Clinuvel: Market Appears Overly Pessimistic; Initiating With a Fair Value Estimate of AUD 18

We initiate coverage of Clinuvel with a fair value estimate of AUD 18 and shares currently appear undervalued, trading at an 11% discount. We suspect the market is likely too pessimistic on the speed and extent of Clinuvel’s commercial rollout of Scenesse for its existing indication which contributes 83% to our fair value estimate. We forecast an EPS CAGR of 16% for the next five years when Scenesse will remain fairly protected from competition. We suspect the market is also underestimating potential new earnings streams. While broader indications including vitiligo are still in clinical trials, early efficacy and safety data is positive and would greatly expand Clinuvel’s addressable market if successful. Regardless, due to low capital requirements and high-profit margins, Clinuvel enjoys high returns on invested capital. Our Morningstar Uncertainty Rating for Clinuvel is High, and we assign a Standard Capital Allocation Rating.