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Clinuvel Pharmaceuticals : Newsletter II - April 2021

03/31/2021 | 06:00pm EDT

Dear shareholders, friends

We welcome many new shareholders, especially the large number of German speaking investors who have discovered CLINUVEL's story the past three months; of course, we will continue to publish our News Communiqués in German. For new readers, the News Communiqués are a continuum of updates on specific and relevant regulatory, clinical, financial and market topics, noting some corporate issues remain confidential to guard the Company from competitive pressure. In a novel format, Strategic Update II - scheduled to be released after Easter and a sequel to Strategic Update I, 29 October 2020- will systematically discuss the progress of the Company per division, its R&D program, and other relevant matters.

Since the release of News Communiqué I on 25 January, we pause and look back at an eventful first quarter, one dominated by the roll out of four approved COVID vaccinations. In March, the European Medicines Agency (EMA) accelerated the approval of a fourth anti-viral from Janssen, allowing for a single shot vaccination. Without expressing preference for any of the four available remedies, Israeli data have shown that the Pfizer one seems to be 97% effective.

Headlines were made in February, as we witnessed how Gamestop, a stock under short attack from syndicated hedge funds, had attracted speculative attention of retail shareholders as they openly rallied against the three hedge funds which had shorted the stock. On market buying support was coordinated through Reddit. As the stock price catapulted in late January, taking the company from a US$3 billion to a US$22 billion valuation, a question arose as to the role of the clearance house Robinhood and its connections with its clients Melvin Capital and Point72. As the dust settled, the fundamental valuation of Gamestop, a retail gaming company, became the focal point.

I view the Reddit phenomenon as one which illustrated the aggregate power of US retail shareholders wielding influence when it mattered. I do

believe we will see more frenzies in securities as the world continues to connect faster and spread corporate news flow as it emerges.

In March, we learned how US banks and markets reeled from the default by Archegos Capital Management. The larger US investment banks had allowed the family office to take on billions of dollars of exposure to volatile equities through swap contracts, until margin calls were triggered by a plunge in the markets. This shows how the bet on one security going awry, in this case ViacomCBS shares, can instantly lead to an international cascade of proportion. As two of the largest investment banks on the street had liquidated up to US$19 billion in US and Chinese positions on one day, many other portfolio managers needed to respond by block sale at discounted prices. Keeping in mind this event is barely one month after the Greensill sage uncovered US$3 billion in exposure to Credit Suisse, leaving investors to guess how this one could have unravelled. Archegos reminds of the 1998 hedge fund LTCM debacle when the US government had no choice than to bail out the fund. At the core, leveraged balance sheets and unfettered lending by banks underlie the cascades unfolding when margin calls and breach of covenants are no longer avoidable, the relentless belief in turn of fortunes in leveraged bets on the markets recur time and time again. Portfolio managers eventually rebalance their holdings irrespective of corporate performance, and shareholders pay the price.

In scanning the world's macro developments, we constantly rethink the course of CLINUVEL, and at present I hold a grim view as to the long- term impact on western economies coming from the rising tensions between China and the US, Europe and Australia. The discussions in Anchorage leave little to guess about the direction of these opposing political views on climate change and trade relationships. While we witnessed two posturing camps, I foresee little change near term. The ecopolitical tensions are further inflamed with Moscow having recalled its ambassador to the US, as the bilateral decisions are called - as "spiralling towards a dead end".

For those who follow us regularly, I share that as part of the deliberations among CLINUVEL's board of directors, macroeconomic issues such as trade imbalance between China and US-Europe, and the ongoing tensions in Asia-Pacific and South China Sea gain our attention. Global events shape our thinking about CLINUVEL, and navigating a listed company through many obstacles, I believe it is expected from us to deliberate the near-term impact of the macro shifts we are witnessing and specifically the possible impact on our business and supply chains.

Supply and distribution related to healthcare poses questions, since fair allocation of resources per country has now become a prevailing issue and pharma deals with governments are seen as putting certain nations at disadvantage. The latest national spats in Europe over the release of


For those who follow us regularly, I share that as part of the deliberations among CLINUVEL's board of directors, macroeconomic issues such as trade imbalance between China and US- Europe, and the ongoing tensions in Asia-Pacific and South China Sea gain our attention.

CLINUVEL Communiqué II 01 April 2021

vaccines and fights to protect intellectual property in the quest for a global public good do not bode well for those who believe in globalisation as a driving economic force. I believe we are swiftly entering a "détente" where self-sufficiency will dominate our political and economic decisions.

Switching to the US, one cannot help but applaud the Congress' bill for a US$1.9 trillion stimulus package passed on 11 March, the sixth COVID Relief Bill passed. This historical record to boost the economy needs to be put in context of the overall economic stimulus since early 2020 totalling more than US$5 trillion, unimaginable 18 months ago.

Since President Biden's inauguration there is no news from Capitol Hill on its stance on pharmaceutical drug pricing. The latest news is that the Biden administration has shelved plans to reform the Medicare Part D and current rebates for Medicaid managed care until possible as far as 2023. We refer to the February 2019 News Communiquéfor the discussion on the most favourable nations model that was to be implemented by the Trump administration and that has now received renewed attention from Vice President Kamala Harris.

