Letter from the MD

Dear loyal shareholders, friends,

It is a great honour to serve this company, each single day starts with the acute awareness of establishing a company based on beliefs and people’s discipline to devote a great part of their career turning concepts to practical healthcare solutions. CLINUVEL is not unique in this, but where our teams differ is in their ability to search, find and conceptualise. Our teams develop new formulations, new applications, translate technology to larger markets and open new communication channels. Working for CLINUVEL is voluntarily embracing ‘pain’ and uncertainty, with ever-changing risks, threats, and dynamic environments, and in spite of all this, at the end of financial year 2022 we arrived at the Group’s strongest financial position. Analogous to any business, performing arts, or cinematography, there is no guarantee that the next film will be a box office hit, however, my belief is that the current pool of management teams executing plans stand a much greater chance of prolonging the Company’s success, based on their ability to find solutions for complex problems.

Surrounded by a generation of managers and many new staff members, we climbed a summit to expand the Company in the middle of a pandemic, as we witnessed the birth of a new employment market. We see it as a primary task to provide shareholders financial strength and business capability to sustain continued prosperity. Put very simply, predicting a downpour doesn’t hold, building an ark does.

The pharmaceutical sector is undergoing a deeper transformation, spurred by three major forces of change: technological advancements, growing negotiating powers by payors, and lower barriers to entry. Each brings challenges and opportunities for CLINUVEL.

In this brief, I will address this year’s financial performance, the current operating climate, and how we aim to adapt and grow our products and services to wider audiences. At the very end, I will elaborate on the ancillary objective to ensure a larger visibility for the Group.

CLINUVEL’s Business Model

We emerged as an Australian domiciled company, but with all commercial operations having shifted to the European Economic Area, Asia, and North America. In establishing functional business units, teams are led to work cross-functionally, and seek daily communications with overseas counterparts, sharing our main currency: knowledge and experience. We do not support the notion of isolated business functions within a larger Group, and actively stimulate cross-border communication imparting critical information. We do this by seconding management, rotating staff, establishing international collaboration, and allocating specific tasks and functions per country. This year, integration has proven more difficult than any other, since staff had grown accustomed to working remotely, but also since we added a greater number of new talents to our teams. In general, there is no magic to corporate integration, it all hinges on the time one devotes to management and newly recruited staff. A single clear vision, discipline, and passion are the commonalities we share to get to the finishing line.

Among our executive team we have seen zero attrition or turn-over the past three years, and a median 16 years of continuity. I attribute this unusual longevity at the top of the organisation to a single factor, the collective wish to see the completion of a journey started. Among our senior management team, the retention of personnel is a median six years, while at managerial level currently three years. We put much effort to assimilate senior management swiftly, as they are adapting to a varying working environment and structure compared to that of pre-pandemic. In turn, we learn from the newly recruited managers that accountability is higher within CLINUVEL compared to peers in our sector.

We adopted a universal model necessitated by the Company’s history. The construct has worked for CLINUVEL, and as environment, regulatory demands and commercial arena are changing, we periodically pose the question where and when we need to change. The Board’s reasoning goes as follows, what worked 15 years ago may not be applicable today, therefore adjustments and changes may be needed to arrive at a diversified pharmaceutical and healthcare business. I expect that many of our current activities will converge and be made public in the coming 12 months.

I always remind myself of the perverse tension in bio-pharmaceutical companies, on the one hand the ultimate attempt to alleviate consequences of human disease, while on the other, simultaneously satisfying our owners with growing returns. In thinking about this paradox, the challenge is to maintain a justifiable balance, while serving multiple stakeholders. We also pay close heed to our specific role in society, making sure that those who have remained unattended, untreated, and not cared for, receive our assiduity and lastly, products. This is a thread running through the Company, stretching to the way we communicate, operate and recruit.

