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 580.00

• Stronger Financial Position: Following the strong cash conversion in FY21, the Group reduced its net debt. It also targets to reduce the leverage below 2.0 within FY23.
• Operational Achievements: During FY21, it gained market share and won significant new business to drive further value.
• Strong Outlook: Clinigen expects 5% to 10% growth in FY22’s EBITDA on the back of robust activity level across the Group.
• Valuation Multiples: As per valuation metrics, EV/Sales, EV/EBITDA, 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 (~29.96) is close to an oversold position, while the stock price is hovering around the lower Bollinger Band.

Risk Assessments

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

Recent News

Partnership: 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: The 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.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative) 

Conclusion 

Clinigen witnessed a solid momentum in the Services and Product business in FY21 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. The long-term fundamentals of the business and its end-markets remained strong, ensuring long-term shareholder value. 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 current market price of GBX 580.00 (as on 12 November 2021 at 08:07 AM GMT), with lower double-digit upside potential based on 12.67x Price/NTM Earnings (approx.) on FY22E Earnings Per Share (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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