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2 future growth stocks I’d buy today

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Should you invest in companies that are not yet in profit? It can be very risky, but today I’m looking at a couple of candidates.

Science in Sport (LSE: SIS) is one that appeared on my radar last year when I took up cycling again after a long break, and how things had changed. Out were baggy ‘Famous Five’ shorts and sausage butties for lunch, and in were lycra and energy gels.

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In fact, sports nutrition is becoming big business, and that’s what Science in Sport does. You can see it everywhere after a big sporting event like the Olympics, and sales of all kinds of gels, energy bars, and scientifically formulated hydration products (ie drinks) all soar.

The Tour de France helped, and when I see groups out cycling they’re all wearing team gear and slurping down those horrible gels — I tried one once and I thought it tasted of sick, but I’m not a target customer.

Sports everywhere

There’s the London Marathon too, with competitors trying to squeeze out every last smidgeon of performance they can.

Science in Sport doesn’t make any profit yet and still has losses (albeit narrower losses) pencilled in for the next two years. But on Friday it announced two new deals, a three-year one with USA Triathlon to target growth in the US market, and a partnership with Rock ‘n’ Roll Marathon Series to be the “official supplier of its patented isotonic energy gels at all 30 race series.

The risks are huge — market cap of only £27m and still in the cash-burn stage — so be very careful if you choose to make an investment. But with the shares at 72p, I’m cautiously optimistic.

Medical prospect

Shares in Circassia Pharmaceuticals (LSE: CIR) crashed in June 2016 when a cat allergy phase III study failed miserably — the candidate immunotherapy treatment did no better than a placebo.

Since then, the company has reinvented itself and now focuses on respiratory diseases, including asthma and COPD. Those are growing problems in the industrialised west, surely offering great potential for anyone coming up with effective treatments.

September’s interim results looked encouraging to me, reporting an increase in revenue of 65%, to £18.3m, with R&D expenditure upped to £27.2m. The latter is particularly exciting as it includes a £14.6m contribution to the firm’s collaboration with sector giant AstraZeneca. Announced in March, the deal secured certain US commercial rights to the COPD treatments Tudorza and Duaklir.

Sales of the firm’s NIOX asthma diagnostic product were up 19% at the halfway stage, with US clinical sales up 39%.

Sufficient cash

With £82.9m in cash at 30 June, there appear to be no liquidity problems at present, but questions over profits remain. There are none forecast for this year and next, though losses per share are forecast to fall sharply, so could we see some in 2019?

At 84p today, the shares have continued down, which is disappointing. And it is another very risk investment, as it doesn’t take much going wrong to destroy a company that’s not yet in profit.

But Neil Woodford has held on to his Circassia shares and clearly still sees something attractive there, and I’m with him. What I really want to see is full-year results for 2017, and the first signs of 2019 forecasts.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. 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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