FTSE AIM pick
Amryt is a global biopharmaceutical firm that focuses on acquiring, developing and commercialising drugs and treatments for rare diseases. A focus on tackling the rarest of diseases is a growing area of the pharmaceutical market and Amryt is positioned to benefit from this growth in my opinion. It already has several approved treatments in the US and Europe in its portfolio.
As I write, shares are trading for 156p per share. In the past six months or so, the share price has dropped from highs of over 200p per share. This time last year shares were trading for 196p per share. That equates to a 20% drop in share price. When a stock loses its value I do not automatically think there are problems. I view it as an opportunity to learn why and see if there is an opportunity to buy a cheap UK share.
Amryt has a history of acquisitions. I like this trait in a stock I am considering as it shows growth plans and ambition. I believe the acquisition of Aegerion in September 2019 has contributed to the share price falling. The due diligence and overhang of consolidating firms and shares into one company can often have this effect. I do believe, with recently reported results and product pipeline, that Amryt’s share price will bounce back.
Performance and latest acquisition
August was a busy month for Amryt. It announced positive Q2 results and upgraded its full year guidance. In addition to this, it confirmed the completion of another merger of US firm Chiasma Inc. This merger will allow Amryt to extend its reach as well as incorporate new products to its portfolio.
Amryt’s results showed a 35.9% growth in year-on-year revenue growth in Q2 to $62.8m. This was also the sixth consecutive quarter of positive earnings before interest, taxes, depreciation, and amortisation (EBITDA). Cash generation increased to $142.9m too. Full year revenue guidance was raised to $210m-$215m which would represent 15%-18% year-on-year growth if achieved.
From an operational perspective, one of Amryt’s leading products it has high hopes for, known as Oleogel-S10, has been granted priority review by the US Food and Drug Administration (FDA). This is seen as a major step forward. I believe the company’s strong performance, a further merger which will only boost its offering, and the priority review of a product with so much promise will boost Amryt.
Cheap UK shares have risks
Amryt does have its risks. Firstly, all pharma businesses face challenges when developing drugs. It is often a lengthy process with lots of challenges along the way. Cost is one of the biggest factors and these can spike unexpectedly. In addition to this, receiving approval can be make-or-break. Furthermore, there are usually competitors attempting to manufacture something similar. All of these aspects are real risks towards Amryt’s potential and growth.
Overall, I believe Amryt is a good cheap UK share that could be a good option for my portfolio. I like the work it is undertaking. I see value in the business, like its strategy to grow, and its performance has been strong. I would happily add shares to my portfolio just now.
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Jabran Khan 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.