Another theme which richly deserves our attention, and where we make incremental steps, is the quest for an integrated but independent group of companies, covering the value chain from start to the end. Here, we made progress, but I would have wanted to see more from the past year; in FY2022 we did not fully live up to our own expectation. I expect that we will expand our services and products in the coming year, thereby gradually transforming the Company. We established the Communications, Branding and Marketing (CBM) Division, found experienced managers leading the teams, engaged in new activities, opened communication channels to reach new audiences. Many of our shareholders commented in FY2022 on the calibre, and change of our communications, feedback that has been appreciated.

ESG Reporting, Governance Risk Review

In FY2022, we continued to strengthen our governance policies, as the Board implemented several important measures.

I have often stated in public that CLINUVEL’s Risk Register is the single most important document influencing our thinking, and changes in strategies. So to speak, an indelible checklist which is quarterly reviewed, keeping us alert and flexible. We strive for gender and cultural diversity, with key metrics showing that we are achieving well above our peers. With 43% female representatives on the Board, 57% of the top salaried personnel, and an overall 68% of employees female, we are readdressing societal imbalances.

We are selecting new talent on a number of criteria, but we have truly accomplished a Group diversified in 16 different nationalities, with 51% of us speaking more than one language. In total, 31% of our staff is born prior to 1981, while 69% after. Keeping the balance while filling the vacancies for specialised professionals is a discipline in itself, and one of current and future challenges, no doubt.

We continued to limit preclinical studies as part of R&D investments, however, within the confounds of our sector and in order to satisfy regulatory authorities, we completed two studies in 2022. We remain conscious on preserving biology and life, where we can.

In 2022, we welcomed Sir Andrew Likierman to the Board of Directors, and after years of having followed CLINUVEL at a distance, the moment was chosen for him to join in the capacity as non-executive director. His attention to decision making is well published, and I am sure we will enjoy his leadership on this very discipline. In financial year 2022, we continued Board exchange, whereby constructive critique and relevant questions allowed for the formation of new thoughts, viewpoints and guidance influencing our current strategy. The diversity of skills on this Board has worked well over the past year.

Last, in FY2022, we aimed to reduce the use of fossil fuels, emphasising renewable energy, and reversing the post-industrial growth in greenhouse gas emissions. We continue to do this by monitoring our global travel policies, and suppliers’ and vendors’ reports on CO2.

Financial Year 2022

The near-term objective is to turn our operations into stand-alone and profitable units within our Group. Each subsidiary has its own operating procedures and targets, however together they comprise a resilient and balanced Group, which has delivered unexpected levels of profitability in financial year 2022. Following our growth plan disclosed in 2021, we have seen a number of our subsidiaries meeting our internal financial criterion.

In focusing our attention on supply during the second and third COVID wave, we have seen the efforts translated into a 37% increase in revenues. In the past year we faced several critical moments, where decisions on manufacturing, supply and actual patient treatment needed to be taken. Cross functional teams led by Drs Wright and Hamila, Mr Hay, Mrs Colucci, Dr Teng and Dr Quadbeck-Diel were committed during the wee hours to see to continuation and growth. We attribute the FY2022 results to all CLINUVEL cogs inter-digiting. During crises, one learns the true make-up of its teams, its verism to objectives, managers devoting the lion share of their career to see ambitions come to fruition. The total research & development costs are found in various line items of our financial reporting, but for the past year we succeeded to reinvest more than 49% of our revenues in research, development, new specialised personnel, and production.

The Group’s Profit Before Tax for 2022 was A$34.3 million, a rise of 33% year on year, and marking the sixth consecutive year posting positive results.

The Net Profit After Tax was A$20.9 million, a decline of 16%, however, this financial metric requires closer attention. In following the financial reporting standards as laid out by the AASB, one is required to expense unvested performance rights valued at the time of grant to the entire staff. In setting a high bar, the majority of these performance conditions had not been met in FY2022, nevertheless we saw A$6.121 million as a non-cash charge affecting the NPAT, compared to A$2.602 million in FY2021. Taking into account these non-cash expenses, growth of profitability of the Company has been linear and well meeting expectations.

