Shares in Quantum Pharma(LSE: QP) had already been falling when a shock profit warning at first-half results time in October saw a further 50% knocked off the price.
Incoming chief executive Chris Rigg had launched a major operational review, and a trading update Wednesday showed just how far the company has come -- impressing the markets enough for a 6% share price rise to 58.5p on the day.
Non-core activities have been dumped as the firm has been refocusing on its Niche Pharmaceuticals business, which is now described as "a highly profitable division" with an improving development pipeline.
With plans to expand internationally, Quantum is apparently ahead of its strategic plan -- and that plan has already resulted in an improved financial performance and higher overall margins.
Net debt was slashed in half by the time the full year was reported in May, thanks to a £15m placing, and the lossmaking NuPharm being closed, though the company did report a pre-tax loss of £10.9m.
From the ruins
In short, the new Quantum Pharmaceuticals looks like a very different entity to its first incarnation from its original flotation in 2014, but I don't think the markets have yet woken up to the potential of the regenerated company.
Forecasts indicate a return to profit for the year to January 2018, with earnings growth of 32% pencilled in for the following year, sending the P/E down as low as 14 and giving us a PEG of just 0.45. To me, that's a very attractive valuation for a company with these growth prospects.
Those who bought in the dip after last year's price crash will have seen their investment rise by close to 70% by now, but I reckon there's still time to grab a bargain.
A Neil Woodford bargain?
In biotechnology probably more than anywhere, early promises often fail and the risks come home to roost. That much is clear from Circassia Pharmaceuticals(LSE: CIR), a growth prospect that top investor Neil Woodford bought a chunk of.
But the firm's big promise, a cat allergy vaccine, failed in its phase III trials. That was followed by a dust mite allergy study failing to meet its phase IIb primary endpoint in April this year, bringing to an end the company's investment in allergy research.
Since the bad news hit, Circassia shares have lost two-thirds of their value, as early growth investors fled. But Neil Woodford didn't sell, seeing value in what was left of the firm at its new low price -- and there's actually still quite a lot left.
The firm has a range of successful respiratory treatments, and has signed up with AstraZeneca to commercialise two of its COPD products in the US -- and its US sales force is ramping up as a result.
Sales of asthma management product NIOX are growing too, up to £23m in 2016, and chief executive Steve Harris reckoned Circassia is heading to become a "world-class, self-sustaining specialty pharmaceutical business."
All of this promise will count for nought if we never see any profits, and there are none on the analysts' radar for this year or next. But Mr Woodford has said that he sees the firm as being "very well-financed" and thinks he sees "long-term value in the shares."
For me that cements Circassia as a buy.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.