Company Overview: Clinuvel Pharmaceuticals Limited (ASX: CUV) is developing drugs to treat a broad range of severe skin illnesses. The company’s branded first-in-class photoprotective drug called SCENESSE®, is utilised to treat phototoxicity in adult patients with erythropoietic protoporphyria (EPP). The company started trading on ASX on 13 February 2001.

CUV Details

CUV Progresses on Vitiligo Study & Provides Encouraging Results from Clinical Trial: The company expanded its clinical program with key developments in individual programs. It made good progress over the years, thanks to the expanded distribution of its key dug SCENESSE® in the USA and Europe via an efficient business model and cost control measures. 

Clinical Progress Highlight; Analysis by Kalkine Group

Limelight on Q3FY22 (for the period 01 January to 31 March 2022):

• Impressive Growth in Cash Receipts: The company’s cash receipts, and prudent control of expenditures aided the company in growing its commercial operations based on SCENESSE® for EPP patients. The performance strength assisted CUV in reinvesting in R&D and attracting additional staff talent. For the first time, CUV recorded more than $100 million in cash and cash equivalents in 3QFY22, enabling added investments and sales through adverse events.

• Key Developments in March Quarter: During the quarter, the company remained on track to progress well in its commercial operations in Europe, Israel, and the USA. In January 2022, CUV inked a second agreement with the German National Association of Statutory Health Insurance Funds (GKV-SV). The deal confirms ongoing access to SCENESSE® treatment for German EPP patients.

Financial Highlight; Analysis by Kalkine Group

Key Metrics: In 1HFY22, the company's EBITDA margin stood at 42.2%, higher than the Industry Median figure of 12.2%. ROE for 1HFY22 stood at 5.7%, as compared to 2.4% of Industry Median.

Liquidity Profile; Analysis by Kalkine Group  

Top 10 Shareholders: The top 10 shareholders together form around 24.08% of the total shareholdings, while the top 4 constitutes the maximum holding. ACN 108 768 896 Pty. Ltd and Ender 1, L.L.C are holding a maximum stake in the company at 5.79% and 5.24%, respectively, as also highlighted in the chart below: 

Top 10 Shareholders; Analysis by Kalkine Group 

Risk Analysis:

Risk Highlights; Analysis by Kalkine Group 

Outlook:

• CUV aims to generate robust cash flows from its commercial operations and has adequate cash reserves to fund its expansion strategy and build a financial shield to handle unfavourable economic conditions. A decent cash balance enabled the company to develop innovative melanocortin products to treat patients with unmet medical needs, offer non-prescription healthcare solutions to individuals, and integrate key parts of its value chain.
• With a robust commercial operation, higher European orders for SCENESSE® products and a leading biotechnology company, CUV is well-positioned for long-term growth. It expects the clinical demand to remain robust, representing the benefits earned from investment in the development of SCENESSE®. CUV stated that results from the ongoing study of CUV156 are expected in 2022.

Valuation Methodology: Price/Sales Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of the company has been corrected by ~56.54% in the past nine months. Currently, the stock has a 52-week high and low level of $44.67 and $14.5, respectively. The stock has been valued using the price to sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers, considering its supply chain disruption risk, strict regulatory approval, etc. For that purpose, peers such as Starpharma Holdings Ltd (ASX: SPL), Telix Pharmaceuticals Ltd (ASX: TLX), and Medlab Clinical Ltd (ASX: MDC) have been considered. Given the current trading levels, robust demand from its key product SCENESSE®, debt-free position in Q3FY22, positive cash flow from operations, decent long-term outlook, and indicative upside in the valuation, we recommend a “Buy” rating on the stock at the closing market price of $15.85, down by ~0.251% as on 1 June 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

CUV Daily Technical Chart, Data Source: REFINITIV 

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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