Will GlaxoSmithKline plc’s Vaccine Stop Ebola?

GlaxoSmithKline plc (LSE: GSK) is leading the race to try and find a vaccine that will stop the advance of the deadly Ebola virus, which is currently spreading across West Africa. 

According to the World Health Organization, since March the deadly virus has killed 1,552 people. And it’s believed that this figure will grow significantly during the next few months. 

So, there is an urgent need for an effective Ebola vaccine and governments around the world have been rushing to find one, before the situation gets really out of hand. The US National Institutes of Health, or NIH for short, is one of the world’s foremost medical research centres and is currently developing a vaccine with Glaxo. 

Good progress gsk

So far, progress has been good, with an experimental vaccine performing extremely well in primate studies. Human studies are commencing as we speak and Glaxo should have results by the end of 2014. However, the vaccine will not be ready for use until the middle of 2015, after Glaxo has had enough time to thoroughly test and manufacture the product to the correct standards.

Glaxo became involved in the Ebola vaccine after buying Swiss vaccine company Okairos AG in 2013. Okairos had been working on the vaccine with the NIH since 2011, although Ebola is was such a rare disease that there was no rush to get the vaccine on the production line. 

But now Glaxo and NIH are throwing their combined weight behind the vaccine, to try and stop this deadly disease as quickly as possible.

Attractive qualities 

Glaxo has many more attractive qualities aside from its ground-breaking Ebola vaccine. Actually, the company’s involvement in helping discover a vaccine for Ebola really backs up the Glaxo investment thesis. 

You see, while Glaxo’s shares have been sold off during the past 12 months, due to concerns about penalties stemming from bribery allegations, Glaxo remains at the forefront of the world’s health industry.

Indeed, aside from the Ebola vaccine, Glaxo has more than 40 potentially lifesaving treatments underdevelopment. And that’s not to mention the Glaxo products that are already being sold to customers. 

All in all, as Glaxo is a key part of the world’s health infrastructure, the company is highly defensive and would fit well into any portfolio.

Low valuation

Nevertheless, Glaxo’s defensive nature means that investors are willing to pay a premium to get their hands on the company’s shares. For example, Glaxo’s shares currently trade at a forward P/E of 15.3. City analysts expect Glaxo’s earnings to expand 6% next year, which puts shares on a 2015 P/E of 14.5.

While this valuation may seem high for some, Glaxo is cheap compared to many of its pharmaceutical sector peers — many of Glaxo’s international peers trade at a forward P/E of around 28.

Glaxo is also a great pick for dividend hunters. The company supports a dividend yield of 5.3% at current levels, and City analysts expect Glaxo’s yield to hit 5.5% next year.

Buy and forget

Every portfolio needs a selection of shares with defensive qualities like those of Glaxo. A selection of defensive shares with attractive dividend yields gives your portfolio a solid backbone, allowing you to sleep soundly at night.  

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Rupert Hargreaves owns shares of GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.