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Stock Strategist

Wide-Moat Glaxo Is Undervalued

The company's entrenched products and developing pipeline are underappreciated.


As one of the largest pharmaceutical companies,  GlaxoSmithKline (GSK) has used its vast resources to create the next generation of healthcare treatments. The company’s innovative new product lineup and expansive list of patent-protected drugs create a wide economic moat, in our opinion.

The magnitude of Glaxo’s reach is evidenced by a product portfolio that spans several therapeutic classes as well as vaccines and consumer goods. The diverse platform insulates the company from problems with any single product. The highest revenue generator, Advair, represents just under 10% of total revenue. However, the complexity in approving a generic version of an inhaled drug like Advair has held off significant generic competition well past the drug’s 2010 patent expiration, where approvals for generic inhaled drugs are particularly difficult. Further, the company’s advancement of its next-generation respiratory drugs should help Glaxo maintain its entrenchment in both asthma and chronic obstructive pulmonary disease as generic Advair competition likely increases in late 2018.

Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.