Analyze This: GSK

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If you think you have ever been confused, you should be glad you’re not an investor in GlaxoSmithKlein (LSE:GSK) (NYSE:GSK). They are REALLY confused. The admixture of good news, bad news and worse news is an analyst’s nightmare and it’s hitting investors like a punch-drunk boxer after taking a right cross to the cheek followed by a left hook to the chin. Short term players can’t decided whether to stand up or stay down for the count. GSK’s share price on the London Exchange is down 1.02% to 1,557.50 less than 30 minutes before closing. Shares on the NYSE are already down 0.46% to 53.53 less than two hours into trading.

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The Good News

On Friday, 27 June, GSK received a positive opinion from the European Medicines Agency (EMA) Committee for Medical Products for Human Use (CHMP) for the company’s new HIV treatment, Triumeq, developed by the GSK joint venture, ViiV. Triumeq is a once-daily, single-tablet for the treatment of HIV-related problems. The positive opinion is “one of the final steps before marketing authorization is granted” in Europe. Final approval is expected in the third quarter of this year. Dr, John Pottage, Chief Scientific and Medical Officer of ViiV confirmed that, “This opinion supports the potential of dolutegravir based regimens, as well as the importance of our ongoing research into additional single-tablet treatment options.”

Just a few hours ago, GSK and Theravance, Inc. (NASDAQ:THRX) announced the submission of a supplemental new drug applicationfor its once-daily, inhaled treatment for asthma, Breo® Elipta®. The application is seeking approval for use of the treatment on a twice daily basis. Breo® Elipta® has been available in the U.S. since May 2013. Despite the abundance of asthma therapies available, more than half of asthma patients complain of significant uncontrolled symptoms. Breo® Elipta® offers a power-based dosage combining fluticasone furoate, a corticosteriod, and vilanterol, a long-acting beta2 agonist that has already been shown to be effective.

The Bad News

If the on-going bribery scandal in China was not enough, the GSK’s top executive there has added insult to injury by providing investigators with a whole new and unexpected twist that would have Agatha Christie – not to mention Miss Marple – red-faced. Mind you, this might be considered one of the greatest bloopers of all time as well. Regardless, the publicity is not helping to inspire confidence in GSK’s top management.

Mark Reilly, in a display of cooperation and full disclosure, hired a private firm to investigate alleged cases of bribery by GSK officials. It is not yet clear exactly what happened next, but at some point last year, the investigators themselves were arrested by Chinese authorities. Whether they were working for GSK at the time of their arrests is not known for certain, but they are accused of “gathering large amounts of personal information on Chinese citizens.” (The NSA does that all the time in the U.S.!)

Part of the irony of the private investigation is that it turned up something that Reilly really didn’t want publicized. The investigators managed to videotape Reilly in a “relationship” with a female companion who was not his wife. But wait – there’s more! One of the owners of the private investigating firm is none other than Reilly’s wife!

I defy any analyst to chart this! All I can say is that I wouldn’t give GSK’s problems to a monkey on a rock. These are the times when investors need to maintain a stiff upper lip and hope that this, too, shall pass.

GSK rebounded to close at 1,564.00 in London. Shares on the NYSE are still holding at 53.69.

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