would be a major disappointment for the company. We are downgrading the stock to Underperform with a target price of $37.

Zacks Investment Research

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