Two weeks ago, I decided to hold back from adding more cyclical stocks into the SIF Portfolio.

My hope was that a defensive stock would become available in my screen results. This would allow me to reduce the portfolio’s long-running imbalance between cyclical and defensive stocks. I’m pleased to say that’s what has happened this week.

AIM-listed Alliance Pharma has been propelled into the Stock in Focus Screen following a strong set of interim results last week. This isn’t a company I’m very familiar with, so despite Stockopedia’s focus on the numbers, I’ve taken a little time to get up to speed with the firm’s story.

No R&D, just sales

Alliance Pharma is a pharmaceutical firm which specialises in buying products from other manufacturers and then marketing them. It doesn’t develop its own products. The company started trading in 1998, when it acquired a portfolio of 16 specialty brands from Novartis. It now has annualised revenues of more than £100m.

The group’s focus is on maximising the commercial returns from the products it acquires. Activities such as manufacturing and logistics are outsourced. Company founder John Dawson remains in charge of the business, which has grown through a series of 28 acquisitions.

One of the most significant deals was the £127.5m acquisition of a portfolio of products from Sinclair Pharma at the end of 2015. This added 27 products to the Alliance portfolio and contributed more than £40m of annual revenue.

Alliance now has a portfolio of 90 products, with sales in more than 100 countries. The bulk of these are “established niche prescription products”, which presumably have little in the way of competition.

Margins are high and the company appears to generate plenty of cash. Last week’s interim results showed that revenue rose by 8% to £50.3m, while underlying pre-tax profit edged higher to £11.9m. Net debt fell by 17% to £63.4m, and shareholders were rewarded with a 10% hike to the interim dividend.

The share price has doubled over the last five years and risen by 10% so far this year.

Stockopedia likes the shares too. At the time of writing, Alliance is the second-highest ranked firm in the Pharmaceuticals sector, with a StockRank of 80 and a style of Super Stock.

Improving value

Alliance Pharma’s StockRanks aren’t actually that…

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