The Motley Fool

Should you be investing money in pharma stocks?

The healthcare and pharmaceutical industry has been growing steadily for years. The UK in particular is home to pharma giants like GlaxoSmithKline and Astrazeneca, with market caps of over £80bn. But there are also some small caps that I think deserve attention when it comes to investing money in the sector.

Allergy Therapeutics (LSE:AGY) is a long-established specialist in the prevention, diagnosis, and treatment of allergies.

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...

The company has a three-part strategy for growth. First, it will continue to develop its European business via investment or opportunistic acquisitions. Then, it has an opportunity to expand its Pollinex Quattro immunotherapy platform in the US market. Finally, it has a pipeline of therapies to develop.

Allergy Therapeutics’ Pollinex is the only subcutaneous immunotherapy (SCIT) pollen product currently registered in the UK. SCIT is the most commonly used and most effective form of allergy immunotherapy. It’s the only treatment available that actually changes the immune system, making it possible to prevent the development of new allergies and asthma.  

Before even considering investing money in the company, let’s see how it has performed recently.


Allergy Therapeutics’ European business has expanded in recent years, with particularly strong growth in Austria, the Netherlands, and Spain. In terms of products, Venomil, Acarovac Plus, Pollinex and Pollinex Quattro were the top performers – driving net sales growth of 8% to £73.7m in 2019. The operating margin for the last 12 months is around 12%. That’s lower than GSK (18.5%) but higher than Astrazeneca (10%). Obviously, comparing Allergy Therapeutics to the giants isn’t meaningful; its market cap is 1,000 times lower at just £89m, but it does give us a good comparison for a healthy margin in the pharmaceutical industry.

Management expects this financial year to show further growth in sales, too. Gross margin percentage growth is likely to be similar to the 2019 financial year, though other operating costs are likely to rise reflecting additional cost in technical support needed in preparation for Brexit.

According to a 2018 report published by Credence Research, Inc., the global allergy immunotherapy market was valued at US$1,499m in 2017, and is expected to reach US$3,602m by 2026 – expanding at a compound annual growth rate of 10.1%. Could Allergy Therapeutics capitalise on that potential growth with their products currently in the pipeline? It’s certainly possible.

Key drivers

So, what are the risks, if you’re thinking of investing money in Allergy Therapeutics? Over the next two years, the company will be running several important clinical trials. These have binary outcomes – either success or failure. The company’s long-standing operations will mitigate this risk to some extent. A second wave of the Covid-19 pandemic would also like have a big impact on forecasts.

The company is likely to invest heavily in research and development as it puts new products though each phase of the pharmaceutical pipeline. This is essential to meeting the demand they are expecting for immunotherapeutics in the future. However, success hinges on whether that demand will actually be there when the products become available.

With a small and lesser-known business like this, you should only be investing money that you can afford to lose. That said, Allergy Therapeutics does look like it has a solid plan to make a lot of money in the future.

There are other great small cap stocks for the savvy investor too!

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Toby Aston has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

The renowned 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 enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.