One of the worst performers on the market today has been the Clinuvel Pharmaceuticals Limited (ASX: CUV) share price.
In late morning trade the biopharmaceutical company's shares are down 9.5% to $19.63. At one stage they were down as much as 11% to $19.29.
Why are Clinuvel Pharmaceuticals' shares being smashed today?
With no news out of the company or broker notes that I'm aware of, I suspect that today's decline is due to profit taking from some investors.
After all, prior to today the company's shares were up as much as 75% since the turn of the year.
This meant they were changing hands at a massive 81x full year earnings, which was always likely to put them under pressure when the market went into selloff mode.
Fellow high PE shares Afterpay Touch Group Ltd (ASX: APT) and Appen Ltd (ASX: APX) have also come under pressure today and dropped deep into the red.
Why have its shares rocketed higher this year?
Investors have been fighting to get hold of its shares due to its strong cash receipts growth and the potential of its lead compound, SCENESSE.
SCENESSE is the company's proprietary first-in-class photoprotective drug. It has been approved for marketing authorisation under exceptional circumstances by the European Medicines Agency for the prevention of phototoxicity in adults with the orphan disease erythropoietic protoporphyria
Last month management advised that the US Food and Drug Administration issued a request for further documentation to support the company's new drug application.
It sees this request as an integral part of the ongoing dialogue between the two parties and expects a decision on its Priority Review to be made following satisfaction of all agency requests.
Investors appear to believe that its cash receipts could be given a major boost if it is approved by U.S. regulators.
Should you buy the dip?
I think Clinuvel is an exciting healthcare company and well worth keeping a close eye on. However, I wouldn't be a buyer until SCENESSE has been approved in the United States and sales are being generated.
Until then, I would stick to the likes of CSL Limited (ASX: CSL) and Mayne Pharma Group Ltd (ASX: MYX).
