Following the outbreak of Covid-19, medical institutions, pharmaceutical companies, and even governments are realising the importance and applications of genomics – both from a diagnostic and treatment perspective.

Consequently, analyst forecasts of the already multi-billion-dollar genomics market predict immense double-digit annual growth over the next decade. 

Needless to say, that could be a very lucrative opportunity. So, let’s dive into the details about investing in genetics shares.

What are genetics stocks?

Genetics stocks occupy a small section of the biotech industry. As the name suggests, these businesses focus on developing treatments for genetic diseases by repairing or replacing the faulty genes causing the problem.

The genomics industry isn’t particularly new and has been around for decades. But due to the high costs, commercialisation has been challenging and still remains that way today. However, thanks to recent technological advancements, development costs are falling drastically while simultaneously boosting accuracy. 

Therefore, it’s no surprise that research into gene therapy has accelerated, with potentially game-changing treatments entering clinical trials both in the UK and abroad.

Genetics shares can be categorised into three segments:

• Sequencing & analysis – Companies analysing genetic data to detect defects in patients
• Testing & diagnostics – Firms using sequencing data to diagnose genetic diseases
• Gene editing – Biotech groups developing gene therapies that eliminate defects in the genome sequence

While there is some overlap in each category, firms within their respective segments often have different target markets and don’t necessarily compete with each other. However, the level of competition within each category is rising as more businesses seek to capitalise on the massive growth opportunity.

Unsurprisingly, this level of growth comes with a high volume of risk. The medical industry is highly regulated, with each test, device, and drug required to meet rigorous standards. 

Drug development is particularly notorious for its difficulty. In fact, a study by the Biotechnology Innovation Organisation showed that only 9.6% of treatments that make it to phase one clinical trials actually reach the market.

So, it’s hardly surprising that most pure-play genetics stocks are exceptionally volatile. And in some cases, the failure of a clinical trial can be a death sentence for these businesses. But all it takes is one successful treatment to potentially unlock multi-billion-dollar annual revenues.

With that in mind, let’s explore the top five UK genetics shares in order of market capitalisation.

[KevelPitch adtype=4578]

Top genetics shares in the UK

Oxford Nanopore Technologies

Oxford Nanopore was spun out of the University of Oxford in 2005. Since then, the business has become one of the UK’s largest genetics stocks, developing a proprietary DNA and RNA sequencing technology. It’s the first one of its kind to provide real-time data analysis and rapid testing.

This technology has been embedded into a variety of devices which the group primarily sells to scientific researchers involved with clinical trials. However, management has also been broadening its horizon, targeting several applied markets. 

The list includes consumer healthcare with its Covid-19 rapid testing solution, agriculture by identifying superior plant genomes, and even the environment by analysing the microbial composition of glaciers.

Key metrics:

• Market cap: £2.24bn
• Average daily volume: 1.86m
• HQ: Oxford, UK
• Cash/debt: £618m/£25m

Genus

Genus is a world-leading genetics sequencing business that focuses on the animal agriculture industry. The company owns directly (and indirectly through partnerships) various herds of pigs and cattle. Using its sequencing technology, the group tests and identifies key desirable traits among the herd, such as feed efficiency, disease immunity, protein and fat content, and fertility.

Management then generates revenue by selecting the animals with the strongest genetic profile for breading with farmers’ herds. The end result is healthier offspring, lowering costs for farmers while simultaneously increasing the quality of the end product for consumers.

Key metrics:

• Market cap: £1.58bn
• Average daily volume: 110.44k
• HQ: Basingstoke, UK
• Cash/debt: £46m/£152m

Ergomed

Ergomed is a global contract research organisation (CRO) that works directly in partnership with drug developers. Running clinical trials is challenging, and pharmaceutical giants often turn to CROs like Ergomed for their expertise.

This genetics stock doesn’t own any proprietary technology within the genetic editing space. However, it does have a long track record of providing support services for cell and gene therapy clinical trials in oncology (cancer) research.

The group charges its customers on an ongoing basis. With more genetics shares entering the arena, demand for its services has been steadily climbing over the years.

