The company is the market leader in the supply of drugs for clinical trials and the distribution of unlicensed pharmaceuticals.
Both of those are little-known niches in the pharmaceutical supply chain, but together represent a US$7.5bn-US$12.5bn per annum opportunity, according to Berenberg.
In terms of unlicensed pharmaceuticals, Clinigen’s Global Access division sources medicines for pharmacists where supply isn’t necessarily straightforward.
For example, the drug may not be approved or marketed in the country or there could be a local shortage.
Pharmacists could opt to go to grey or black markets but run the risk of buying inferior or counterfeited products. It makes more sense to use an international supplier like Clinigen though, which can guarantee its supply chain.
Clinigen counts most of the world’s top 25 pharma companies as its customers and has exclusive supply arrangements for more than 100 drugs.
Almost all of the Global Access sales come from Europe, but Clinigen has been beefing up its worldwide presence over the past couple of years.
At the time Clinigen said Quantum was a “sound cultural fit” which would “enhance [its] position as the global leader in ethical access to unlicensed medicines”.
In October Clinigen expanded its global footprint once again with the acquisition of International Medical Management Corporation – Japan’s largest supplier of unlicensed medicines – for an undisclosed sum.
Has its own drugs, too
Clinigen doesn’t just ferry other companies’ drugs around the globe, it uses that supply chain to sell specialty drugs which it has acquired along the way.
It’s spent the best part of £60mln to build up its portfolio, which currently consists of six niche, hospital-only drugs.
By 2020, Berenberg reckons these drugs will generate a combined £47mln of gross profits, as Clinigen works on ‘revitalising’ the high-margin products and driving sales growth.
Berenberg reckons shares are worth £12, probably more
That may not sound particularly bullish given that the share price currently sits at around £11.77, but analyst Charles Weston concedes his valuation doesn’t factor in the potential for more M&A activity.
This is because it’s “tough to predict” when Clinigen will snap up its next company or product, so look out for upgrades if and when the company does open the chequebook.
“We are positive about Clinigen’s strong positioning within niches of the pharmaceutical market, but believe that valuation is up with events, and is already reflective of the organic growth that the company should be able to deliver,” wrote Weston in a note.
“Acquisition of specialty pharmaceutical products, which drives growth and return on capital or acceleration of the unlicensed medicines division would cause us to revise our thesis.”
Investors rewarded for strong year
Shareholders received a pleasant surprise when Clinigen reported its annual results in September.
The full-year payout grew in line with earnings per share, which advanced 25% in the 12 months to June 30, with investors netting 5p a share.
Elsehwere in the results, Clinigen reported a 21% increase in underlying profits (EBITDA) to £65.1mln on revenues of £302.2mln.
Cash generation was strong at £54.7mln, while net debt decreased substantially to £35mln from £68.1mln.