Shareholders in the makers of weight-loss drug Ozempic have made huge profits. Now our award-winning Midas stock picking expert, Joanne Hart, unearths the companies working on potential blockbuster treatments of the future.
Anyone astute or lucky enough to have bought shares in Danish pharmaceuticals group Novo Nordisk three years ago would have seen their investment increase five-fold, thanks to Ozempic and its other weight-loss drugs.
Ozempic and other weight-loss drugs are making investors take notice
The drug business is one of the biggest in the world. As well as providing hope for patients, it is the source of huge excitement for investors. New wonder-drugs can generate huge returns – though there are risks.
So-called blockbuster drugs are the industry’s top dogs. These remedies deliver annual sales of $1billion (£800 million) or more for the companies selling them and there were 52 of them in 2023, generating in excess of £400billion between them.
That was a third of all drug sales last year. So perhaps it is not surprising that every pharmaceutical company in the world is in search of the next big thing.
Midas stock picking expert Joanne Hart looks at the companies that might be sitting on new big-selling drugs
It is not easy. Many treatments fail to fulfil hopes, are overtaken by rivals, or run into difficulty with regulators.
But that does not stop companies from trying – and if they succeed, the rewards can be huge, for patients and investors.
Take Novo Nordisk. It started out more than 100 years ago and it took decades of painstaking research for the Danish giant to reach its position today, worth some £380billion and ranked as the most valuable company in Europe.
The company is making huge amounts of money for shareholders, transforming millions of lives and attracting both admiration and envy from healthcare peers.
For investors, this Danish saga prompts one key question: are there other companies out there which might follow suit?
Could the UK be harbouring a future Novo Nordisk or, at the very least, a pharma company with the potential to deliver outsize gains for shareholders?
Here, we look at the companies that might be sitting on new big-selling drugs, though there are no guarantees and even industry giants are not immune to criticism.
Only last week, a study was published linking Ozempic to a sight-loss disease. Novo Nordisk claimed the report had limitations but its shares still lost 3 per cent of their value. The response just shows that investors must always weigh up the risks when they buy shares and should never invest money they cannot afford to lose.
Immunologist Professor Lindy Durrant and her Scancell team have developed a vaccine in a bid to find a cure for advanced skin cancer
Scancell
Britain is widely recognised as a healthcare powerhouse with firms champing at the bit to produce blockbuster sales.
Many are in the cancer field. Despite the hype around Ozempic, the market for cancer drugs is at least three times bigger than its weight-loss counterpart and expected to remain so for years.
Already generating sales of almost £175billion a year, revenues from cancer treatments are forecast to more than double this decade and carry on rising thereafter.
That leaves room for plenty of blockbusters and Scancell is hoping to create one of them.
Founded by immunologist Professor Lindy Durrant, the company is developing a cure for advanced skin cancer and early signs are highly encouraging.
The treatment combines a vaccine developed by Durrant and her team with two widely available drugs. Trials to date have shown an 85 per cent success rate, far outweighing alternative approaches and better than Durrant ever imagined.
Vaccines are usually associated with disease prevention, from smallpox to measles to Covid.
Cancer vaccines are different. They aim to stimulate the body’s immune system so that it produces cells that will fight and destroy cancer tumours.
Researchers have been trying to develop an effective vaccine for years but cancer keeps outwitting them.
Durrant’s Eureka moment came when she decided to try a combination approach, blending her immune-system-boosting vaccine with drugs that allow the medicine to enter tumorous cells and do their magic.
The treatment has already proved successful on a small group of patients. A larger trial will be ready by the end of this year and further studies are expected thereafter.
Drug trials can take years but Durrant should be able to move faster, as her treatment could prove a lifesaver. There is also the possibility of moving into other forms of cancer, which could help millions of people worldwide.
Existing cancer treatments tend to be extremely expensive, riddled with side-effects or both. Scancell’s therapy is simple to make, easier on the body than alternatives and a lot cheaper too.
Midas verdict: Scancell shares, which are listed on the junior AIM market, are less than 12p today. The company has been through tough times and nothing is certain in the world of drug research. But Durrant has more than 40 years’ experience in the cancer field. She is a renowned professor at Nottingham University and believes she is on to a winner. If she is right, Scancell could fly – and that makes the shares well worth considering.
Avacta chief executive Christina Coughlin was appointed in January and was a cancer doctor in America for many years
Avacta
Avacta is also striving to treat cancer more effectively, this time by making chemotherapy more targeted and less toxic for patients.
No one doubts that chemotherapy can work wonders on tumours but it has sometimes ruinous side-effects, from nausea to extreme fatigue to a savage reduction in immunity.
These occur because chemotherapy kills any cells that are dividing, whether they are healthy or not. Avacta has found a clever little protein that can be added to chemotherapy drugs so they only kill cancerous cells, leaving the rest of the body alone.
Trials are at an even earlier stage than Scancell’s but they are already attracting interest from leading specialists and drug firms, because they could prove revolutionise cancer treatment worldwide.
