Pharmaceuticals, healthcare, biotechnology — it’s an attractive investment business.
Most of the money goes into the biggies, like GlaxoSmithKline and AstraZeneca, but there’s a whole host of smaller companies out there with great prospects. And some of their shares have been flying:
Look at Advanced Medical Solutions (LSE: AMS), for example. It’s a company with a market capitalisation of around £300m, and it’s in the unglamorous-sounding field of wound care technology. But it’s serious business, and Advanced Medical shares are up 16.5% over the past 12 months to 143p, having put on nearly 250% over five years.
Five years of strong earnings growth lie behind that, though the shares are now on a P/E of over 20 with forecast growth slowing a little. But at results time in March, CEO Chris Meredith told us he was “confident that AMS is well placed to drive growth“.
Not a screamingly cheap share, but it looks like a quality company with some key product strengths.
Boring is good
Then there’s UDG Healthcare (LSE: UDG), a bigger company at around the £1.3m market cap level, which on the face of it appears even less glamorous. Based in Dublin, the firm provides services to the medical industry — sales and marketing, wholesaling, packaging and so on.
And it’s shares have done even better over the past year — at 540p, they’re up 54%.
With double-digit EPS rises forecast for this year and next, we’re still looking at growth pricing and a forward P/E of 23 this year. But it looks like a business that will remain in demand, and its first quarter this year has seen it off to a strong start with trading “well ahead” of last year.
The biggest winner
I’ve saved the highest one-year flyer for last. It’s Vernalis (LSE: VER), the smallest of the three with a market cap of a bit under £270m. Vernalis shares have more than doubled in 12 months to 61p, having been sent soaring by approval on 1 May for its Tuzistra branded extended-release cough treatment, developed in conjunction with Tris Pharma Inc.
CEO Ian Garland called it a “very significant moment in the evolution of Vernalis to a commercial stage speciality pharmaceutical company“, and all eyes are now on getting the new product to market for the coming 2015-16 cough-cold season in the US.
What about valuation? Vernalis is not yet profitable, so there aren’t any meaningful traditional ratios available yet — but it could easily be the most exciting of the three, and is definitely one to watch.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK 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.