Specialist pharma services group Clinigen (CLIN:AIM) reported interim gross profits up 35% to £108m, driven by acquisitions. Underlying sales growth of 9% was at the top end of guidance of 5%-to-10%), yet the shares softened 4.4% to 812p as investors focused on cash outflow and increasing debts.

Chief executive Shaun Chilton said, ‘with the commercial platform in the EU and US now established, we are actively seeking further product in-licensing and acquisition opportunities to leverage across the business.’


Clinigen’s focus has been on integrating corporate and product acquisitions to realise operational benefits and support growth. There should be gains to be had as revenues grow and cover a higher proportion of fixed costs, resulting in profits growing faster than revenues.

In addition the push to increase synergies across the various activities is aimed at capturing more business from the group’s client base. For example there is a natural overlap between very early clinical services and later stage unlicensed medicines, with 14 introductions being made in the first-half.

There was good evidence of financial benefits showing through at the half-year stage with adjusted earnings per share (EPS) growing 34% to 30.8p, on the back of a 24% growth in net revenues to £224.6m.


Cash generated from operations was strong at £64m (£37m), but unfortunately, the implementation of a new enterprise resource planning (ERP) system in October hit a few bumps in the road with lower cash collection and extra inventories contributing to a £53.8 working capital outflow.

This led to a £10.5m cash drain from operations. In addition, there was a deferred consideration of £30m for the rights to kidney cancer medicine Proleukin in the US.

The cash collection issues are largely fixed and the cash outflow is expected to reverse in the second half as Clinigen works to maximise the benefits of the ERP system. However further second half deferred payments for CSM and Proleukin are expected to increase net debt.

To facilitate the extra payments the group’s debt facility was increased to £430 post period end.

The company ended the period with net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) of 2.4 times, within the banking covenant of three times. Management is targeting a gearing of one to two times EBITDA in the 2021 financial year.

Historically the business has generated strong cash flows and converted around 75% of cash to profits and management is confident that historical trends will revert in future.

The dividend was upped 10% to 2.15p.


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Issue Date: 25 Feb 2020