In the last five months, Avacta (LSE:AVCT) shares have jumped nearly 173%. But this doesn’t tell the full story of this pharma stock. Despite the recent surge, this FTSE AIM share is still down 8.5% over the last 12 months and 3.9% in 2022. This price action points to a volatile asset that rises and falls rapidly with the market. So what’s the reason behind this new spike in interest and should I invest in this medical research stock? Let’s find out. 

The rise and fall of Avacta shares

The pandemic-driven pharma boom is well documented. But Avacta was a huge winner, thanks to its timely antigen test kits that were effective detection tools. Its shares rose an astronomical 1,125% between March 2020 (when Covid was first declared as a pandemic) and May 2021. 

But the rise of variants meant the efficacy of the results dropped, causing the company to pull its test kits from the market in early 2022. Subsequently, the Avacta share price fell 86% to 42p. 

However, in recent weeks, this pharma stock has made a big comeback. Here’s what happened and my verdict on the stock. 

Big developments

Avacta is still primarily a clinical-stage biopharma firm with a focus on cancer detection and treatment. While it has a few other divisions, its most promising oncology treatments are still under development. 

Right now, oncology is one of the fastest-growing medical sectors. The market for such treatments is growing at a compound annual rate of 9.6%, which will generate $292.8bn by 2028. 

And a recent update from the board showed some significant developments in bringing these cancer treatments to market. While it will still take a decade before Avacta’s new AVA6000 chemotherapy system reaches the market, the prospects are promising. 

The innovative treatment focuses on reducing the toxicity of chemotherapy on healthy cells by strengthening its tumour-targeting properties. This is done with the help of a protein marker that’s present in high amounts in cancerous cells. 

The update shows that the treatment will move to Phase II by the second half of 2023. This was earlier than first expected and shows me that Phase I dose escalation data has been favourable so far. 

At the same time, the company also rolled out updates on several key partnerships. Its ongoing relationships with LG Chem Life Sciences and Daewoong Pharmaceuticals both received positive updates. Results from these partnerships are expected to boost the disease detection product line of Avacta over the coming decade. 

Concerns and verdict

Positive business developments and the UK market rebound have triggered this recent jump in Avacta shares. But I don’t think the current growth rate can be sustained without visible financial results. Even if trials are completed, bringing new cancer treatments to market is no easy task. It could take years to reach profitability. 

And financially, the firm is still loss-making, recording a pre-tax loss of £29m last year. This makes this AIM share a very speculative investment. The market is volatile right now and further economic distress in the UK could cause the FTSE 100 and other indexes to tumble. And while its future looks promising, I’ll wait for Avacta shares to show signs of sustained growth across the rest of 2022 before I consider a small investment in 2023. 

The post Up 173%, can Avacta shares continue this incredible run?   appeared first on The Motley Fool UK.

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Suraj Radhakrishnan 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.

Despite having seen its share price rise nearly 10% from the beginning of the year, GlaxoSmithKline (LSE: GSK) has had a turbulent past 18 months. Although the FTSE 100 stock saw a rise in its share price after Elliott Management announced back in April that it had built a large stake in the pharmaceutical giant, over the past year the stock has underperformed compared to competitors. So, does this present an opportunity to get a hold of cheap shares?

GSK latest results

In its Q2 results, released at the end of July, GSK reported 6% growth in sales from Q2 2020. This was mainly due to vaccine sales, up 39% for the quarter. On top of this, the firm also offered a solid outlook for the period. For example, it had a positive phase III result for medical treatment for chronic kidney disease. CEO Emma Walmsley highlighted how the positive results from the latest quarter would provide momentum for the second half of the year and beyond. This is positive news for investors.

With that said, not all of the results provided as much reason for optimism. Total earnings per share (EPS) came in at 27.9p for Q2, 39% lower than EPS for Q2 2020 (45.5p). GSK also offered adjusted EPS for Q2 2021. This metric strips out non-recurring components, such as disposals. Adjusted EPS for Q2 came in at 28.1p, an improvement on the 19.2p for Q2 2020. Half-year sales were down 7%, while profits also took a slight hit. This mixed bag of results may reflect the inconsistency witnessed recently in the FTSE 100 stock’s share price.

