Cochlear results last week were interesting. First up they announced another $75 Million share buyback, last year they also did a $75 Million capital distribution via share buyback and it was completed in full and without fuss and Cochlear shareholders were happy. I expect they will complete this years share buyback in the same straightforward and no fuss manner making shareholders happy again. I expect Clinuvel to complete their capital distribution via share buyback commencing as soon as results are released this week to back up their words below. An interesting fact is that Cochlear is more than 30 times greater valued than Clinuvel and their buybacks help to keep a healthy P/E ~56 and they are using just $75 Million. I guess the Clinuvel buyback will cost about $25 Million which is a nice amount and a full one third of the Cochlear buyback despite CUV being less than 1/30th the size of COH so it should have significant impact if done right because it can be seen from ASIC data how shorters manipulate this stock every day on pretty low volumes. Another interesting fact is despite the COH P/E being more than double CUV they are only offering guidance of 6-11% profit growth, my own personal opinion is CUV could exceed that in FY25 but it's a guesstimate only and mainly based on picking up patients from Disc and MT programs and possibly more implants being prescribed in Europe - I would love CUV to offer some forward guidance but they will not IMO. Results will certainly be interesting, shorters betting hard against CUV despite Clinuvel being in a better financial position than ever, despite EPP competition doing worse than ever, despite super profits and absolute EPP market monopoly, and despite a great pipeline with a drug that is already FDA and EMA approved. Furthermore the CUV share buyback will only use a tiny percentage of the huge cash pile and could easily be repeated.
So the capital distribution via a Share buyback was announced with some fanfare in March (you can see everything Clinuvel said to the ASX further below) but in the following 5 months only 50 thousand shares out of 1.5 Million have been bought back. The capital distribution of 1.5 million shares is significant to shareholders as there are only 50 Million CUV shares on issue and having 48.5 Million shares after the buyback is even better because that means less shares to spread profits amongst. Just with Vitiligo approval that is something to really think about. Assuming no shares are bought back in August then that means 1.45 Million shares need to be bought back in the 7 remaining months of the buyback. Clinuvel will need to be buying over 10 thousand shares every day which is a significant number - shorters are manipulating the price every day on extremely low volume and REAL shares being bought and deleted every single day via the buyback for 7 months will have an impact. Especially if they 'front-load' the buyback a little to remove some liquidity from the market by buying back 30, 40 or 50 thousand shares on a few days early on which will also take some predictability out of just buying 10K shares every day. The very first newsletter this year Clinuvel said that just a single institution buying a large number of shares was enough to take the price over $40 so things can change rapidly.
As a reminder here's what the Clinuvel board of directors said about the crazy undervaluation, and also what the company said in a recent newsletter regarding the share buyback (underline mine): (Note: since the directors released this there has been some good news on Parkinson's disease indication, DNA Repair results, Disc flunking an EPP trial plus more cash piling up I guess - so what must they think of the 'decoupling' now?)"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, andwe 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"
All IMO DYOR
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