Clinigen Group PLC

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

Rationale for Valuation – SELL at GBX 778.50

• Profit Booking: Clinigen has yielded over 28% return in the past month and there is uncertainty regarding the takeover. Therefore, investors can liquidate their position with decent gains as per their risk-return profile.
• Business Uncertainty: Clinigen showed a decline in profitability in FY21. Moreover, acute inflationary pressure and supply chain concerns can last even further with concerns related to the Omicron variant.
• Technical Indicator: From a technical standpoint, 14-day RSI (~82.90) indicates an overbought scenario, while the stock price has breached the upper Bollinger Band.
• Overvalued Multiples: On a forward 12-month basis – EV/EBITDA, Price/Cash Flow and Price/Earnings are quite higher than the median of the Health Care sector.

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 financials.

Recent News

Response to Press Speculation: On 2 December 2021, Clinigen unveiled that it has received a non-binding indicative proposal from Triton Investment Management Limited for the entire issued capital. However, Clinigen has also affirmed that there is no certainty regarding the offer, terms, or price.

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 showed 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 done by Kalkine Group)

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

Conclusion

As Clinigen has breached our previously recommended target price, it is giving an opportunity to book profit with decent gains. Meanwhile, the arrival and sustained impact of the Covid-19 with the Omicron variant can pose various challenges across the globe. It had already impacted the profitability in FY21 and kept the demand subdued for Proleukin and On-Demand products.

Therefore, investors can escape the market uncertainties at the current level and reinvest principal plus gains when there is clarity regarding the takeover or further business prospects.  The stock made a 52-week High and Low of GBX 891.79 and GBX 541.50, respectively.

Based on the recent gains, threat related to Omicron variant, takeover related speculations, uncertain outlook, overvalued multiples, unfavourable valuation done using the above method, we have given a “SELL” recommendation on Clinigen Group PLC at the closing market price of GBX 778.50 (as on 2 December 2021).

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

*All forecasted figures and Peer information have been taken from REFINITIV.

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