Be bold when picking stocks in the healthcare sector says Peel Hunt, which has cast its eye over the small and mid-cap opportunities and suggested three favourites.
The COVID-19 pandemic has seen interest, investment and share prices bound ahead across healthcare and this bodes well for the medium- to long-term outlook.
In the coming year, though, Peel Hunt suggests a recovery in other sectors from COVID-19 elsewhere might grab investors’ attention, hence the focus in healthcare should be on those companies developing the next-generation therapies, new approaches to drug delivery and big data and AI-driven tools.
On that basis, house stocks Sensyne Health PLC (LON:SENS 'buy' with a target price of 349p), Oxford Biomedica (LON:OXB 'buy', TP 1,200p) plus PureTech Health (LON:PRTC 'buy', TP 930p) are the best bets, suggests the broker.
The link between the three is the transformative potential of their technology platforms.
Sensyne’s clinical AI expertise, and its access to one of the richest and best-structured healthcare datasets in the world, underpins a business model which enables healthcare providers to monetise their patient data sustainably and ethically while improving discovery research and reducing drug development timelines.
Recent strategic collaborations, and the first US launch of one of its leading software products in December, support the broker's expectations of a hockey-stick in revenues over the next 12-18 months, and base case/bull case upsides of 2.2x and 6x respectively.
Oxford Biomedica’s role as main UK manufacturer of the AZN/Oxford vaccine has cemented its reputation as a world leader in viral vector expertise, boosting capacity and broadening its capabilities.
Full de-risking of the publicly disclosed pipeline represents an order of magnitude of upside in the analysts' bull case.
PureTech’s internal pipeline is advancing swiftly, with major clinical catalysts due in the second half leading Peel Hunt to double its base case valuation for 2.4times upside to our target price.
Other 'buy' recommendations include Arix Bioscience PLC (LON:ARIX TP 256p) and Ergomed (LON:ERGO TP 1,210p) where its growing foothold in the US gives it the ammunition to leverage cross-selling opportunities between its two divisions.