Does GlaxoSmithKline Have a Bright Future?

With shares of GlaxoSmithKline (NYSE:GSK) trading around $53, is GSK an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

GlaxoSmithKline is global healthcare group engaged in the discovery, development, manufacturing, and marketing of pharmaceutical products. These products are vaccines, over-the-counter medicines, and health-related consumer products. GlaxoSmithKline’s principal pharmaceutical products are medicines in these areas: respiratory, antivirals, central nervous system, cardiovascular and urogenital, metabolic, antibacterials, oncology and emesis, dermatology, rare diseases, immuno-inflammation, vaccines, and HIV.

In an escalation of previous charges facing the company, GlaxoSmithKline is now facing a criminal investigation from Britain’s Serious Fraud Office. The company is already facing fraud allegations in several countries. The SFO said in a statement released on Tuesday that it “has opened a criminal investigation into the commercial practices of GlaxoSmithKline plc and its subsidiaries.” The news follows reports that GSK’s China Exec will face jail time after the Chinese government found him liable for charges of corruption and bribery. The company has faced several similar investigations in China, Poland, and the Middle East. Earlier this month, GSK’s former head of its China unit, Mark Reilly, along with two other top executives were charged with ordering employees to bribe healthcare workers; the charges carry a maximum sentence of life in prison, according to FiercePharma.

The Serious Fraud Office as well as GSK, have declined to offer any additional information on the subject of the new investigation, and the BBC reports that GSK refused to comment on whether the SFO investigation was connected with any specific incident in particular; the investigation is in response to an apparent violation of a UK law which states it is illegal for companies to bribe government employees, even while conducting business abroad. The U.S. enforces similar legislation, known as the U.S. Foreign Corrupt Policies Act. In response to the new criminal investigation in Britain, GSK released a statement on Tuesday, announcing that, “GSK is committed to operating its business to the highest ethical standards and will continue to cooperate fully with the S.F.O.” Were the company found liable of corruption through the SFO investigation, it’s possible that it would also have to face discipline from the U.S. as well, since both countries have laws forbidding such practices.