Key metrics:

• Market cap: £540.62m
• Average daily volume: 85.93k 
• HQ: Guildford, UK
• Cash/debt: £31m/£2.68m

Oxford Biomedica

Oxford Biomedica is a rising gene and cell therapy business specialising in viral vectors. In oversimplified terms, the company re-engineers existing viruses to deliver improved genetic material into patients’ cells.

Management is using this technology to develop its own treatments. However, management also outsources its capabilities to other drug developers via its LentiVector platform. 

This drastically reduces the cost of developing gene and cell therapies. So, it’s not surprising that pharmaceutical titans like Bristol Myers Squibb, AstraZeneca, and Novartis are all active customers. These customers pay ongoing milestone fees throughout development, as well as a royalty on sales for any drug that makes it to market. However, it’s worth noting that most of the current drug pipeline using LentiVector remains relatively early stage.

Key metrics:

• Market cap: £504.34m
• Average daily volume: 302.69k
• HQ: Oxford, UK
• Cash/debt: £109m/£9.34m

ReNeuron Group

ReNeuron is a specialist in stem cell therapy. Using its proprietary Exosome Technology platform, the company can deliver payloads of critical proteins such as siRNA, mRNA, and genetic materials to patients.

The technology has proven to be quite promising. However, unlike its peer genetic stocks, this business remains firmly in the early-stage portion of its lifecycle. Today, ReNeuron has two flagship assets, both in phase two clinical trials. One is for treating retinitis pigmentosa, a progressive disease that leads to blindness. And the other is for repairing damage after a stroke.

Key metrics:

• Market cap: £21.68m
• Average daily volume: 44.12k
• HQ: Bridgend, UK
• Cash/debt: £22m/£0.72m

Investing in the US genetics industry

American genetics stocks have to navigate an equally complex regulatory environment. In the UK, all medical treatments and tests need to be approved by the Medicines & Healthcare Regulatory Agency (MHRA). In the US, approval is required by the Food & Drug Administration (FDA).

The US stock market has plenty of genetics shares listed. So, let’s explore some of the leading businesses in this space in order of market capitalisation.

1. Illumina (NASDAQ:ILMN)
2. CRISPR Therapeutics (NASDAQ:CRSP)
3. Fulgent Genetics (NASDAQ:FLGT)
4. Pacific Biosciences of California (NASDAQ:PACB)
5. Editas Medicine (NASDAQ:EDIT)

Are genetics stocks right for you?

The world of genetics stocks is a highly volatile place. Just looking at these five UK genetics shares demonstrates that perfectly. 

Over the last five years, some have achieved tremendous growth. For example, Ergomed and Oxford Biomedica are up 434% and 110%, respectively. Sadly the same can’t be said for Oxford Nanopore and ReNeuron Group, which are down 55% and 82% across the same period. And shrinking the range down to the last six months reveals double-digit declines for all five companies. What’s more, a similar story exists when looking across the pond.

Needless to say, individuals thinking about investing in genetics stocks need to have a high risk tolerance. While genetic research may have been around for decades, the same can’t be said for most of the stocks listed today. And odds are most will fail in their quest to capture the multi-billion-dollar market opportunity.

That’s why we recommend taking a diversified approach. By owning a basket of companies in this area, the odds of finding the future industry leader climb higher.

[KevelPitch adtype=151]

Disclosure

Zaven Boyrazian owns shares in Oxford Biomedica. Zaven Boyrazian’s mother is an employee of Bristol Myers Squibb involved with clinical trials.

Cakes solve many problems

Cake Box Holdings is a small-cap growth stock that’s had an outstanding 2020 despite the pandemic headwinds. The Cake Box share price has risen 21% year-to-date.

The company is Vegetarian Society Approved and free from eggs. They offer a gluten-free range of teatime cakes and have all cake ingredients listed on the company website. It’s a popular business that’s really taken off. While cakes are readily available in supermarkets and bakeries across the UK, people love a treat and Cake Box makes catering to special diets simple. Vegetarianism is on the rise and I think its vegetarian and eggless appeal will help keep it relevant.

It’s staying power will largely depend on its range of products and customer service. So far, so good, as it appears to be keeping customers happy with 30% revenue growth year-on-year for the 20-week period to September 30. However, it did lose out on six weeks of sales during lockdown.

