Peter Thilo Hasler
EUR 49.00 For Business Accounts Only

There is so much more than the FDA approval

Clinuvel reported its H1/2018/19 report (30/06) this week. Revenues (AUD 9.0 million, +27.0% YoY) came in below our expectations despite positive currency effects. Since total expenses (AUD 5.7 million) were below last year’s level mainly due to lower costs from general operations, operating profit almost tripled to AUD 3.3 million from AUD 1.2 million in H1/2017/18, and EBIT margin more than doubled to 36.7% from 16.7%.

During the following months we expect a steady positive news flow from Clinuvel. Main topics will be announcements regarding (1) the US Food and Drug Administration’s assessment of the risk-benefit profile of Scenesse in the prevention of erythropoietic protoporphyria (EPP) symptoms (to be announced on July 8), followed by submissions of New Drug Applications to authorities in Japan (PDMA) and Australia (TGA); (2) the Phase IIa proof of concept study where patients suffering from orphan disease variegate porphyria (VP) will be treated with Scenesse; (3) progress in the upcoming scientific vitiligo studies which would give Clinuvel access to an untapped market of substantial size; (4) announcements of a third indication, most likely xeroderma pigmentosum (XP), a disease which is defined by extreme sensitivity to sunlight (and therefore similar to EPP); (5) the appeal against the decision of the UK National Institute of Health and Care Excellence (NICE) not to recommend Clinuvel’s Scenesse for use by English National Health Service for adult EPP patients (March 14, 2019); (6) inclusion in the ASX 200, the benchmark for Australian equity performance; (7) the potential Nasdaq listing.

Following the strong outperformance of the shares since initiation of our research coverage (+197.6% vs. ASX 200 +1.1% and DAX -13.8%), we have adjusted our valuation methodology. Contrary to our previous method, we have now included additional medical indications, even with the lowest possible penetration rates. We therefore consider our valuation a worst-case scenario. Notwithstanding our rather conservative approach, we calculate a base-case scenario equity value of AUD 2,788.7 million or AUD 58.40 (previous AUD 32.70) per share; a Monte Carlo simulation calculates bear and bull case scenario equity values of AUD 84.80 and AUD 32.10 per share, respectively. In light of an expected 24 months price potential of 126.9%, we reiterate our buy rating for the shares of Clinuvel.

Clinuvel Pharmaceuticals

Clinuvel Pharmaceuticals is a biopharmaceutical company engaged in the development of its drug candidate SCENESSE® (afamelanotide 16mg) for the treatment of a range of severe skin disorders. SCENESSE®, a drug targeting erythropoietic protoporphyria (EPP), has completed Phase II and III trials in the U.S. and Europe and has been approved by the European Commission for treating adults with EPP. Co.'s products aims at preventing the symptoms of skin diseases related to the exposure to harmful Ultraviolet radiation and at repigmentation of the skin due to a number of depigmentation disorders. Co. has operations in Europe, the U.S. and Singapore.

Sphene Capital GmbH
Sphene Capital GmbH

Founded in 2010, Sphene Capital is a German based pure-play research house offering state-of-the-art research and evaluation services to European small- and mid-caps by avoiding typical conflict of interests of traditional investment banks.

As a general rule, analysts of Sphene Capital strive to understand companies better than any other analyst or investor before publishing their initiation reports. Therefore, the comprehensive initiation research reports comprise of 50-80 pages, including an extensive analysis of the value chain of the IPO candidate, its unique selling proposition, an elaborate analysis of suppliers and clients, a thorough SWOT analysis, a commercial due diligence (i. e. market and competitive analysis), an integrated financial forecast model and a profound company valuation (both DCF methodology and peer group multiples). Before publication, each of Sphene Capital’s research report will be double-checked by a fellow research colleague (“Four-eyes-principle”), ensuring highest quality and avoiding careless mistakes.

After initiation of research coverage, Sphene Capital publishes regular updates of 12-30 pages following relevant news flow from the issuer or major peers, f. ex. after acquisitions or after publication of quarterly results.

Due to Sphene Capital’s extensive experience in equity and bond research, the team has established longstanding contacts to all relevant market players, i. e. institutional investors, family offices and high net-worth individuals as well as journalists. To each of these groups, Sphene Capital’s research analysts have regular contacts during analyst and management roadshows or via daily phone calls. Finally, analysts publish articles in selected stock markets magazines and websites in which the analysts help issuers to improve their popularity on the German capital markets.

Peter Thilo Hasler

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