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Clinigen Shares Crashed 26.8% as Markets Overreact to Lower 2021 Profits Forecast

Updated: 9 Jun 2021

Shares of Clinigen Group PLC (LON: CLIN) crashed 26.8% after the company lowered its earnings forecast for the 2021 financial year ending June 30.

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The pharmaceutical company attributed the lower earnings guidance to the COVID-19 pandemic, which has reduced demand for in-patient oncology treatments as hospitals admit more coronavirus patients instead of cancer patients.

Clinigen maintained its prior revenue growth forecast of 5-10% compared to last year’s revenues of £504.3 million.

The company now expects its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to be between £114m and £117m for the 2021 financial year.

I think investors overreacted to the pharmaceutical company’s announcement, given that it maintained its revenue growth forecasts and slightly lowered its profit target.

Clinigen did not report that it was in danger of plunging into massive losses, which could warrant such a steep selloff. Instead, it reassured investors that it expects to achieve double-digit EBITDA growth in fiscal 2022 and is currently focused on paying off some of its debts.

The pharma company is not in any financial distress. However, it faces uncertainty regarding the long-term impact of the coronavirus pandemic, including whether demand for its oncology products such as Proleukin will recover once the global economy fully reopens.

Clinigen noted that its cash-conversion efforts were in line with adjusted expectations. The company expects net debt to fall below £330 million as it focuses on paying off its debts. The firm also has ample liquidity and leverage.

Clinigen also revealed that it had cleared all deferred payments for the acquisition of CSM and Proleukin.

Shaun Chilton, Clinigen Group’s CEO, said: “COVID-19 has continued to have a significant impact on our business as it has for many other companies operating in the clinical trial and hospital-based products area.”

*This is not investment advice.

Clinigen share price.

IG chart of Clinigen share price 09-06-2021

Clinigen shares crashed 26.75% to trade at 615.5p, falling from Tuesday’s closing price of 840.3p.

Should you invest in Clinigen shares?

Clinigen shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. But are Clinigen shares the best buy? Our stock market analysts regularly review the market and share their picks for high growth companies

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