Elliott Management

As an activist fund, Elliott has not simply bought its large stake in GSK to sit back and relax. Instead, it will be actively pursuing ways to increase the value of the company — and therefore, the share price. A factor like this is highly persuasive for me when considering whether to buy the shares or not. Not only is the presence of an activist fund enticing for me, but I also think GSK has the potential to thrive with the correct guidance. The stock has experienced a decline in its share price, yet the firm possesses strong qualities such as a strong brand and large workforce, which in the future could allow it to succeed.  

Another factor is the recent decision to split GSK into two divisions: a consumer healthcare business and a biopharma business. I think this will boost performance, allowing the respective businesses to streamline their operations.

So, should I buy?

Although the GSK share price has been far from exciting over the past 12 months, I think the business could see a bounce back in the future. The stock has a solid foundation, and if all goes to plan, the split, planned for 2022, should further boost growth. What worries me is its inconsistency and pretty poor long-term performance. The Elliott investment should provide a lift, but there are certainly no guarantees of this – and its long-term record proves this. For this reason, I’ll be avoiding GSK shares for the time being.

The post Should I buy this FTSE 100 stock? appeared first on The Motley Fool UK.

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Charlie Keough has no position in GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. 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.

The rising share price

To be clear Open Orphan is not a drug developer. It actually, provides services to large pharmaceutical companies like Pfizer and Johnson & Johnson to assist in the execution of clinical trials.

The firm specialises in vaccine and anti-viral testing. This has been in rather high demand recently due to the pandemic. So it’s not surprising that Open Orphan was the first to run Covid-19 human challenge trials under a £46m contract with the UK Government last October.

What’s more, the management team believes that governments and pharmaceutical companies are now investing considerably more capital into vaccine development programmes in order to be better prepared when the next global pandemic hits in the future.

Consequently, the vaccine development market is expanding considerably. And needless to say, this provides many more opportunities for the business and the ORPH share price to grow. Even more so now that it has launched its Disease In Motion platform. This new project allows its clients to access a vast database of clinical, immunological, virological, and digital biomarkers that can significantly accelerate various steps in the drug development process.

Some risks to consider

I’ve previously discussed the highly regulated nature of the pharmaceuticals industry. And while Open Orphan is not directly developing any drugs of its own, it is still subject to the same regulations surrounding clinical testing. These rules create complexities and high expenses. But they also protect patients’ health and safety.

While I believe it’s unlikely, if the firm fails to meet the regulatory standards, there would be severe legal consequences as well as reputational damage. So much so that I doubt its clients would continue using its services, especially when there are a vast number of alternative CROs.

The company performed admirably in 2020 and even reached profitability in the last quarter. But based on the current revenue forecasts of £29m for the year, the ORPH share price looks a bit expensive to me. By comparison, the firm’s current market capitalisation sits at around £290m. Thus placing its price-to-sales ratio at a relatively high value of 10.

The bottom line

The sudden surge in the ORPH share price appears to be strongly linked to shareholder expectations rather than fundamentals. Experience has taught me that this often leads to short-term volatility and a higher level of risk.

However, over the long term, Open Orphan looks to me like a business whose services should never fall out of fashion. Also, I believe its Disease In Motion platform grants it some significant competitive advantages versus other CROs. Therefore, while risky, this is a growth stock I would consider adding to my portfolio.

The post The Open Orphan (ORPH) share price is surging. Should I buy now? appeared first on The Motley Fool UK.

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Zaven Boyrazian does not own shares in Open Orphan. 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.

The company, which manages, sells and distributes pharmaceutical products, reported a “strong financial performance” over the year to the end of June, with contract wins in Africa and the Asia Pacific region as well as good trading at its Commercial Medicines division.

Revenue moved 28% higher at constant currency to £381.2m with adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) increasing by 19% to £76m. Pre-tax profit came in at £35.9m — a stonking 155% higher than in 2017. 

In addition to these positive numbers, Clinigen has acquired the global rights outside of the US to kidney cancer therapy Proleukin since the end of the reporting period. The global rights to infection-fighting drug Imurkin outside the US, Canada, and Japan were also secured as part of its ‘buy and build’ strategy. 

So why were the shares 10% lower this morning? It all seems to be down to the company’s decision to conduct a placing to institutional investors to raise up to £80m. This cash will then be used to part-fund the $150m purchase of packaging, labelling, and warehousing specialist CSM. In addition to this purchase, Clinigen also announced that it would be buying privately owned Swiss-based pharmaceutical business iQone for €7.5 million. 

While some investors may be a little concerned by this spate of buys, it’s worth pointing out that the integration of rival Quantum Pharma — purchased last year — has already generated £1.1m in cost synergies. 

