Disc Medicine - Best comparison stock to Clinuvel, page-103

The very best comparison stock to Clinuvel is Disc Medicine which just runs a few Phase 1 and 2s, and with their lead drug candidate targeting the modest EPP market. The Disc trial drug hoping to one day compete with CUV recently showed in their P2 EPP that there was NO SIGNIFICANT INCREASE in time in the sun over the placebo (which is what it is all about for EPP really) and the Disc share price took a big hit - but they are still amazingly valued much higher than CUV. There is a bit of news on Disc from last night and this is very interesting for many reasons and worth taking a look at because it shows how very undervalued Clinuvel is in my opinion, but it also shows how bad they are at attracting investor interest - Disc are far superior in this regard and can teach CUV a LOT about attracting investment which is very important for supporting shareholder interests, especially when they are attacked by short sellers.

As mentioned, last night Disc Up over 18% to a market capitalisation of $1.72 Billion AUD which is $1 Billion More than the CUV market cap of $0.7 Billion AUD. And as one dives deeper this becomes even more incredible. Disc LOST $76.4 Million USD ($116 M AUD) last year running Phase 1 and 2s (one of which just flunked on the time in sun endpoint compared to placebo), while CUV made last FY $31.6 Million PROFIT after taxes.

So Disc jumped over 18% last night mainly due to this I believe "Updated analyses of data from AURORA and BEACON studies further demonstrate clinical activity of bitopertin across multiple measures of erythropoietic protoporphyria (EPP) and support development path forward". Disc also talked a bit about a couple of Phase 1s. Cash burning Disc are going to talk to regulators later this year about further trials in the modest EPP market (which is totally monopolised already by cash printing Clinuvel with it's FDA, EMA approved drug) and that causes a surge in investment (equivalent to about half the market cap of CUV)? As we know Clinuvel is already running a Phase 3 into blockbuster Vitiligo which dwarfs the EPP market, and this is with an already FDA approved and safe drug so the major hurdle has already been overcome. Previous studies, the Vitiligo expert panel, and recent photos support how effective the CUV treatment is for Vitiligo and it would seem that adding it as a new indication could be considered likely especially as it has no immune suppressing side effects.

My opinion is Clinuvel are more likely to have Vitiligo approved and on the market before Disc gets any EPP treatment approved and clearly the Vitiligo market is massive compared to EPP. Other factors to consider are CUV has an impressive drug retention rate of 95%, they are taking new EPP patients all the time and this will make it hard for Disc to recruit for future trials in a limited pool, and Clinuvel is also very advanced with 85 US treatment centres already approved, as well as having billing codes for the drug well established already and insurers familiar with the treatment. Clinuvel are doing all this themselves so a very large percentage of Vitiligo revenue will fall directly to an already profitable bottom line - while again Disc doesn't compare favourably as I believe they have milestone payments and other payments if certain figures are met in the small EPP market. An important note from the latest CUV newsletter said "We are also seeing new patient and physician demand following conclusion of experimental therapy clinical and expanded access programs." That is great news and I do believe Clinuvel are in the most monopolistic EPP position the have ever been in with no competitive therapies close.

I don't think Disc gets the constant attention from shorters that Clinuvel has had for 5 years but they are undoubtedly better than CUV at attracting investor interest despite being a MUCH riskier investment proposition and a much less advanced company. Hopefully the new Clinuvel US appointee can help address this imbalance because CUV are very poor in this regard and a possible simple upgrade from their current listing in the States would be a very positive move. Disc last night had about $50 Million USD turnover while CUV had just a pitiful 100 depository receipts traded - laughable. They did have 400 shares traded with UR9.F in Europe which is actually higher than normal - obviously still a joke.