Boundless growth for this small-cap stock

Nevertheless, Cake Box wasn’t deterred by the lockdown. The company paid back furlough money it received and paid shareholders a special dividend to replace the previously cancelled one. It’s been recruiting, and management is confident it can weather any storm.

Listed on the FTSE AIM All-Share index, Cake Box is following a similar model to Domino’s Pizza. But unlike Domino’s, Cake Box still has vast room for growth. Illustrating this point, it added six new franchise stores to its group of holdings during the six months to 30 September, plus another five since then. It now has 144 stores, mainly throughout England, with one in Scotland. It’s also been using Uber Eats, Just Eat, and Deliveroo to help boost online sales.

The £84m company’s price-to-earnings ratio (P/E) is 26 and earnings per share are 7.8p. Its forward dividend yield is approximately 2.8%, based on an annual payment of 5.9p per share. I like the look of this company, but the high P/E is off-putting.

A biotech growth stock shaking up agriculture

Genus is another small-cap growth stock, and it’s a biotech company dealing in livestock. The animal genetics specialists carries out gene editing to create genetically elite breeding animals and embryos. It sells these internationally to pork, beef, and milk producers, competing with national and regional farmer-owned cooperatives. The point of this is to improve the efficiency and sustainability of meat and milk production and reduce the spread of disease.

Genus has a £2.7bn market cap. Its P/E is 66 and earnings per share are 62p. The company doesn’t yet offer a dividend. I think the Pfizer/BioNTech coronavirus vaccine approval will speed up acceptance of other gene editing processes, paving the way for progress in this area. This bodes well for Genus in the future.

The Genus share price is up nearly 28% year-to-date and its high P/E reflects this. Yet, I do think this company may well continue to thrive in 2021, as China is recovering well and demand for Genus’ offerings is accelerating.

All-in-all, I think both Genus and Cake Box are small-cap growth stocks that will continue to thrive in 2021. I’d consider buying on a dip.

FTSE opportunity

What does an animal genetics company actually do? Genus breeds better pigs and cattle for farmers so they can produce higher quality meat and milk more efficiently. This involves a scientific and technological process involving DNA, identifying desirable characteristics and much more that a scientific mind would understand better than me. GNS also owns intellectual property for its own technology, which enhances its processes.

I feel I know a good opportunity on the FTSE when I see one. Although the pandemic and ensuing market crash has battered many industries, anything linked to food, production of food, and consumer staples are safe stock options in my opinion. I firmly place Genus in this category.

When the market crashed GNS lost just over 25% of its share price value. The beginning of March saw shares trading at 3,644p per share. Fast-forward two weeks and you could pick up shares as cheap as 2,650p. Since this low point, GNS has recovered to pre-crash levels and surpassed the beginning of March price. At the time of writing, shares can be purchased at close to 3,850p per share.

FY results

This morning GNS released its FY results ending 30 June 2020. The results were impressive in my opinion especially in the midst of an economic downturn and difficult market conditions. Revenue increased 13% from £488.5m last year to £551.4m this year. Profit before tax jumped a stellar 16% from £61m to £71m. Free cash flow rose from £10m last year to £35.2m, too.

There was further good news for investors as the board maintained the dividend would be retained. Many other FTSE-listed companies have suspended or cancelled dividends to conserve cash in the crisis. GNS’s board recommended a final dividend of 19.7p per share. This is a healthy increase of 5% over the prior year final dividend. If you combined the interim dividend increase of 6%, this will result in a total dividend for the year of 29.1p per share. You can be paid this dividend in December as long as you are a shareholder on the register by close of play on 20 November 2020.

Stroke of Genus

Genus has been affected by the Covid-19 pandemic. With a global footprint and customer base, there have been logistical issues and restrictions. That said, it has not affected GNS as much as anticipated and there is a favourable outlook moving forward in the light of easing restrictions. I believe its global footprint as well as key strategic partnerships in China and the US will help continue its impressive performance.

