2014 has been something of a mixed year for investors in pharmaceutical stocks. While the likes of BTG (LSE: BTG) and AstraZeneca (LSE: AZN) (NYSE: AZN.US) have easily beaten the FTSE 100, being up 30% and 29% respectively versus a fall of 2% for the wider index, life hasnt been so enjoyable for GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US).
Indeed, the largest of the three companies by market capitalisation has seen its share price fall by 10% this year, with allegations of bribery and competition from generics dampening sentiment in the stock.
Looking to 2015, though, I believe that all three companies could post strong gains and outperform the wider index next year. Heres why.
Restructuring could be on the cards at GlaxoSmithKline, with the company mulling over the spin-off of its HIV unit, ViiV Healthcare. This could boost sentiment, since ViiV has huge potential and could offer a stunning growth profile over the medium term.
Meanwhile, the allegations of bribery that have pegged back sentiment in GlaxoSmithKline during 2014 could prove to be less of a problem next year. Thats because the company has been fined around 300 million by Chinese authorities and so it will be aiming to draw a line under the matter.
Furthermore, with shares in the company trading on a price to earnings (P/E) ratio of just 15.5, they seem to offer good relative value. In addition, a yield of 5.6% could boost demand for the shares and mean that they have a strong 2015.
Even if another bid from Pfizer or a different sector peer is not forthcoming, AstraZeneca could continue its excellent performance of 2014 into 2015 and beyond. Thats because the main reason for its turnaround has been a vast acquisition programme that is turning the companys drugs pipeline around.
Indeed, while it was once viewed as its major weakness, AstraZenecas drugs pipeline is now seen as a source of growth moving forward. And, with considerable financial firepower and superb cash flow, more acquisitions seem inevitable and they could drive sentiment in the stock much higher.
Trading on a P/E ratio of 16.8 and yielding 3.7%, AstraZeneca still seems to offer good relative value and income potential. Combined with improving growth prospects, 2015 could be another great year for investors in the stock.
Todays results from BTG were highly encouraging and show that 2015 could be another fantastic year for the company. Indeed, partly as a result of acquisitions in its interventional medicine unit and impressive growth in its specialty pharmaceuticals business, it reported higher profit for the first half of the current year (37.6 million versus 32.7 million last year) and stated that full-year results look set to be at the top end of analysts forecasts.
Furthermore, with BTG being expected to increase earnings by a whopping 48% next year, the fact that the company expects the current momentum to continue is clearly excellent news for investors.
In addition, shares in BTG trade on a P/E ratio of 50.9 which, when combined with such a strong growth rate, equates to a price to earnings growth (PEG) ratio of just over 1. As such, BTG seems to offer growth at a very reasonable price and could have another stunning year of share price growth in 2015.
Investing in BTG, AstraZeneca and GlaxoSmithKline could prove to be a great move for 2015, and I think that all three companies could post excellent returns over the next year. However, I also believe there are excellent opportunities elsewhere on the FTSE 350, and a free and without-obligation guide from The Motley Fool can help you to take advantage of them.
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Peter Stephens owns shares of AstraZeneca and GlaxoSmithKline. The Motley Fool UK has recommended BTG and GlaxoSmithKline. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.