Free share tips posted weekly! This week’s free share tip is Clinigen. We believe that shares in AIM-listed Clinigen are worth a look following the recent weakness in the share price. The company issued a profit warning last month and this resulted in a fall in the share price of around a quarter to 615p as investors were taken by surprise. The pandemic has delayed clinical trials and has also delayed cancer treatments resulting in a sharp reduction in profit forecasts for the year. However, last week the company provided another update on trading for the financial year that ended on 30 June and this contained no new surprises. The new financial year which has just started is expected to see a return to growth and so the 2021 financial year could prove to be the low point in the group’s fortunes.
Clinigen is an AIM-listed global, specialist pharmaceutical services and products group which operates globally with sites in North America, Europe, Africa and the Far East. The group operates through two divisions. The products business includes the cancer drug Proleukin, which is administered in hospitals, and demand for this has fallen due to delays to oncology treatment. Sales of this are only likely to increase when hospital and cancer centre services return to normal.
The company also has other drugs which it supplies although these are less important. It is also rolling out a new drug to treat leukaemia called Erwinase although this was only made available in April. The services business provides packaging, logistics and other services to pharmaceutical companies, operating with 34 of the top 50 global companies.
In the most recent statement, the company confirmed that revenues in the year to 30 June were £455m, an increase of 12% excluding discontinued activities. Adjusted pre-tax profits are likely to fall to £93m from £108m last year with earnings per share on the same basis falling to around 55p from 65.6p. This puts the shares on a modest p/e ratio of just 10.7x and with earnings per share likely to rise to 57p in the current financial year this falls yet further.
The annual dividend of 7.61p per share is nothing to shout about but the group continues to reduce debt as it generates cash. Despite spending £15m on the roll out of Erwinase in the second half of the year, net debt is expected to have fallen by £13m to £317m during the period. This can be expected to fall further in the current year.
Although the shares are currently out of favour, they look cheap on fundamental grounds and the current valuation could make the company attractive to a predator. We have highlighted the high levels of corporate activity elsewhere on the website and the healthcare sector has not avoided this with bids for Vectura and UDG Healthcare. Our free share tip is therefore BUY.
Read more of our free share tips here.