Interesting story for sure. We prob should write an email to that lone analyst in Germany that covered CUV and whisper Par's name so we get coverage...
I'm joking ...we will hopefully not need to go to any analyst, they should come to us!
My views.

Here is the article and link.


Link to article:
https://www.copyright link/companies/healthcare-and-fitness/the-strange-rise-of-clinuvel-pharmaceuticals-20190410-p51cv7

Investigation

The strange rise of Clinuvel Pharmaceuticals

Carrie LaFrenzSenior Reporter

Apr 26, 2019 — 11.09am

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KEY POINTS

• Clinuvel's market cap has claimbed to a high of $1.4 bln from $490 mln a year ago.
• Clinuvel's key drug activates the production of melanin - the skin's natural defence against ultra-violet light - to protect patients against sun-related diseases.
• Toppled German financier Florian Homm was once a major Clinuvel shareholder, and still speaks highly of the biotech.
• Clinuvel is waiting to hear from the US FDA on July 8 for the approval of its marketing authorisation for its key drug.

It is not often a chief executive of a listed company dismisses an analyst who suggests bullishly that the value of the company he leads is set to triple.

It's also unusual for a small Australian drug company to attract a raft of major investors – from superannuation funds to asset management giant Fidelity and even Napster founder Sean Parker – before it has even entered the crucial US market.

But for Clinuvel Pharmaceuticals – formerly known as Epitan – this barely registers on the bizarre scale.

Clinuvel chief executive Dr Philippe Wolgen hopes to get US approval for the company's drug in July. Supplied

Clinuvel, which is seeking US approval for its drug to treat a rare skin disease that causes extreme light sensitivity, is among the market's best performers. Its share price has climbed more than 200 per cent in the past 12 months, peaking at $29.98 on March 19 to give it a market value of $1.4 billion that made it a similar size as companies like rare earths miner Lynas and aerial imaging company Nearmap.

It has joined the S&P/ASX 300, hitting the radar of fund managers, with talk of it heading into the S&P/ASX200 and a possible NASDAQ listing. The stellar run has made chief executive Dr Philippe Wolgen – the second largest shareholder – a rich man with his 6.73 per cent stake valued at about $84 million.

RELATED QUOTES

CUVClinuvel Pharmaceuticals

$27.01-0.22%

1 year1 day

Sep 18Jan 19May 1910.0020.0030.0040.00

Updated: Sep 2, 2019 — 6.49pm. Data is 20 mins delayed.

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Yet, perhaps, you have never heard of this company? You are not the only one.

No Australian coverage

No analyst in Australia covers the stock (CLSA ceased its coverage in 2013, given a tight share base and limited selling), but in January 2018 a lone analyst at Sphene Capital in Germany suddenly initiated coverage with a "buy" rating and target price of $31.70. At the time Clinuvel shares were trading at just $8.65.

For some CEOs this would be wanted attention. But not for long-serving Wolgen who dismisses the German analyst, despite his very upbeat view of the company's prospects.

"The company has done well on its own merits and then individuals suddenly springing up putting a $40 price on the company – maybe some of my peers might like it, but I don't like this kind of pressure," Wolgen tells AFR Weekend from the UK where he was meeting investors.

"When one individual who has the choice of 50,000 life science companies in the world is choosing Clinuvel in Melbourne there then is a motive. You need to disclose who your employer is and why you are doing this."

Sphene Capital owner Peter Thilo Hasler, who authored the Clinuvel research, covers about 23 companies. Most are in Europe, one is Canadian and Clinuvel is his sole Australian topic of investment interest.

Hasler says he has been writing research for almost 30 years, scouring the globe for undervalued companies.

"This is supposed to be my job as an analyst, isn't it? I have analysed companies from all over Europe, Americas, Asia. So why not Australia?" he says.

Sphene Capital's Peter Thilo Hasler is bullish about Clinuvel's prospects but critical of management's communications. DVFA

"Analysts are multipliers who tell their clients about the progress the company is making," Hasler says. "With this function they help to make markets efficient. Clinuvel decided for some reasons not to talk to analysts. Therefore the market was not efficient, and the share was significantly undervalued at disallowed. Which is why I initiated coverage, because this was an outstanding undervalued company. And still is, in my opinion."

That might be so, but Hasler also has some criticisms of Clinuvel management and the board, led by former CSL executive Stan McLiesh.

Hasler explains that he has found it is "highly complicated" to get a meeting with management. This is unusual, he says, "since management must be interested in attracting new potential shareholders since this increases shareholder value – which is the number one job for the executive board!"

From Epitan to FBI's most-wanted list

Wolgen was working as an analyst for a European hedge fund when he came across the Victorian company Epitan. It had failed in its attempts to get approval in the US and Australia to use its product for cosmetic purposes as a tanning agent. Even though the company was struggling with its pathway to market it had an "abundance of safety data", he says.

When Wolgen joined in November 2005 as CEO the company had just raised $10 million from Absolute Capital Management, run by German-born hedge fund manager Florian Homm, who would later land himself on the FBI's Most Wanted list.

