It is rare to discover a sensational biotech from Australia. Why? Because when we search for quality Biotechs our eyes look to Europe. Especially, as the European countries like England, Germany, Belgium and Switzerland pride themselves on their extensive research. Just think of the most reputable biotechs in Europe such as Cambridge Antibody Technology, Micromet and Acetlion.
However, Clinuvel (ASX: CUV) is challenging this stereotype as CUV shakes the entire biotech world. CUV focuses on delivering treatments, through their drug SCENESSE, for people suffering severe skin disorders.
Today we are discussing CUV’s H1 2020 financials, why its share price is down 18% since the release of financials and whether Clinuvel is worth the investment amidst the current ASX bearish trend.
Clinuvel’s H1 2020 financials – 26th February 2020
Clinuvels 2019 financials were nothing short of remarkable. Especially with a 37% increase in CUV’s profit margin, a new ROE of 32% (Industry average of 11.9%) and a cash total of $58,336,000 million. Yet again, CUV posted stellar financials in their H1 2020.
Net profit after tax came in at $1.059 million. Representing their eight consecutive half-year profit. Illustrating the financial aptitude behind the management team to consistently sustain a profit over 4 years.
CUV reported an 11% increase in revenues in comparison to June-December 2018, totalling $9,971,000 million. A driving factor behind CUV’s revenue growth was the 4.7% increase in European sales of SCENESSE.
Clinuvel maintained its strong balance sheet. With debt and equity remaining at $0 and $58 million respectively. Moreover, total assets jumped up 1.48% totalling $58,027,000 million.
Despite the excellent financials, we must analyse the negatives (risks). Why? Because YIG believes in providing investors with a balanced perspective on stocks. Especially with the current bearish trend in the market.
Even though CUV reported its 4th consecutive year of profit, Net profit was down 74% in comparison to H1 2019. However, CEO Darren Keamy outlined how the necessary 54% increase in expenses caused the drop in profit. CUV strategically invested in R&D around drug formulation, marketing and Clinical Development research to fuel future growth in the company.
Why is CUV down 18% since releasing H1 financials?
It can be hard to wrap your head around how a biotech with stellar financials, a global profile and recent FDA approval in August, is down 20% since it released its H1 report on Wednesday.
Now, maybe the 74% decrease in H1 2020 profit in compared H1 2019 triggered a slight decrease in the share price.
However, in my opinion, I believe CUV is declining because of the current bearish trend in the ASX. Clinuvel was already decreasing back in late January. Coincidentally when the overinflated fear of the coronavirus started to spread panic throughout the stock market.
With CUV falling 28% over the last month I think it is safe to say the coronavirus fear is driving down and will continue to drive down Clinuvel.
Is Clinuvel worth the investment?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
After dropping 28% over the week, short term investors may not see CUV as a worthwhile investment. Also, the 28% decline probably left potential investors clueless as to whether to invest or not.
I do see Clinuvel (ASX: CUV) as a biotech with significant upside potential. Clinuvel’s US, Australian and Asian campaigns made significant progress in 2019 and the trend looks to continue throughout 2020. Same goes with their financials. Lastly, CUV offer a dividend, allowing me to accrue cash over my long-term hold.
In saying all that, all signs show that Clinuvel may be along term hold. Ofcourse you must conduct your own research before entering the market.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Patrick McLoughlin, Associate of YIG.