A year ago, little was known about Enaleni which, since listing in June, has gained 315% in value to become the best-performing stock in the health & pharmaceuticals sector. While New Clicks' shares crept slightly higher, Enaleni has maintained its meteoric rise despite the government-initiated freeze in drug prices.

Enaleni sells drugs such as anti-inflammatory generics and antiretrovirals (ARVs) and produced 850m tablets last year which makes it the fifth-largest pharmaceutical company in SA by volume. Shares in the firm have more than quadrupled in value while maiden results (as a listed firm) showed a 274% surge in profits to R12,5m and a 113% rise in revenues. Enaleni - which leads the sector in this year's FM Top Empowerment Companies survey which measures how well firms are fulfilling government's black economic empowerment (BEE) programme - is set to boost its BEE status by lifting the stake in black hands to 51%. Factors such as a partnership with Cipla India and the growth of the generics market have helped buoy Enaleni, notes CEO Trevor Edwards.

Groups involved or interested in distributing HIV/Aids drugs include Tiger Brands-held Adcock Ingram which is awaiting approval and registration of its new ARVs.

Furthermore, pharmaceuticals groups are competing for a multimillion-rand government tender to supply antiretroviral drugs to public hospitals. IN SA more than 400 000 people with Aids in SA are on waiting lists for ARV treatment. During the period under review, Aspen's market cap surged from R7,7bn to more than R16bn, with share prices also more than doubling.

Sasfin Frankel Pollak consultant David Shapiro ascribed the sector's performance to strong demand. It's a high-growth area due to the accelerated and shared growth initiative, he said, adding that the state planned to put more money into fighting HIV/Aids, malaria and TB.

But while pharmaceuticals stocks are on the rise, shares in hospital groups may take pain from the state's plans to scrutinise private health-care pricing structures.

It's not failure to find new revenue streams locally, nor is it the stagnant number of hospital beds in SA that would yield slimmer earnings from local operations. The biggest danger is government-initiated consumercentric mechanisms - if implemented - to regulate fees that private doctors as well as Medi-Clinic, Netcare and others can charge patients.

The fact that the sector is seen as uncompetitive with only a few dominant players could strengthen health minister Manto Tshabalala-Msimang's argument for lower prices. However, given the high entry barriers, this form of regulation would not stoke competition, as observers and smaller players argue.

Regulation is an ongoing risk, and this is one of the reasons that hospital group stocks don't offer much value, says African Harvest Fund Managers portfolio manager Mark Ansley. But with attractive returns expected because of the acquisition of General Healthcare Group and Emirates Healthcare, by Netcare and Medi-Clinic respectively, the sector may soon regain its impetus.