Other than that, there doesn’t seem too much to worry about. Indeed, according to CEO Shaun Chilton, 2018/19 is likely to be “another year of good progress” for Clinigen as it attempts to “capitalise on the substantial long-term growth opportunity” in its markets.

Given this, a valuation of 17 times earnings for the new financial year (before this morning’s fall) already looked reasonable to me.

I’m inclined to regard today’s dip as an opportunity for new investors to climb on board. 

Buy on the dips

Another growth stock I remain positive on is veterinary services provider CVS Group (LSE: CVSG), despite concerns over whether the company can continue to recruit enough staff following Brexit.

Today’s full-year figures for the 12 months to the end of June (which included a 3.2% fall in pre-tax profit to 14.1m) haven’t been particularly well received by the market, even though the company did already signpost being cautious on earnings some time ago.  

Personally, I still think there’s a lot to like. Revenue moved 20.4% higher to £327.3m with like-for-like sales rising 4.9%. Adjusted EBITDA was 13.3% higher at £47.6m and there was also an encouraging 18.3% rise in owners signing up to its Healthy Pet Club loyalty scheme, bringing total membership numbers to 362,000.

No stranger to acquisitions, CVS purchased and integrated 52 surgeries over 2017/18 with another 16 secured after the end of the financial year. This now brings its entire estate to 491 surgeries. Make no mistake, it’s a major player in what it does. 

At 20 times earnings for the new financial year, the company isn’t cheap considering its rapidly growing debt pile (due to the aforementioned acquisition spree) but its valuation is certainly a lot more attractive than this time last year.

Once short-term issues are resolved, I’m confident the share price will recapture its lost form. 

The post Have £2,000 to spend? These out-of-favour growth stocks could still help you retire early appeared first on The Motley Fool UK.

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Paul Summers 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.

What that means is you’ll be able to invest up to £20,000 in your ISA in the 2018/19 tax year, and you won’t have to pay a penny in tax on any money you take out — regardless of how well your investments grow.

Now that’s a significant sum and not many people will have that much to spare to invest every year, but using up as much of the allowance as you can is very much to your advantage.

It’s good to utilize as much of your existing 2017/18 ISA as you can in the next few weeks. But what should you then consider for the new one?

Cash is king

You might be surprised to learn that I rate the banking sector highly, despite the crash that knocked our economy for six. But it’s arguable that we really did need that short-term shock in order to shake up the excesses of the banking business, and I reckon we’re looking at a far safer sector than we’ve seen for decades.

My favourite of the big banks is Lloyds Banking Group, which is back to paying healthy and growing dividends, with yields of better than 6% currently forecast. There’s even been a bit of share price growth over the past five years, of 34%, and the shares are still lowly valued on a P/E of under nine.

HSBC Holdings is offering better than 5% and there’s decent earnings growth on the cards. Even Barclays shareholders are seeing a return to dividends — the yield is expected to reach only around 3.7% by 2019, but it’s growing rapidly and should be very well covered by eanrings.

I’d consider the smaller “challenger” banks too, which are sticking to safe UK-centric retail banking. Virgin Money Holdings is looking good value to me, on P/E multiples of under eight and with dividends modest at around 2.5%, but growing ahead of inflation.

Growing demand

The pharmaceuticals sector has also long been a favourite of mine, as demand for health services from ageing Western populations, coupled with increasing wealth in developing nations, should keep the profits rolling in.

The UK’s top two, GlaxoSmithKline and AstraZeneca, are still getting over recent hits through the expiry of some key patents and the resulting stiffer competition from generic alternatives, but both have been investing heavily in their drug development pipelines. 

And again, we’re looking at long-term generators of cash. Even throughout the patent-led down spell, both the giants kept paying out dividends that were firmly ahead of the FTSE 100‘s long-term average. 

As a return to earnings growth is edging closer for AstraZeneca, analysts are forecasting dividend yields of 4.3%. They wouldn’t be well covered yet and there is a bit of risk there, but I see underlying long-term safety.

And at GlaxoSmithKline, which has already recovered to put in a couple of years of growth, the prognosis is for yields of better than 6%.

There are also plenty of newcomers to the pharma and biotech fields, which are researching potentially exciting areas, if you want to add a bit of excitement to your ISA. But if you went for one of the biggest and best from each sector, I think you’d be off to a great start.