At present, the discussion in democratic corners of the Administration aims to find ways to restrain list prices while benefiting the patient. However, pharmaceutical pricing is only a small part of the perceived problem. The deeper issues lie with the insurance system itself. US patients lacking insurance, and those who entered plans with high deductibles and coinsurance, need the most urgent political help. The lowering of drug prices may have very little bearing on the out-of-pocket cost, depending on how the insurance companies adjust to possible future cost-sharing arrangements. For now, we are not optimistic that the US drug reimbursement system can be overhauled since too many actors and intermediaries play a role in prescription drugs.

In CLINUVEL's case, the direct distribution model to hospitals, the lack of availability in US pharmacy chains and well-defined patient population requiring Prior Authorization gives insurers much control over the drug price and patients receiving treatment.

Switching attention, as discussed in past News Communiqués (see Julyand September2020), we remain much focussed on interest rates and inflation. With anticipation, we await the next quarter to watch how markets react to creeping inflation, negative US yields, and record-high valuations in tech stocks and specific market sectors. Nevertheless, there seems to be a widespread belief that economic recovery may be faster than predicted in December 2020 with growth expected in value equities, value-oriented investments and real estate, but a slow-down in fixed income.


At present, the discussion in democratic corners of the Administration aims to find ways to restrain list prices while benefiting the patient.

CLINUVEL Communiqué II 01 April 2021

With concern we follow the economic debate on the possibility of interest rate hikes as an unlikely factor to hold back economic growth for the next few years, whereby the value of cash remains a hot point of contention. As CLINUVEL grows and is compelled to make investment decisions to prolong its pipeline, these parameters prompt continuous adjustments to our plans.


Dr Linda Teng, Director North American Operations

Although most US states are operating on a limited scale, our distribution team is making better than expected progress in current times.

We see a steady increase in US insurers partaking in the SCENESSE® (afamelanotide 16mg) treatment. On a daily basis our teams are managing the administrative demands from the submissions for "Prior Authorization" by each individual EPP patient, assisting Specialty Centers whenever they encounter delays and difficulties with insurers. Under strict guidance of data protection regulations and the Health Insurance Portability and Accountability Act (HIPAA) of 1996, our team members can be of direct help without compromising personal and medical data. This balancing act requires documentation, databases and frequent auditing.

The unique J-code was assigned to SCENESSE® on 01 January 2021, and we have since seen a number of changes occurring.

First, in some cases Prior Authorization is now being granted per annum, taking away the red tape of requesting Prior Authorization prior to each implant. Some insurance groups started setting PA for the duration of five years.

Second, we observe that Centers have freed-up their administrative burden to spend more clinical time with patients.

Lastly, the prescribing Centers are getting better and faster in processing patients' administrative duties, having come through the first learning phase of managing and handling SCENESSE®.

The next stage is for our teams to secure a treatment-specific Current Procedural Terminology (CPT®)-code. Although this usually takes more than two years, we have managed to speed this up by one year.

A CPT®-code allows a set of codes, descriptions, and guidelines intended to describe medical procedures and services for processing claims, conducting research, evaluating healthcare utilisation, and developing medical guidelines and other forms of healthcare documentation.


The unique J-code was assigned to SCENESSE® on 01 January 2021, and we have since seen a number of changes occurring.

CLINUVEL Communiqué II 01 April 2021


The CPT® code system was adopted as part of the Centers for Medicare

  • Medicaid Services (CMS), Healthcare Common Procedure Coding System (HCPCS). The HCPCS code set is divided into two principal subsystems: (1) Level I of the HCPCS, which comprised the CPT® and (2) Level II of the HCPCS. Level I CPT® codes are five-digit numerical codes used to describe medical procedures or services performed by healthcare professionals.

Ultimately, the American Medical Association (AMA) is responsible for the additions, deletions, revisions, and annual updates of the CPT® code system. As part of HIPAA, the Department of Health and Human Services designated CPT® and HCPCS as the national standards for electronic transaction of healthcare information.

Every medical, diagnostic, or surgical procedure or service has a CPT® code assigned to it. These are used by healthcare professionals, hospitals, clinics, and insurance companies to identify healthcare services and procedures in federal programs and through commercial and/or private insurers. CPT® codes are also used by insurers to determine the amount a healthcare professional will obtain as reimbursement, given the patient's health insurance coverage and agreement the Center has in place with the health service provider.

The US team is in the process of requesting a new CPT® code with the AMA for the procedure of SCENESSE® administration. By obtaining a unique CPT®-code for the SCENESSE® administration, it will facilitate and accelerate the Prior Authorization approval, medical billing, and reimbursement for the EPP Specialty Centers. Most of all, the combination of J-code and CPT®-code will introduce SCENESSE® as standard of care for US insurers adopting it on their list of reimbursable drug therapies.

As the knowledge and experience about SCENESSE® grows, the number of registered patients is still increasing while the ease of gaining access to treatment is being addressed. By now making treatment available within a radius of three and a half hours of the majority of patients, we are nearing our goal of providing sufficient options nationwide.

In parallel, we are in the process of establishing a structure in the US which will enable CLINUVEL to handle and distribute more drug products in the future. For this we follow a comprehensive plan to obtain all necessary pharmaceutical licenses in each of the key states.

A first careful assessment shows that US payments fluctuate by month and much depends on each insurer. The larger insurers seem to adhere to payment terms exceeding 120 days, while smaller ones appear to adhere to 90 days. The payments received vary per state as well, but no bad debt has been recorded thus far.

CLINUVEL Communiqué II 01 April 2021

This is an excerpt of the original content. To continue reading it, access the original document here.


Clinuvel Pharmaceuticals Limited published this content on 01 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 April 2021 14:13:05 UTC.

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