I feel Genus is well protected as there will always be demand for food products, especially staples such as meat and milk. Although the share price is not the cheapest, full-year results show GNS has performed well against the backdrop of the Covid-19 pandemic and downturn. There is also a dividend to be paid out which has increased on last year too. I would not be surprised if the share price rose further still as other FTSE counterparts are still struggling.

Safety in utilities

FTSE 100 member Severn Trent (LSE: SVT) is one of the three listed water stocks in the UK. It serves almost 8m people. Management believes the group offers “a valuable combination of reliable earnings, long-term asset growth and an inflation-linked dividend”.

Following the recent market crash, most investors are sailing through choppy waters. Therefore April may be an appropriate time for many of us to review our portfolios to see whether they’re built to withstand a potential recession. If you believe we’re entering a period of economic contraction, you may want to add a defensive stock to your portfolio.

SVT is one of the nine stocks that have been recently identified by analysts at Morgan Stanley as key picks in uncertain times. No matter how the economy fares in the near future, we’ll all need to use water and other utilities in our daily lives.

On 31 March, Severn Trust issued a trading update. Management sees “no material change to current year business performance. We continue to expect the Group will deliver full-year trading performance in-line with previous guidance”. These words are likely to bring relief to its customers and shareholders alike.

So far in 2020, this FTSE 100 stock is down about 11%. As I write, the price is hovering around 2,230p. The recent decline has pushed the dividend yield to about 4.2%. And the shares are expected to go ex-dividend next in June.

Animal breeding and genetics

Animal genetics company Genus (LSE: GNS) is a member of the FTSE 250 index. Its investment thesis centres around “improving the efficiency and sustainability of meat and milk production”. 

For example, the company owns a patent for commercialisation of pigs genetically edited to resist Porcine Reproductive and Respiratory Syndrome (PRRS). It’s also known as blue-ear disease and causes substantial losses for the global pig industry each year.

National and global pork, beef and milk producers are its customers. It serves over 50,000 customers in over 70 countries. The business is both profitable and cash-generative.

In February, this FTSE 250 group reported strong first-half results for the period to 31 December. Revenue came in at £271m and adjusted profit before tax was a record £30.4m.

A notable highlight was porcine revenues, driven 15% higher thanks to restocking in China. This followed the decimation of pig herds from African swine fever. Asia is an important market for the company. 

Year-to-date, the GNS share price, which hovers around 3,250p, is almost flat. And its dividend yield is about 0.9%. I expect the company to keep growing its customer base and margins for the rest of the year.

The bottom line on FTSE shares

UK residents over the age of 16 have a tax-free personal savings allowance of £20,000 which they can invest across various ISA accounts. The two shares featured here may not appeal to you, of course. And if you’re unsure about which industries or companies to concentrate on, a low-cost FTSE 100 or FTSE 250 tracker fund might also be appropriate. 

FTSE 250-listed animal genetics company Genus (LSE: GNS) is up more than 15% over the last turbulent week, and 60% over 12 months. Its 10-year growth chart shows a steady upward climb that even the coronavirus hasn’t interrupted.

Sheer Genus

The Genus share price was given a further lift last week as its interims boasted a “strong first-half performance and strategic momentum”, with record adjusted profit before tax, up 27% in constant currency to £36.6m. It also posted its highest first-half adjusted profit before tax growth rate in more in a decade.

Genus aims to breed better pigs and cattle for farmers, allowing them to produce high quality meat and milk more efficiently and sustainably. It has benefited from strong demand from China, which has been restocking following the spread of African Swine Fever, but is also growing strongly in Europe, Latin America, and North America.

CEO Stephen Wilson warned that COVID-19 uncertainties could disrupt trade and hit the business, but added that the board’s second-half expectations should still be met.

Genus looks like a business with strong growth potential to me, as the global population rises and emerging economies expect meat-rich diets. The downside is that it is expensive, trading at a whopping 40.1 times forecast earnings. Those earnings are forecast to grow 13% next year, but it can’t afford any slippage given today’s valuation. It could fly higher if China enjoys a V-shaped recovery in the weeks ahead. Definitely one for a watchlist.

