Why the Clinuvel share price dropped 21% today

The Clinuvel Pharmaceuticals Limited (ASX:CUV) share price has come under pressure on Thursday. Here's why…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Clinuvel Pharmaceuticals Limited (ASX: CUV) share price has been the worst performer on the ASX 200 index by some distance on Thursday.

In morning trade the biopharmaceutical company's shares crashed as much as 21% lower to $35.45. Its shares have since rebounded slightly but are still down 11% at the time of writing.

Why is the Clinuvel share price crashing lower today?

Today's decline appears to have been driven by profit taking from some investors following an incredible rise on Wednesday.

Clinuvel's share price rocketed over 60% to an all-time high of $45.88 after the U.S. FDA approved its SCENESSE product for the treatment of erythropoietic protoporphyria (EPP) in adults.

This is expected to be a major boost to its revenue as no other treatment has approval in the United States market.

What is SCENESSE?

SCENESSE is a first-line pharmaceutical product aimed at treating patients with the rare genetic disorder EPP.

EPP is a rare life-long genetic disease found mainly in fair-skinned people. Sufferers will often have a severe phototoxicity of the skin, resulting in intolerable swelling and scarring when exposed to light. Reactions can vary from mild to extreme, with hospitalisation and powerful pain killers required for the worst cases.

The product has been a huge success in Europe and has been generating strong revenues in the market in recent years. For example, in FY 2019 Clinuvel reported an impressive 22% lift in revenue to $31.05 million. And on the bottom line things were even better. It posted a 40% jump in profit before tax to $18.1 million over the 12 months.

So, with the company now able to sell its product in the massive U.S. market, it looks well-placed to deliver further strong top line and bottom line growth in FY 2020.

But whether that growth will be enough to justify its current market capitalisation of ~$2 billion, is hard to say. As a result, I commend the company on this fantastic achievement, but I'm going to watch on from the sidelines.

For now, I would be a buyer of fellow healthcare shares CSL Limited (ASX: CSL) and ResMed Inc. (ASX: RMD) ahead of it.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A worried man holds his head and look at his computer.
Share Fallers

Why 29Metals, Brainchip, Platinum, and Premier Investments shares are falling today

These ASX shares are having a tough time on hump day.

Read more »

Man with his head in his head because of falling share price.
Share Fallers

Why 29Metals, Atlas Arteria, IDP Education, and Mineral Resources shares are falling

These ASX shares are having a tough time on Tuesday. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why ALS, EOS, NRW, and Patriot Battery Metals are dropping today

These ASX shares are starting the week in the red.

Read more »

A man looking at his laptop and thinking.
Technology Shares

Why are these ASX tech shares getting smashed today?

Owners of these two stocks are missing out today.

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Share Fallers

Why AGL, Brickworks, IGO, and New Hope shares are dropping today

These ASX shares are having a poor session. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Amcor, Arafura, Brainchip, and South32 shares are tumbling today

These ASX shares are having a tough time on hump day. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Aussie Broadband, Liontown, Metals Acquisition, and Seek shares are falling

These ASX shares are having a poor session. But why?

Read more »