Sprinkling of gold dust should make drugs firm a 2015 winner
THE coming year offers plenty of scope for both optimistic and pessimistic investors. Jolly souls can point to improving economic growth, falling unemployment, rising wages and low inflation. Gloom-mongers can point to a persistently high current account deficit, declining public services and unsettled geo
political conditions. Whichever side investors fall on, they cannot ignore the forthcoming General Election, which is likely to create considerable uncertainty before May and who knows what kind of disruption afterwards.
Against this backdrop, Midas has chosen three very different tips for 2015 – a 200-year-old engineer, a brick maker and a cutting-edge healthcare firm. Each has a distinctive line of business, but they should all prove rewarding investments, not just this year but for the long term, too.
Midatech Pharma floated on AIM only last month and specialises in nano-technology, using tiny particles of pure gold to treat cancer, diabetes and other medical conditions. The shares are 264½p and should gain ground, as the board’s members are ambitious, experienced and have a history of success.
Midatech’s chief executive is Jim Phillips, a physician turned entrepreneur, with an accomplished track record, including Eusa Pharma, a private cancer specialist that was founded i n 2006 and sold for $700 million (£484 million) just six years later.
The company is chaired by Rolf Stahel, who won widespread admiration as chief executive of FTSE 100 drugs group Shire from 1994 to 2002. Stahel went on to chair Eusa until it was sold. Now he and Phillips are determined to put their combined nous to work at Midatech.
The Oxford-based company has developed two innovative processes in the healthcare field. The first uses gold nano-particles to make cancer treatments work more effectively. When the nano-particles are combined with existing drugs, chemotherapy becomes much more targeted, so it attacks the cancer and not the healthy tissue around it.
Not only does this mean fewer side-effects from treatment, it also enables patients to endure stronger dosages. Midatech is working principally on cancers that are extremely hard to treat, such as brain, liver and pancreatic tumours.
It is also working on a groundbreaking treatment for diabetes, using nano-particles to deliver insulin via a strip that can be popped inside the mouth. The strip dissolves within 30 seconds, a far more palatable and simpler solution than insulin injections.
When Midatech came to market last month, it acquired a business called Q Chip, which has developed a way to release drugs slowly into the body over days or weeks. This could have widespread uses for the ill, the elderly and people suffering from certain kinds of dementia.
Drug companies often take years to bring products to market because they have to jump through regulatory hoops. Midatech should be much more nimble because it is working with existing drugs but applying them in more effective ways. Phillips expects to bring his first product to market within 18 months and to introduce more treatments annually thereafter, both from the company’s current stable and from future acquisitions.
Midas verdict: Stahel and Phillips have been highly successful in healthcare and this latest venture has won the support of star investor Neil Woodford. His Woodford Fund Management firm owns 19.9 per cent of Midatech. Other investors would do well to follow suit.