Midas verdict: Avacta, which is also listed on AIM, has had a long and tumultuous past. In January, however, Christina Coughlin was parachuted in as chief executive and a new chairman was appointed only last month. Changes are already under way and more are expected this year.
A cancer doctor in the US for many years, Coughlin has seen the debilitating effects of chemotherapy first-hand and is keen to do everything in her power to improve patients’ lives. With decades of experience in drug companies large and small, she is also well equipped to take Avacta to the next level. At 60p, the shares are worth a closer look.
Allergy Therapeutics
Nestle is best known for snacks and drinks but in 2020, the Swiss giant forked out $2billion to buy California-based Aimmune Therapeutics, which had developed a drug to help peanut allergy sufferers.
The deal proved disappointing and Nestle sold the business three years later for an undisclosed sum.
Allergy Therapeutics is hoping for much greater success with a new treatment for peanut allergies.
Allergy Therapeutics chief executive Manuel Llobet is working towards a hay fever vaccine
Aimmune’s drug has to be taken for up to two years and sufferers remain allergic to peanuts, just less so than they were initially. But Sussex-based Allergy Therapeutics is working on a vaccine that would cure peanut allergy sufferers completely with one to three injections, followed by a booster every decade or so.
Early signs are promising and the group expects to start more extensive trials by early next year. The vaccine could be a game-changer. Peanut allergies can have devastating consequences, with even minuscule exposure sending sufferers into shock or worse. Around three per cent of Americans and Brits suffer from the allergy. Numbers are increasing and so are fatalities, with dozens of deaths recorded every year.
An effective vaccine would not only transform lives but also catapult Allergy Therapeutics into blockbuster territory, sending its 5p share price into orbit.
Chief executive Manuel Llobet has another bite at the blockbuster cherry too, with a hay fever vaccine. This is much closer to commercial launch and could achieve sales amounting to hundreds of millions of pounds.
Midas verdict: Allergy Therapeutics has been through the mill and its shares have slumped from highs of more than 50p before the financial crisis to around 4.9p today. But the Nestle deal proves how much big firms are prepared to splash out on exciting new drugs. For adventurous investors, now could prove an exciting time to snap up some Allergy shares.
York-based OptiBiotix has created SlimBiome, a product which works in a similar way to Ozempic, made entirely from natural ingredients
OptiBiotix
Slimming products have been around for decades but, until Ozempic took the world by storm, most focused on meal replacement shakes and bars.
These can deliver speedy results but many dieters find they are hard to stick with for any length of time. Ozempic works differently from these low-calorie products.
It reduces cravings and appetite so users simply do not feel hungry and are less inclined to reach for the biscuit tin at tea-time. Ozempic has been heralded as a miracle cure and sales ran into billions of dollars last year.
Closer to home, York-based OptiBiotix has created a product which works in a similar way to Ozempic, made entirely from natural ingredients.
Developed by professors at Nottingham and Reading universities, SlimBiome has been proven to help users lose weight, while lowering blood pressure, improving mood and doing wonders for their gut bacteria.
SlimBiome is not a drug but it has been developed scientifically, working on the theory that if people feel less hungry and experience fewer cravings, they will naturally consume less food.
The product is already on sale, through Amazon, Holland & Barrett and The Hut Group, as well as several businesses overseas.
Adoption was disappointing in the past but interest has risen significantly, now that Ozempic has brought the whole notion of appetite reduction into focus.
Deals have been struck with Indian giant Tata Group and US mega-retailer CostCo. Chief executive Stephen O’Hara is in talks with another big American firm about a global launch of SlimBiome next year.
Midas verdict: O’Hara has struggled for years to make the case for SlimBiome. Now Ozempic is almost doing the work for him. SlimBiome is a natural product, with no side effects and it is considerably cheaper than its medical counterparts. If the world wakes up to its potential, OptiBiotix shares, now 15p, should soar.
AstraZeneca is most well known for its Covid-19 vaccine
Some share and fund ideas for the cautious
Small, pioneering healthcare firms are not for the cautious. However, there are plenty of options for investors who fancy some exposure to the world of drugs but would prefer to put their money into a larger and more established company.
Valued at more than £185billion, AstraZeneca is the biggest company on the FTSE 100 index, with 13 blockbusters already on the roster.
Boss Pascal Soriot has lined up another 25 potential winners by 2030 and hopes almost to double sales to £60 billion in the same time frame.
Many associate AstraZeneca with its Covid-19 vaccine but the group’s pipeline centres on weight loss, cancer and gene therapy medicines.
At £120.88 each, AstraZeneca shares are not cheap but they have delivered consistent rewards, especially in recent years.
And for investors who prefer safety in numbers, funds may offer the best solution.
Investment experts at AJ Bell single out the International Biotechnology Trust. Analysts at Fidelity International suggest the Legal & General Global Health & Pharmaceuticals Index fund, Syncona, an investment trust focussed on healthcare, the Worldwide Healthcare Trust, the Biotech Growth Trust and the Polar Capital Global Healthcare Trust.