The share price for Smith & Nephew (LSE: SN) has grown 15% over the last six weeks alone, and still has some way to go, if its pre-pandemic stock valuation is anything to go by. This, together with the fact that the company has never yet failed to pay out a dividend since it was first listed back in the 1930s, leads me to give it serious consideration as an addition to my investment portfolio.        

Smith & Nephew operates across three segments – orthopaedics, sports medicine and ENT (ear, nose, and throat), and advanced wound management, and while the company is not a leader in any of these, it is in the top three across the board. Geographically, Smith & Nephew draws most of its business from the US (50%) and Europe (20%). Back in 2019, the stock of this FTSE 100 company was showing real momentum on the back of overcoming some fairly tortuous changes in personnel and leadership, and the growing pains that come from inorganic growth. But then the pandemic happened, and revenue growth for the whole year hit a wall.

Smith & Nephew’s Q1 sales call, however, was tentatively positive. Revenues were up in Q1 2021 across all three franchise segments, driven by a genuine increase in surgical volumes, and totalled $1.3 billion, representing 6.3% underlying revenue growth. Within orthopaedics, hip options were consistently the most resilient to Covid-19, likely owing to such procedures being more challenging to delay. Sports medicine has shown the most rapid recovery, ascribed to a combination of the outpatient setting, younger patient mix, and the acute nature of the injuries, rendering such procedures the most amenable to this period of Covid-19 transition.

This FTSE 100 company expects Q1 trends to pick up through the year, and lead to a 10-13% growth in 2021 revenues, with the majority of growth organic. The outlook assumes no Covid-19 constraints on surgical procedures in H2 2021, and in many ways is predicated on the incumbent health-care systems being sufficiently able tooled up to deal with pent-up demand. Early indications point to faster normalisation being likely in the highly decentralised US, with the more centralised healthcare systems of Europe slower to respond.

Smith & Nephew also needs to execute on the successful integration of recent acquisitions. In January 2020, the company acquired Tusker Medical Inc. which bought with it an ENT system (Tula), the launch of which was considerably impacted by the pandemic. More recently, Smith & Nephew acquired the Extremity Orthopaedics business from Integra LifeSciences Holdings Corporation for $240M. Despite the downturn of last year, Smith & Nephew has continued to invest in R&D, and has a number of home-grown launches to roll-out, in what remains a challenging environment where stakeholder engagement opportunities remain limited.

Overall, Smith & Nephew is a FTSE 100 company that I’m inclined to invest in as I believe the share price has room for growth, and the dividend return is reliable. 2020 was the first year in many where the dividend was flat rather than growing, but my expectation is that dividend growth will return.

The post Smith & Nephew: are shares in this FTSE 100 company a buy? appeared first on The Twelfth Magpie.

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Pam Narang owns no shares in any company mentioned. The Motley Fool UK has recommended Smith & Nephew. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The (moderately) good…

On the Q1 2020 earnings call, AstraZeneca reported an 11% increase in total revenues relative to the same time last year, at $7.3 billion in Q1 2021. Taking out Covid-19 vaccine related sales, year-on-year growth was still strong at 7%, driven by oncology sales and what the company terms its new CVRM (cardiovascular, renal, metabolic) franchise.

AstraZeneca’s leading oncology products include Tagrisso and Imfinzi, which grew by 17% and 20% in Q1, respectively, despite the headwinds of Covid-19. At the end of last year, Tagrisso picked up an additional indication in the US for the adjuvant treatment of particular patients with non-small cell lung cancer, and in April of this year gained a similar approval from the EMA.

Farxiga, or Forxiga in Europe, is the catalyst behind AstraZeneca’s new CVRM franchise, and was initially approved to treat type 2 diabetes. However, growth in Farxiga has been driven by additional heart failure indications in both the US and Europe over the last two years, and is set to really take off following the new FDA approval for chronic kidney failure – a large, under-served market – announced in the last week.

Geographically speaking, AstraZeneca has had a good quarter for its stock, with all regions pulling their weight, and it is notable that the company outperforms many of its peers in China, where AstraZeneca has succeeded in getting 15 drugs on the essential drug list. Full-year guidance for 2021, which excluded Covid-19 vaccine impact and Alexion integration (see below), remains unchanged.

