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The worldwide inventory market has been having fun with a stable run in 2025. Each the FTSE 100 and the S&P 500 have climbed by round 10% to date this yr, boosted by sturdy company earnings, surging demand for synthetic intelligence (AI), and a lift in aerospace and defence budgets.
For a lot of buyers, it has been a productive begin to the yr.
However one tiny penny inventory is making these features look pedestrian. Defend Therapeutics (LSE: STX), a £57.8m micro-cap pharmaceutical firm, is up a staggering 108% yr to this point. That’s greater than 10 instances the expansion of the broader market!
Nonetheless, large value jumps should not unusual for micro-cap shares. With a comparatively small variety of shareholders and restricted liquidity, one small funding might make an enormous distinction.
So I made a decision to seek out out if the features are warranted.
A distinct segment pharma inventory
Defend is a speciality pharmaceutical agency centered on treating iron deficiency, with its lead product, Accrufer, already available on the market. On the time of writing, the shares commerce at simply 5.6p — a exceptional leap from a low of 2p earlier this yr.
Trying additional again, the image is much less rosy. The share value has tumbled round 96% from its all-time excessive roughly 5 years in the past. Since its inception in 2008, it has skilled a number of sharp rallies, together with a climb from 28p to £1.84 in 2019.
However now, there are indicators the enterprise might be gearing up for an additional chapter of progress.
The corporate stays loss-making, however it’s transferring in the precise course. Its newest outcomes confirmed a decreased lack of £21.3m in 2024, down from £40m the yr earlier than. Income surged 139% yr on yr, whereas earnings per share (EPS) improved from -4p to -2p.
That’s not profitability but, however it’s progress.
A glance underneath the bonnet
Defend’s stability sheet exhibits round £21m in debt towards £45.9m of property, with no free money movement at current. A fast ratio of 0.99 suggests it may possibly barely cowl its short-term liabilities, however there isn’t a lot wiggle room.
The corporate has been lively in shoring up its funds. It just lately raised £10m in fairness funding from its largest shareholder, AOP, and renegotiated a £20m debt facility on extra beneficial phrases. It has additionally launched a brand new digital advertising marketing campaign for Accrufer within the US, the place it sees important progress potential.
Administration’s ambition is to develop into money movement constructive by the top of 2025.
The decision
That is an intriguing story: a beaten-down penny inventory now sprinting forward of the broader inventory market because of surging gross sales and a renewed progress technique. The promote it operates in is area of interest however essential — iron deficiency stays a widespread and infrequently underdiagnosed situation, particularly in sure affected person teams.
Nonetheless, Defend is a high-risk proposition. It’s targeting a single flagship product and its monetary place leaves little margin for operational missteps. However for buyers snug with micro-cap volatility and eager on the healthcare sector, it would simply be one value contemplating.
If the present momentum in gross sales continues, I feel this might be certainly one of 2025’s extra memorable inventory market comeback tales.
