Clinigen Group PLC

Clinigen Group PLC (LON: CLIN) is a FTSE AIM UK 50 index listed global pharmaceutical and services entity that through three business divisions, namely, unlicensed, clinical trials, and licensed medicines.

Upcoming Event: On 24 November 2021, Clinigen expects to hold its annual general meeting.

Investment Rationale – SPECULATIVE BUY at GBX 602.00

• Solid Momentum for Growth: Clinigen witnessed a solid momentum in the Services and Product business and expecting strong cash generation and EBITDA growth in FY22. It is also confident that its simplified operating structure shall deliver synergies across the business.
• Robust Fundamentals: The long-term fundamentals of the business and its end-markets remained strong, ensuring long-term shareholder value.
• Strong Outlook: Clinigen expects 5% to 10% growth in FY22’s EBITDA on the back of robust activity level across the Group, while it is focused on debt paydown.
• Valuation Multiples: As per valuation metrics, EV/Sales, Price/Cash Flow, and Price/Book multiples of the Clinigen Group PLC are currently lower as compared to the corresponding multiples of the Health Care industry.
• Technical Indicator: From a technical standpoint, 14-day RSI (~36.22) is close to an oversold position, while the stock price is hovering around the lower Bollinger Band.

Risk Assessments

• Emerging Challenges: The ongoing supply chain disruption, stringent regulatory policies, and volatile exchange rate movements can considerably impact the financials.
• Weak Demand: The demand for On-Demand products and Proleukin remained weak due to the impact of Covid-19.
  

Recent News

Agreement: On 8 October 2021, Clinigen signed an agreement with Humanigen, to implement a Managed Access Program for lenzilumab.

Financial Highlights (for the year ended 30 June 2021, as on 16 September 2021)

 (Source: Company Website)

• Top-line Growth: Clinigen recorded a 7% year-on-year growth in net revenue from continuing operations to £458.6 million in FY21 (FY20: £428.6 million).
• Covid-19 impact: However, adjusted EBITDA shown a decline of 10% year-on-year to £116.3 million (FY20: £129.8 million), reflecting the Covid-19 impact.
• Financial Position: As on 30 June 2021, net debt leverage stood at 2.8x, with net debt of £316.9 million.

Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative) 

Conclusion

Clinigen has established the market position as the global leader in the specialist supply and management of quality-assured comparator medicines and services. It has a strong cash generative business model which are underpinned by tight credit control and working capital management. Moreover, it has reduced net debt and expecting a strong operational growth in FY22, supported by business implication initiatives. The stock made a 52-week high and low of GBX 891.79 and GBX 559.81, respectively.

Based on the robust cash generation, resilient balance sheet, increased new business, supported by the valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on Clinigen Group PLC at the closing market price of GBX 602.00 (as on 2 November 2021), with lower double-digit upside potential based on 13.07x Price/NTM Earnings (approx.) on FY21E Earnings Per Share (approx.).

Creo Medical Group PLC

Creo Medical Group PLC (LON: CREO) is a FTSE AIM 100 index listed medical device entity focusing on the emerging field of surgical endoscopy.

Investment Highlights – SPECULATIVE BUY at GBX 154.50

• Growth Prospects: CREO continued research & development initiatives and strengthened commercial infrastructure with the growth in clinical network and increased knowledge about its products.
• Promising Outlook: It expects strong trends in H2 FY21 with increasing clinician education and training sites. Besides strong growth in the US and Europe, it has also enhanced direct presence in the APAC region. In a nutshell, the Group appeared optimistic for continued progress in FY22.
• Strengthened Balance Sheet: Following the successful placing of additional £36.3 million, CREO has solid balance sheet to pursue strategic growth opportunities.
• Technical Indicator: From a technical standpoint, 14-day RSI (~23.11) is close to an oversold position, while the stock price is hovering around the lower Bollinger Band.

Key Risks

• Pandemic Led Disruption: The restrictions on elective surgery had raised the likelihood of the commercial execution risk. The increased financial pressure on governments and hospitals caused by the Covid-19 pandemic has exposed CREO to pricing and reimbursement risk.
• History of Operating Losses: The Company is not yet profitable and can face liquidity crunch in absence of substantial capital.

H1 FY21 Financial Highlights (for the six-month period ended 30 June 2021, as on 30 September 2021)

 (Source: Company Website)

• Strong Orders: The Group experienced solid orders for Speedboat Inject across the US and Europe.
• Operational Progress: During H1 FY21, it reported total sales of £12.9 million (H1 FY20: £0.0 million).
• Operating Loss: Its operation loss slightly worsened to £11.4 million in H1 FY21 from £10.6 million in H1 FY20, reflecting the impact of £0.6 million in share-based payments.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Valuation Methodology: Price/Sales Approach (FY21) (Illustrative) 

Conclusion

CREO showed continued regulatory progress for its products as MicroBlate Flex got FDA 510(k) clearance, and the Company reported 326 granted patents and 810 pending applications as of 31 August 2021. Moreover, the Group expects positive trends to continue in H2 FY21 with increasing clinician education and training sites. It has also strengthened the balance sheet to capitalise on the opportunities arising with the rising demand. The stock made a 52-week high and low of GBX 236.00 and GBX 150.00, respectively.

Based on the strong revenue growth, positive trends, growth in clinical network, strengthened commercial infrastructure, and valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on Creo Medical Group PLC at the closing price of GBX 154.50 (as on 2 November 2021), with lower double-digit upside potential based on 12.94x Price/NTM Sales Per Share (approx.) on FY21E Sales (approx.).

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peers/ Industry information have been taken from Refinitiv.

*Dividend Yield may vary as per the stock price movement.

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