GSK share price: Jefferies sees pharmco’s dividend as ‘sustainable’

Jefferies remains bullish on GlaxoSmithKline (LON:GSK), arguing that the model which allows the company to pay the highest dividend in the EU large-cap pharmaceutical space is sustainable, Citywire has reported. The comments mark a boost for the London-listed drugmaker, which is currently facing pressure on its ‘blockbuster’ respiratory drug Advair with the launch of Mylan’s generic version.

GSK’s share price has been steady in early morning trade, having inched 0.22 percent higher to 1,550.20p as of 08:03 GMT. The advance is largely in line with gains in the broader UK market, with the benchmark FTSE 100 index currently standing 0.31 percent higher at 7,155.06 points.

GSK’s dividend seen as ‘sustainable’

Jefferies reaffirmed GSK as a ‘buy’ yesterday, with a price target of 1,750p on the shares. The move follows the blue-chip pharmco’s full-year results last week.

“GSK offers the highest dividend yield of EU large-cap pharma, which our model suggests is sustainable […] at least until the proposed split of the consumer healthcare joint venture,” the broker’s analyst Peter Welford pointed out, as quoted by Citywire, adding that the broker saw “the strategic rationale for a UK demerger within three years as an opportunity to crystallise value, plus consumer standalone can support higher debt levels”.

Mylan launches generic Advair

In a separate development, Mylan announced yesterday that it was launching its generic version of GSK’s Advair, at a list price 70 percent less than the original. The move follows an approval by the US Food and Drug Administration last month.

Last week, the FTSE 100 drugmaker said in its full-year results statement that it expects its adjusted earnings per share to decline by between five percent and nine percent at constant exchange rates reflecting the generic Advair’s recent approval as well as the expected impact of the Tesaro acquisition.

As of 08:20 GMT, Wednesday, 13 February, GlaxoSmithKline plc share price is 1,550.20p.