The post Why I’d stash banking stocks and pharma stocks in my 2018 ISA appeared first on The Motley Fool UK.

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Alan Oscroft owns shares in Lloyds Banking Group. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca, Barclays, HSBC Holdings, and Lloyds Banking Group. 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.

Big pharmaceuticals such as GlaxoSmithKline, AstraZeneca and Shire earn the label ‘defensive’ because their underlying businesses tend to be good at generating incoming cash flow whatever the general economic weather. Selling medicines is a classic consumer goods set-up. Customers return time and again for their drugs, rarely missing a purchase just because economic times might be tough, which is great for investor dividends.

Big banking firms such as HSBC Holdings, Lloyds Banking Group and Barclays fall into the category of ‘cyclicals’ because their underlying businesses tend to thrive or shrivel depending on the health of wider economic cycles. Instead of the constant cash flow we see with defensives, cyclicals often suffer from plunging cash flows and falling share prices when economic times are hard, which is bad for investor dividends.

An emerging opportunity and a constant threat

Defensives are becoming cheaper because their share prices have been falling for the past year or so, mostly because valuations had risen too high. These also tend to fluctuate in a cycle of their own. When economic times are uncertain — such as over the past 10 years since the credit crunch — investors find the stability of defensives attractive and they buy their shares, driving share prices up. On top of that, interest rates have been low for so long that we’ve seen the so-called bond-proxy trade go something like this: “I can’t get a decent rate of interest on bonds or from bank accounts but look at those juicy dividend yields from defensive shares over there!”

Valuations of defensive firms appear to be cycling down right now. I think we’re seeing an investor rotation out of pricey defensives, such as big pharmaceutical stocks, and into cheap-looking cyclicals, such as big banking stocks. The general economic outlook is quite good, and the valuations of cyclical firms have looked low for some time. But I think there is a good reason for the market assigning a low valuation to the big banks and other cyclical firms. The market knows their profits tend to cycle up and down, and profits have been high for the banks and other cyclicals for some time. So, I think the market is keeping a lid on big bank valuations right now in anticipation of profits cycling down again at some point.

Yet economies are doing well and interest rates are on the rise. One argument goes that banks thrive in a higher-interest-rate environment. Maybe so, but I’m not expecting interest rates to shoot the lights out in the current macro-cycle, and I’m not expecting the market to raise the valuations of banks to growth-style ratings. I am, however, expecting a cyclical plunge in banks share prices, profits and dividends at some point. Such an event may be years away, but it’s still a threat. To me, the compelling retirement investing opportunity hidden in the banks-versus-pharma stocks debate is with the pharmas, and I’m ready to pounce.

The post Should you invest in banking or pharma stocks for retirement right now? appeared first on The Motley Fool UK.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca, Barclays, HSBC Holdings, Lloyds Banking Group, and Shire. 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.

Blockbuster potential

Over the last three months, shares in the AIM-listed company have climbed more than 200% in value as anticipation grows over the outcome of a Phase III clinical trial for Lupuzor — its 100%-owned potential treatment for Lupus.

Approximately five million people are believed to suffer from the chronic and potentially life-threatening autoimmune disease that can be a notoriously difficult to treat. In the last 50 years, only one therapy — GlaxoSmithKline‘s Benlysta — has been approved for use, despite its questionable efficacy and serious side-effects. In 2015, the drug achieved sales of over $400m. By 2020, this figure is expected to rise to $1bn.

Positively, data from Lupozor’s Phase IIb trial indicated that ImmuPharma’s treatment — which modulates rather than blocks the immune system — was both effective and safe. Moreover, the effectiveness of Lupuzor increased even after the three-month trial’s conclusion. Investors will be hoping that the 52-week, randomised and double-blinded study currently in progress (involving patients in the US, Europe and Mauritius) yields similar results.

In its most recent update on 21 December, the company revealed that all 200 participants had now received the full 12-month dosage and that the “robust safety record” shown in earlier trials continues to be seen. According to Chairman Tim McCarthy, the company looks forward “with continued confidence” to reporting on top-line results in Q1 of next year. 

In the event of a positive outcome, ImmuPharma will then seek to exploit its Fast Track designation and push for approval from the Food and Drug Administration (FDA). Once received, the company would then be free to seek out a global licensing deal for taking Lupuzor to market or — perhaps more likely — consider takeover bids by deep-pocketed pharmaceutical giants at a price befitting its blockbuster potential. Given the suggestion that it could be used in the treatment of other diseases, the price could easily be in the billions of pounds. Right now, ImmuPharma’s market cap is a little over £200m.

