The Motley Fool

After its 25%+ fall, what am I doing about Clinigen shares?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A Dechra Pharmaceuticals scientist uses a microscope
Image: Dechra Pharmaceuticals

Clinigen (LSE: CLIN) is a pharmaceutical and services company that provides access to medicines on a global scale. While this business model has proved effective over the last few years, with consistent strong financial results being the evidence of this, the pandemic has adversely affected the company. Today, this resulted in the pharmaceutical company issuing a profit-warning, causing the Clinigen share price to fall 25+%. It’s down by 24% over 12 months. Does this present the perfect opportunity to buy or is there further to fall?

Profit warning

Due to the pandemic, the main focus of healthcare was fighting the virus, and this often came at the expense of fighting other diseases. For Clinigen, this has been detrimental due to weaker demand for its kidney cancer drug Proleukin.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Clinigen became the exclusive owner of Proleukin in 2019 when it paid $120m for the rights. But that looks like bad timing as the pandemic led to a significant reduction in hospital-based oncology treatments, thus denting Proleukin sales. Management has also assumed that this “weaker demand” will continue until normal hospital services have resumed.

As such, although revenues are expected to remain in line with previous guidance, adjusted cash profits are expected to be in a range of £114m-£117m for the year. This is a 12% drop against consensus forecasts. This is why investors have reacted so severely and the Clinigen share price has fallen so much in a day.

Has the market overreacted?

When a stock falls so significantly in one session, there is always the chance that the market has overreacted. I believe that this is one of these occasions.

Indeed, as already mentioned, revenues are expected to be in line with previous guidance. In February, Clinigen said that it expected net revenue growth of around 5%-10%. Accordingly, it is clear that there are still growth opportunities for the company.

Furthermore, there is optimism that profits will be able to return, and this should help a rebound in the Clinigen share price. Management has offered a positive outlook, stating that it anticipates a return to double-digit growth in the next financial year. This is backed up by strong growth in the company’s services sector, which is gaining market share.

Nonetheless, there is always the possibility that there is worse to come. For example, while the poor performance of Proleukin has been blamed on the pandemic, it may signal the continuing decline of the product. If such demand cannot return, the Clinigen share price may suffer in the long term.

Am I buying Clinigen shares?

Yet I still believe that the market has overreacted to this profit warning. Accordingly, although a profit warning is never good news, such a big fall in the Clinigen share price does not seem warranted to me. Therefore, I am now very tempted to buy the stock. This is especially because I believe it has significant recovery and growth potential. Nonetheless, due to the risks of contrarian investing, I would only buy Clinigen shares as part of a balanced portfolio.

There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it!

Don’t miss our special stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to get access to our presentation, and learn how to get the name of this 'double agent'!

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.