The (moderately) bad…

AstraZeneca’s development and manufacture of a not-for-profit Covid-19 vaccine was, at the outset, an entirely laudable endeavour, and remains so, despite all that has transpired and the sense that it has become something of a debacle. But the mismanagement of clinical data read-outs and deep problems with meeting manufacture and supply commitments are more indicative of the company’s inexperience in the vaccine arena than anything else. And the ongoing news-flow concerning the very rare risk of thrombosis related side effects really hasn’t helped matters.

And something else entirely…

Last month, the US Federal Trade Commission (FTC) approved AstraZeneca’s acquisition of rare-disease drug maker Alexion, despite initial indications that the trade body may take a tougher stance on M&A in biopharma. The December 2020 announcement of AstraZeneca’s intention to buy Alexion for $39 billion was not well received and prompted a 7.8% drop in AstraZeneca stock that month. However, Alexion’s focus on rare diseases provides an interesting counterpoint to AstraZeneca’s therapeutic footprint across the ‘big’ chronic disease markets (diabetes, cardiovascular, CKD, asthma, and COPD) and offers up the opportunity to broaden Alexion’s expertise in the immune complement cascade.

The post AstraZeneca stock: time to sell? appeared first on The Twelfth Magpie.

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Pam Narang owns shares in AstraZeneca. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Unsurprisingly, the company’s share price mirrors volatility in the gold market. So what’s moving the price of gold? Given the cost and time involved in exploration and mine construction, the year-on-year change in gold supply is unlikely to fluctuate notably. Consequently, price is driven mainly by demand and macroeconomic conditions. As economic conditions worsen, the price of gold often rises because it is seen by some as a ‘safe-haven’ investment, and a hedge against inflation.

Accordingly, the Covid-19 pandemic drove up the price of gold in 2020 to a peak of $2036.58 per ounce in August. And the average price in 2020 was 25% up on that in 2019. That this volatility was owing to economic uncertainties is evident from the fact that consumer demand in 2020 was down on 2019.  The World Gold Council reported a 34% drop in gold jewellery sales in China and India – countries that are collectively responsible for half of all such demand globally. This was accompanied by a slow-down in central bank net purchases of gold in 2020, positively impacting mining stock.

All of the buoyancy in the gold market in 2020 translated to a similar rise in Barrick Gold’s share price, peaking at $29.6 in August of that year. However, what followed was a pretty continuous slide, such that the share price had fallen by 37% in a little under six months, reflecting the much less precipitous decline in the price of gold through February 2021. This fall in the price of gold was likely linked to optimism around Covid-19 vaccination programmes and the beginnings of recovery from the pandemic. That was in February.

What’s happened since is something of a reversal in fortunes, as the short-term concerns around inflation look increasingly justified. US consumer prices in March continued their four-month rise, and the rate of inflation is at a two-year high. Further, there have been a number of high-profile side-effect concerns, which have put a dent in the rate of vaccination uptake (with AstraZeneca and more recently Johnson & Johnson in the frame). As pessimism has set in, the decline in the price of gold has levelled off, and is showing signs of resurgence. And in a little over a month, Barrick Gold’s share price rebounded by 19% from its lowest ebb in February to $22.23.

My expectation is that this is an opportunity to capitalise on what might very probably be a short-term spike in mining stock. Do note, though, that in the long term, returns on gold have not compared favourably with the S&P 500 index, so there’s a huge amount of risk involved in choosing when to exit. Being in it for the long haul can offer some level of portfolio diversification. And, of course, there are a number of investment funds that hedge the risk for you.

The post 1 mining stock to watch appeared first on The Twelfth Magpie.

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Pam Narang owns shares in AstraZeneca. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Positive outlook, but things need to keep going right

AbbVie (NYSE: ABBV) has and continues to be heavily reliant on Humira, which was responsible for 40% of 2020 revenue, and competes against biosimilars in Europe. Biosimilar entry in the US is anticipated in 2023, and the expectation is that Humira sales will take a further substantial hit. So why is the outlook positive for this pharma stock?

