uk broker tips increased relenza revenue

Broker tips: Glaxo, Go Ahead, Modern Water
Wed 09 Sep 2009

LONDON (SHARECAST) - The Centers for Disease Control and Prevention (CDC) issued new guidelines for the use of antivirals in the treatment of flu on Tuesday, which should boost revenues drugs giant GlaxoSmithKline (GSK) receives from its Relenza flu treatment.

The ruling that Tamiflu and Relenza should promptly be given to hospitalised patients suspected of having the flu rather than waiting for influenza test results supersedes the CDC’s previous guidance that the drugs should be reserved for patients with more severe illnesses and those in high risk groups.

Broker Panmure Gordon is forecasting Relenza revenues of £700m for 2009, and expects this figure to rise to £1bn in 2010 before sliding back towards £250m per annum from 2011 onwards.

The stock is trading on 11 times projected 2010 earnings, in line with its European peers. ‘Growth is not going to be easy and will be fairly low quality in the short term, with cost containment central to the thesis, but we expect the dividend yield of 5.3% to provide support,’ the broker said, adding that the stock should prove an attractive purchase, particularly to risk-averse investors.