Company Reports

No-moat Clinuvel’s first-half fiscal 2024 sales growth moderated to a low 4% constant-currency revenue growth versus 19% constant-currency revenue growth in the previous corresponding period. Sales-growth volatility was partly because orders from larger treatment centers in Europe were recognized earlier in the 2023 calendar year. Despite that, we reduced our forecast five-year group revenue compound annual growth rate to 11% from 13% because we think demand for Scenesse is slowing more than we expected. However, the valuation impact was largely offset by the time value of money, reduced forecast investment in working capital, and performance rights lapsing in November 2023. We maintain our AUD 18 fair value estimate with shares remaining undervalued.

Clinuvel’s strategy revolves around expanding its direct distribution for adult erythropoietic protoporphyria, or EPP, patients. This involves training and collaborating with doctors and accrediting the specialist skin centers they practice in to prescribe Scenesse. By focusing on distribution, Scenesse is more accessible to a greater number of patients, and supportive of organic top-line growth.

We initiate coverage of Clinuvel with a fair value estimate of AUD 18 and shares currently appear undervalued, trading at an 11% discount. We suspect the market is likely too pessimistic on the speed and extent of Clinuvel’s commercial rollout of Scenesse for its existing indication which contributes 83% to our fair value estimate. We forecast an EPS CAGR of 16% for the next five years when Scenesse will remain fairly protected from competition. We suspect the market is also underestimating potential new earnings streams. While broader indications including vitiligo are still in clinical trials, early efficacy and safety data is positive and would greatly expand Clinuvel’s addressable market if successful. Regardless, due to low capital requirements and high-profit margins, Clinuvel enjoys high returns on invested capital. Our Morningstar Uncertainty Rating for Clinuvel is High, and we assign a Standard Capital Allocation Rating.

Clinuvel’s strategy revolves around expanding its direct distribution for adult EPP patients. This involves training and collaborating with physicians and accrediting the specialist skin centers they practice in to prescribe Scenesse. By focusing on distribution, Scenesse is more accessible to a greater number of patients, and supportive of organic top-line growth.