Liberum reckons the UK healthcare sector still has further to run even after gains since the start of the year of 36% relative to the FTSE250 and around 200% since 2016.
The broker points to three major deals over the past fortnight to support its view.
Vectura, Spire Healthcare and UDG have all fallen to private equity or in Spire’s case a rival and these transactions are likely to drive further interest and reinvestment in the sector, believes Liberum.
The broker has picked out three companies it likes, two of which are house stocks.
“The market dynamics across its geographies are very favourable with of surging end-market demand and incredibly tight supply. This will allow it to deliver a 22% organic EPS CAGR (compound earnings) to 2025.”
Puretech Health PLC (LON:PRTC) is also a buy with a 550p target. “PureTech has built a stronger internal R&D capability and now has 2 fully owned pipeline assets with greater value retention.
“Both of these assets (LYT-100 and LYT-200) have significant value inflection points this year where we expect a positive outcome.”
Sensyne Health PLC (LON:SENS) meanwhile has developed significant artificial intelligence (AI) expertise through its collaborations with Oxford University and signed exclusive agreements with NHS trusts to access their patient data on an anonymised basis.
“The business has matured very quickly having been established in 2017 and is on track to deliver £27m of revenue for fiscal 2022 (year-end April).
“This is a unique asset given the quality of its health data but also due to the commercial partnerships it’s struck already: the NHS, Bayer, Bristol Myers-Squibb, Bayer, Alexion, Cognizant and Microsoft.”
Buy with a 310p target is Liberum’s view.