After utilisation of the previous years’ available carry forward tax losses, we saw a current tax expense of A$7.370 million on FY2022 taxable income, further affecting the bottom line. For the past financial year, we utilised further carry forward tax losses under the deferred tax asset allowance, resulting in a debit to income tax expense of A$6.075 million and the recognition of a deferred tax liability.

Total Assets increased by 33% from A$108.568 million to A$143.950 million and cash reserves rose by 47%, to a new level of A$121.509 million. In line with our communicated strategy, the intention is to grow the Group while maintaining countercyclical liquidity during low conjuncture, providing optionality to procure capital equipment, and integrate products and new businesses.

Importantly, and heeding the numerous lessons taught by equity markets, our fiscal discipline has taken away anticipation of further equity or debt finance, most frequently putting companies in a longer-term value spiral. The strong profitability helped us withstand periodic fluctuations in patients’ treatments, dictated by hospital capacity during and post pandemic.

The Company’s return on equity for FY2022 is 17% with both our EU and US operations delivering double-digit returns.

The Board has thoughtfully decided to increase our dividend in 2021-2022 by 60% with our long-term shareholders in mind, some of you holding CUV common stock since 2005. In total, we enjoy approximately 35% longer term investors in support of the Company’s direction, and I would like once more to wholeheartedly thank you all for the words of encouragement during COVID. The total net cost of redistribution is approximately A$2.1 million, while we have refrained from a share buy-back plan.

Finally, my own reminder on the projections made, we continuously review and track our budgets set against five-year projections made in 2021. Total expense was for the Group A$32.667 million (+44%) compared to FY2021. In sum, the two years yield a total expense of A$55.405 million, leaving A$119.6 million in projected expenditures for the remaining three years of the plan, expiring in June 2025. In continuing to invest in the next generation of managers, we aim to establish a stronger and diversified group.

In line with the global biotechnology sector, CLINUVEL’s share price declined heavily with a low of A$13.16 and high of A$44.67. The decline follows the drop in key life-sciences indices like the XBI over the same timeframe. The current reality is that multiple factors play a role and impact a company’s share price, short selling, lack of buyers and uncertainty about the sector are some of the main reasons found. However, the Company’s continued growth within a sector where the majority of bio-pharmaceutical companies are not posting revenues or profits, will eventually distinguish as markets seek value.

My observations underscore the necessity of maintaining financial performance, increasing the visibility of the Group’s mission, while expanding target audiences. Our performance over the last five years, certainly compared to other peers with platform technologies, is evidence that the chosen approach has provided strength and stability and a foundation to build from.

Pipeline Value

Periodically, we hold a mirror to ourselves, and discern whether we are achieving our objectives, and whether we need to adjust. Equally, we are conscious of time, and in a rear view assess whether our teams are on course. To reiterate our objectives for growth of the pipeline; the intent is to expand the Company on different fronts:

  1. clinical expansion of afamelanotide: new indications, persisting unmet patients’ need,
  2. new formulations of afamelanotide, providing dosing flexibility,
  3. new melanocortin molecules (ACTH, CUV9900),
  4. new formulations, delivery methods, and
  5. translation of technology and knowhow to over-the-counter (non-prescriptive) products for specialised populations (Highest Risk of photodamage).

These five targets will establish the Company as an integrated melanocortin house, with drug products for a variety of patient populations, while occupying a sub-specialty in photomedicine.

In terms of clinical development, the breakthrough consensus with the US FDA’s Division of Dental and Dermatology Products to test afamelanotide as monotherapy in darker skin populations is welcome, timely and most exciting. Our teams see the development of afamelanotide for a select group of vitiligo patients as a commercially viable avenue. With SCENESSE®, as a non-immune-modulatory repigmentation therapy, we target parts of the vitiligo market, patients with the strongest visible contrast of depigmented skin and at highest need. One can argue that any loss of pigmentation occurring establishes a medical need, however other factors determine the clinical necessity to treat, such as affected surface area, visibility (head and limbs), age, and skin complexion.

