Shares in small-cap drug delivery specialist Skyepharma have risen by 915% in five years. Results like this sometimes make me wonder why I tend to invest in value and income shares. Yet the truth is that five years ago this was a pretty risky investment. Skyepharma could have been one of the many small-cap pharma stocks that has since fallen by the wayside.
We now know that’s not likely, thanks to a strong product range and partnerships with big companies such as GlaxoSmithKline. However, this doesn’t necessarily mean that it’s too late to see big returns from a new investment in Skyepharma.
Gathering momentum
This firm’s specialty is drug delivery. Skyepharma doesn’t develop medicines of its own, it finds new ways of formulating and delivering existing drugs to patients, using in-house technology such as specialist inhalers and oral capsules.
Skyepharma’s latest results make it clear that the firm’s portfolio of young products are gathering momentum. Revenues rose by 19% compared to the first half of last year, while adjusted pre-tax profits rose by 17% to £9.1m.
One of the firm’s big hopes for the future is flutiform, which combines two established treatments for asthma in one inhaler. Skyepharma’s inhaler technology is also used under licence in a number of Glaxo’s respiratory treatments.
The firm is investing in additional manufacturing capacity for its flutiform product and expects trading for the year to be ahead of expectations. Sales of flutiform are 129% higher than during the same period last year, suggesting the product is gaining market share from alternative treatments.
In this week’s column, I’ll ask whether the data back up the market’s expectation that the shares will continue to outperform.
Elevated rank
At the time of writing, Skyepharma’s StockRank has risen by 36 places to 80 over the last 30 days. Value, Quality and Momentum ranks have all risen sharply.
This is a good example of how a single set of results plus strong price momentum can trigger major changes to a company’s StockRanks. This comes about because the StockRanks are calculated using sets of financial ratios, plus price and earnings momentum indicators.
Does this make Skyepharma a better stock than a month ago? Possibly not, but the difference is that bulls now have more evidence to back up…
