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Kick-start 2017 with these explosive growth stocks

When it comes to drugs manufacturers, Hikma Pharmaceuticals (LSE: HIK) has got to be one of the great success stories of the past decade. Unlike larger peers GlaxoSmithKline and AstraZeneca, Hikma doesn’t have a long history dating back to 1850 in the case of Glaxo, or 1913 in the case of Astra. But nevertheless it found itself rubbing shoulders with pharmaceutical royalty within a decade of its 2005 IPO when it first joined the blue-chip FTSE 100 index in March 2015.

Rapid expansion

Since being founded by the son of a Palestinian tea merchant as recently as 1978, Hikma has transformed itself from humble beginnings operating from a small factory in Jordan into a global business, now operating in around 50 countries, with established operations in Europe and the US as well as its core Middle East and North African markets. Hikma’s rapid expansion hasn’t gone unnoticed by investors, and the group’s share price has rocketed from just 250p per share in 2008 to all-time highs of 2,676p last August.

What has driven this growth and continues to drive it? While larger pharmaceutical firms such as GlaxoSmithKline, and in particular AstraZeneca have suffered as a result of generic competition, Hikma as a generics manufacturer has benefitted in recent years  from consumer demand for more affordable drugs. The group has also created partnerships with other established pharmaceutical firms to produce and market licensed drugs, which in turn gives the partners access to the fast growing Middle East and North African markets.

With a strong pipeline of drugs in areas such as diabetes, oncology, and cardiovascular diseases, I believe Hikma is poised for an even more prosperous future, which should translate into healthy gains for loyal shareholders over the long term. Hikma’s shares have plunged by a third since hitting all-time highs last summer and look enticingly cheap for a firm expected to grow its earnings by 30% in 2017. So for me the recent share price weakness is an unmissable buying opportunity for buy-and-hold investors looking for long-term growth at a very reasonable price.

Pay attention to Shire

Another blue-chip drug-maker that looks poised to make significant gains this year is Hikma’s much larger peer Shire (LSE: SHP). The Basingstoke firm, which specialises in developing and marketing medicines for rare diseases, ended 2016 pretty much back where it started, with its shares still changing hands at around £47. But that doesn’t mean the group is standing still. On the contrary, it’s expected to post a massive 88% improvement in underlying earnings for 2016, with revenues forecast to reach £12.1bn by the end of this year.

Shire remains strong in the attention deficit hyperactivity disorder (ADHD) market despite the launch of generic competition in the US, and in particular with its lead product Vyvanse. The late stage drugs pipeline also looks promising, with the firm optimistic on its treatments for a number of disorders including binge eating, schizophrenia and depression. I believe Shire looks significantly undervalued trading at just 11 times forward earnings for the current year, and could post healthy gains in 2017.

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