Pinned straw:
Clinuvel Pharmaceuticals (CUV) reported last week. From their presentation:
I thought this was a pretty good result as seasonally 1H is the weaker half of the year. On a operational level, Revenues increased by 10% compared to the pcp with interest income also boosting revenues due to the large cash balance.
In November 2024, the business decided to refocus into 3 core clinical programs: Porphyria (EPP & VP), Vitiligo and ACTH. With a 4th additional focus into photocosmetics.
To date, only Porphyria is revenue generating with the hope that the other segments will become revenue generating in due course pending results.
Surprisingly, the report did not touch upon anything from the photocosmetics side of the business although they did mention briefly that they are due to release new products in 2026 which contain melanocortins ("M line" products).
Listening into the investor briefing, there seems to be a sense that the business is in some what of a transition phase away from the current Managing Director (Phillipe Wolgen) who was announced to be stepping down but was then extended till June 2026. Normally Phillipe would lead the results but this was instead lead by the CFO and the lead of the clinical programs instead. There was mention that they are not sure how the new CEO/MD will decide to take the business going forward and perhaps this is why the share price has been depressed.
CUV screams cheap on all valuation methods, with a strong balance sheet and no debt, it seems the market is waiting for some certainty as to the future leadership of the business. I will admit that there have always been rumblings of issues behind the scenes and perhaps their inability to find a new MD/CEO may hint at these issues.
Given that operationally the results are still strong, I will continue to hold as I believe the risk/reward proposition still exists. But definitely not as high conviction as I was previously.
Disc: Held IRL and on Strawman.
@BoredSaint I can't agree more! I've been a shareholder for the past 4 years and have watched (squirmed) as the market has given this company no love, all the while shorters have been putting pressure on the SP with no real attempt from the company to progress with their buyback at these depressed (undervalued) prices. I speculate that a company with only $50m shares on issue and avg trading volume of just over $1m a day may see the SP suddenly move with any decent BuyBack activity by the company, along with a resulting short squeeze would end up in a trading halt and a please explain from the ASX.
The value proposition for me is that this is a company that in 2019 made $18.1m in PBT (I didn't use NPAT as they had years of accumulated losses built up in prior years to use as offset on their tax payable) and had a market valuation of $1.5b, to now being a company projected to make $55-$60m in PBT in 2025, have over $200m in Cash and No Debt, but has a market cap that's 66.6% less than in 2019!! It makes me scratch my head as to why that's the case!? What am I missing? As you said some of the issues with the lack of market confidence in the company may be around the uncertainty of the replacement for Dr. Wolgen as CEO/Managing Director. It was interesting to see Lachlan Hay, the COO take the lead on the HY results with the absence of Phillipe. Could he be at the head of the line to take over? I've heard him speak many times in the past and while I'm not a huge fan of his tone when speaking, he does seem very knowledgeable and understands the company very well as it's COO.
Other possible issues?... The slow progression of their Vitiligo clinical trials and if they will ever get it to the point of commercialisation is worrying. However, they are making decent strides and have provided interesting real life evidence that the treatment is effective. If they do get to commercialisation and can penetrate the market as they project, they would be looking at the below added value to the company. Instantly tripling their revenue! For a business that averages 37% Profit Margins, you just need to do a basic, back of the envelope calculation with a very conservative PE and it's amazing value at this point in time. Was far better value last month when it traded under $11 though!
It reminds me a little of Nueren in that you almost get a 2 for 1 in the company at current prices. EPP is priced in, but you get all the upside of Vitiligo, ACTH and Photo Cosmetics (to a smaller extent) pretty much for FREE.
ADDITIONALLY - They have also experienced headwinds in expansion of Scenesse into the European market due some pretty shady reviews by the EMA, however they seem to be ticking off all the extra boxes and hoops they have to jump through that the EMA are (I believe unfairly) demanding to advance treatment for EPP patients in Europe as well as extending treatment to adolescents who are need of something to help treat their horrible EPP affliction.
Anyway, I decided to do a little DCF which I'll add to my own valuation soon, but below is a simple chart outlining the movement in Revenue (broken in to Commercial Sales & Other income as they make a decent amount in interest on their cash) v Expenses v NPAT. Over the past 6 years you can see their growth isn't stalling (it may be slowing slightly), but they continue to grow patient intake and commercial sales. All the while accumulating a HUGE war chest of cash, which is just under a 3rd of their total Market Cap at this current time, to which provides the ability to make strategic M&A decisions to either build their competitive advantage in their Melanocortins market, or provide significant return to shareholders via a special dividend or more aggressive BuyBack, which I hope they recommence at these prices.
**Note on the chart. FY22 was the point at which the company had used all of their prior years tax losses and had to start paying tax on their earnings. Hence the slight dip.
DISC Held in RL & on SM.