Meconic rises high on opiates

One of the more unusual ways of investing in the world healthcare boom is bearing fruit for a small company, Meconic, which was floated in June 1995 at 135p and has seen its shares climb to 353.5p. Part of its attraction is its strong position as the world's leading manufacturer of opiates. Based on this core activity the group is developing as a supplier of services to other pharmaceutical companies. Prospects for the recently acquired Phoenix Chemicals are described by finance director and shareholder James Cook as very exciting.

Recent interim figures showed profits up by 94 per cent to pounds 4.8m, on sales up 33 per cent to pounds 22.1m, helped by a maiden contribution from Phoenix which traded strongly in its first four months within Meconic.

Meconic's core business is as the world's largest supplier of opiates for manufacture into painkillers. Typical end products include codeine used for branded items like Nurofen Plus and morphine used for relief of pain in cancer.

There has been pressure on margins because of poor harvests in poppy- producing countries, restricting the supply of raw material. Opiates are controlled drugs, with UK production licensed by the Home Office. Meconic is the only licensed UK manufacturer. Because of its monopoly, the group has felt unable to pass on the increase in costs to customers. Profitable exports take around half Meconic's output, but this has been restricted as the group has given UK customers preference. The change is expected soon with legal poppy production slow to respond and vulnerable to the climate.

Sales in the pharmaceutical "actives" division, which includes opiates, rose by 21 per cent to pounds 16.1m in the first half out of total sales of pounds 22.1m. The group sees its major growth opportunity in building its non- regulated business where margins are significantly higher.

The first of these areas is fine chemicals where the group has developed a bitter-tasting product,Bitrex, which is used to give an unpleasant taste to household products like cleaners, slug bait and antifreeze. Margins are high although the company has to spend heavily on sales and promotion to build sales initially. The group is beginning to make inroads into the US and has had some notable successes in continental Europe. Another successful product in the fine chemicals division is Aloin, which is a key constituent in a new arthritis drug now being "rolled out" in continental markets.

The most exciting prospects for the company are in the third division, contract manufacture, where first-half revenues increased from pounds 363,000 to pounds 3.0m, helped by the maiden contribution from Phoenix Chemicals. Phoenix uses engineering and computer technology to perform high-speed chemical experiments using small samples. The advantage of the faster experiments is a reduced susceptibility to impurities. The computers are needed to monitor and shut down experiments where a potentially explosive reaction develops too fast for staff to abort the process.

Great secrecy shrouds Phoenix because it is involved in sensitive product development. Phoenix provides a manufacturing service as well as testing chemical reactions. Some idea of the potential is that the consideration for Phoenix was an initial payment of pounds 6m with a further pounds 12m payable in 2000.

A further speculative spice for Phoenix is its involvement in a new therapy for Alzheimer's Disease, currently in trials. Meanwhile analysts are looking for profits to advance from last year's pounds 5.8m to pounds 7.1m and then pounds 8.0m to drop the p/eto 25.6 and then 23. That looks good value for a business with exciting prospects and strong growth.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?