Tempted? If so, it’s vital to consider the flip side of this investment.

A word of warning

Despite the encouraging outcomes of previous trials, the possibility of the drug failing to impress still remains. Plenty of highly promising treatments have disappointed at the last hurdle, resulting in significant capital losses for investors. Unless you’re willing to embrace this level of risk, Immupharma shouldn’t even make it on to your watchlist, let alone into your portfolio.

That’s why — as a holder of its stock — only a small proportion of my capital is invested in the company. This money can be lost. I might grumble and curse but — thanks to a degree of diversification — I won’t lose my shirt.  

That said, if — and it remains a sizeable ‘if‘ — Lupuzor proves effective (or at least more efficacious than Benlysta), I’m confident that ImmuPharma could generate huge wealth for investors in a very short time period.

No investment is devoid of risk but only you can decide whether this is one worth taking.

The post This promising small-cap stock could be a millionaire maker in 2018 appeared first on The Motley Fool UK.

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Paul Summers owns shares in ImmuPharma. 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.

Get-rich-quick schemes

In an age of short-termism and get rich quick schemes, sensible investors know that the first step in generating sustainable long-term wealth lies in capital preservation. It’s for this reason that companies like Glaxo often form part of the core of many well-balanced portfolios, helping to steady the ship in times of political and economic uncertainty.

Along with other defensive sectors such as consumer goods and utilities, multinational pharmaceuticals are less likely to be affected by unforeseen events such as Brexit, or a surprise election win by Donald Trump. Both equity markets and currency markets can collapse and bounce back at a moment’s notice, but these sectors are generally less sensitive to or volatile on the back of such unpredictable political events.

Income investors in particular have had a long-term love affair with Glaxo. Thanks to its capacity to generate enormous profits from worldwide sales each year, the FTSE 100 stalwart can afford to reward its shareholders with generous quarterly payouts that have helped to support the company’s share price through a period when patent expiries have led to increased levels of generic competition for some of its treatments. But what about the future? Is there any hope of growth in such a competitive market?

New York, New York

Commentators like myself had to wait until noon today to get a glimpse of Glaxo’s third-quarter results, rather than the usual 7am regulatory news releases we’re accustomed to here in the UK. The reason? Glaxo is also traded on the New York Stock Exchange (NYSE), and noon equates to 7am Eastern Time. Further proof if it were needed that Glaxo is a true pharmaceutical goliath revered on both sides of the Atlantic.

Today’s results showed continued progress during the third quarter of 2017, with growth in sales and improved operating margins. This was driven by targeted cost savings and restructuring and integration benefits, which in particular helped the Vaccines and Consumer Healthcare businesses, and also supported investment in its new products and Research & Development pipeline. There were also major approvals for its Trelegy Ellipta treatment for Chronic Obstructive Pulmonary Disease (COPD) and shingles vaccine Shingrix.

New product sales up 44%

Pharmaceutical sales were up 3% during the quarter, reflecting continued strong growth of new Respiratory and HIV products, partly offset by a decline in the older products and the impact of recent divestments. Vaccine sales were up 5%, with a strong performance from Meningitis vaccines and continued delivery from influenza products. Consumer Healthcare sales were up 5%, reflecting strong performances from power brands in the Pain and Oral health categories.

But for me, what was most encouraging of all was that sales of new pharmaceutical and vaccine products were up by an impressive 44% to £1.7bn, with total group turnover rising 4% year-on-year to a mammoth £7.8bn.

So is Glaxo still a strong buy after third-quarter results? With its defensive qualities, attractive valuation at less than 14 times forward earnings, and juicy 5.3% yield, the answer has to be a resounding YES.

The post Is GlaxoSmithKline plc still a strong buy after Q3 results? appeared first on The Motley Fool UK.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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.

A new lease of life

The Oxford-based speciality pharmaceuticals business sells its novel, market-leading NIOX asthma management products directly to specialists in the UK, US, and Germany, and in a wide range of other countries through its network of partners. The company has also recently established a promising collaboration with AstraZeneca in the US in which it promotes the chronic obstructive pulmonary disease (COPD) treatment Tudorza, and has the US commercial rights to late-stage COPD product Duaklir.

