Sector Spotlight: Pharmaceuticals & Biotechnology

In this investor spotlight, I look at  Pharmaceuticals & Biotechnology, are there any opportunities for investors.

Article updated: 5 February 2021 10:00am Author: Michael Baxter

I happen to think that Pharmaceuticals & Biotechnology is a particularly exciting sector. In fact, I think some significant opportunities are lurking in the Pharmaceuticals & Biotechnology sector. But there are many companies listed in the sector, how do you find the truly exciting ones?

For this report, I am only looking at companies worth over £100m and am focusing on companies that piqued my interest. This is just meant to be a taster, do your own research before investing.

I have also excluded some very big companies such as GSK and Astra Zeneca. I am not saying they are not good investments — instead, I wanted to focus on less obvious companies, although some of the firms I am looking at have substantial valuations. 

Here goes:

Silence Therapeutics

Silence Therapeutics has been listed on the stock market since 1996. The share price peaked at 27,000p or so in the year 2000 almost 50 times greater than the current share price. Yet, the company is still loss-making — it lost £23 million last year.

So why do I include it? 

In one respect it ticks the very box I am looking for. It may have been working on its technology for a long time, but conditions are now right for technologies such as that which Silence Therapeutics applies to come into its own. The company describes itself as an RNA therapeutics company. There are few areas in healthcare technologies I think are more exciting.

Whether Silence Therapeutics is the right company for optimising this technology, however, only you can determine.

Share price 522p
One year high 526p
Five year high (2019) 540p
Change last 12 months 47%
Change last five years 248%
Market cap £m 435
Yield % N/A
P/E -20
Total assets/total liabilities 1.8%
net assets £m  21

Avacta 

Revenue at Avacta has trebled in the last five years — that got my interest. But losses have grown during this period.

But what really got me to sit up is what the company does. To quote: "Avacta is developing novel cancer immunotherapies combining its two proprietary platforms – Affimer® biotherapeutics and pre|CISIONTM tumour targeted chemotherapy."

As is the case with Silence Therapeutics, it specialises in a fascinating area. 

Share price 140p
One year high 202p
Five year high (2020) 202p
Change last 12 months 678%
Change all time 10,426%
Market cap £m 354
Yield % N/A
P/E -16
Revenue growth since 2015 205.6%
Pre-tax profits growth since 2015 Loss making
Total assets/total liabilities 10.8%
net assets £m  26

Circassia

Circassia is a speciality biopharmaceutical company focused on the development and commercialisation of a range of immunotherapy product candidates for the treatment of allergy. The company has recently restructured. 

Revenue has increased roughly six-fold in five years, but it is still loss-making, although it took a Covid related hit in the last six months. 

It says: "Asthma affects millions of people worldwide and is the most common chronic childhood disease. Our NIOX® products help physicians measure and monitor airway inflammation, helping to improve diagnosis and management of their patients' asthma."

Recently, Ian Johnson, Circassia's Executive Chairman, said: "The decision to hand back the COPD products and focus the Group's activities on NIOX® has led to a significant reduction in the cost base of the Group reflecting its smaller size, reduced complexity and lower regulatory risk profile."

Share price 29p
One year high 32p
Five year high (2016) 312p
Change last 12 months 45%
Change last five years -91%
Market cap £m 113
Yield % N/A
P/E -2
Revenue growth since 2015 463.6%
Pre-tax profits growth since 2015 Loss making
Total assets/total liabilities 1.5%
net assets £m  85

4D Pharma 

First listed in 2014, 4D Pharma is still loss-making. It says of itself: "We are pioneers in harnessing bacteria as a revolutionary new class of medicines – called live biotherapeutics."

And what is it's unique selling point? It says: "We understand that the bacteria of the gut microbiome have an important function in health and disease, but importantly – we understand how they function, and how they could be used as potential new therapies."

Share price 123p
One year high 174p
Five year high (2016) 1,005p
Change last 12 months 23%
Change last five years -85%
Market cap £m 162
Yield % N/A
P/E -3
Total assets/total liabilities 3.9%
net assets £m  22

Dechra Pharmaceuticals 

This £3.8 billion company has seen revenue double and pre-tax profits almost treble in the last five years.

Dechra describes itself as "a global specialist veterinary pharmaceuticals and related products business." It says: "Our expertise is in the development, manufacture, marketing and sales of high-quality products exclusively for veterinarians worldwide."

Share price 3,514p
One year high 3,574p
Five year high (2020) 3,574p
Change last 12 months 17%
Change last five years 233%
Market cap £m 3,800
Yield % 0.98
P/E 107
Revenue growth since 2015 107.7%
Pre-tax profits growth since 2015 173.3%
Total assets/total liabilities 2.1%
net assets £m  638

Ergomed 

With both revenue and profits more than doubling over the last five years, this company immediately grabbed my attention.

It was first listed in 2014, and shares have increased almost eight-fold since then.

Ergomed works with pharmaceutical companies in helping to assess new drugs. It says that it is "dedicated to the provision of specialised services to the pharmaceutical industry and the development of new drugs. Operating with a global footprint in over 100 countries, Ergomed enables our clients to access solutions even for their toughest clinical development and trial management challenges from early phase to complex late-stage programmes. Ergomed has provided and managed clinical development, trial management and pharmacovigilance services for over 200 clients: these range from top 10 pharmaceutical and generics organisations to small and mid-sized drug development companies."

Share price 1,200p
One year high 1,200p
Five year high (2020) 1,200p
Change last 12 months 195%
Change last five years 576%
Market cap £m 560
Yield % N/A
P/E 96
Revenue growth since 2015 126.7%
Pre-tax profits growth since 2015 138.1%
Total assets/total liabilities 2.9%
net assets £m  37

Oxford Biomedica 

Revenue has quadrupled in five years, but the company is still loss-making, although this company has been listed since 1998, and things haven't always gone to expectations.

Oxford Biomedica has gene and cell therapy product candidates in the areas of oncology, ophthalmology and CNS disorder.

Frankly, I am not surprised that it has taken so long for this company to look interesting — after the dotcom hype phase. Gene and cell therapy is only just beginning to look like fulfilling the promise from 20 years ago.

Excuse the pun, but when it comes to technology in the healthcare or patient business, investors need patience. 

Share price 1,016p
One year high 1,048p
All time high (2020) 1,048p
Change last 12 months 51%
Change last five years 173%
Market cap £m 836
Yield % N/A
P/E -46
Revenue growth since 2015 300%
Pre-tax profits growth since 2015 Loss making
Total assets/total liabilities 2.6%
net assets £m  76

All prices are approximate figures taken from 8 January 2021.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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