Is Vernalis plc The Perfect Partner For GlaxoSmithKline plc In Your Portfolio?

Here’s how Vernalis plc (LON: VER) could give your portfolio a boost alongside GlaxoSmithKline plc (LON: GSK)

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

GlaxoSmithKline

2014 has been a great year for investors in Vernalis (LSE: VER), with shares in the pharmaceutical stock being up 25% year to date. This easily beats the performance of the FTSE 100, which is up 1% over the same time period. Of course, Vernalis remains unprofitable but, as today’s hugely positive news flow shows, it could prove to be a strong performer moving forward. It could also be the perfect complement to GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) in your portfolio. Here’s why.

Upbeat News Flow

This week saw yet more positive news flow for Vernalis, with the company having its cold prescription treatment, Tuzistra, approved for full review by the FDA. The drug, which is being developed in partnership with Tris, is the first of up to six unique extended release equivalents to existing immediate release prescription cough cold treatments. Although it triggers a milestone payment from Vernalis to Tris, it’s great news for the company and Vernalis remains hopeful that it will be on sale in late 2015.

Looking Ahead

Clearly, it’s great news for Vernalis and shares in the company reacted positively. Further strong news flow could also have a big impact on the company’s share price but, for now at least, Vernalis remains a relatively high-risk pharmaceutical play. That’s why it could prove to be the perfect complement to sector peer, GlaxoSmithKline.

Certainly, GlaxoSmithKline is not without risk. Its bribery allegations have depressed sentiment heavily in recent months and have sent shares falling by 11% since the start of the year. However, GlaxoSmithKline remains vastly profitable and has a hugely diversified pipeline that could help to grow the top and bottom lines at a brisk pace moving forward.

Income Prospects

Similarly, a mixture of the two stocks could prove to be worthwhile from an income perspective. While Vernalis currently does not pay a dividend (and is not expected to for the next couple of years, as it invests heavily in drug development), GlaxoSmithKline’s yield stands at 5.7%. This means that the two companies’ combined yield remains close to the FTSE 100’s 3.2% and, furthermore, the long-term growth potential (and possible reward) remains very lucrative.

The Best Of Both

Indeed, Vernalis and GlaxoSmithKline seem to offer the best of both. Vernalis has considerable capital growth potential (as shown thus far in 2014) and further positive news flow regarding its pipeline could boost its share price further, while GlaxoSmithKline offers a pipeline diversity and income potential that could also prove to be highly lucrative moving forward. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens 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.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »