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I reckon GlaxoSmithKline and this growing healthcare company are UK shares to buy

The FTSE 100’s GlaxoSmithKline (LSE: GSK) has many attractions including a modest valuation and I reckon it’s one of several UK shares to buy right now.

With the share price near 1,517p, the forward-looking earnings multiple for 2021 is just below 13 and the dividend yield is above 5%. And, given recent operational progress, I reckon that rating is undemanding. Indeed, apart from a slight blip down because of the coronavirus crisis, it looks like earnings have stabilised after the patent-expiry challenges of the past few years.

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Why I think GlaxoSmithKline is a UK share to buy

A string of updates underlines the progress the company has been making with its push to develop new treatments. In July, the company said the biopharma pipeline was continuing to strengthen. At the time, the firm had 35 medicines and 15 vaccines in development with over 75% of the pipeline assets focused on immunology.

I reckon GlaxoSmithKline would make a good core holding in my portfolio. But in the healthcare sector, I’d also buy shares in growing drug development company Vectura (LSE: VEC), which released its half-year results report this morning.

Although revenue declined by 2.2% compared to the equivalent period last year, cash from operations shot up by more than 520% to almost £20m. And the cash-and-equivalents figure on the balance sheet rose by more than 10% to almost £82m.

Vectura specialises in developing inhaled medicines via contract development and manufacturing agreements. So far in the current trading year, the company has signed 12 new deals worth between £3m and £5m in revenue during the second half of the year. The firm’s strategy aims at turning Vectura into an “industry-leading” inhalation Contract Development and Manufacturing Organisation (CDMO).

Going for growth

The report highlights the company has recently established a new business development team with a presence in the US, Europe, and the UK. Meanwhile, operations haven’t been affected that much by Covid-19. The directors reckon there’s been progress across the co-development pipeline in the period. For example, the approval of Enerzair Breezhaler in Japan generated a $1.25m milestone payment, which the company accounted for in the period. There was also the post-period approval of the product in Europe. This triggered a further $5m milestone payment to be recognised in the second half of the year.

Looking ahead, the directors point to the potential approval of its generic Advair programme in the second half of the year. The company is in partnership with Hikma Pharmaceuticals with that one. Meanwhile, chief executive Will Downie said in the report he’s “confident 2020 will be another year of strong delivery for Vectura.

City analysts expect an almost 100% up-thrust in 2021 earnings. And with the share price near 115p, the forward-looking earnings multiple is around 11. That drops to about 10 if you account for the cash pile on the balance sheet. Given the firm’s growth prospects, I think the valuation is attractive.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended GlaxoSmithKline and Hikma Pharmaceuticals. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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