Throughout 2017, Circassia has continued to build on the changes it began last year following the disappointing phase III results for its lead allergy product. Since then, the company has halted investment in the allergy field, significantly expanded its commercialisation platform, and completed a major commercial transaction with AstraZeneca. With a period of dramatic change behind it, Circassia now has a strong commercial infrastructure, growing revenues, advancing pipeline and a robust balance sheet.

All of which is good news. But the company’s shares have yet to recover from last year’s disappointing clinical trials. However, I have hope for the future. The change in focus and partnership with AstraZeneca makes me optimistic that this new lease of life can transform Circassia into a profitable business, and propel the share price back to where it truly belongs.

Poised for a comeback

Despite Circassia’s long-term potential, risk-averse investors may nevertheless steer well clear of what is essentially a small-cap pharmaceuticals business that has yet to prove it can turn a profit. Such investments are not exactly the bedrock of a solid retirement portfolio.

Perhaps a more comfortable option for growth-focused investors would be Hikma Pharmaceuticals (LSE: HIK).

But Hikma has had its challenges. The FTSE 250 firm’s share price has been knocked back in recent months with investors concerned about the intense levels of competition for generic drugs in the US. The impact has been dramatic, with  the shares now trading a whopping 57% lower than last summer’s peak of 2,676p.

Poised for a comeback?

Yet Hikma is much more than just a generic drugs firm, with its injectable and branded drugs businesses contributing 65% to overall group revenues during the first half of 2017. Geographical diversity should also help to offset fierce competition in the US. The group is a market leader in the Middle East and North Africa region, as well as having significant sales in Europe and the rest of the world. This geographical diversity should help to counter the effects of tougher competition across the pond.

With an uncharacteristically low price-to-earnings ratio of 15, I believe Hikma’s shares could be well-poised for a dramatic comeback.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca and 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.

This is exactly why GlaxoSmithKline (LSE: GSK) is the only pharma stock I’d ever own. Unlike peers such as Shire or AstraZeneca, which are pureplay pharma companies with all the upside and downside that entails, GSK offers exposure to the benefits of the sector, while cushioning the drawbacks with profitable, steady-as-she-goes divisions selling vaccines and consumer healthcare staples such as toothpaste and pain relief tablets.

In H1 2017, these non-pharma products accounted for 42% of group revenue and were actually growing quite nicely. Vaccines revenue was up 23% year-on-year (y/y) and consumer healthcare sales up 13% y/y at actual exchange rates, which were helped considerably by the weak pound.

On top of the steady growth from these divisions, GSK investors also gain access to the company’s array of top-notch pharma products. The company’s respiratory treatments brought in £3.4bn in sales in H1 and are growing nicely, while new HIV treatments were going gangbusters with sales up 32% y/y to £2.1bn.

The combination of steady growth from the non-pharma products with the potential of new pharma blockbusters has proven to be a winning combination, with group sales up 14% y/y in H1 at actual exchange rates and 4% on a constant currency basis. The company’s management team is also putting an increased emphasis on increasing profitability, which is paying off already with adjusted operating margins rising to 27.6% in H1.

Furthermore, with its shares trading at a sedate 13.5 times forward earnings while kicking off a safely-covered 5.3% dividend yield, GSK is priced as a value stock while offering considerable long-term growth potential that only adds to my interest in this relatively safe pharma pick.

A high-risk, high-reward option?

One pureplay pharma stock that exemplifies the roller coaster ride investors can be in for is Vernalis (LSE: VER). The company has spent heavily in recent quarters in preparation for launching its first cough and cold treatments in the massive US market. In the year to June, investments in a large sales staff were beginning to bear fruit with American revenue rising from £1.1m to £2.1m y/y.

Unfortunately, even though the volume of prescriptions for its drugs in the US is rising rapidly, the revenue has yet to translate into bumper profits. Indeed, during the year, pre-tax losses rose to £21.6m from £17.1m in 2016, reflecting both operating expansion into the States and pressure from generics on a European partner’s product sales. For the time being this isn’t a huge worry as the £61.3m of cash on hand at the end of June will cover several years of expansion.

However, while the growth prospects for its American sales are high, investing in a £100m market cap, heavily lossmaking pharmaceutical company is not for risk-averse investor or those like me who don’t know the ins and outs of the drugs and their market like the back of their hand.

The post Why GlaxoSmithKline plc is the only pharma stock I’d ever own appeared first on The Motley Fool UK.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca and Shire. 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.