Clinigen has high hopes following two major acquisitions
The benefits of two major acquisitions will begin to be felt in Clinigen’s (LON:CLIN) financial second half, according to City broker Peel Hunt, which reckons chief executive Peter George and his team are building a global healthcare leader.
The comments came in the wake of a first-half trading update that showed the business is firing on all cylinders.
However, the real benefits from its £225mln purchase of Idis, a specialist in the ethical supply on unlicensed medicines, and Link Healthcare, which has become part of Clinigen’s managed access division, are only starting to be felt.
Its global footprint will expand thanks to a global alliance with NASDAQ-listed Cumberland Pharmaceuticals, experts also pointed out.
The trading updated for the six months ended December revealed revenues and gross profit advanced 116% and 100% respectively, boosted principally by those recent acquisitions. Organically, gross profits were up 4%.
“Clinigen has been through a transformation over the last 12 months and is well set to develop its global footprint,” said Peel Hunt analyst Charles Hall.
“Unsurprisingly during a period of substantial change the rate of organic growth has slowed.
“However, there are clear signs of a stronger performance in the second-half (both organic and timing) and the rate of new business wins is encouraging.”
Clinigen is essentially four different companies under one roof, although there are synergies between the component parts.
Clinical trial services essentially does what it says on the tin – it supplies drugs for clinical trials.
There is an ethical dimension to Clinigen in that it provides managed access and global access programmes for drugs, so it might find and distribute medicines for compassionate use. “Wherever they are, we can deliver treatments quickly, efficiently and, most importantly, ethically,” Clinigen’s web site says.
Global access allows a medicine not yet commercially available, or is experiencing temporary supply problems, to be distributed to those in need.
Finally, Clinigen has a niche drugs arm for products that don’t fit into the portfolio of mainstream pharmaceutical companies. This business provided the strongest growth in the first half.
According to Peel Hunt, the Clinical Trials unit will deliver a decent performance for the full-year thanks to a number of new client wins. The Managed Access pipeline, meanwhile, is reported to be excellent.
Investors should also begin to detect “greater impetus” from the Global Access operation, the broker said.
Peel Hunt is predicting Clinigen’s underlying earnings (EBITDA) will be £23mln in the first half, giving pre-tax profits of £21mln.
For the full-year, pre-tax profits will be £50.5mln on sales of £373.5mln and up from £31.1mln a year earlier.
The dividend, 3.4p in 2015, is expected to grow to 3.7p, then 4p, the broker reckons.
The stock has outperformed the wider healthcare market over the past year by some margin as it has increased a quarter in value, but at 619p a share it still has some to go. Peel Hunt has a price target of £10.
The specialist healthcare boutique, Stifel, points out the Clinigen currently trades at a 10% discount to speciality pharma sector, which it says is unwarranted.
It has a ‘buy’ recommendation underpinned by an 800p a share price target.
“These results reflect the transformation of Clinigen over the past twelve months,” said Stifel’s Max Hermann, echoing the comments of Peel Hunt.
By Ian Lyall