On the PLUS side

Plus500 (LSE: PLUS) is an investment platform that specialises in contracts for difference (CFDs), a popular form of derivative that let traders play shares, forex, commodities, cryptocurrencies, ETFs, options and indices. Demand rises when markets are volatile, as investors look to play falling share prices, boosting customer activity (and fees).

The Plus500 share price is up 10% in the last week, and 120% over three years, but with plenty of volatility in-between. Its shares crashed a year ago, after management warned of “materially lower” profits due to stricter EU limits on how much retail traders can borrow from their broker.

By May, the yield had shot up to 16%, while it was trading at just seven times forecast earnings. Many shied away, but crypto-currency Bitcoin’s resurgence gave it a lift, with further support from recent virus volatility.

My fellow writers on the Fool are sceptical about this stock, as its fortunes are prone to market hype, and customer churn is high. However, last week’s trading update reported “a significant increase in levels of customer trading activity”, with the current quarter up “substantially” year-on-year.

Trading at 10 times forward earnings and with a forecast yield of 4.6%, Plus500 looks tempting, but only for risk seekers who do their research. In contrast to Genus, Plus500 could take a hit from a V-shaped recovery.

And with this being the case, I think investors are better off sticking with stocks instead of digital currencies.

One undervalued FTSE 250 growth stock that I think has the potential to generate much better returns than Bitcoin over the long term is gambling group GVC Holdings (LSE: GVC).

Growth champion

Through a combination of acquisitions and organic growth, GVC has grown from being one of London’s smallest public companies five years ago into one of its largest today.

City analysts believe the group has the potential to generate a net profit of £371m this year and £448m in 2020, compared to just £10m in 2013.

As the company’s earnings have exploded, shareholders have reaped the rewards. Shares in GVC have produced a total annual return of 18.7% for investors over the past decade, turning every £1,000 invested into £6,400.

Past performance should not be used as a guide to the future, but it does give us an indication of a company’s ambitions and capabilities. As noted above, City analysts believe GVC’s earnings will continue to grow at a high double-digit rate over the next two years, and I think there’s a good chance that the group’s growth will carry on at a rapid clip in the years after.

Shareholders who want to go along for the ride can buy the stock today for just 13.3 times forward earnings. There’s also a dividend yield of 4.2% on offer. I think that’s a steal for such a fast-growing business.

Unique offering

If gambling isn’t for you, then animal genetics company Genus (LSE: GNS) is another FTSE 250 growth stock that I currently have my eye on.

This company is a relatively unique business. It provides farmers with genetics that enable them to produce animal protein, in the form of meat and milk. Its porcine business has a network of over 600 breeding herds in approximately 40 countries, giving farmers around the world access to its animal protein genetics.

Genus’s earnings per share have hardly budged over the past six years, but City analysts believe this is about to change. They believe the company is on track to achieve earnings growth of 57% in its current financial year, and 12% the year after.

In a recent trading update, management confirmed that the company is on track to meet growth targets for the year. Sales are expanding so quickly that the enterprise is investing to increase its production capacity.

Based on these forecasts, shares in Genus are currently dealing at a forward P/E of 39, which looks expensive at first, but when you consider the company’s growth, coupled with its portfolio of unique products, I think this is a price worth paying.

Global demand for food is only going to increase going forward, and the need for products that can help farmers improve the yield on their property is only going to grow as well. That suggests to me that Genus’s growth is only just getting started.

What I mean by that is a reflection of the progress of Glaxo and the valuation of is shares. Earnings are back on track after those difficult few years when the company was rebuilding its drug development pipeline. We have a couple of effectively flat years for earnings forecast, but that’s fine — stability rather than rapid growth is what the FTSE 100 has traditionally been thought of as providing.

Bread and butter

That stability has fed through to the dividend, and there’s a forecast yield of 4.7% this year. Cover at 1.4 times could be a bit stronger, but it’s also fine — and I see it as a sufficient base for growing dividends as earnings pick up further in future years. On valuation, GSK shares are on forward P/E multiples of 14.7 on this year’s forecasts, and 14.3 on 2020’s.

So what we’re looking at here is a great FTSE 100 company, on a valuation that’s pretty much bang in line with the Footsie’s long-term average, and offering a decently covered dividend that’s a bit above the index average yield (which is standing at 4.5% now).

