- Oncology treatments and clinical trials have been delayed by the pandemic
- Profits have been hit by a fall in demand for Proleukin
As the full weight of the Covid-19 crisis became apparent, governments around the world redirected their healthcare resources to the front line. The upshot of this was a delay in routine medical procedures. Routine check-ups also waned in number as patients stayed away from the doctor for fear of catching the virus.
A trading update from Clinigen (CLIN) on Wednesday laid bare the impact of the disease on hospital-based oncology treatments and clinical trials. Amid a reduction in the former and postponements to the latter, the pharmaceutical group has endured “significantly weaker” demand than expected in approved indications for cancer therapy Proleukin.
Net revenues are still expected to be line with the group’s prior guidance and market expectations, which currently sit at £531m according to Factset. However, adjusted cash profits are now projected to be in a range of £114m-£117m for the year ending June 2021 because of a lower sales contribution from Clinigen’s products business. This reflects an 11-13 per cent drop against consensus forecasts.
Management believes it is “prudent” to assume a reduced level of demand for Proleukin will sustain “until revitalisation efforts into new indications alongside novel cell therapies are successful and normal hospital and cancer centre services have resumed”.
Looking further ahead, the group reckons that Proleukin demand will return eventually and beat pre-Covid levels. It said it was also continuing to work on coronavirus-related projects and expects cash profit growth to reach double digits in the next financial year.
The group added that it was focusing on servicing its debt, which is expected to be lower than £330m on a net basis excluding lease liabilities.
Bullish brokerage Stifel conceded that it was “surprising that whilst other companies are reporting improved conditions in the US market, Clinigen has seen sales of Proleukin deteriorate”. This “may be Covid related but could also reflect the continuing decline in the product which was occurring prior to it being acquired”, Stifel added. But the broker “continue[s] to expect rejuvenation in the longer term from new uses”.
Analyst Charles Weston at RBC Capital Markets wrote on Wednesday that Proleukin’s recovery will be “delayed, rather than lost”, although it may take time for cancer therapeutic use to return to normal levels. RBC has reduced 2022 and 2023 cash profit forecasts by 18 per cent and 13 per cent respectively.
Aim-traded shares in Clinigen plunged by a quarter in morning trading, changing hands at 621p apiece. A day earlier, they were down just 4 per cent on the previous 12 months.
