You see, Astra and Glaxo have adopteddifferent strategies for the next few years. Astra has gone down the growth route, while Glaxois breaking itself apart, trying to unlock value for shareholders.
Astra has laid out an ambitious growth plan to deliver annual revenues of $45bn by 2023, up from reported revenues of just under $26bn during 2013. And so far, the company is well on its way to hitting this target.
Indeed, alongside the companys somewhat disappointing set of fourth-quarter results, Astras chief executive Pascal Soriot reaffirmed the groups goal to return to growth by 2017. Whats more, as part of the plan, Astraannounced that it was paying$600m to buy a respiratory drug business from Actavis. This follows a similar deal conducted in June of last year withSpains Almirall. The deal saw Astra pay $2.1bn for the rights to Almiralls existing drugs and pipeline of experimental therapies.
Alongside acquisitions, Astra has developed an industry-leading immuno-oncology portfolio, with 13 clinical trials already underway. A further 16 trials are planned and a total of 14 potential new drugs are already in the process of Phase III testing or registration before sale. As many as 10 drug approvals are set for 2016.
Some of Astras new treatments are already hitting the market. Four of the companys five key sales areas showed growth during 2014. These five growth platforms includelung drugs, diabetes, new heart drug Brilinta, emerging markets and Japan. Japan was the only market that didnt experience growth last year.
As Astra looks to grow, Glaxo is splitting itself apartandrefocusing its treatment portfolioin an attempt to realise value for investors. In particular, the companyis currently in the process of completing a complex three-way transaction with Novartis, which will see Glaxo dispose of itscancer drugs business but acquire Novertis vaccines division. Additionally, as part of the deal the two companies are looking to combine their over-the-counterunits.
Further, during the past few weeksGlaxo has appointed investment banks to advise on a potential part-flotation of its HIV division. Analysts believe the division could attract a valuation of 15bn.
This all part of the companys plan to unlock value for investors. Indeed, asGlaxo reshuffles its divisions they should attract a higher valuation than if they remained part of the Glaxo emprie. The Novartis deal is set to unlock $7.8bn in cash for Glaxo, 4bn of which the company is planning to return to investorsthrough a special dividend.
Income vs. growth
Overall, Astra and Glaxo are two different companies for different investors. In particular Astra has now become a growth stock, as the companys sales are set to double over the next eight years, while Glaxo has become the perfect stock for income investors.
With a yield of 5.3% at present levels, special dividend on the cards this year and the spin-off of the companysHIV division set for 2016, Glaxos investors will be richly rewarded.
Glaxo is set to yield a total of 11% this year, including the special dividend. If this double-digit yield isn’t enough and you’re still looking for dividend opportunities, then the Motley Fool is here to help. Our top analysts have put together thisnewfree reporttitled”How To Create Dividends For Life“which is designed to help you discover the market’s best income stocks.
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