Clinigen Group PLC (LON:CLIN) is one of those rarities on AIM – it’s a billionaire. In fact, out of the 950 or so companies listed on the junior market, just eight of them have a market cap with ten digits.
The speciality pharma and services group listed its shares on AIM towards the end of 2012 for 164p each, valuing the company at £135mln.
Those same shares change hands for almost 800p now; not a bad return on investment.
Back when it floated, Clinigen provided clinical trial supply services and sold a number of niche products, the most valuable of which was an oncology drug called Foscavir.
In its first full year as a listed company, its revenues were £123mln, giving underlying profits of £20mln.
Under former chief executive Peter George and his successor Shaun Chilton, it has been transformed via a series of well-judged, quickly integrated and, crucially, cash generative acquisitions. Only in October it completed two more: CSM for an initial £115mln (US$150mln) and iQone for £6.7mln in a mixture of cash and shares.
It is now the market leader in the supply of drugs for clinical trials and the distribution of unlicensed pharmaceuticals.
Both of those are little-known niches in the pharmaceutical supply chain, but together represent a US$7.5bn-US$12.5bn per annum opportunity, according to Berenberg.
In terms of unlicensed pharmaceuticals, Clinigen’s Global Access division sources medicines for pharmacists where supply isn’t necessarily straightforward.
For example, the drug may not be approved or marketed in the country or there could be a local shortage.
Pharmacists could opt to go to grey or black markets but run the risk of buying inferior or counterfeited products. It makes more sense to use an international supplier like Clinigen though, which can guarantee its supply chain.
Clinigen counts most of the world’s top 25 pharma companies as its customers and has exclusive supply arrangements for more than 100 drugs.
The firm doesn’t just ferry other companies’ drugs around the globe, it uses that supply chain to sell speciality drugs which it has acquired along the way.
Updating on its recent trading, Clinigen told investors revenues for the six months ended 31 December jumped by 25% on a constant currency basis, while gross profits soared by 27% compared to last year.
“The Unlicensed Medicines portfolio performed well as anticipated, starting a number of new programs, and we have diversified our Commercial Medicines portfolio with the purchase of two specialty medicines,” said chief executive Shaun Chilton.
“We are already seeing the operational benefit of combining Clinical Trial Services with the clinical trial capabilities of the recently acquired CSM, which when combined with iQone, also acquired in October 2018, enhance our European and US infrastructure for the benefit of all our businesses.”
Shares are currently changing hands for around 750p, but analysts at RBC Capital see potential for that figure to double.
“We believe acquisitions have positioned Clinigen as the No. 1 player in the ‘ethical’ supply of medications and, alongside existing products, this should lead to strong cash flow generation over the coming 5 years,” RBC analyst Nick Keher said in a note.
“With management aiming to double the number of products under its control and with the business model enhancing its product acquisition pipeline, we see this goal as likely. We see further product acquisitions enhancing margins and promoting even faster earnings growth.”
He added: “Our upside scenario values Clinigen at 1740p per share and is based upon the successful integration of recent acquisitions plus a return to growth of the CST and Unlicensed Medicines business, leading to forecast certainty and potential earnings upgrades.