We have grown through a combination of transformative acquisitions and organic growth to create an international platform which is now taking shape and supporting synergistic growth. This year's performance reflects the results of this strategy.
Shaun Chilton, chief executive
What it does
Having listed on London’s junior market back in 2012 with a market cap of just £123mln, it is now the market leader in the supply of drugs for clinical trials and the distribution of unlicensed pharmaceuticals.
In terms of unlicensed pharmaceuticals, Clinigen’s Global Access division sources medicines for pharmacists where supply isn’t necessarily straightforward.
It counts most of the world’s top 25 pharma companies as its customers and has exclusive supply arrangements for more than 100 drugs.
Clinigen doesn’t just ferry other companies’ drugs around the globe, it also uses that supply chain to sell specialty drugs which it has acquired along the way.
In recent years it has spent tens of millions building up its portfolio, which includes a cancer drug formerly owned Novartis and the global rights to Horizon Pharma’s rare disease therapy, Imukin.
One recent addition to the portfolio was metastatic melanoma drug Proleukin, acquired in April, which is looking like a catalyst for growth after promising data from phase 2 trials that tested it in combination with a new drug being developed by another pharma company, Iovance Biotherapeutics.
Broker Liberum was buoyed by the news, saying that this could ultimately “help to drive sales over the mid-term”.
How is it doing?
With the international platform taking shape to support higher organic growth, profits advanced by a third in the past financial year.
In a trading update covering its half-year to 31 December, the pharma group said its latest acquisition, CSM, for which it paid £193mln, was continuing to performing well.
Having set new financial targets for adjusted gross profits to expand by at least 5-10% annually, Clinigen confirmed in January 2020 that they were still tracking “towards the upper end of guidance” for the current year, with organic gross profit up at least 8% in the first half.
The strong performance from CSM and in unlicensed medicines helped offset some weaker performances elsewhere.
Net debt was around £325mln at the half-year stage and management aim to pay down and maintain net debt within a range of 1x to 2x EBITDA on an ordinary basis and expects to deliver this within the next financial year.
Since its IPO, the company has grown by a compound annual 22%, chief executive Shaun Chilton pointed out on its seven-year anniversary last year.
“We have grown through a combination of transformative acquisitions and organic growth to create an international platform which is now taking shape and supporting synergistic growth. This year's performance reflects the results of this strategy,” he said.
Updating in January 2020 he added: “We have had a strong start to the year, having grown organic gross profit by at least 8% in H1 2020, validating the group's unlicensed to licensed synergy strategy.”
Integrations of recent acquisitions iQone and CSM were on-track, Chilton said, adding that “further, more meaningful steps” can be taken now the CSM earn-out has been completed.
Also in January, Clinigen took a “first significant step” to revitalise its Proleukin kidney and skin cancer drug by agreeing to supply the product to an American life sciences company developing exciting new cancer immunotherapies.
In April, the company made another advancement when it signed a global agreement with Porton Biopharma for the drug Erwinase/Erwinaze.
The treatment has been developed for people with acute lymphoblastic leukaemia who have developed hypersensitivity to E. coli-derived asparaginase.
And the plan is to expand the market opportunity for Erwinase by “driving awareness” of its availability, ensuring uninterrupted patient access, launching in new countries and increasing the supply into unlicensed markets.
Clinigen is paying Porton an upfront £5mln for Erwinase, which last year generated sales of just shy of £140mln. It will then hand over sales-based milestone payments of up to £20mln, alongside tiered royalties.
In the same announcement, the company said trading for the year to June 30 continued to be in line with forecasts, adding that organic gross profit growth was “over 10%” in the nine months ended March 31.
Cash generation in the first three months of the second half “has proceeded in line with the board's expectations”, Clinigen reported.
It said it anticipates the business will remain well within its 3-times net debt/EBITDA covenant throughout 2020, before reducing that figure to below 2-times during full-year 2021.
What the broker says
In April, analysts at Liberum hiked their target price for Clinigen to 850p from 780p as they forecast that the group’s shares could see 35% upside “in the next six months”.
The broker also noted that the company’s global agreement with Porton Biopharma was “low-cost, low-risk” and will be 13% accretive to earnings per share (EPS) by 2025 while also providing a “template to drive sustainable growth” for Clinigen’s commercial medicines business.