Company Overview: Clinuvel Pharmaceuticals Limited (ASX: CUV) is engaged in 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 was listed on ASX in February 2001.

CUV Details

CUV Rides on Geographical Expansion & Commercialisation: The company has witnessed increased patient demand for treatment with its innovative drug SCENESSE® (afamelanotide 16mg) in Europe and the USA. Notably, the year 2021, was marked with R&D expansion to make CUV’s technology available for more patients with unmet medical needs, thus laying a strong foundation to support the growth and sustainability of the company.

Performance Highlight in FY21; Analysis by Kalkine Group

Spotlight on Q2FY22 Key Aspects (for the period 01 October to 31 December 2021):

• Robust Increase in Cash Receipts: The company’s cash receipts, and prudent control of expenditures aided the company to grow its commercial operations based on SCENESSE® for EPP patients. Further, decent cash balance enabled the company to develop innovative melanocortin products to treat patients with an unmet medical need, offer non-prescription healthcare solutions to individuals at high risk of exposure to ultraviolet (UV), and integrate key parts of its value chain.
• Geographical Diversification: During the December quarter, the company remained on track to progress well on its commercial operations in Europe, Israel and the USA and also maintained increased focus on the augmentation of research and development pursuits.
• Clinical Trials:
  • The company expanded its clinical program with key developments in individual programs during the period. CUV stated that it received approvals to commence a new and world-first study (CUV156). As this study continued, the company also took measures to begin a new study (CUV151) involving healthy volunteers of fair complexion.
  • CUV also announced the completion of enrolment in the CUV801 study in January 2022, pertaining to Arterial Ischaemic Stroke (AIS).
  • Also, CUV expanded its melanocortin drug portfolio in 2QFY22, with NEURACTHEL® addition, a new formulation of the melanocortin adrenocorticotropic hormone (ACTH), under a longer-term commercial agreement with one of its strategic partners.

Cash and Liquidity Highlight; Analysis by Kalkine Group

A Robust FY21 Results Amid Global Headwinds:

• Looking at the performance over the period of 5 years covering FY17 – FY21, the company has reported a remarkable top-line CAGR of ~130%, with FY17 and FY21 revenue amounting to ~$17.03 million and ~$47.97 million, respectively.
• Net profit after tax CAGR for the above-mentioned period stood at 136%, with FY17 and FY21 profits of ~$7.18 million and $24.73 million, respectively. Moreover, the company has maintained a continuous upward trend in basic EPS in all these five years.

• Revenues have continued to grow since the initial launch of SCENESSE® in FY2016. The company made progress in its bottom line due to the expanded distribution of its key dug SCENESSE® in the USA and Europe via an efficient business model and cost control measures. 

• Commercial sales for FY21 went up a whopping 62% year over year, depicting increased commercial sales of SCENESSE®. Notably, the number of companies agreed to reimburse SCENESSE® has increased more than 60 by the end of FY21 from 45 at the end of FY20.
• The company exited FY21 with a cash balance amounting to $82.691 million, up from $66.747 million reported at the end of 30 June 2020. The company has no long-term debt at the end of FY21, providing a robust foundation to finance future growth and expansion.

Past Performance Over the period of 5 years covering FY17 – FY21; Analysis by Kalkine Group

Key Metrics: In FY21, net margin of the company stood at 51.2%, higher than the year-ago figure of 45.4%.  EBITDA margin for FY21 stood at 63%, as compared to 43.5% in FY20.

Profitability and Liquidity Profile; Analysis by Kalkine Group  

Top 10 Shareholders: The top 10 shareholders together form around 24.17% 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 5.63% and 5.24%, respectively, as also highlighted in the chart below: 

Top 10 Shareholders; Analysis by Kalkine Group 

Risk Analysis:  

Risks Highlight; Analysis by Kalkine Group 

Outlook: CUV remains well equipped to invest in new technology and service enhancement. Additionally, with a robust commercial and operations excellence, higher European orders for SCENESSE® products and a leading biotechnology company, CUV remains well-placed for long-term growth. Additionally, CUV has built a strong cash position to support the planned organic growth and built a robust financial structure to respond to COVID-19 and any adverse changes in the economic environment. The company expects the clinical demand to remain robust, indicating the benefits earned out of investment for the development of SCENESSE®.

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 ~25.2% in the past three months. Currently, the stock has a 52-week high and low level of $44.67 and $19.63, 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 some discount its peers, considering its supply chain disruption risk, increased costs, and expenditure with commercialising SCENESSE®, foreign currency risk, and strict regulatory approval, etc. For that purpose, peers such as Starpharma Holdings Ltd (ASX: SPL), Telix Pharmaceuticals Ltd (ASX: TLX), Mesoblast Ltd (ASX: MSB), and others have been considered. Considering higher demand from its key product SCENESSE®, strong liquidity position, positive cash flow from operations, robust FY21 performance, encouraging long-term outlook, geographical diversification, current trading levels, and indicative upside in the valuation, we recommend a “Buy” rating on the stock at the current market price of $24.09 as on 9 February 2022, 11:35AM (GMT+10), Sydney, Eastern Australia.

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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