In recovery

Abzena provides technologies and complementary services to drug companies across the globe. It was last dealing at 10-week highs after advising that group revenues had risen to £9.6m during April-September from £4m in the same period last year, helping gross profit advance to £4m from £3.8m previously.

Adjusted losses at the firm, however, increased to £7m from £3.1m a year earlier.

Today’s solid update comes hot on the heels of positive contract news on Monday. Abzena advised then that it will assist a US biotech company “to provide process development and manufacturing services to progress a novel antibody-drug conjugate towards clinical trials” in a deal valued in excess of $5m.

The company’s share price plummeted back in September after it shocked the market with news that revenues in the fiscal year to date has been below expectations and that, as a consequence, sales during the first fiscal half would “not be significantly higher” than year earlier. The firm said this was caused by “lower volumes in certain areas of the business, a small number of large projects that are taking longer to complete than expected, and certain other projects being delayed until the second half of the year.”

On the march

So today’s update should go some way to soothing the nerves of investors. Indeed, Abzena reiterated what it said in September that revenues in the second half should be higher than in the first six months.

Particularly cheering was its advice that “average bookings in the months since the period end are more than 30% higher than in the first half of the year.”

While City analysts are expecting pre-tax losses to swell to £12.6m this year from £9.5m last year, and Abzena is expected to remain in the red with an £8.5m loss in fiscal 2019.

However, the massive revenue opportunities afforded by the huge investment the company has made in its research and manufacturing capabilities are underlined by forecasts for revenues to boom from £24.1m in the current year to £34.3m next year.

With Abzena making all the right noises again, I reckon we could see the company’s share price spring higher once more.

A footsie favourite

I am convinced that AstraZeneca is also very much on the path to powerful profits expansion.

Impatient growth investors may want to throw in the towel as City brokers are expecting earnings to keep on struggling a little longer (falls of 10% and 5% are forecast for 2017 and 2018 respectively).

However, I remain confident that AstraZeneca’s improving pipeline, and particularly in the oncology arena, should deliver the profits growth we have been seeking for some time now. Indeed, last month regulators in the US approved the firm’s asthma battler benralizumab in a move that could begin to unlock fresh new revenues streams

Share pickers can also take comfort in the meantime from the drugs giant’s huge yield,s which stand at 4.4% through to the close of next year.

I reckon AstraZeneca’s long-term investment case remains compelling, as does the company’s very-reasonable forward P/E ratio of 17.1 times.

The post AstraZeneca plc isn’t the only pharma stock I’d buy today appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. 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.

However, sometimes it can be worth buying a stock which has posted a decline following a profit warning. It can lead to high rewards in the long run. With that in mind, could this small-cap be worth buying right now?

Disappointing update

The company in question is life science business Abzena (LSE: ABZA). It provides services and technologies which enable the development and manufacture of biopharmaceutical products. It reported that revenues for each of the company’s business lines have been below expectations since the start of the current financial year. It now expects revenue for the first half of the year to not be significantly higher than the revenue reported in the same period of the prior year.

The reasons for the disappointing start to the current year include lower volumes in certain areas of the business, a small number of large projects that are taking longer to complete than expected, and certain other projects being delayed until later in the year. As such, losses are expected to be higher than previous guidance, which is why the company’s shares are down by over 20% following the update.

Turnaround potential?

Despite the disappointment of Abzena’s profit warning, it expects its performance in the second half of the year to improve. It has good order cover and a high engagement level for new business. Furthermore, it remains committed to the growth strategy announced earlier this year, while its cash balance of £18.8m indicates that it has a strong financial position through which to deliver improving performance.

However, with profit for the full year expected to be lower than previous guidance, its near-term outlook remains challenging. Its share price could fall further in the short run, which means it may be prudent to wait for more positive news before buying a slice of it.

Improving performance

One company which has experienced a difficult period and made a successful turnaround is IAG (LSE: IAG). The British Airways owner reported a loss in 2012 but has been able to deliver a rapid improvement in profitability since then. In fact, its pre-tax profit in the current year is forecast to be 10 times higher than it was in 2013, which shows that its strategy has been working well.

Looking ahead, the company is expected to report a rise in its bottom line of 9% next year. Certainly, there are risks ahead for the business as Brexit may hurt demand for a range of discretionary items. However, with a price-to-earnings (P/E) ratio of just 7, it seems to have a sufficiently wide margin of safety to merit investment at the present time.

The post Could this small-cap turnaround stock be a millionaire-maker after falling 20%? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any of the companies mentioned. 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.