Focus: Pharma

Tuesday, 3rd January 2017 09:44 - by Moosh

Those of you who have been with me for a few years will have watched with me the price appreciation of a few pharmaceutical/bioscience companies.

I had long been a supporter of Cyprotex for a number of years and followed a triple annual revenue model to estimate a reasonable potential takeover price. In Spring 2015 Cyprotex had been around 50-60p but over the next 18 months it’s price gradually crept up as the fundamentals of the company strengthened and investors eventually took notice of them. The company was eventually taken over at a price of ~160p which was still undervaluing it on a triple annual revenue basis but it was the highest price for Cyprotex ever since I have been following the company since 2010 so all recent buyers of it would have profited well from the investment had they had faith in the fundamentals. Tony Baxter (former CEO) did a tremendous job to tame the fundamentals at the appropriate time and made a determined effort to streamline operations and generate value for investors in such a short term frame, but these efforts had long term benefits for the company so it’s no wonder that it was taken over. It’s nice to follow an investment through on a long term basis like this because it really brings home what investing is and should be about – the long term view, the slow burn. It’s impossible to build a business overnight and strong businesses do require solid foundations and these can only be laid down early in the life of a business so that real growth can then be realised in the future.

The next pharmaceutical success which I have been a long term fan of in my blog has been Beximco Pharma (BXP). I have been championing BXP from its days during the long term downtrend and was buying tranches from 13p upwards a few years ago. Over the last week the price rose to 58p+ and this rise too has been long (a few years) and has been in line with a growing story of fundamentals for BXP. The story is not over for BXP by the looks of recent positive news flow, but for me, the story has ended. I am no longer a shareholder since it’s not in my jurisdiction regarding what I like to plump for – recovery plays. I wish the company well and congratulate them on surviving the post-recession slump and telling their story of growth in a timely fashion in order to keep shareholders hooked. Bravo!

A company which I have been following for a while now which I have been adding to during the recent slump has been Juniper Pharmaceuticals (NASDAQ:JNP). I was particularly pleased with the drop in price following duff clinical trials because it gave me the opportunity to acquire more shares in JNP because I am following a triple annual revenue model to guide my buying decisions. I am particularly familiar with the type of contract work that the Juniper Pharma arm of JNP is associated with and have confidence that this part of the business can provide steady long term growth because when it was originally bought out, this subsidiary had shown 5 years of steady growth so I see no reason why this shouldn’t continue. It is my aim to build up a holding of JNP on a long term basis (10 years). If you have access to US markets and if your interest is piqued, then add JNP to your watchlist!

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.