Theres no doubt thatGlaxoSmithKlines(LSE: GSK) (NYSE: GSK.US) future is uncertain. After being accused of using bribes to sell its treatments within several markets, the biotechnology giant is now under investigation by the Serious Fraud Office.
Unfortunately, if the SFO decides to make an example of Glaxo, the company could be facing hefty fines. If serious enough, these fines could force the company into an aggressive cost-cutting programme, or even worse, management could be forced to reduce the dividend payout to save cash.
However, its unlikely that the SFO will force Glaxo to pay a hefty fine.
Theres no denying that some of Glaxos treatments are in demand. The company did not get where it is today by producing and selling placebos. As a result, governments around the world depend on Glaxos research and development abilities.
So, its unlikely that the SFO will levy a fine on Glaxo that will force the company to reducing staff numbers and cut back on R&D. Whats more, with over 40 key treatments already under development, governments around the world will not want to slow down the already lengthy process of getting drugs to market, which could potentially cost lives.
One of Glaxos most desired treatments right now is a potential vaccine for the deadly Ebola virus. Ebola is currently sweeping across West Africa and the World Health Organisation has declared an international emergency due to the spread of the disease.
Glaxo is just one of the many companies testing a cure for Ebola. The company has already manufactured 400 doses, enough to conduct a clinical trial, but needs to prove the cure works before increasing production. Glaxo is planning totest the vaccine later this year. The company has told reporters that it is hoping to be able to report meaningful results by the end of the year.
Glaxos strong pipeline of treatments under development make the company the perfect long term buy and forget share. Indeed, as the company plays such an integral part in keeping the world healthy, it is bound to be around for a long time to come.
Further, healthcare is not a cyclical industry, so while some economies may be struggling to recover from economic crises, Glaxos shares should remain robust.
And the great thing is, right now Glaxo is selling at an extremely attractive valuation. Specifically, the company supports a 5.5% dividend yield at present and trades at a forward P/E of 14.8. City analysts expect the companys dividend yield to hit 5.8% next year.
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Rupert Hargreaves owns shares of GlaxoSmithKline. The Motley Fool has recommended GlaxoSmithKline. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.