The trial CUV104 will start in Q3 2022, as the American hospital is going through its screening process to find suitable darker skinned patients affected by generalised vitiligo. The trial size is small, since administering SCENESSE® as a single therapy will rapidly reveal whether visible pigmentation re-emerges or not; a systemic treatment (a drug transported through our circulation) for generalised – spread over one’s body surface – vitiligo needs to show rapid and visible response. We have looked forward to this trial and patients’ reactions, worldwide it would be a first to see a melanocortin being administered as a monotherapy, that is without narrowband UVB (light therapy).

Significantly, as the medical community states, afamelanotide would be a natural human hormone not affecting the immune system in contrast to JAK inhibitors in development which suppress immune response long-term. Whereas the systemic treatment has seen in CUV102 and CUV103 first signs of repigmentation after weeks, topical treatments take months to exert a beneficial effect, such as the topical JAK inhibitor approved recently by the US FDA.

Xeroderma pigmentosum (XP) is a disease with highest impact on patients’ lives and morbidity. As a pharmaceutical company, being the only one doing something for these patients is a humbling experience, and one can only truly appreciate the worthwhile mission of developing and testing a drug when one sees and hears the XP patients, their families and healthcare professionals.

Our clinical team started the CUV156 study (which had been numerated CUV150 before a new therapeutic parameter was added), CUV152, CUV152 and CUV151, the latter acting as a control study in fair-skinned disease-free subjects. The study aims are to evaluate the properties of afamelanotide in providing photoprotection and DNA-assisted repair of skin cells. The Company had to overcome more than a decade of hurdles to compel the medical community, decision makers and importantly patients and their families to collaborate in clinical trials. The challenge to subject patients to a new drug therapy has been immense, mainly due to the grave nature of XP. In 2022, our teams advanced the studies, and at present the first data are being analysed, while completion of the studies is next.

Our stroke program using afamelanotide started with CUV801, whereby six patients were evaluated on safety. Given the acute nature of arterial ischaemic stroke, long dialogues with hospitals and leading physicians were needed. The specialists and their institutions had to arrive at a point willing to take the responsibility for subjecting their patients to a new drug therapy. In 2022, we posted better-than-expected results in all patients, while unfortunately one patient suffered a second stroke during the trial and passed away.

Safety and neurological functionality were evaluated, and the results led to the unanimous decision to prepare the second trial CUV803, when afamelanotide will be dosed higher and more frequently. It is hypothesised that afamelanotide has a positive effect in stroke patients, providing benefits to the vascular circulation and oxygen-deprived brain tissue. Here, we are aware that the medical need is vast.

The expansion continued with the development of PRÉNUMBRA® Instant, the flexible dosing alternative of afamelanotide. The R&D teams secured contract manufacturing for the exclusive production of this second product, to be tested first in CUV803, and later in other undisclosed indications.

The past year, we also saw the new direction taken by investing in ACTH, a well-known molecule with multiple applications. Historically, the distribution of ACTH in easy-to-use formulations had been dominated by Novartis and Mallinckrodt, however development and supply had stagnated in recent years. New market entrants with generic versions concentrated on the US market for ACTH, while our teams identified new opportunities for unserved populations. As the approved list of diseases for ACTH nears 20, our scientific teams believe that there is an untapped potential for new generations of the drug product. The production of ACTH is ongoing, and we expect to see first clinical testing in 2023.

In CUV9900, we hold one of our smaller molecules, with the intent to make the melanocortin derivative available for topical use (administered to the skin surface). Here, we received new positive data giving us direction for its final applicability.

Taken together, afamelanotide, ACTH and CUV9900 provide CLINUVEL a differentiated position, grouped around specific hormones, members of the same family.

The final piece of the photomedicine jigsaw is found in our specialised consumer product lines. Here, progress was made with the first formulations produced for commercial distribution, whereby our marketing team are collecting expectations and preferred product profiles from specialised groups. Data sets, qualitative information will be used by our newly formed CBM team to translate these in the 2nd, 3rd and 4th product lines to be launched. Further expansion on the role and objectives of the CBM division is gradually given as the products near launch.