AbbVie’s $63 billion acquisition of Allergan in May 2020 was met by the market with a degree of concern, but there is little doubt that it offered AbbVie some much needed diversification. More notably, however, AbbVie has developed two products that look set to secure its leadership position in immunology in a post-Humira world. Skyrizi and Rinvoq have shown strong uptake in their initial approved indications (psoriasis and rheumatoid arthritis, respectively), and AbbVie is vigorously pursuing additional indications, which should come through in the next 24 months. However, Rinvoq’s approvals for psoriatic arthritis and atopic dermatitis have each been pushed back by a quarter this year, owing to regulatory delays as the FDA investigates safety concerns related to the JAK-inhibitor class.  

A high-risk bet that should pay off in the short term (unless it doesn’t)

Over a decade ago, plucky upstart Amarin (NASDAQ: AMRN) gained FDA-approval for Vascepa, to treat patients with severely elevated triglycerides – a form of cholesterol that contributes to cardiometabolic disease. So far, so uneventful. Fast-forward to December 2019, and the label for Vascepa was expanded to include patients at high cardiovascular risk – effectively growing the potential market for the drug many-fold. Amarin’s share price sky-rocketed, at a rate rarely seen in mature pharma stocks. However, a court ruling in March 2020 in favour of generics challengers caused Amarin’s share price to plummet to a level it has never recovered from.

With the US market for Vascepa no longer the cake-walk it should have been, all eyes are now on Europe. Vascepa received EMA approval for the expanded indication in March of this year, and is set to launch first in Germany. The absence of generic competition, Vascepa’s first-in-class approval for a demonstrably large patient pool, and robust clinical outcomes data all paint a rosy picture. The risk lies in Amarin’s ability to pull it off, as a relatively small, US-based company with no other in-line products, and a handful of generics challengers snapping at its heels in its home-market of the US.

The post 3 pharma stocks to watch in April appeared first on The Twelfth Magpie.

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Pam Narang holds shares in Merck & Co. and Amarin. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Ostensibly, GlaxoSmithKline’s broad geographic footprint – and an operating model that includes pharmaceuticals, consumer health, and vaccines – would appear to give this Big Pharma player the sturdiness to weather a multitude of storms. But at a time when the prevailing trend has been a move towards pure-play pharmaceuticals and the higher margins this commands, GlaxoSmithKline appears to be somewhat behind the times… an impression the company is seeking to rectify with the planned spin-out of the consumer health joint venture it co-owns with Pfizer in 2021.

GlaxoSmithKline’s dividend has been held flat for several years, its shares yielding a return of 5-6%, which has been very reasonable for a company of its size. However, GlaxoSmithKline recently indicated a dividend reduction to finance pipeline development – essentially to buy in early stage assets. While GlaxoSmithKline has talked up its current pipeline – the 20 or so products in development, half of which with blockbuster potential – many will not come to fruition until 2026. Inorganic growth is therefore an important means of bulking up on pipeline opportunities for the next few years to provide something of a revenue bridge to the outer years when GlaxoSmithKline’s home-grown assets hit the market.

In the meantime, GlaxoSmithKline is capitalising on its key strengths, namely leadership in respiratory and HIV, and making waves with recent landmark approvals. In September 2020, GlaxoSmithKline received FDA approval for Trelegy Ellipta, the first once-daily, three-in-one drug to treat both asthma and COPD, beating AstraZeneca to the post. And Nucala – GlaxoSmithKline’s injectable biologic treatment for asthma – was the first to be approved for use in a rare eosinophil driven disease. In January 2021, GlaxoSmithKline secured US approval for the first injectable long-acting treatment for HIV. Previous to this, GlaxoSmithKline had another first, with the April 2019 FDA approval of Dovato, the first complete two-drug regimen to be approved in the US for the treatment of HIV.

On balance, GlaxoSmithKline’s near-term prospects look great, with a convincing in-market presence, and imminent splintering0off of the consumer health division sure to improve the operating margin of the pure-play Pharma that’s left. Further, GlaxoSmithKline’s vaccine and infectious disease experience will undoubtedly stand the company in good stead at a time when keeping up with the latest Covid-19 mutations has spawned a sub-industry in the vaccine sector. It’s the long term where the greatest uncertainty lies for GlaxoSmithKline shares, and despite positivity around the company’s pipeline, it is perhaps too heavily loaded to the outer years for my comfort.

The post Are GlaxoSmithKline shares under-valued? appeared first on The Twelfth Magpie.

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Pam Narang has no position in any company mentioned. The Motley Fool UK has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.