Shares of Clinuvel Pharmaceuticals Limited (ASX: CUV) are trading nearly 3% up today with investors looking to the healthcare sector for value. Prior to the March market correction, Clinuvel’s share price was trading above $29 and are yet to regain these levels. 

What does Clinuvel do?

Clinuvel has spent the last 15 years developing its product, Scenesse; the world’s first systematic photoprotective drug. Scenesse is used to treat Erythropoietic Protoporphyria (EPP) which is a metabolic genetic disorder causing intolerance to light. 

EPP patients suffer painful reactions and burns from exposure to direct light, which means they must avoid it at all times. Reactions can occur after just a few minutes of exposure and last days or weeks. The disorder is rare, affecting around 10,000 people worldwide and causes social isolation and anxiety. 

The Scenesse drug provides EPP patients with photoprotection and the ability to lead a “normal” life. Prior to the creation and regulatory approval of Scenesse in Europe in 2014 and the US in 2019, EPP had no approved treatment.  

What does the Clinuvel share price represent?

Clinuvel has progressed from the R&D phase into the commercialisation phase with FY17 being the first year of commercial operations and the first profitable year. Its profits rose in FY18 and FY19, with the December 2019 period seeing Clinuvel eighth consecutive half-year profit. Its earnings per share increased from 18 cents in 2017 to above 30 cents in 2019. 

Clinuvel paid its first dividends to shareholders in FY18 and FY19. The company is debt-free and has cash and equivalents of over $60 million. The share price has increased by around 700% over the last 5 years, taking Clinuvel into the S&P/ASX 200 (ASX: XJO) in June last year. 

What’s next for Clinuvel? 

Clinuvel hopes to specialise in creating treatments for rare genetic conditions. And beyond 2020 it is seeking to evolve into a diversified pharmaceutical company.

Clinuvel plans to take Scenesse to new regions to develop a paediatric formulation. A clinical trial is also underway to evaluate Scenesse for the treatment of vitiligo as a repigmentation agent. 

Clinuvel has strong cash flow and an ambition to deliver new products which provide treatment to multiple patient groups. Investors with an eye on the Clinuvel share price will be interested to see if it can sustain long-term growth and evolve into an integrated biopharmaceutical company. 

More reading

• Why MOAT is my favourite ASX ETF
• Can ASX big banks generate an attractive sustainable dividend yield from FY21?
• ASX 200 falls 2%, ASX travel shares drop heavily
• Why the ASX 200 tumbled lower on Monday and 2 shares to buy
• Should you buy ASX shares during this market selloff?

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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After a reasonably subdued morning of trade, the S&P/ASX 200 Index (ASX: XJO) fell heavily in the afternoon to end the day notably lower.

The benchmark index tumbled a disappointing 2.2% to 5,719.8 points.

Why did the ASX 200 tumble lower?

Australian investors were selling off shares this afternoon after U.S. futures took a sharp turn.

At present, futures contracts are pointing to the Dow Jones opening the day 3.3% lower, the S&P 500 starting the week with a 2.8% decline, and the Nasdaq index opening 2.3% lower.

According to CNBC, stock futures fell heavily amid signs of a second wave of coronavirus cases in the United States as the economy reopens. This follows a spike in cases late last week in a number of states.

President and chief investment strategist, Ed Yardeni, from Yardeni Research, believes that investors got ahead of themselves in respect to the reopening.

Mr Yardeni said, courtesy of CNBC, that: “The meltup may need to take a break, as sentiment has turned too bullish too rapidly. Now that reopening is happening, there’s fear of suboptimal results: less social distancing triggering a second wave of the virus, followed by another round of lockdowns.”

Though, another lockdown seems unlikely based on what Treasury Secretary Steven Mnuchin told CNBC late last week. Mnuchin suggested that shutting down the economy again wasn’t viable and would only “create more damage.”

Is this a buying opportunity for Australian investors?

Unfortunately for Australian investors, we have a tendency to follow the lead of U.S. markets regardless of what is happening over here. This means that if the U.S. does struggle with a second wave, it could weigh on our market in the near term.

However, I wouldn’t let this put you off investing. In fact, I would suggest you look to see if you like the look of any of the shares that have pulled back notably over the last few days.

Companies like Aristocrat Leisure Limited (ASX: ALL) and EML Payments Ltd (ASX: EML), for example, have fallen heavily since last week. I think this could be a buying opportunity for long term-focused investors. I feel both shares trade on attractive multiples relative to their long term earnings growth potential.

More reading

• Why MOAT is my favourite ASX ETF
• Can ASX big banks generate an attractive sustainable dividend yield from FY21?
• ASX 200 falls 2%, ASX travel shares drop heavily
• Clinuvel share price jumps as investors favour healthcare
• Should you buy ASX shares during this market selloff?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia has recommended Emerchants Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the ASX 200 tumbled lower on Monday and 2 shares to buy appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) have both tumbled more than 7% over the past 4 trading sessions. This follows an increase in coronavirus cases and a grim economic outlook announced by the United States Federal Reserve last Thursday.

With all things considered, should investors be buying ASX shares during this recent market selloff? 

The bad news 

Coronavirus infections continue surging 

From a global perspective, the coronavirus pandemic is still running rampant. The US experienced a record number of new cases across multiple states last week. State health officials are pointing to an increase in gatherings over the Memorial Day holiday as a catalyst for this increase.

South America has also seen a surge in cases with daily infections surpassing those in Europe and the US. The World Health Organization declared the region the pandemic’s ‘new epicentre’ on 22 May. 

China reported its highest daily increase of coronavirus cases in 2 months, with 57 new confirmed cases over the weekend. The cases identified in Beijing have been linked to its biggest wholesale food market, which has since been shut down. 

I believe the recent selloff combined with fresh news that the pandemic is not showing signs of slowing down will add to the uncertainty and panic in the markets. 

Unemployment crisis 

The US Fed updated its economic projections for the year, predicting a 6.5% drop in its GDP. It also estimates an unemployment level by the end of the year of approximately 9.3%. Whilst this is still dire, it is less than the 13.3% seen in May. 

Australia is in much better shape, with a seasonally adjusted unemployment rate of 6.2% in April. However, much of this can be attributed to the JobKeeper stimulus package that is assisting many businesses to retain their employees in what are extremely tough times.

On Monday morning, prime minister Scott Morrison warned that some businesses will fail when JobKeeper is withdrawn. This creates a lot of uncertainty, and businesses will no doubt be more cautious with spending moving forward. 

Patience is needed 

This is a unique recession, in that it came about because an economic shutdown was required to prevent the spread of the virus. Should the pandemic subside, there is no reason why the economy can’t return to a pre-COVID-19 state. The amount of money going into the economy via quantitative easing is both greater and faster than the responses to crises such as the GFC. Interest rates are still at a record low and will be low for many years to come.

Australia is also one of the leading countries to come out of COVID-19 largely unscathed. However, it is the rest of the world that we are waiting on to resume activity in key sectors such as education and travel.

Foolish takeaway 

I believe that it is a good idea for investors to be patient and wait for the current market volatility and uncertainty to subside before jumping in and buying ASX shares. 

More reading

• The ASX winners and losers from the latest S&P index shake-up
• 3 Warren Buffett quotes to start your week off right
• Shares up? Haven’t you seen the economy?
• These 5 ASX shares were last week’s worst performers
• Why the Reliance Worldwide share price is outperforming today

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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