Shares in specialist veterinary pharmaceuticals company Dechra Pharmaceuticals (DPH) ticked up 0.2% to £44.74 after saying strong first quarter trading had continued through the first half to 31 December 2021.
Group revenues increased around 15% in constant currencies (90% of the company’s revenues are generated outside the UK) for the first half which Numis pharma analyst Kane Slutzkin estimates is around 2% higher than market expectations.
UPGRADE
Despite tougher comparatives management has maintained its guidance for 2022 performance to be at the upper end of expectations, which Slutzkin believes is the top end of current consensus and if delivered would mean around 8% full year revenue growth.
Slutzkin nudged up his 2022 earnings per share estimate marginally to 133p to account for the better revenues but also factoring in foreign exchange losses.
Importantly, the company said its outlook was underpinned by a ‘robust’ supply chain despite Covid-19 challenges.
Post the period end Dechra announced the acquisition of the worldwide rights to verdinexor, branded Laverdia®, a novel treatment of all forms and stages of canine lymphoma in dogs, providing access to a new niche therapy area which over the medium term could be a top 10 contributor to earnings.
RESILIENT PORTFOLIO
Management said group results should continue to benefit from good growth in the companion animal market, although analysts at Jefferies point out there is limited official data supporting such claims.
However, Jefferies admits Dechra is likely to be more resilient than some to a reversal of the Covid-19 triggered pet boom due to the company’s many chronic products impacting older animals with the products unlikely to have seen a benefit from the boom.
In addition, Jefferies believes that existing customers purchasing premium pet pharmaceuticals products are less likely to abandon their animals even if recent trends reverse.