We made the decision to increase investments in the new afamelanotide formulation, PRÉNUMBRA® Instant, the next generation of melanocortins, the development of ACTH, NEURACTHEL® (larger melanocortin molecule), and enter production of the first over-the-counter product. Although, I wish to see faster progress, the past 12 months has seen valuable addition to the Group’s pipeline.

I am grateful that our teams can benefit further from the current CSO, Dr Wright’s deep knowledge, and dedication. He is a unique talent understanding in-depth all aspects of new drug development to commercial stage. Surrounded by a scientific team of seasoned and new managers, he is passing on his experience and managing a complex program. However, there is unity and desire among the team to see multiple applications of afamelanotide on market, as well as new generations of melanocortin developed into commercial prescriptive products. At the same, the team around Dr Wright is equally engaged to achieve success with our healthcare products for specialised user groups.

Communication With New Audiences

There is a strong opinion among our stakeholders for us to continue our pharmaceutical strategy, but in 2022 we have shifted our focus to a wider range of activities to globally increase visibility of CLINUVEL. I have no doubt that a diversified model will become the bedrock of the Company’s success for many years.

I see many opportunities of opening new communication channels with wider audiences, and these new routes will go beyond those one may expect from a pharmaceutical company. Our current social media activities, and planning are the results of longer thoughts, discussions, and exploration. With the decision to establish a CBM team, we are stepping once again away from what is regarded as conventional in pharmaceuticals, however there is a good reason to go this avenue. Two main factors underlie our communications strategy, a growth story, and the relevance of our specialised healthcare products to wider audiences (‘at risk populations’).

In 1980, the quest for the ‘holy grail’ to develop a self-tanning solution started. Based on flawed technological and commercial assumptions, although led by a group of seasoned pharmaceutical executives, the treasure was never to be found. Many companies followed suit, larger cosmetic players such as L’Oréal, Johnson and Johnson, but around the millennium also dermato-cosmetically focussed Galderma and Allergan dabbled in the research of melanocortins and other compounds as a topical tanning solution, however none proceeded. The mission proved too challenging, too costly, too long, and uncertain.

As CLINUVEL focussed on the use of afamelanotide, analyses of pharmacology, photoprotection and anti-oxidation were made while other valuable properties had been identified for wider use. Objectives and definitions changed, applicability in dermato-cosmetics became feasible, and new and more data were generated. The new observations and learnings led to investments in developing a number of new melanocortin molecules for topical use. My personal aim is to see the first melanocortin being marketed as a topical, skincare product with multiple photoprotective and photo-reparative effects. The DNA-assisted repair program aims to provide further data in highest risk populations and aid the launch of a successful melanocortin topical product. This would finalise the sanctified journey started 42 years ago.

For our journey to successfully come to completion, a conducive environment needs to be developed, new audiences are to be reached; in 2022, we started to implement some parts of this global communications strategy, and the first response from the audiences on our mission is better than expected.

In FY2022, a new comprehensive communication strategy was implemented involving CLINUVEL Ambassadors (‘CUVAs’) to disseminate our mission and objectives to ‘prevent photodamage induced by UV-HEV and reduce skin cancers and melanoma’. Simultaneously, we are engaging multiple individuals with a large public exposure, such as performing artists, TV personalities, those affected by skin cancers, and politicians aligned with our mission and objectives and reaching wider audiences.

Communications also span the dialogue with new institutions, investment funds and family offices. Here, our head of investor relations, Mr Malcolm Bull, has made important strides. Both through the more traditional participation in investment conferences, follow ups and by directly meeting private investors, we see a steady pool of new investors on our register.

Going back to CLINUVEL’s mores of organising in major capital cities gatherings with funds, private investors, investment banks and firms, we receive positive response on this initiative. Actually, this is how the Company had started off in November 2005, organising luncheons in Frankfurt, Vienna, Paris, Sydney, London, and New York. We discontinued these face-to-face presentations in 2007 as the GFC shattered market confidence.

