Why Clinuvel Pharmaceuticals Jumped 5.3% Wednesday

Why Clinuvel Pharmaceuticals Jumped 5.3% Wednesday

Clinuvel Pharmaceuticals Ltd [ASX:CUV] is a small biotech company developing drugs to treat a range of skin disorders. The stock climbed 5.35% on Wednesday to a high of $7.28 per share.

What happened to the Clinuvel Pharmaceuticals share price?

CUV has been in negotiations with Germany’s National Association of Statutory Health Insurance Funds since August 2016. The negotiations have surrounded pricing of CUV’s treatment. And this morning, CUV announced that they’ve finally come to an agreement.

CUV will adopt a uniform global pricing policy. The rationale for this is ‘patients are migrating across borders to seek treatment, expert physicians are associated through porphyria networks, and hospitals collaborate internationally to purchase pharmaceutical products for orphan diseases,’ CUV said.

The annual cost of therapy for a patient in Germany now ranges from 56,404–84,606 euros.

What now for CUV shares?

It’s great news that CUV has come to an agreement on pricing its treatment. However, I wouldn’t rush into the stock just yet. It’s trading at a price-to-earnings (P/E) ratio of 129.24-times earnings. That means, holding current earnings constant, shareholders need to wait 129.24 years before redeeming their initial investment in the stock.

If you’re interested in the company, I’d suggest waiting until earnings start to grow rapidly, and for the share price to trade down. In that time, you could further research the stock and determine what you believe is a realistic growth rate for the years ahead.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

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Harje Ronngard

Harje Ronngard

With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation.

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