As every Fool knows, investing is all about making money. The raison d’etre for buying shares is to one day sell them at a higher price than you paid, as well as receiving dividends between those two dates.
Indeed, the business world is focused on profit, and rightly so. However, I’ve always been of the opinion that the function of business within a capitalist society such as ours is not only to make people rich, but to improve the lives of our fellow citizens.
This leads me neatly onto the healthcare sector and, more importantly, onto GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US). It has recently been given a boost after one of its subsidiaries, ViiV Healthcare, received regulatory approval for an HIV treatment.
The US Food and Drug Administration (FDA) gave authorisation for the subsidiary to commercialise ‘dolutegravir’, which belongs to a class of drugs called integrase inhibitors.
The treatment, which will be branded as Tivicay, has the potential to eventually become a backbone for treatment for millions of HIV patients worldwide as part of a ‘first line’ drug cocktail.
Indeed, it has the potential to revolutionise treatment and could compete with existing HIV drugs.
The subsidiary is 76% owned by GlaxoSmithKline and the approval of Tivicay is the first successfully developed drug by ViiV, which has been in operation for around 4 years.
The regulatory approval should give a substantial financial boost to GlaxoSmithKline, meaning it is great news for investors in the shares. Of course, it is also fantastic news for the millions of people worldwide who are seeking more effective treatment for HIV. For me, this is capitalism at its best: creating wealth and improving the status quo in one form or another.
Of course, this is not the only positive piece of news flow surrounding new drug developments for GlaxoSmithKline this year. It continues to receive positive news flow surrounding FDA approvals, and the company has an impressive pipeline of drugs as well.
Furthermore, it trades on a price-to-earnings (P/E) ratio of 14.8, which compares favourably to the healthcare industry group, which has a P/E of 17.7, and to the FTSE 100, which has a P/E of 15.2.
In addition, a yield of 4.4% beats the FTSE 100 yield of 3.5% and currently offers a return above and beyond inflation.
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> Peter owns shares in GlaxoSmithKline. The Motley Fool has recommended shares in GlaxoSmithKline.
