The UK life sciences sector is on a roll and offers a "rich vein" for investors to tap into, according to broker Stifel.
In a wide ranging note, featuring a raft of recommendations, analyst Max Herrmann and others noted that, the broker's 'UK small cap life sciences index' has grown around 250% over three years - 35% in the last year alone - well ahead of the wider UK pharma sector.
That growth has mirrored the strong surge in the US, he said, where the ‘IPO window’, which historically opened once every four years for around 18 months at a time, has now been open for the last three years.
Stateside, the NASDAQ Biotechnology Index (NBI) has delivered a total return of 280% over the past three years in comparison to London's broader S&P 500, which is up 55% over the same period.
The broker's top picks are Vernalis (LON:VER), target price 103p and Skyepharma (LON:SKP), target 460p, both of which have seen strong share gains over the last year.
It also has 'buy' ratings on Ergomed (LON:ERGO), Clinigen (LON:CLIN) and minnow Rex Bionics (LON:RXB).
Vernalis has been boosted last month by the FDA approval of its first cough/cold medicine Tuzistra XR at the end of last month, removing uncertainty. This is only the second branded 12-hour prescription cough/cold treatment to be approved in the US.
Skyepharma, the broker noted, still trades on a 2015 P/E of 14.6 times, a significant discount to its peers, and it believes there is further for the firm to go.
On specialty pharma group Clinigen, it has lifted the target price to 700p from 650p, saying it has delivered significant value since floating in 2012.
"The recent £225mln purchase of Idis is earning enhancing, reduces the dependence of Clinigen on its key product Foscavir and gives Clinigen a leading position in the fast growing market for ethical unlicensed drug supply," said Herrmann.
On Rex Bionics, the analyst said that, after delays to achieving commercial sales of its robotic exoskeleton, the group has now started to expand its commercialisation activities and has begun the clinical trials necessary to establish significant market traction.
It targets a price of 150p, which is more than double the price of 61p.
Elsewhere, fast growing pharma services and drug developer Ergomed (LON:ERGO), which also floated last year is a business which Stifel believe remains undervalued.
The target price is 218p.