Clinigen PLC (LON:CLIN) is one of only a few bright spots in a subdued healthcare sector according to broker Peel Hunt.
Headwinds such as the outlook for US drug pricing, broader macro concerns such as taxation policy and a strengthening US Dollar have kept the yoke firmly on mid-cap pharma shares over the past year.
In response, investors have been switching out of “riskier” pharma/biotech stocks into perceived safer havens such as lab tools and services players.
The broker sees little evidence that these trends will turn soon but argues companies where growth is relatively secure but with potential for some upside surprise still have appeal.
Clinigen fits the bill suggests Peel Hunt, which has a buy rating and has upgraded its target price to 1,015p.
Since June last year the share price has risen by 58% but there is more to come argues the broker and Clinigen is a core pick as a defensive GARP (growth at reasonable price) play.
“Defensive from being pharma aligned without significant pricing risk, while delivering solid EPS growth (2016- 20: 14%).
“Growth is being driven by increasing pharma out-sourcing and deeper synergies between divisions.
“The stock also offers exposure to faster growing pharmerging markets with potential for balance sheet utilisation through specialty product acquisition.”
Other companies to consider are ConvaTec PLC ( LON:CTEC), which is a buy with a 300p target, and Sinclair Pharma PLC (LON:SPH) with a target price of 68p.
ConvaTec’s secure mid single-digit top-line growth derives from its leading positions (1-3) across medtech consumables sub-segments and geographies.
“Low working capital and capex burdens see strong cash conversion, supporting a 35-45% dividend payout for a mid single-digit yield by 2020.”
Sinclair Pharma, meanwhile, is Peel Hunt’s favourite growth story in UK small & midcap healthcare.
“We see Sinclair as a way to play the “luxury goods” consumer market through healthcare.
“Sinclair is a pure-play on aesthetic dermatology, selling next generation minimally-invasive (injectable) products that provide subtle yet noticeable cosmetic enhancement (lifting and plumping) for significantly better results vs traditional fillers.”
Share prices today were 32p fpr Sinclair, 232p for ConvaTec and 825p for Clinigen.