MIDAS SHARE TIPS: Ergomed a leader in drugs testing field

This week could mark the beginning of the end of Covid-19 purgatory, as thousands of people start to receive their first coronavirus jab. 

While the vaccine has been fully approved, the testing process does not end there, because it will be constantly monitored for side-effects and other issues. 

The process is known as pharmacovigilance and it applies to all drugs and vaccines, from the newest products on the market to established favourites, such as aspirin or ibuprofen. 

Breaking records: Ergomed has helped accelerate Covid-19 trials

That does not mean they are not safe. It is simply part of medical best practice, designed to present as full a picture as possible to doctors, patients and consumers more widely. 

Ergomed is a leader in the field and the shares, at £9.30, have serious potential for growth. 

The company helps drug companies to test products, sourcing data from patients to compile reports that explain whether products have adverse side effects and, if so, how prevalent they are. 

The work continues for as long as drugs are on the market, it is highly specialised and plays a critical role in patient care, particularly with new treatments, such as the Pfizer vaccine. Ergomed is a major player in the clinical trials market, too. Operating in around 60 countries, it works with pharmaceutical groups and biotech firms to develop new drugs for diseases from multiple sclerosis to rare forms of cancer. 

The company manages every stage of the trial process – gaining regulatory approval, finding hospitals and patients to participate in new tests, compiling data and delivering reports to its customers. Hundreds of trials are taking place at any one time and most take several years to complete.

At times, however, the process is accelerated. Ergomed has been involved in several Covid-19 trials, for example, which have been implemented at record speed. The group was involved in one of the very first studies, in Italy in March, when employees worked round the clock so the trial could start just eight days after they were appointed to do it. 

Ergomed was founded by Miroslav Reljanovic, a former neurologist. Having taken part in clinical research in the 1990s, he felt that many trials lacked rigour so he started his own company to try to improve the process. 

Originally from Croatia, Reljanovic moved to the UK in 2000 and listed Ergomed on AIM 14 years later. The business went through a rough patch but in the past two years, Reljanovic has reshaped the firm and strengthened his management team. 

The approach is working. Ergomed employs more than 1,000 people and, with finance director Richard Barfield at his side, Reljanovic is determined to expand further. 

Barfield has a good track record. Appointed in 2019, he spent five years at clinical research group Chiltern International, during which time revenues almost quadrupled before the firm was snapped up for $1.2billion (£900million) by US healthcare giant LabCorp. 

Chiltern grew organically and by acquisition, and Ergomed is likely to follow suit. One deal has already been completed under Barfield’s watch. Others are bound to follow.

Brokers expect sales of £85million for 2020, up 14 per cent from last year, while profits are forecast to increase by 58 per cent to £14.6million. Further substantial gains are likely next year, too.

Midas verdict: At £9.30, Ergomed shares have done well this year, benefiting from increased investor interest in almost all healthcare stocks. However, the company is profitable, its balance sheet is robust and the shares should continue to rise as Reljanovic and Barfield roll out their strategy. Buy. 

Traded on: AIM Ticker: ERGO Contact: ergomedplc.com or 01483 503 205 

This post first appeared on Dailymail.co.uk