Investors are strapping themselves in as a bumpy ride could be ahead with the coronavirus panic continuing to control the markets. In times like these, fundamentally strong stocks are going for a discount. Clinuvel (ASX: CUV), based on my research, is a fundamentally strong stock. CUV delivers treatments, through their drug SCENESSE, to people suffering from light-sensitive skin disorders.
Today we are discussing why CUV surged by 22% yesterday, whether today’s 7.5% fall is concerning and whether the biotech is worth the investment?
Why did CUV surge by 22% yesterday?
Yesterday the FDA confirmed CUV’s vitiligo meeting, triggering a volcanic 22% surge. The FDA announced it will discuss the North American vitiligo-SCENESSE program with CUV on the 29th April 2020.
Vitiligo is a skin disorder in which the pigment becomes damaged causing a series of white and off-white patches over the face, chest and limbs.
The North American study aims to treat vitiligo by combining SCENESSE with narrowband UVB. UVB is the current standard of care. However, clinical experts agree that UVB alone is not effective in providing a repigmentation solution.
The FDA meeting in April will focus on the design and objectives of the study as well as bringing the drug for vitiligo to market.
In previous SCENESSE and UVB trials (CUV102 and CUV103), the combination resulted in rapid repigmentation. In comparison to UVB on its own.
Thus, with a strong clinical record, the meeting in April is likely to be another successful milestone for CUV. In turn, investors rallied behind CUV yesterday as they realised the positive reaction the announcement would cause. Ultimately, driving the price up.
Should investors be concerned about CUV falling 7.50% today?
It seems CUV’s rebound from the bearish decline was short-lived as it dropped 7.50% today. The decline is not reflective of any fundamental changes in the company. Instead, the fall represents short term investors cashing in during turbulent times.
CUV is following a downward trend and it was doubtful that this one ASX announcement could bring the share back to $29. Meaning, short term investors could not see CUV climbing higher in coming days and decided to cash out the same day they invested.
In saying that, CUV is still up 4% since Monday. Providing some confidence to investors that CUV might be back on its upward trend.
Is CUV 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.
Clinuvel is proving itself to be an exceptional biotech with possible great long-term potential. CUV’s 2020 campaigns in Australia, America and Asia are developing at an organic level with signs of significant revenue increases once SCENESSE is commercialised in the US.
Moreover, Clinuvels H1 2020 financials exceeded investor expectations yet again. Thus, resulting in Morningstar changing its position on CUV today from fairly valued (3rd Feb) to undervalued (3rd March). With a fair value target of $20.33.
The volatility around CUV is providing investors with a possible opportunity to get shares a fraction of their true value. In my opinion, I would not jump on the CUV train immediately. I will be watching the stock closely over the coming weeks and set my price entry based on research.
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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