Looking at that, you’d never get a clue the Brexit circus is in town, or that Donald Trump is waging a trade war with China, or of any of the negative stuff that’s making the daily headlines. And that’s why I reckon GlaxoSmithKline is possibly the perfect defensive long-term investment.

Meaty option

If you want to add a bit of spice to your portfolio, I reckon Genus (LSE: GNS) is a growth stock worth watching. Genus specialises in breeding genetically-modified pigs and cows, and has a worldwide market. Its shares have already gained 140% over the past five years, though the price has fallen back a little over the past year. That may well be due to a flattening off of the firm’s short-term earnings growth forecasts.

Results for the year ended 30 June showed a modest 4% rise in revenue to £488.5m, with adjusted pre-tax profit up by the same margin to £6.7m and adjusted EPS down 4% to 73.2p. While that financial performance is pleasing, I’m more interested in strategic progress for the long term right now.

Global penetration

Genus has made strong inroads into Latin America and Europe. And although its business in China was hit by the spread of African Swine Fever, I’m pleased by the resilience of the firm’s results. It’s going to continue to hold back Genus’s pig business, though, and the impact should continue into next year — but there should be some benefit from subsequent restocking.

Bovine semen volumes grew 40%, and that’s something I never expected to write when I started in this job all those years ago.

Genus shares are on a premium valuation with forward P/E multiples in the 30s, and that’s something you’ll have to be comfortable with if you go for the shares. But I reckon the share price weakness of the past year could be presenting a fresh opportunity for growth investors.

Looking ahead, further outperformance of the FTSE 100 could be ahead. The company appears to offer good value for money, as well as an improving financial outlook. As such, it could be worth buying alongside a sector peer which reported positive results on Thursday.

Positive outlook

The company in question is animal genetics specialist Genus (LSE: GNS). Results for the year to 30 June showed further improvements in sales and profitability, with revenue up 6% to £470.3m, while profit before tax moved 9% higher to £75.9m. The company experienced strong bovine revenues, rising 11% in constant currency. Porcine revenues moved up 1% in constant currency as the business continued to deliver its growth strategy.

Looking ahead, the company continues to see growth opportunities. The successful launch of its sexed semen product, Sexcel, in September 2017 has the potential to improve its financial performance in the medium term. And while there have been challenging operating conditions for some of its customers due to trade disputes, its overall outlook appears to be positive.

With Genus forecast to post a rise in earnings of 6% in the current financial year, it appears to have a bright outlook. With demand for its products likely to increase in the coming years, it could benefit from a tailwind which helps to boost its sales and profitability. As such, now could be a good time to buy it.

Growth potential

Prospects for the GlaxoSmithKline share price also seem to be positive. Although the pharma stock has risen significantly in recent months, it continues to offer a wide margin of safety. For example, it has a dividend yield of 5%, and a price-to-earnings (P/E) ratio of around 15. These figures suggest that it could offer further growth potential due, in part, to the strategy it’s being pursuing.

The company is seeking to restructure in a bid to make itself more efficient. It intends to focus on a more limited range of potential treatments within its pipeline, where it believes the risk/reward ratio is more appealing. It’s aiming to reduce costs by around £400m per year, which could help to deliver a rising bottom line over the medium term.

With GlaxoSmithKline’s dividend having been frozen since 2014, it now has a dividend coverage ratio of around 1.4. This suggests that dividend growth could be ahead for the company over the next few years, which could act as a catalyst on investor sentiment. With strong defensive characteristics (should the world economy’s growth rate slow down), the prospects for the stock seem to be bright.

My first stock has risen by 211% over the last 10 years. Animal genetics company Genus (LSE: GNS) released its half-year results today, giving us a chance to see whether this momentum is being maintained.

Double-digit gains

Revenue at the Basingstoke-based firm — which breeds genetically-modified pigs and cows — rose by 7% to £238.6m during the six months to 31 December. Adjusted operating profit including joint ventures rose by 18% to £31.5m, implying a respectable adjusted operating margin of 13.3%.

Cash generated by operations improved, rising to £22m. That’s nearly double the £13.5m generated during the same period in 2016. The interim dividend was increased by 9.5% to 8.1p, reflecting higher profits and stronger cash flow.

