FTSE Aim-listed stock Novacyt SA (LSE:NCYT), has seen its share price plunge 35% year-to-date. It had fallen further but has since rebounded. The Anglo-French biotech stock has a £260m market cap, earnings per share (EPS) are negative, and the NCYT share price is down 56% from its 52-week high.
Nevertheless, its share price is rising in recent trading sessions after a positive release on its latest Covid-19 tests. Its new product line includes lateral flow antibody detection and new variant tests. While this is promising, a very big red flag over the company is its recent loss of a lucrative NHS contract. Without this, it doesn’t look nearly as enticing as it did last year.
This is undoubtedly a risky, volatile stock to own. Competition is rife in the Covid-19 testing sector, and its share price has already seen wide speculation by the market. Therefore, I’m not tempted to buy shares in this biotech stock. I prefer well-established pharma companies such as AstraZeneca (LSE:AZN) or Hikma Pharmaceuticals.
Will the AstraZeneca share price bounce?
FTSE 100 pharma giant AstraZeneca is itself facing a host of troubles. As it embarked on producing a Covid-19 vaccine last year, its future looked bright. Working alongside the UK’s prestigious Oxford university, it received glowing media coverage with an early study showing a strong immune response in older adults. Not needing to be stored at extreme temperatures proved a logistical advantage over Pfizer.
But since then, things have rapidly gone downhill. There were production delays and problems with distribution. Recently, concerns that the vaccine leads to blood clots have caused several European countries to halt its use. And there are reports the vaccine doesn’t appear to be as effective as first believed. It may also face litigation costs in a trial with the EU for failed vaccine deliveries.
The AstraZeneca share price also fell in December after it announced its acquisition of US biotech stock Alexion, which shareholders deemed too expensive. Alexion develops life-changing therapies for people living with rare disorders. This unique perspective will enhance AstraZeneca’s portfolio and could complement its research in other areas.
The AZN share price ended 2020 down 4%. Year-to-date it’s up 2%, despite considerable volatility. It has a price-to-earnings ratio of 43, EPS are 175p, and its dividend yield is 2.6%.
A biotech stock with multiple revenue streams
While the Astra-Oxford Covid-19 vaccine commands headlines, I think the company actually has plenty else keeping shareholders reassured.
This week the company announced its phase 3 trial for a respiratory drug is progressing successfully, showing potential immunisation against RSV in the general infant population. RSV is a common pathogen that causes bronchiolitis and pneumonia in infants globally.
It also has an early stage lung cancer drug in the pipeline already approved in China. This drug called Tagrisso has also been recommended for marketing authorisation in the EU.
AZN is operating in key areas of medical research including respiratory, cancer, and heart disease. The fight against each of them continues, and AstraZeneca’s expertise will be in demand for many years to come. That’s why I feel bullish on AstraZeneca’s long-term outlook and would happily add AZN shares to my Stocks and Shares ISA.
Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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.