Here’s why the Clinuvel Pharmaceuticals Limited (ASX: CUV) share price is flying nearly 4% higher today.
Why are Clinuvel shares trading higher today?
Although there has not been any direct news from the company today, Clinuvel’s CEO released a letter to shareholders earlier this week. In his letter, CEO Dr. Philippe Wolgen highlighted the Clinuvel’s performance in 2019 and elaborated on the company’s short- and long-term goals.
What does Clinuvel do?
Clinuvel is a dual-listed, global biopharmaceuticals company that develops and delivers drugs to treat patients with severe genetic and developmental skin disorders. The company’s flagship SCENESSE drug is designed to prevent phototoxicity in patients with erythropoietic protoporphyria (EPP). EPP is a rare genetic disorder that causes burns after brief exposure to light.
Clinuvel’s SCENESSE drug is a slow-release implant that activates melanin, with patients needing about 6 implants per year to be protected permanently. In October this year, Clinuvel obtained a historic US Food and Drug Administration (FDA) approval for its SCENESSE product to be used on patients. The FDA approval saw the Clinuvel share price soar 60% in a single day to an all-time high, adding $800 million to Clinuvel’s market value on the day, valuing the company at $2.2 billion.
How has Clinuvel performed in 2019?
Earlier this year, Clinuvel reported strong full-year results, posting its 3rd consecutive and record annual net profit before tax for FY19. Clinuvel saw a 21.8% increase in revenue of $31.05 million and a 40% increase in net profit before tax to a record $18.1 million for the year. Other milestones for the company included paying a maiden, unfranked dividend and joining the S&P/ASX 200 (INDEXASX: XJO) in 2019.
SCENESSE continues to be the company’s flagship drug, marking 3 years of continued distribution in Europe and is a key driver of Clinuvel’s ability to deliver shareholder value. FDA approval provides Clinuvel access to the lucrative US market. The company currently has $54.2 million in cash, which it can use to expand into the US market and improve research and development.
Should you buy?
Clinuvel has a solid earnings base in Europe and is investing to expand further. FDA approval opens the lucrative US market to Clinuvel, providing the company with great potential for the medium and long-term. The company also extended its employment agreement with its CEO for a further 3 years and continues to invest in product innovation.
The Clinuvel share price has been sold down from its all-time high in October of $45.88 and is currently trading at $26.76. In my opinion, the company shows great promise and a prudent strategy would be to keep it on a watchlist and wait for price action to confirm buying activity.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.