Bottom Line: Healthy signs for unloved Glaxo

GLAXO is a stock the market currently loves to hate. Unlike SmithKline Beecham, which has been making big acquisitions, Glaxo has appeared to be sitting on its hands while the healthcare market has been radically transformed.

Worries that Glaxo is being left behind in the race to respond to those changes combined with threats to the patent on Zantac, Glaxo's blockbusting anti-ulcer drug, have led its shares to underperform SmithKline's by about 20 per cent over the past six months.

Yesterday's full-year figures were at the low end of expectations and overshadowed by the bond market fiasco, sending the shares down 7p to 609p.

There is a danger the market is losing its sense of perspective. The bond market losses are insignificant. The threats to Zantac's patent, while undoubtedly damaging should they materialise, are overblown.

There are a number of highly promising drugs in its portfolio and its main markets continue to show strong growth.

Most important, however, the task that rivals such as Merck and SmithKline have taken on in attempting to become healthcare companies is more risky than the market has acknowledged.

Glaxo stands a chance of emerging from the current fog of uncertainty clouding the industry as the only big pharmaceutical company with its eye fixed firmly on drug development.

Providing it is right in its belief that there are other ways of obtaining the increasingly essential patient data that other drug companies have in effect bought, it may yet win the day.

If so, the shares will look cheap. Underpinned as they are with a healthy yield of more than 5 per cent, now is the time to buy.