Here it get's more interesting again, Disc last night offering nearly 5 Million shares at $36 USD (they closed at $46.27 USD) to raise about $178 Million USD because they are burning cash rather quickly. 1st QTR 2024 they had a net loss of $26.9 Million USD (up from $22.8 M USD 1Q23). Raising capital and missing trial endpoints seems to hardly affect Disc at all! They obviously couldn't even dream to pay a dividend or run a share buyback like at Clinuvel but they are going up and CUV going down? Here's what the Clinuvel board of directors said about this crazy undervaluation, and also what the company said in a recent newsletter regarding the share buyback (underline mine):

"Board of Directors view current market capitalisation as decoupled from the Company's value". PW said on the same release "Given expected earnings, underlying growth in existing and new porphyria markets, current cash reserves, and projected expenses over the next 12 months, redistribution of capital to shareholders through a buy-back program is appropriate".

"We have chosen the moment of a repurchase as first clinical results for 2024 are published, and we will keep at it until those who gamble against the Company have understood the message. Given the expected future cash flows, we are in the position to prolong the program when required, since Board and management do not believe that market value has reflected the Company's performance in recent months. To those shareholders who have proven supportive, we have waited for the right moment to strike on your behalf."

"The share buy-back further increases the relative percentage of ownership for our owners, and thereby compounds CLINUVEL'S strategy to minimise dilution. With 1,500,000 shares (or approximately 3% of the outstanding share capital) to be repurchased, we hold a longer-term view on capital management without jeopardising plans to reinvest and expand the Company."

"The first trading days after the buy-back announcement on 14 March dispelled the myth that the share price is reflective of performance only"

Just get moving with the bloody buyback, anything under $30 is a comparative bargain, and back it up with some executive buying to show that everyone internal is aligned with long suffering investors who believe in the company strategy but have questions when the share price is at 5 year lows and new investment is just not happening much despite money being spent on Michelin catered Soirees. Loss making Disc makes significant losses, which is ok for this stage, but they may never even get any drug approved and they certainly don't make great profits like money-printing CUV yet they are valued at ~ $1.7 Billion AUD while CUV languishes at about $0.7 Billion (with $180M cash). Risk/reward is curious with Disc valued entirely on hope and CUV with no future cash flow valuation for Vitiligo or anything else like Stroke, XP, VP or tanning. Disc have no trouble attracting investment, from Globalnewswire they said in relation to the $178 Million USD financing;

"The financing was led by Frazier Life Sciences and Logos Capital and includes participation from new and existing institutional investors, including Access Biotechnology, Adage Capital Partners LP, Atlas Venture, Janus Henderson Investors, OrbiMed, Paradigm BioCapital, TCGX, Wellington Management, a leading mutual fund, and others."

Do these investors even know about Clinuvel, if they do then why aren't they interested in investing? I would love to know the answers to those questions because Disc seems quite a risk to stump up all those dollars for at this current valuation when EPP is the main target.

The average analyst PT for Clinuvel is mid $20s just for EPP and only one analyst is pricing in Vitiligo right now and they have a PT nearly $50. If CUV had the same valuation as loss making Disc they would have a SP of ~$34. With only 50 Million CUV shares on issue, and a share buyback just started that will remove 1.5 Million CUV from circulation, you would think US investor relations could make a pretty good investment thesis for CUV but they might need that pink sheet upgrade to help their case. The share buyback needs to be actually used to 'strike on our behalf' , less than 50k shares out of a 1.5 Million share buyback in nearly 3 months is very poor and not supportive of shareholders at all. It has not been used to raise the price from 5 year lows, it has bought a few token shares on some random down days and that is it, while 'those who gamble against the company' are allowed to do as they please and continue with maintaining the undervaluation the board of directors identified. The share buyback is also dual purpose as the company said buying back 3% of capital is to redistribute capital to shareholders and compound the dilution avoiding strategy they have long maintained. It's only ~$25 Million, just a fraction of cash reserves and much less than Disc burnt in their 1st quarter this year so get on with it.

I hope everyone enjoyed this comparison.

All IMO DYOR