Hasler tells the AFR Weekend that he has known Homm for 25 years, although they rarely speak. "I have not spoken to Mr Homm regarding Clinuvel," Hasler says by email. "However it is none of your business what I discuss with Mr Homm about other matters (which as I said I don't do regularly)."

Homm had been an important supporter of Epitan, having been introduced by founder, Wayne Millen.

In February 2006 the group changed its name to Clinuvel Pharmaceuticals, to shed its cosmetic past. A short time later Homm participated in a further $5 million placement, but then everything began to unravel.

In September 2007, Homm went on the run for five years following charges of investment fraud in the US. The explosion of Absolute Capital saw Clinuvel's share price halve in value despite the company itself not having any bad news to report.

With the stock was trading below $2 management had to go around the globe explaining to shareholders all was still OK.

Homm, who is no longer a shareholder, was arrested in Italy in 2013 while visiting the Uffizi Gallery in Florence and soon after Clinuvel's luck turned.

Its drug Scenesse was approved in Europe in 2014 for the prevention of phototoxicity in adults with EPP.

Scenesse activates the production of melanin – the skin's natural defence against ultra-violet light – to protect patients against sun-related diseases. It is used to treat erythropoietic protoporphyria (EPP) – a rare genetic disorder that causes burns after brief exposure to light. The drug is a slow release implant, the size of a grain of rice, and it is estimated that patients need about six implants per year, ongoing, to be protected permanently.

It made its first revenues in 2016 but there are still no sales people, with the drug directly distributed to hospitals. The company's Australian headquarters in Queen Street, Melbourne house a small team of 10 to 12 people who work in finance and regulation.

Stock on a tear, despite red flags

A curious cast of characters and a bumpy history are just some of the red flags people in the market are examining around Clinuvel. But while they do some other investors, and the CEO, are doing very well.

According to the group's latest remuneration report Wolgen was paid $2.3 million in 2017-18 including 207,097 performance rights, up from $1.6 million the year before. In fiscal 2018, Wolgen was also given a €500,000 ($794,000) cash bonus as Clinuvel reached an accumulative €10 million in sales from self distribution of its product.

Hasler, who is a board member of the German Association for Financial Analysis and Asset Management, says Wolgen "deserves all the money he gets" for running a "spectacularly successful company".

Several fund managers say Clinuvel's incredible run is an example of a company being boosted on the back of index and quant funds' buying, without any real good news to propel the stock higher.

"You have forced demand when the index funds start buying," says one fund manager who knows the stock. "Momentum comes, then quant funds start buying. And the market cap keeps growing. Then it goes ASX 200, and these stocks just go on a long-dated monster rally."

Florian Homm, wanted in the US on charges related to the fall of his hedge fund, still talks positively about Clinuvel, where he was previously invested. The New York Times

Since taking over as CEO, Wolgen – who was born in France, nearly became a professional soccer player before training as a facial surgeon and later working in financial markets – has had plenty on his plate.

He has pivoted the company away from its cosmetic roots and defended Clinuvel from a $95 million takeover tilt in 2014 by US-giant Retrophin which was then led by notorious hedge fund investor Martin Shkreli.

Now Clinuvel has some key milestones coming up. Management has been pressing the flesh with investors – at the Goldman Sachs conference on April 3 in Sydney, before heading to London and New York – ahead of July 8, when it will hear if its key product, Scenesse, will be approved by the Food and Drug Administration in the US.

According to Clinuvel it is estimated that between 5000 to 10,000 individuals worldwide have EPP. With approvals so far in Europe Clinuvel has only touched the surface of this. While Wolgen would not disclose the number of EPP patients treated with Scenesse, he says it is increasing about 25 per cent a year.

Wolgen is also hopeful one day the drug can be used to treat other skin diseases.

But getting reimbursement for the treatment is proving to be difficult for the company in Europe. Reimbursement is the coverage of the cost of medicines by a public payer (such as social health insurance or a national health service).

When payers set the price they are willing to pay too low, or even decline to reimburse at all, this can spell trouble for drug developers.

On average, the cost per treatment with Scenesse is about €70,000. Clinuvel is mid-appeal of the decline of reimbursement for the product by the UK's National Health Service. The Norwegian government also declined reimbursement.

"Getting regulatory approval is all well," says Wolgen, who lives in Singapore where Clinuvel has labs.

"But real battle is fighting and vying for the drug price, among another dozen companies who hold up their hand. Society will need to pay for innovation. Some countries have no issue with it and some countries resist this."

As for cigar-smoking Homm, he is regularly on his YouTube channel talking about an array of things – from his time in an Italian prison, to offering advice on bonds. Every so often he still mentions Clinuvel.

"It gives me a kick, that between all the raids, dozens of IPOs, short sales, VC deals and so forth there is this one company which makes me happy to be associated with: Clinuvel," Homm says in a 2014 blog.

In several 2017 video posts he talks up the biotech, in one speaking highly of Wolgen. But Homm's advice for investors that they must do their own due diligence and "make up their own minds" is perhaps most apt.