The Motley Fool

What next for Quantum Pharma plc after today’s 50% crash?

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.

There are few things that hammer home the risk of investing in small hi-tech hopefuls than a 50% share price crash. But sadly, that’s what’s just happened to Quantum Pharma (LSE: QP), after the firm issued a shock profit warning along with its first-half results, and its share price has slumped to 34.5p — knocking around £45m off the value of the AIM-listed company.

Sales from recent product launches now look like they won’t be as healthy as anticipated, moving new chief executive Chris Rigg to say that “performance will be materially below market expectations“. This comes after the firm “instigated and completed a review of a number of key areas of the business” just after Mr Rigg’s appointment in August. It’s not uncommon for a new boss’s arrival to be seen as a good opportunity to get the bad news out and let the blame fall on the previous management.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

First-half revenue actually rose, by 25% to £42.8m, though adjusted pre-tax profit dropped by 42% to £2.6m, and the firm’s debt stood largely unchanged at £23.8m. The year was always likely to be weighted towards the second half, but forecasts for a modest 8% fall in EPS (to be followed by a 17% rise the following year) have now vanished in a puff of smoke.

Start again?

Quantum is to close its lossmaking NuPharm business, and it reckons the remaining divisions are looking good — the speciality pharmaceuticals maker says its resulting “simplified business … offers the best opportunity for value creation“.

The difficulty for investors now is that the company’s next couple of years are unquantifiable, and there’s really no way to put a measure on the worth of the shares — we might know more when forecasts are reworked. On the other hand, crisis-led share price slumps often lead to overselling, so Quantum might be a worthwhile (if risky) punt now.

Balance the risk

Looking further afield, our big FTSE 100 pharmaceuticals companies are a lot safer than a high-risk small-cap, and I like the look of Shire (LSE: SHP) as a low-risk alternative. Shire, specialising in rare illnesses and perhaps best known for the attention deficit disorder treatment Vyvanse, has had a few years of ups and downs in its earnings.

But forecasts of an 82% rise in EPS this year, followed by a further 19% next, put the shares on a forward P/E multiple of 15.5, dropping to 13 — and give us PEG ratios for the two years of 0.2 and 0.7 respectively, which is a strong growth indicator.

The downside is very low dividends, yielding only around 0.5%, but with the firm having taken on extra borrowings to fund the acquisition of Baxalta, which was completed in the first half, it’s understandable if handing out cash isn’t a big priority right now — net debt stood at $23.7bn at 30 June.

Shire’s shares are up 150% over five years, but could the modest 10% over the past 12 months be giving us a buying opportunity? The City’s analysts are putting out a very strong buy consensus, and I think they’re on the money. In fact, I think a pairing of Shire and Quantum shares could turn into a nice long-term investment.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.