In May 2022, we organised the first of a series of 13 meetings in Basel, the pharmaceutical hub, attended by 60 people. The aim is to increase visibility on CLINUVEL’s mission, ambitions, and commercial plans. In the coming months, several meetings are being organised in Monaco, Sydney, and New York. This avenue of communication needs to be viewed as part of a wider program, and in parallel to the traditional bank-led non-deal roadshows, webinars, public meetings with retail investors’ associations and upon request from investment funds. We will review the impact in 12 months, but so far, the response is excellent.

Prospects 2023

We typically refrain from making predictions, timelines or giving guidance, since the sector engenders too much uncertainty, too much dependency and unexpected events urging for a change in strategies. However, I am of the belief that 2022-2023 will see larger activities taking place in the Company, since the foundation for more aggressive growth has been laid the past years.

In 2021, we stepped out and shared the commitment to taking the Group towards becoming the high performing business that CLINUVEL should be. Through biannual Strategic Updates, we share progress, laying out the steps that we need to take to complete our restructuring and improve our performance. I remain confident that our decisions allow us to become a Group which can maintain returns to our shareholders, who have been patient and deserve ongoing success. However, I also make a proviso that in today’s economic climate we carefully need to redefine the notion of ‘deserve’. Let’s say, thus far, our stakeholders have benefited from the contorted roads we needed to travel.

In completing the restructuring of the Group, we focus on our core pharmaceutical business, while establishing a non-core healthcare franchise. We will continue to operate as an integrated international business, straddling these two new divisions.

The question of the timing of new developments and specialised consumer products often comes up with our head of investors relations, Mr Malcolm Bull and equally, we are often asked as to the rationale of diversifying the Group. The latter question is relevant, as we hold that intense focus at an early stage is necessary to maximise chances of regulatory and commercial success. As the business reaches maturity, focus is replaced by controlled expansion from within. That implies strengthening the skill set of one’s management team, before going to inorganic expansion. I view this final stage as critical since the majority of mergers fail due to the lack of ability to integrate with the acquirer. I believe we are reaching the point where CLINUVEL can diversify its efforts without losing attention to the ongoing research, and commercial activities. The ultimate objective is not only to diversify the revenue stream but also the markets we operate in. With a sibling market, we will maintain our foothold in pharmaceuticals, while entering a specialised consumer market.

As to the timing, we have been analysing many public and private opportunities in FY2022, which deserve each thorough understanding of cost synergies, market opportunities and commercial risks. As progress is made in financial and operational diligence, it is clear that we will not retreat from being focused only on the family of melanocortins. We are seeking for value-driven organisations complementing our business strategies.


I entered pharmaceuticals 25 years ago, and I was excited to be a part of a respected profession doing good at large scale. CLINUVEL posed an entire new set of challenges. Part of our current mission has already succeeded, in that we have established an organisation in which the commitment and longevity of our employees do not hinge on the size of their remuneration package, but where they join to be part of unique venture trying to play a role in society to develop innovative technology for unaddressed and attended populations. All our staff hold in common the wish to overcome adversity in their operations.

For the next 12 months, I wish to see CLINUVEL as a diversified Group, where our employees choose to work because they believe in the mission, challenges, and opportunities to express themselves. As the employees grow, develop, and become accountable, they are becoming co-owners, taking responsibility for the growth of the Company. Along this vein, in FY2023 we will maintain the most important key performance indicator found across all staff levels, ‘an annual demonstration of new initiatives taken to add value to the Group’.

En résumé, I hold all reasons to be optimistic about the future, while unmistakably new challenges will befall our teams. I am privy to their ability and resilience to solve problems at the right time, and there is no reason why this attitude will not continue in FY2023. As the foundation of the house, under the guidance of Mr Keamy and Mr Lim, the finances of the Group remain in safe hands. Therefore, I believe that FY2023 will become the year of expansion transforming the Group.

My appreciation goes out to all new employees who joined our forces in FY2022, all the work performed by our staff often behind the scenes and at irregular hours as the boundaries between professional and private life working from home became blurred in FY2021-2022. You have all contributed to CLINUVEL’s successful year, excellent under difficult circumstances!

Dr Philippe Wolgen signature

Philippe Wolgen
Managing Director, CLINUVEL Group