Is this under-the-radar pharma stock the next GlaxoSmithKline plc?

This little-known pharma stock could be the next giant if it’s international expansion continues.

| 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.

Beximco Pharmaceuticals (LSE: BXP) flies under the radar of most investors despite the company’s enormous potential. 

Operating out of Bangladesh, Beximco designs, manufactures and supplies generic versions of drugs that have come off patent. The company is extremely good at this. Between 2011 and the end of the company’s 2016 financial year, sales grew at an average rate of 25.3% per annum, and net profit expanded at an average annual rate of 23% over the same period. 

Despite this growth, investors have avoided Beximco for much of the past five years. Over the five years to the end of 2015, shares in the company fell by 40%, as the market seemingly gave up on Beximco. However, this year the market has regained confidence. Shares in Beximco have gained close to 100% year-to-date and there could be further gains to come. 

Further growth ahead

Beximco is one of the world’s fastest growing pharma companies and it’s also Bangladesh’s most successful business. This year it has become the first Bangladeshi firm to ship medicine to the United States, the first Bangladeshi company to receive approval for the sale of its products within Canada, and the first Bangladeshi company to enter the Gulf market. All of these approvals are a testament to its goal of providing high-quality treatments at affordable prices. The company produces more than 500 products in different dosage forms covering broad therapeutic categories with many more under development. 

The most exciting part of Beximco’s investment case is the company’s growth potential. For much of its life, it has been a domestic pharmaceutical company, producing treatments for its home market in Bangladesh. Back in 2014, just 6% of Beximco’s sales were to the export market. 

Today, management is concentrating on driving export growth. Since 2014 the company has been granted the rights to sell its products in Europe and the US, as well as other smaller regions. This export drive has supercharged the group’s growth. For the three months ended September 30, Beximco reported year-on-year revenue growth of 12%, pre-tax profit up 24%, and earnings per share up 22%.

However, despite this growth the shares are trading at an astonishingly low forward P/E of just 9.3. 

Under the radar 

Beximco seems to fly under the radar of most investors, which is why the shares trade at an attractive valuation. The pharmaceutical sector average P/E is 14.3, making Beximco one of the sector’s cheapest opportunities. 

Now the company is exporting outside of Bangladesh, this discount doesn’t make much sense. Indeed, if the group’s sales continue to grow at their current rate (and as the company starts to conquer the rest of the world there’s no reason why they can’t) Beximco could quickly become one of the world’s premier drug manufacturers taking on the likes of GlaxoSmithKline

Even though Beximco is a tiddler compared to Glaxo today, global expansion could quickly change that. 

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.

Rupert Hargreaves owns shares of GlaxoSmithKline. The Motley Fool UK owns shares of and 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

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 »