MIDAS SHARE TIPS: Get a dose of benefits from diabetes shots with Arecor, pioneering a way to make insulin work faster and more efficiently
Boost: Arecor has developed innovative new treatments against diabetes
Diabetes is one of the fastest growing health problems in the world, affecting more than 700 million people worldwide, or almost 10% of the population. Many patients need to inject several times a day or wear a device that regularly injects insulin into their body.
The first is unpleasant; the second, often ineffective. Arecora Cambridge-based pharmaceutical company has developed a way to make insulin work faster and more efficiently.
The company is testing two products, both of which are said to have a dramatic effect on people with diabetes, limiting the need for self-injection and reducing the glucose spikes and dips commonly associated with the condition.
Arecor went public in June 2021 at £2.26 and shares soared to over £4 as the company released positive updates on its diabetes treatments. But the price has since fallen back to £2.43, hampered by market antipathy towards smaller healthcare companies in recent months.
The title should regain strength this year. Arecor awaits good news on its diabetes treatments and has several other initiatives underway, which should also yield encouraging results. Arecor is different from most small healthcare companies because it doesn’t try to create new drugs. Instead, the company focuses on existing products and seeks to improve them.
In the hospital, for example, many treatments are in powder form and therefore must be mixed with a saline solution before being given to patients. This is time consuming and can lead to dosing errors, but Arecor has developed a way to keep products stable in liquid form so they are ready to use as soon as they arrive in service.
Several types of drugs are given by intravenous infusion over several hours. Arecor discovered how to increase the concentration of these drugs so that they could be administered by injection, which meant that patients could self-administer the treatments from the comfort of their homes.
Small healthcare companies can struggle to achieve commercial success, which is why CEO Sarah Howell is pursuing various avenues to market Arecor’s products.
The company was founded in 2007 as a spin-out from a Unilever-backed biotechnology company. Its technology has become recognized by pharmaceutical groups around the world, so much so that many have asked Arecor to facilitate the use of their products.
A number of partnerships have been signed and more are expected to follow. These are generating revenue upfront and one is expected to produce a commercially available treatment later this year, triggering potentially generous royalty payments for Arecor.
British drug group Hikma is also a partner. The FTSE 250-listed company agreed in 2020 to fund the development of two products and has just licensed one of them, taking the drug in-house and paying Arecor’s licensing fees as it develops . The other product was returned to Arecor earlier this year, but brokers are optimistic that Howell will find another partner in the coming months.
Howell and his team are also scouring the market for drugs that could benefit from improvements with Arecor’s technology, insulin being one example.
The company has already seen encouraging results in trials and there are high hopes that both diabetes treatments could be on the market within a few years.
Midas verdict: Arecor focuses on some of the hardest-to-treat health issues in the world. Proponents believe the shares could more than double from the current price of £2.43 and Unilever retains a nearly 10% stake in the company. Start-up pharmaceutical companies are never without risk, but it seems safer than most. Buy.
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