Hikma Pharmaceuticals (LSE: HIK) andShire (LSE: SHP) are two of the most excitingbiotechs trading on the London market today. However, investors seem to have forgotten about Hikma and Shires larger, more experienced peerGlaxoSmithKline (LSE: GSK).
Year to date, Hikma andShirehave seen their shares jump by 20.2% and 6.7% respectively, while Glaxos shares have fallen 6.1%.
As a contrarian value investor, Im attracted to Glaxoas it seems the market has turned its back on the company. But Glaxo may not be suitablefor all investors.
Bright outlook
Shire and Hikma have brighter outlooks than Glaxo. Both companies are still growing their top and bottom lines with the releaseof new drugs and bolt-on acquisitions.
Meanwhile, Glaxos management has refused to do any deal in the current environment. Whats more, the company has been unable to release any new blockbuster treatments during the past few years. As a result, sales are falling as the companys exclusive manufacturing rights for existing treatments expire.
So, by investing in Glaxo, investors need to take a leap-of-faith, which may not suit everyone. That said, Glaxos drug development pipeline is the best in the business.The company has 258 new products under development more than any other big pharma group. Around 40 of these productsarein advanced clinical trials andmanagement expects at least half of its drugs currently under development will beon the market by 2020.
Even though less than 10% of all newdrugs make it from the initial developmentstage, to market, Glaxos chances of striking gold are better than average due to itseclectic mix of new products under development.
Glaxos shares currently support a dividend yield of 6.2%, so investors are being paid handsomely while they wait for the company to return to growth.
Rapid growth
Unlike Glaxo, Hikma and Shireare growing rapidly.
According to current City figures, Hikma is set to report earnings per share of 99p for full-year 2016, meaning that the company is trading at a 2016 P/E of 22.9. This might seem expensive, but over the past five years Hikmas earnings per share have increased by 200%, and the companys shares have outperformed the FTSE 100 by 186%.
If Hikmas management can keep this performance up for another five years, the companys shares are certainly worth paying a premium for.
Rare disease specialist
Shire is currentlytrying to acquire Baxalta, another specialist in rare disease treatments. Unfortunately,Baxaltas management has rejected Shires first low-ball offer for the company but its unlikelyShirewill give up the chase.
Shires figuresshowthat the combined Baxalta-Shire group will be a global leader in rare disease drugs with projected product sales of $20bn by 2020. The enlarged group could launch more than 30 new products by 2020 with an incremental sales potential of $5bn.
Still, even without Baxalta, Shiresearnings per share are forecast to expand by around 17% during the next two years. The company currently trades at a forward P/E of 19.9.
Hidden gem
If you’re not interested inShire, Hikma or Glaxo, there’s onebiotech out therethat flies under the radar of most investors.The company in question is a small but growing player in the industry and is backed by some of the world’s largestpharmaceutical companies.
Also, the small-cap in question gearing up to launch several new proven products during the next year or so.
The Motley Fool’s top analysts have identified this company as one of the market’stop small caps. They believe theshares could jump by as much as 45%.
If you want to find out more about the company in question, downloadour new free reporttoday.
Rupert Hargreaves owns shares of GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline and Hikma Pharmaceuticals. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.