International specialist healthcare firm BTG (LSE: BTG) last week lifted its guidance for full-year revenues on the back of a weakened sterling, with FY2017 figures ahead of its previously announced range of £510m to £540m. Although half-year results aren’t formally announced until next month, the firm said that on a constant currency basis, it delivered double-digit revenue growth over the six month period, with the acquisition of US-based Galil Medical in June providing further strength and diversification to its interventional oncology portfolio.
Growth at a reasonable price
The FTSE 250-listed pharmaceuticals firm has a growing portfolio of Interventional Medicine products designed to advance the treatment of cancer tumours, advanced emphysema, severe blood clots, and varicose veins. In addition BTG’s Specialty Pharmaceuticals business offers antidotes that alleviate toxicity and treat rare conditions including snake venoms and the toxicity associated with some heart and cancer medications.
BTG has an excellent track record of growth stretching back over a decade with further earnings expansion forecast for the medium term at least. Analysts are predicting a £99m improvement in revenue to £547m for the full year to 31 March, with pre-tax profits jumping to £89.7m from the £57.5m reported for the last financial year. The forward price-to-earnings ratio of 31 may look expensive for value-focused investors, but this drops to a more palatable 22 for FY2018, well below historical levels and good value for this high growth pharmaceuticals play.
Cost synergies
Meanwhile fellow mid-cap pharmaceuticals group Vectura (LSE: VEC) has raised its expectations for 2016 following its merger with rival SkyePharma, with integration of the two businesses progressing well according to management. The merger was completed in June following approval by the UK’s Competition & Markets Authority with the enlarged £1bn group expecting to achieve cost synergies of around £10m per year from 2018 onwards.
Prior to the merger, Vectura had reported an encouraging set of results for its most recently ended financial year, with revenues up 24% to £72m driven by a 56% leap in royalties to £39.2m. Most encouraging was the news that royalties from recently launched inhaled products were up by a staggering 104% to £25.5m. Pre-tax losses narrowed to £1.9m, compared to £6.2m a year earlier, with underlying earnings per share up by 42%.
The business, which focuses on inhaled airways diseases, is tipped to more-than-double revenues in the current financial year, which incidentally has been shortened to nine months following the company’s decision to move its year-end date from 31 March to 31 December after the merger. Perhaps more significantly, the City expects Vectura to move into the black, with last year’s losses swinging to pre-tax profits forecast at £8m. The future looks good, and I believe Vectura could be an astute buy ahead of interim results on 23 November.
