Novartis Deal Will Strengthen Glaxo's Dividend say Analysts

Glaxo buys full control of consumer joint venture from Novartis, strengthening cash flows for the dividend

Damien Conover, CFA 28 March, 2018 | 7:36AM
Facebook Twitter LinkedIn

pharmaceutical company laboratory healthcare cancer drug

Glaxo’s (GSK) acquisition of the Novartis (NOVN) portion in its consumer healthcare joint venture should strengthen Glaxo’s cash flow generation and further support its dividend. But Morningstar equity analysts don’t expect any major impacts to the fair value estimates for either company. With the acquisition, Glaxo further entrenches itself in the consumer healthcare market, taking full ownership of the joint venture, up from the current 63.5% stake.

With Glaxo’s further entrenchment in consumer healthcare, we expect the brand power around several brands to help reinforce its wide moat. For Novartis, we don’t expect any impact on the firm’s wide moat. We believe the patent protection and pricing power around Novartis’ drug division support the core pillar of its wide moat. Further, we expect the likely redeployment of the deal proceeds toward acquiring more drug assets will reinforce the solid competitive positioning of Novartis’ drug group.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
GlaxoSmithKline PLC1,396.20 GBX0.09Rating
Novartis AG78.28 CHF0.50Rating

About Author

Damien Conover, CFA  is an equity analyst and associate director at Morningstar.

© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies       Modern Slavery Statement