The Clinuvel Pharmaceuticals Limited (ASX: CUV) share price has been the worst performer on the ASX 200 index by some distance on Thursday.
In morning trade the biopharmaceutical company's shares crashed as much as 21% lower to $35.45. Its shares have since rebounded slightly but are still down 11% at the time of writing.
Why is the Clinuvel share price crashing lower today?
Today's decline appears to have been driven by profit taking from some investors following an incredible rise on Wednesday.
Clinuvel's share price rocketed over 60% to an all-time high of $45.88 after the U.S. FDA approved its SCENESSE product for the treatment of erythropoietic protoporphyria (EPP) in adults.
This is expected to be a major boost to its revenue as no other treatment has approval in the United States market.
What is SCENESSE?
SCENESSE is a first-line pharmaceutical product aimed at treating patients with the rare genetic disorder EPP.
EPP is a rare life-long genetic disease found mainly in fair-skinned people. Sufferers will often have a severe phototoxicity of the skin, resulting in intolerable swelling and scarring when exposed to light. Reactions can vary from mild to extreme, with hospitalisation and powerful pain killers required for the worst cases.
The product has been a huge success in Europe and has been generating strong revenues in the market in recent years. For example, in FY 2019 Clinuvel reported an impressive 22% lift in revenue to $31.05 million. And on the bottom line things were even better. It posted a 40% jump in profit before tax to $18.1 million over the 12 months.
So, with the company now able to sell its product in the massive U.S. market, it looks well-placed to deliver further strong top line and bottom line growth in FY 2020.
But whether that growth will be enough to justify its current market capitalisation of ~$2 billion, is hard to say. As a result, I commend the company on this fantastic achievement, but I'm going to watch on from the sidelines.
For now, I would be a buyer of fellow healthcare shares CSL Limited (ASX: CSL) and ResMed Inc. (ASX: RMD) ahead of it.
