Two pharmaceuticals tiddlers that could beat the best stocks

Could these gems from the pharmaceuticals sector bring you big profits?

| More on:

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.

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.

There are few things growth investors likes more than checking the news and seeing one of their shares climbing.

FDA approval

That’s what awaited Beximco Pharmaceuticals (LSE: BXP) shareholders this morning, with their shares up 20% in early trading to 55p. But that’s only part of the growth story — Beximco shares are up 175% over the past 12 months, and have risen nearly fivefold in the past five years.

So what’s behind it — some revolutionary new discoveries? Actually, no, the Bangladesh-based company does something simpler but profitable — it manufactures generic pharmaceuticals products, which sell in great quantity and at much lower prices than their branded counterparts, and are a boon to much of the developing world.

It’s what happens to a lot of pioneering products invented by the likes of GlaxoSmithKline and AstraZeneca when their patents expire, which is something both giants have been suffering from in recent years, and the drugs end up being made by companies like Beximco and sold cheaply.

Today’s big share price gain is a result of the company receiving a second product approval from America’s FDA, this time for Sotalol Hydrochloride, a generic version of the cardiovascular drug Betapace — and cardiovascular medicine is big business in overfed Western countries. The product should launch in early 2017.

There are no forecasts for Beximco, but even after today’s rise they’re still only on a trailing P/E of 11 based on December 2015 figures. And with a maiden dividend last year yielding 3.9%, we could be looking at one of tomorrow’s cash cows.

A growth star

Back in 2011, speciality drugs and pharmaceutical services firm Clinigen (LSE: CLIN) was top of the Sunday Times Fast Track 100 list, which ranks the country’s fastest growing privately held companies. Clinigen went on to float on the London Stock Exchange in 2012 and since then its track record has been stellar, with a quadrupling of the share price to 742p.

Today the company announced an extension of its partnership with healthcare company BTG, with a new agreement “to manage BTG’s critical care portfolio across the whole of Europe and now into new territories in Asia.

Chief commercial officer Steve Glass enthused that the deal “demonstrates the value of our unique, synergistic businesses, which enables us to provide safe and ethical access to a medicine throughout its lifecycle – from development to approval, to launch and beyond.

But after their meteoric rise, are Clinigen shares still worth buying? Since that maiden set of results in 2012, we’ve seen earnings per share soar by 160%, and there’s a further 18% currently being forecast for the year to June 2017. If anything, that seems conservative to me, especially in the light of 2016 results released last month.

Revenue for the year rose by 84%, with adjusted EBITDA up 73%. There was plenty of cash coming in too, with cash flow up 213%, and that fed through to a dividend rise of 18%. Dividend yields are still modest at under 1%, but a progressive policy is lifting them well ahead of inflation every year. There’s a further 19% hike on the cards for the current year, and I see terrific potential for long-term dividend growth here.

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.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca, BTG, and Clinigen. 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

Investing Articles

Will it be too late to buy Nvidia stock in March?

NVIDIA stock is up more than 60% since the start of 2024. Our writer considers whether it might still be…

Read more »

Typical street lined with terraced houses and parked cars
Investing Articles

Why did Direct Line shares just soar 27%?

Direct Line shares have jumped more than a quarter in the course of today's trading session. Our writer explains why…

Read more »

Close-up of British bank notes
Investing Articles

These 2 shares are Dividend Aristocrats. Which should I buy this March?

Our writer likes the business model of this pair of FTSE 100 Dividend Aristocrats. So why would he only consider…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

I bought 49 Unilever shares in June. Here’s what they’re worth today

Harvey Jones bought a modest amount of Unilever shares last summer hoping the stock would soon recover. He's having to…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

I reckon these shares, potentially 20% undervalued, are Warren Buffett’s type of investment

Oliver Rodzianko thinks Games Workshop is an absolutely stellar investment. As it's potentially undervalued, he reckons Warren Buffett would agree.

Read more »

Calendar showing the date of 5th April on desk in a house
Investing Articles

Great investing habits that can boost my Stocks and Shares ISA

Forget complicated calculations and financial jargon! Our writer uses a few simple habits to build wealth inside his Stocks and…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Why has the St. James’s Place share price crashed 30%, after FY results?

The St. James's Place share price has just fallen off a cliff. What could have gone wrong in 2023 that's…

Read more »

Family in protective face masks in airport
Investing Articles

Here’s how much I’d have if I’d bought 1,000 Rolls-Royce shares 10 years ago

Rolls-Royce shares may be flying high this year but that wasn't always the case. I'm calculating how much I'd have…

Read more »