Beyond Novo: Fund manager likes this under-the-radar pharma stock with a weight loss drug in the works
Portfolio manager Sean Peche is betting on one global biotech stock — and it’s not Danish drug manufacturer Novo Nordisk . Instead, Peche, who is also the founder of the U.K.-based Ranmore Fund Management, likes the Hong Kong-listed United Laboratories , which produces drugs ranging from insulin to animal medication. The company is also in the process of producing a weight management drug, an area that has seen immense competition following the hype around glucagon-like peptide-1 (GLP-1) drugs. “The last time I checked there were 170 competing weight loss products in development … there’s not a company out there that’s not trying to get a bit of that action. So, we like to go find better value in the road less travelled,” Peche said. Aside from Novo Nordisk, pharmaceutical giants like Eli Lilly , Amgen , Pfizer and AstraZeneca are also in the weight-loss drugs space. “Maybe that weight loss product (by United Laboratories) works, maybe it doesn’t. But, I’m paying for it,” Peche added. The portfolio manager oversees the $329 million Ranmore Global Equity Fund , which seeks to identify mispriced stocks — or those selling for less than their underlying value. He described United Laboratories as a “really well managed company … that also exports to Europe.” United Laboratories’ price-to-earnings of 5.8 times is a fraction of the 34.3 times that Novo Nordisk is trading at, Peche added. In addition to the Hong Kong bourse, shares in United Laboratories also trade in the U.S. as an American Depositary Receipt under the ULIHF ticker. Year-to-date, its shares are up around 47.5%. 3933-HK YTD mountain Year-to-date shares in United Laboratories Analysts Carol Dou and Sunny Chen at UOB Kay Hian share Peche’s confidence in United Laboratories, reiterating their buy rating on the stock with a 12-month price target of 11.20 Hong Kong dollars ($1.44) — up from 10 Hong Kong dollars previously. “We expect increasing demand to continue supporting the company’s steady revenue growth in 2024. [United Laboratories] is making smooth progress in R & D and targets to launch Liraglutide in 2024. Its rich pipeline and continued cost control efforts bode well for stronger earnings growth in 2024-26,” they wrote in a research note last month. Liraglutide is used to treat Type 2 diabetes and chronic obesity. “We believe the extensive pipeline will yield increasing R & D and commercial benefits for the company in the next few years,” the analysts added. Their comments follow United Laboratories’ “faster than expected earnings” growth in the first half of the year. Its net profit was up 16.1% year on year to 1.5 billion Chinese yuan ( $213.1 million), while revenue grew 3.9% from the year before to 7.2 billion yuan. According to FactSet data, of nine analysts covering the stock, seven give it a buy rating, while the remaining two have hold ratings. Analysts’ average price target on United Laboratories is 12.95 Hong Kong dollars, giving it 28.2% potential upside.
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