These figures all seemed fairly positive to me, but they weren’t enough to stop the shares falling by around 5%. Do investors need to be worried?

Headwinds could slow growth

Last year, Genus benefitted from unusually high pig prices in China. The firm says that pig prices are now “returning to a more normal level,” reducing profits from this region.

Currency movements could also put pressure on profits. Commenting today, chief executive Karim Bitar said that shifting exchange rates are expected to reduce reported profits by around £3m this year.

Broker consensus forecasts indicate that Genus is expected to report adjusted earnings of 71.5p per share for 2017/18. This is only 3% more than last year’s adjusted figure of 69.4p per share.

Although the headwinds described today sound like short-term issues to me, I’m not convinced now is the right time to buy. With the shares trading on a forecast P/E of about 30, I think there might be better buying opportunities later this year.

I’m tempted by this stock

Shares of pharmaceutical services firm Clinigen Group (LSE: CLIN) have also fallen this week following the firm’s interim results. But I’m more inclined to see this as a buying opportunity.

Clinigen specialises in providing unlicensed medicines to doctors and other healthcare professionals. These might be used in trials or to treat a patient with specific requirements. It’s a bigger business than you might think. The group ships 3.5m units for patient treatment each year to more than 111 countries. In 2017 it provided access to 1,700 unlicensed medicines.

Expansion has come through organic growth and acquisitions. Two acquisitions were made during the first half of the year, including a £143.5m deal to buy AIM-listed firm Quantum Pharma. These deals should expand its geographical footprint and its product portfolio.

This could be the right time

Sales rose by 28% to £167.8m during the six months to 31 December, while adjusted earnings rose 13% to 21.2p. Cash generated from operations rose from £7.7m to £34.3m, giving me confidence that the group should quickly be able to repay the debt used to buy Quantum.

My feeling is that after a period of major investment, Clinigen is now well positioned for further growth.

Analysts expect the group’s adjusted earnings to rise by 11.5% to 46.6p per share this year, putting the stock on a forecast P/E of 20. Earnings are expected to accelerate by a further 18% in 2018/19. I believe this stock could be a profitable growth buy at current levels.

Despite this, there are still some companies which appear to be undervalued. Here are two examples which could provide high returns in the long run and help to make you a millionaire.

Improving performance

Reporting on Thursday was animal genetics company Genus (LSE: GNS). Its results for the year to 30 June showed that it is making good progress with its strategy. Evidence of this can be seen in a revenue rise of 18%, with strong porcine revenues. They increased by 20%, with notable growth in Asia and from royalties. There was also improving performance from bovine revenues, which were 13% higher than in the previous year.

The effect of increasing sales meant that the company’s adjusted profit before tax moved 13% higher. Its growth was offset to some extent by a planned increase in R&D investments, but they should help the company to deliver further growth in future years. In fact, R&D investment increased by 27% as key initiatives in genomic selection, gender skew and gene editing made considerable progress.

Looking ahead, Genus is forecast to post a rise in its bottom line of 7% in the current year, followed by further growth of 12% next year. Although it trades on a price-to-earnings (P/E) ratio of 29, its mix of high and sustainable growth means it could perform relatively well in the long term.

Defensive profile

With the FTSE 100 facing a number of major risks such as geopolitical challenges in North Korea and political risks in the US, companies with defensive profiles could become more popular in future. Of course, relatively few companies with defensive characteristics offer high and dependable growth. That’s why medical technology company Smith & Nephew (LSE: SN) could prove to be a worthwhile investment in the long run.

The company looks set to capitalise on the opportunities created by an ageing population. For example, it provides knee and hip replacements alongside its woundcare and sports medicine operations. Together, these businesses provide it with a degree of diversity, as well as lack of exposure to the boom/bust patent cycle which is a feature of a number of healthcare companies. As such, its earnings growth tends to be steady and highly sustainable.

Over the next two years, Smith & Nephew is expected to post a rise in its bottom line of 6% per annum. While it has a P/E ratio of 20.6, it seems to be trading at a fair price given its diverse and robust business model, as well as its long-term growth potential.