Clinigen expanding with Quantum acquisition

Quantum and Clinigen operate in a similar area of the pharma market: they give doctors access to hard-to-get drugs; breathe new life into crucial treatments with small marketing budgets; and supply patients around the world with medicines that are not licensed globally. But where Clinigen has used its impressive operational cash inflows (£55m in these full-year results) to grow sensibly through acquisition, Quantum has taken on too much debt and made poor strategic choices. But now it has sorted out its portfolio and fits well into the Clinigen business model.

It will also bring a new drug development division to the group. Quantum identifies gaps in the market and creates new drugs to fit the demand. Although this means Clinigen’s research and development expenditure is likely to rise, Mr Chilton says this won’t have a big impact on cash flows.

Clinigen’s full-year results demonstrate its ability to acquire and integrate companies. Gross profits – the best top-line measure – rose 22 per cent to £123m as strong organic growth was compounded by the first full-year contribution from unlicensed and speciality pharma business Link Healthcare. The loan used to finance that acquisition is being paid back quickly, meaning net debt has nearly halved to £35m. Reported numbers in the year to June 2017 were hit by a final £29m payment to Link’s former owners. Exclude this and other one-off finance costs, and adjusted pre-tax profits increased by 27 per cent to £62m.

Broker Peel Hunt expects pre-tax profits of £67m, giving EPS of 52p, in the year to June 2018 (up from £62m and 42p in FY2017), excluding the potential for Quantum.