1. UK Health Care Industry Landscape

The UK Health Care Industry comprises companies focused on providing medical services, manufacturing drugs, medical equipment and facilitating the provision of healthcare to patients. The various segments of the healthcare industry include Pharmaceuticals & Related Segments, Hospitals, Clinics; Healthcare IT; Laboratories and Testing Services; Healthcare Services and Facilities; Managed care; Medical Devices; Hospital Supplies Manufacturers and Healthcare IT.

The industry attracts a lot of Government intervention. Moreover, the UK healthcare system is well managed as the entire population in the UK got covered by the National Health System (NHS). NHS is financed by general taxation and run by the Department of Health.

The most prominent players of the UK healthcare sector are GlaxoSmithKline and AstraZeneca, followed by foreign companies such as Pfizer, Novartis, Hoffmann–La Roche and Eisai. Furthermore, it is evident that Covid-19 pandemic created several opportunities for the healthcare sector, which accelerated progress across verticals. The demand for drug stores and pharmacies witnessed a sudden hike amid the pandemic. Moreover, the developments in the clinical trials for developing the Covid-19 vaccine boosted the sector. In 2021, the growth of the pharma industry shall be supported by the availability of Covid-19 vaccines and its required demand.

Key Trends in the Health Care Sector

Risk Exposures to the Health Care Sector

SWOT Analysis

Benchmark Index Performance

Based on the last six-months performance, the FTSE All-Share Pharmaceuticals & Biotechnology index has outperformed the FTSE 100 and the FTSE 250 index. The FTSE All-Share Pharmaceuticals & Biotechnology index generated a return of about 21.19%; however, the FTSE 100 produced a return of around 4.21%, and FTSE 250 generated a return of around 10.06%.

Figure 1: Six Months Benchmark Index Performance

  (Source: Refinitiv; Analysis done by Kalkine Group)

Health Care Sector Outlook

The UK Health Care industry had demonstrated rapid transformation after the emergence of the Covid-19 pandemic. Moreover, the pandemic had opened new path for the industry as people realized the importance of the strong health care infrastructure. In 2021, the growth of the pharma industry shall be supported by the availability of Covid-19 vaccines and their required demand. Currently, global pharmaceutical giants like Pfizer, Moderna, AstraZeneca, Novavax, Sanofi, and Johnson & Johnson are distributing Covid-19 vaccines worldwide. Meanwhile, Britain’s Covid-19 vaccination drive deserves appreciation. According to the recently available data from the Office for National Statistics, nearly 1.2% of total Covid-19 deaths happened between 02 January 2021 and 02 July 2021 were of fully vaccinated people. Thus, the risk of death involving COVID gets significantly reduced after receiving both doses of vaccination.

2. Investment analysis and stocks under discussion (HIK, BVXP, CTEC)

After gaining insights into the Health Care sector, we would look at the business model of three Health Care players listed on the London Stock Exchange. 

A. Hikma Pharmaceuticals PLC (LON: HIK)

(Recommendation: Buy, Potential Upside: 31.34%, Market Capitalization: GBP 5.79 billion)

FTSE 100-listed Hikma Pharmaceuticals PLC (LON: HIK) is the United Kingdom-based Pharmaceuticals and Biotechnology Company, which specializes in the business of developing, manufacturing, and marketing a portfolio of branded and non-branded generic medicines.

HIK will pay an interim dividend of 18 US cents per share on 20 September 2021, while the ex-dividend date was 19 August 2021.

 

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)      

From a technical standpoint, the stock price is trading between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price.

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 31.34% over the closing price of GBX 2,485.00 (as of 14 September 2021).

B. Bioventix PLC (LON: BVXP)

(Recommendation: Speculative Buy, Potential Upside: 18.30%, Market Capitalization: GBP 201.08 million)

Bioventix PLC (LON: BVXP) is an FTSE AIM All-Share Index company. It develops and commercializes high-affinity monoclonal antibodies for its application in clinical diagnostics.

The company will release its FY21 results on 18 October 2021. 

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

From a technical standpoint, the stock price is trading between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price.

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 18.30% over the closing price of GBX 3,860.00 (as on 14 September 2021).

 

 

C. ConvaTec Group PLC (LON: CTEC)

(Recommendation: Watch, Potential Downside: 24.20%, Market Capitalization: GBP 4.51 billion)

ConvaTec Group PLC (LON: CTEC) is an FTSE 250 Index listed holding company. Through its subsidiaries, the company is engaged in therapies for the management of chronic conditions.

The company declared an interim dividend of 1.717 US cents per share to be paid on 14 October 2021. (Ex-dividend date: 2 September 2021).

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

From a technical standpoint, the 20-days EMA of GBX 226.8 is suggesting a correction in the stock price.

Valuation Methodology

Our illustrative valuation model suggests that the stock has a downside potential of 24.20% over the closing price of GBX 223.80 (as on 14 September 2021).

*All forecasted data and peer information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*The "Buy/Speculative Buy” recommendation is also valid for the current price as covered in the report as on 15 September 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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