100-300% return in a year! Should you buy these 2 AIM stocks?

Highlights

  • ValiRx inked a contract with a renowned London university to test new technology for the treatment of breast cancer. As per the terms of the contract, it will conduct preclinical tests on the drug candidate for nine months to validate the treatment and determine its commercial viability.
  • Sareum received approval from the US Patent and Trademark Office for its SDC-1802 TYK2/JAK1 Kinase Inhibitor Program for cancer therapy.

Some small-cap pharma shares have offered high returns to shareholders driven by patent approvals and the progression of research and drug development activities. Further, during the Covid-19 pandemic, regulatory approvals pertaining to products aimed at tackling the spread of infection delivered strong financial performance and, in turn, offered better returns to shareholders. Here is a detailed review of the investment prospect in two AIM-listed pharma stocks, ValiRx and Sareum Holdings, that offered 100% -300% return to shareholders in the last one year.

ValiRx & Sareum : Market cap & One year return

(Data source: Refinitiv)

ValiRx Plc (LON: VAL)

ValiRx is a biotechnology firm based in the UK that provides financial, scientific, and commercial frameworks to speed up biomedical research and drug development. It was listed on the AIM sub-market of the London Stock Exchange (LSE) in October 2006.

Last month ValiRx inked a contract with a renowned London university to test a new technology designed for the treatment of breast cancer. As per the terms of the contract, the company will be engaged in conducting preclinical tests on the drug candidate for a period of nine months to validate the treatment and determine its viability for commercialization.

For H1 ended 30 June 2021, ValiRx’s research and development costs stood at £166,500 compared to £99,879 in H1 2020. The company recorded a loss before tax of £785,434 in H1 2021 compared to £884,523 in the same period in 2020.

The shares of ValiRx Plc are trading at GBX 54.75, up by 15.26% in the early hours of trade at 8:19 AM on Friday 22 October 2021. The shares of the company gave a return of 122.69% to shareholders in the last one year, and the market cap is £30.90 million.

Sareum Holdings Plc (LON: SAR)

Sareum Holdings is a UK-based specialist drug development company. Recently, Sareum received approval from the US Patent and Trademark Office for its SDC-1802 TYK2/JAK1 Kinase Inhibitor Program for cancer. It also announced a Covid-19 research project funded by UKRI for SDC-1801 TYK2/JAK1 inhibitor.

Sareum Holdings raised £1 million ($1.4 million) via a share subscription from a high net-worth individual (HNWI), the proceeds of which will be used for its drug-development programs in August 2021. It also raised £2.37 million in June 2021 through two subscriptions to HNWIs.

The shares of Sareum Holdings Plc are trading at GBX 6.65, down by 1.48% in the early hours of trade at 8:00 AM on Friday 22 October 2021. The shares of the company gave a return of 365.03% to shareholders in the last one year, and the market cap is £227.18 million.                 

Bottom line

Investors keen on exploring the investment prospect in pharma stocks can look at these AIM stocks as they have historically offered high returns. Nevertheless, it must be borne in mind that although these small-cap stocks offer attractive returns to shareholders, they may be associated with risks as traditional regulations of the main market do not apply to AIM stocks.

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