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Most ASX pharmaceuticals are small caps that are working on a medical treatment that they hope to bring to market. But a handful of companies have products out on the market. And the top stock (Blackmores) looks set to be delisted having accepted a takeover offer.
In this article, Stocks Down Under recaps 2 other well-positioned ASX pharmaceuticals that investors may want to consider.
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Why you might consider ASX pharmaceuticals
The pharmaceutical industry is an attractive option for stock investors due to its long-term potential for growth. The industry benefits from strong consumer demand, as people require ongoing medication and treatments for a variety of ailments. Additionally, the ability of pharmaceutical companies to continuously develop new products to treat unmet medical needs gives them a competitive edge in the stock market.
Furthermore, the pharmaceutical sector can provide great returns even during times of economic uncertainty. Pharmaceutical drugs are often essential items that people cannot go without, meaning demand for them usually remains relatively steady when other industries suffer in a recession.
Moreover, many governments subsidize drug costs so that it’s affordably accessible for citizens, further ensuring a consistent level of sales despite economic conditions. Finally, the regulatory environment in this sector has become more favourable over time due to deregulation in several jurisdictions that helps speed up approvals for drugs and reduce the costs of R&D.
This makes it easier for companies to bring new products to market and increase their profits, which is reflected in stock prices over time. Nonetheless, investors may find it difficult to find good stocks now that industry giant Blackmores (ASX:BKL) looks set to be taken over. So what is left?
Our top 2 ASX pharmaceuticals
1. Probiotec (ASX:PBP)
This pharmaceutical company provides contract manufacturing services to global behemoths, such as Pfizer and L’Oreal.
In 1HY23, it made record revenues of $106.8m (up 25% from 12 months ago and slightly ahead of guidance), EBITDA of $17.2m (up 16% and again ahead of guidance) and a dividend of 3c per share (representing a modest 2.2% yield). For the full year, it is expecting $205-$215m in sales and $34.5-$36m EBITDA due to recent business wins and the easing of labour shortages and supply chain disruptions.
Shares have been on a run lately due to speculation that it might be taken over, but no comment has been made the company.
2. AFT Pharmaceuticals (ASX:AFP)
This dual ASX-NZX listed pharmaceutical firm is both a drug developer and commercialiser. It was founded and is still operated and 70%-owned by the Atkinson family and recorded a sales CAGR of 18% between 2005 and 2021.
It has a broad portfolio of >100 proprietary and in-licensed products that have applications in several therapeutic areas, including pain, vitamins, allergy, skincare and digestive health. It also has a solid R&D pipeline and a proven track record of commercialising such goods.
At the moment, the key focus of the company is commercialising pain-relief product Maxigesic, now licensed in 125 countries, but only recently approved by the FDA. So, plenty of uside, in our view.
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