When I think about the best UK pharma stocks that could help me get rich over the next decade, this crop of the finest FTSE 100, FTSE 250 and AIM-listed shares come to mind.
To me these are the best UK pharma stocks because of their unimpeachable economic moats. This is the metric for greatness favoured by the world’s most successful investor Warren Buffett.
These companies achieve this feat through registered trademarks, copyrights and branded products that no other business can legally sell.
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So despite high R&D costs, they remain at a long-term advantage to other industries.
Best UK pharma stocks: FTSE 100
GlaxoSmithKline (LSE:GSK) is a world leader in oncology (cancer treatments), HIV and respiratory drugs. And the business is expanding in personal care too. Extending its booming oral health business in India is positive news.
CEO Emma Walmsley declares the pharma giant’s 19p per share dividend like clockwork every quarter. It looks bombproof to me. When the Covid crisis forced FTSE 100 powerhouses like Royal Dutch Shell to cut their dividends, GSK powered on like nothing had happened.
The GSK dividend is 6%, nearly three times larger than the average healthcare stock, on a cheap P/E ratio of 10.
And with annual free cash flow of £5.1bn, there is plenty in the bank to keeping paying out year after year. That makes it a no-brainer buy for me.
My FTSE 250 pick
High-margin prescription veterinary drugs specialist Dechra Pharmaceuticals has me very interested. In the main, its speedy profit growth looks sustainable and the share price has just beaten recent all-time highs too.
Income payouts to Dechra investors are 89% higher than four years ago. And the business raised its dividend again after bumper 2020 full-year profits, which bodes well for the future.
Now for AIM
On AIM, truly great businesses are hard to find, even with the best UK pharma stocks. But picking wisely offers serious multibag possibilities. Novacyt remains a solid choice for me, and seeing its revenues grow 10 times larger year-on-year is of serious interest.
North Carolina-based Polarean Imaging has an unimpeachable economic moat with zero competitors for its non-invasive medical imaging tech. So I’m a fan. But the best UK pharma stock I’m backing to get rich over the next decade is one I already own — Open Orphan (LSE:ORPH).
I’m a huge fan of executive chairman Cathal Friel for stripping out costs and pushing the most profitable parts of the business forward since the 2019 IPO. And he has delivered on every promise to investors to date, lifting revenues with multi-million pound contracts.
Open Orphan has just signed a contract worth up to £40m with the UK government to provide human challenge tests for Covid-19. Clearly these kinds of revenues will be transformational for the small Anglo-Irish contract research business.
And there are a number of other strands of the business that have me excited. One of which is Open Orphan’s 49% ownership of Imutex, a joint venture with London drug manufacturer SEEK Group, which has a candidate for a universal flu vaccine, the holy grail of modern medicine.
The best thing I can say about Open Orphan is that 90% of its revenues have nothing to do with Covid-19. So I can predict it should continue to earn big money well into the future.
