This biotech growth stock is hammering the AstraZeneca share price. Here’s what you need to know

The AstraZeneca share price is climbing. But this biotech firm is collaborating with the pharmaceuticals giant, and its shares have multi-bagged.

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Pharmaceuticals stocks like AstraZeneca (LSE: AZN) are doing well in 2020, for obvious reasons. The AstraZeneca share price is up 9.5% this year, while the FTSE 100 is down 20%. Some biotechnology stocks are doing even better, and  Silence Therapeutics (LSE: SLN) is one of them, with a share price gain of 35%.

Silence has a proprietary technology platform for drug development based on RNA interference. That provides researchers with the ability to develop treatments to selectively inhibit gene expression. I don’t have the expertise to know what’s likely to come from it. But anything that provides the ability to selectively target specific genes responsible for diseases just has to be a good thing.

The company isn’t profitable yet, and that does make it very hard to place a valuation on its shares. I’d expect volatility too, and a comparison with the AstraZeneca share price is telling. Over the past five years, the two have had a pretty similar overall result. Silence Therapeutics is up 77%, while AstraZeneca has the edge with a 92% gain. But that’s where the similarity ends.

A recent ten-bagger

AstraZeneca shares have been climbing steadily, while the Silence Therapeutics chart shows a history of boom and bust. Or perhaps bust and boom, as the price had been in a slump until the middle of 2019. But since then, Silence shares have soared more than tenfold in value, easily beating the AstraZeneca share price in the short term.

For the first half of the year, Silence Therapeutics recorded an £11m loss after tax. But it reported cash equivalents and term deposits of £50.3m at 30 June, which looks healthy. That’s an increase, and it’s driven by the firm’s collaboration with AstraZeneca. The firm received a cash payment of $60m and an equity investment of $20m, and stands to reap “up to $400 million in potential milestones for each target plus tiered royalties“.

AstraZeneca share price picking up

Speaking of AstraZeneca, the pharmaceuticals giant had just paused its late-stage Covid-19 study after a patient taking part reported a side effect. But the trial has already been resumed. The AstraZeneca share price hasn’t done much yet in response, but hopefully any renewed Covid-19 pessimism will have subsided a little.

Meanwhile, the AstraZeneca resurgence under boss Pascal Soriot continues. The company’s shares had been in the dumps due to the loss of patents and a drying up development pipeline. Big investment in research is reversing that situation, though it was always going to be a long-term project.

Not too late to buy

But with the AstraZeneca share price’s impressive performance of the past five years, have investors missed the boat? I’d say a big no to that.

Profits from the firm’s refocused research and development are really only just starting to come through. Forecasts suggest a price-to-earnings multiple for 2021 of a little over 20, and I reckon a few years of earnings growth could soon see that tumble. And that should feed through to higher dividend yields too, currently at around 2.6%.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »