Bottom Line: Drugs keep a smile on the market’s face

 
Marc Sidwell
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WITH the Glaxosmithkline (GSK) share price falling only 1.59 per cent, the market seems pretty sanguine about the announcement of an SFO investigation. That shouldn’t be too surprising.

While the SFO has the power to levy unlimited fines in the most extreme cases, with so little detail the gravity of this investigation is not yet clear. The move may be purely procedural in the wake of recent Chinese charges of corruption.

In any case, GSK certainly has the potential to claim mitigation against major financial liability, so long as it had robust anti-bribery policies in place – even if a rogue individual subverted them.

So it’s not a shock to find investors are instead focusing on the undeniable strengths that GSK possesses, whatever the outcome. Above all, its deal with Novartis in April to trade billions of pounds of assets.

GSK gained a vaccine portfolio and 63.5 per cent of an over the counter joint venture. Each of these should be lucrative over the long term. For now, that asset injection matters more than the SFO’s probe.

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