Newspaper article The Evening Standard (London, England)

Merrill Favours GSK despite Options Row

Newspaper article The Evening Standard (London, England)

Merrill Favours GSK despite Options Row

Article excerpt

Byline: MICHAEL CLARK

SOME shareholders of drugs giant Glaxo-SmithKline have been up in arms over chief executive Jean-Pierre Garnier's pound sterling11 million share options package. Today the company refused to comment on claims that it had climbed down over the award because of shareholder pressure.

Institutional shareholders rightly feel aggrieved, having seen the share price virtually halve during the past three years as worries about patents expiring, increased competition and the lack of new drugs coming on stream combined to hit sentiment.

Broker Merrill Lynch has taken another look at the shares and says it likes what it sees.

It has upgraded its recommendation from neutral to buy while slapping on a 1460p target price.

They traded 8p better at 1256p in a falling market.

GSK has fallen 27% this year while underperforming the European pharmaceuticals industry by 15%.

Merrill points to the group's 3.3% prospective yield as a plus point and reckons that investor concerns regarding the Paxil patent and the absence of new drugs in the pipeline are now being discounted. The broker says GSK shares offer quality and value.

"They should outperform a weak market while participating in any rallies as investors seek large liquid companies with which to participate in the FTSE 100 index," the broker says. Merrill has also ruled out the possibility of GSK bidding for German rival Bayer. Rival AstraZeneca retreated 46p to 2431p after Merrill trimmed its earnings forecast.

In thin and patchy conditions, investors were unable to work up much enthusiasm and the FTSE 100 fell back 29.9 points to 4145.3.

Cable & Wireless slipped 21/2p to 82p as Deutsche Bank downgraded from buy to hold and slashed its target price from 162p to 79p. It blamed the problems at C&W Global, the poor market conditions and lack of faith in the management. …

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