Australia's Greatest Biotech

Today Australia's greatest Biotech - CSL - reported full year results. I have been in CSL for decades, it's a behemoth and what it has done over time is very impressive and it is my main core holding. Historically Clinuvel has traded at a higher P/E than CSL, in recent times it has been much lower, it is probably interesting to make a few comparisons and observations on these two companies because they are both very high quality from a financial perspective and pipeline. Some differences are quality of board/management, amount of shorting at CUV, debt and competition (or lack of competition for Clinuvel).

Profit Growth: CSL NPAT up 15% to US $3 Billion, amazing numbers. CSL P/E ~40. Debt (correct me if wrong ~ $10 Billion).
CUV (last year) NPAT up 47% to ~ $30 Million. CUV P/E ~ 20. Zero Debt (~$200 Million cash). Let's see what CUV produces this year, it's going to be interesting but they have proven ability to produce profits and growth. Will the 'linear growth' we heard from PW last year eventuate?

CSL have produced amazing growth for decades and they are forecasting double digit growth every year thru to 2030 which is mighty impressive considering the sheer size of numbers we are talking about. CUV has produced some decent growth over recent years and unlike CSL they have no debt so are just building a cash pile, CSL pays a much nicer dividend than CUV. The big difference is that CUV could deliver ~10 times revenue growth in just a few years and just on Vitiligo - this is a key point because it's something CSL is unlikely to do despite the higher P/E. The drug for Vitiligo is FDA approved and safe, the investment case is simple if you believe in Vitiligo being added as an indication. Stroke, Tanning, VP, XP, Parkinson's you can get for free. Clinuvel have in recent times gained a FDA approval for a drug which is rare feat amongst Aussie Biotechs and making good profits is rarer for small Biotechs. CSL recently failed their blockbuster CSL112 program which about $1 Billion went into, this is ok because stuff happens and it would have been transformation for CSL if successful. The point is the Biotech game is tough and even CSL loses money developing a pipeline, many small Biotechs with far less resources achieve little or nothing, CUV is not doing badly and are doing well on many metrics.

Shorting, CUV nearly 6%. CSL 0.44% open short positions. Those figures say plenty but CSL is also far larger and more liquid and less influenced by fake Sell liquidity. Clinuvel tightly held and lightly traded and manipulated each and every day for five years - shorters playing a high risk game and absolutely keeping a handle on CUV by introducing vast amounts of new open short positions in the face of good news like the Share buyback and competition flunking trials. Also worth noting there is no competition for Clinuvel in EPP for years to come (if ever), they have an absolute monopoly in this market. CSL have many competitors and are just doing better than the competition, they are innovative and powerful and the plasma collection business is a very high quality core business.

CSL with proven track record and growth still to come from existing businesses and the pipeline. Clinuvel story is all about the massive shorting and the share price right now despite solid financial performance, the SP is dictating the narrative and even the CUV board has spoken about the undervaluation when announcing the share buyback. CUV share price at Covid lows, funnily enough Covid had little impact on CUV profit growth, CSL took a hit due to plasma collection issues yet they still kept a far higher P/E than CUV. If Clinuvel actually start to use the share buyback to return capital to shareholders as they stated then the CUV story can quickly change - if the SP was $30 - $40 few would raise questions. They simply need to do what they said as any normal company would do (eg Cochlear share buyback). There are only 50 Million CUV shares on issue which is amazing and if they buyback those stated 1.5 Million shares then that will mean only 48.5 Million shares for profits to be shared with as well as boosting EPS and most likely the share price. The fact that many are questioning if CUV will actually follow up their words with actions in regards to the buyback is illuminating, weird communication is not something you see at CSL powerhouse they are just too professional and have a very strong board, CUV board facing a 2nd strike after a very strong 1st strike last year.

All IMO DYOR