GlaxoSmithKline (LSE: GSK) has announced an agreement today with Verily Life Sciences that will see the two companies work together to form Galvani Bioelectronics. The partnership will enable GlaxoSmithKline and Verily (formerly Google Life Sciences) to further the research, development and commercialisation of bioelectronics medicines. GlaxoSmithKline will be the majority stakeholder in the partnership with a 55% stake.
The total investment in Galvani over the next seven years could be as much as £540m and the deal represents an important step forward in GlaxoSmithKline’s bioelectronics research. This should help to further diversity its business model, with its appeal for investors seeking out a resilient, robust and relatively consistent healthcare company remaining high at a time when the outlook for the wider index is highly uncertain.
Although GlaxoSmithKline has risen in value by 24% since the turn of the year, it still yields 4.7%. This not only indicates that it remains a top-notch income play, but also shows that further share price gains could lie ahead – especially with sterling being weak and providing a boost to the company’s bottom line.
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Profitable but pricey?
Also reporting today was Fidessa (LSE: FDSA), with the information solutions company’s first half sales rising by 4% (constant currency). In fact, Fidessa’s top line grew across all of its business lines and regions and with 63% of its total revenue being derived from outside of Europe, the potential challenges that may come to the fore in the UK and EU may not dampen Fidessa’s operating performance in future.
Fidessa’s revenue is also made up of 86% recurring revenue, which provides it with relatively high consistency and resilience. And with strong cash generation, Fidessa has been able to increase dividends by 9% in the first half of the year. This puts it on a yield of 3.4% and with its bottom line due to rise by 5% in each of the next two years, further growth in shareholder payouts could be on the horizon.
However, due to Fidessa having a price-to-earnings (P/E) ratio of over 30, now may not be the right time to buy it. Certainly, it may perform well as a business, but for investors there could be better opportunities available elsewhere.
Growth ahead but losses for now
Meanwhile, life sciences and animal care market specialist Avacta (LSE: AVTC) has today released a pre-close trading update prior to the release of its full-year results. Revenues for the year have increased by around 19%, which is in line with market expectations. Although losses almost doubled to £4.6m, this was at least partly due to a change in accounting policy. And with Avacta making strong progress in the development of its Affimer affinity purification systems, its shares could offer improved performance following their 36% fall since the start of the year.
Looking ahead, Avacta expects to continue to grow the pipeline of its Affimer technology evaluations, many of which are now on-going. It anticipates that this will ultimately deliver a flow of ‘Affimer powered’ products to positively catalyse its long-term growth. As such, it has long-term potential, but with it being lossmaking and a relatively small entity, there may be better risk/reward opportunities available elsewhere.
