Open Orphan plc (LON:ORPH), a rapidly growing specialist CRO pharmaceutical services company which is the world leader in the testing of vaccines and antivirals using human challenge study models has published its full year results for the year ended 31 December 2019.
Financial Highlights
| Open Orphan plc(As reported) | hVIVO plc(As reported) | Open Orphan plc(formerly Venn Life Sciences Holdings plc -proforma resultson a stand-alone basis and excluding any impact of the 28 June 2019 combination) | Open Orphan DAC(proforma resultson a stand-alone basisand excluding any impact of the28 June 2019combination) | Open Orphan plc(proforma results on a combined basis and including the impact of the 28 June 2019 and 17 January 2020 combinations) | ||||||
| 2019€’000 | 2018€’000 | 2019£’000 | 2018£’000 | 2019€’000 | 2018€’000 | 2019€’000 | 2018€’000 | 2019€’000 | 2018€’000 | |
| Revenue (incl. Other income) | 4,039 | – | 15,092 | 13,626 | 9,854 | 14,291 | – | – | 27,061 | 29,712 |
| Operating (Loss) | (5,837) | (1,611) | (5,893) | (13,427) | (6,469) | (2,367) | (763) | (1,611) | (14,249) | (19,174) |
| EBITDA before exceptional items | (4,311) | (1,611) | (3,785) | (8,862) | (5,053) | (1,432) | (763) | (1,611) | (10,130) | (13,072) |
| Loss for the period | (6,543) | (1,656) | (6,973) | (16,833) | (6,442) | (4,775) | (1,025) | (1,656) | (16,524) | (25,481) |
Post Period End Highlights
· Completion of merger of Open Orphan plc and hVIVO plc in January 2020 creating a specialist pharma services group with complementary CRO services
· Continued action to reduce the cost base with annualised savings of €2.0m in hVIVO and €3.0m in Venn respectively removed since the merger in January 2020 and further annualised cost savings of €2.5m in the merged entity are expected to be implemented by 31 December 2020
· Developing the world’s first challenge study model clinical trial in order to be able to test the efficacy of the large number of Covid-19 vaccines that are in development
· Developing an antibody testing service with capacity for up to 3,000 tests per day using the Quotient testing instruments which is one of the few able to offer 100% accuracy
· Expanded the Group’s pipeline of opportunities and converting pipeline of contracts across the whole Group, including:
o provision of an RSV human challenge study projected to deliver £3.2m in revenue all of which is expected to be recognised in 2020 with potential for additional follow-on £7m Pivotal challenge study delivering significant further revenue
o A contract with a US Biotech company for the provision of an RSV human challenge study projected to deliver £3.5 million in revenue all of which is expected to be recognised in 2020
o Expansion of laboratory service with offerings to third party biotech companies and small cap pharma companies with new contracts already completed and this is anticipated to be an important new revenue generating stream for the Group
o Venn’s traditional pharma consulting business continues to perform well and a significant contract was announced in recent weeks to obtain and support market access of newly developed vaccines into the EU and US markets for one of the top pharmaceutical companies in the world
· Increased liquidity and strong balance sheet through placings of £5.3m in January 2020 and £12.6m in May 2020 to allow the Group to complete its transition and leverage a broader service offering to an enlarged and combined customer base
Outlook
· Unprecedent growth opportunities as pharma focuses funding on Covid-19 and respiratory diseases resulting the development of a strong pipeline of opportunities, for both Covid-19 and non-Covid-19 challenge studies along with the wider CRO services offered by the Group
· Strong pipeline of work to build H2 2020 revenue, targeting operational profitability by Q3 2020
· A further €2.5m of cost to be removed from the business in H2 2020
· Right management team in place, with a clear strategy, targeting the high margin pharma services sector, to deliver significant shareholder value
· A strategic review is underway in order to seek to monetise the 49% stake in Imutex and our other non-core investments such as the 62.5% in PrEP Biopharm and our 100% stake in an immunomodulator
Cathal Friel, Executive Chairman of Open Orphan, said:
“Since the reverse takeover of Venn in June 2019 we have been building the foundations of a soon to be profitable business in Q3 and a rapidly growing CRO pharmaceutical services Group with all loses in both companies confined to the past. The merger with hVIVO, post period end, has given us a full-service business, with world class facilities, motivated colleagues and a strong pipeline of work and transforms out business into the world leader in the testing of vaccines and anti-virals through human challenge model clinical trials.
Traditionally, the testing of vaccines and antivirals had been somewhat of a Cinderella industry, however, following the advent of the Covid-19 pandemic it is clear that for the months and years ahead the development of new and novel vaccines and also the testing of such vaccines and antivirals will be one of the fastest growing areas of the pharmaceutical industry. In recent decades, governments and pharma companies around the world completely underinvested in new vaccines and the onset of Covid-19 caught them significantly off-guard and as such there is a huge capital investment program underway around the world to roll out an extensive range of Covid-19 and importantly non-Covid-19 vaccines to ensure that the world is not caught unprepared in future pandemics.
We have substantially reduced overheads and rightsized the management team including combining the CEO and other senior roles in both Venn and hVIVO. We have also brought forward some long-serving and excellent line managers and heads of departments flattening the organisation structure and giving them more autonomy and responsibility to successfully run their own areas and this is proving very effective both for the company but also most importantly for the individual managers as well. In turn, this has completely transformed the culture of the enlarged business to one of vastly more open communications, sharing of knowledge and a much faster decision-making process.
I am very excited for the year ahead and I am confident that we have created a soon to be profitable, fast-growing business which is creating value for all our stakeholders.”
Conference call for sell-side analysts and investors
The Company will hold a conference call for sell-side analysts and investors at 09:30 today.
Participant dial-in numbers
| Dial-in numbers: | IE: +353 1 526 0106UK: +44 33 0606 1122ITFS: International Access Numbers |
| Room number: | 430863 |
| Participant PIN: | 5880 |
A corporate presentation is available to shareholders on the Group’s website at: https://www.openorphan.com/investors/reports-and-presentations/year/2020
Executive Chairman’s Statement
For the year ended 31 December 2019
Dear Shareholder,
I am very happy to report to you as Executive Chairman of Open Orphan plc (formerly Venn Life Sciences Holdings plc), having completed a reverse acquisition with Open Orphan DAC in June 2019 and the acquisition of hVIVO Ltd (formerly hVIVO plc) in January 2020. I have previously served as Chief Executive Officer of the Group from May 2019 until January 2020.
While the attached Financial Statements report on the results of the Group in 2019 prior to the acquisition of hVIVO Ltd (and in particular reflecting reverse merger accounting treatment of the merger of Venn Life Sciences Holdings plc and Open Orphan DAC), this statement addresses the performance of both Open Orphan plc and hVIVO Ltd in 2019 and the outlook for the combined entity in 2020.
Governance
The Board continues to recognise the importance of the high standards of corporate governance and considers that the Group’s success is enhanced by the imposition of a strong corporate governance framework. Accordingly, in recognition of the need to maintain continued best practice the Board will monitor its composition and skills balance.
I very much welcome the significant experience of Trevor Philips, Mark Warne and Michael Meade who have joined the Board as part of the recent merger and am grateful to Christian Milla, Michael Ryan, Maurice Treacy, David Kelly for their service in 2019. In addition, we have appointed Leo Toole as Chief Financial Officer and Board member.
Strategy
Our enlarged offering of early clinical development services, clinical trial delivery expertise and virology related challenge studies, with a particular focus on rare and emerging diseases, is a strong platform to deliver substantial and sustainable returns to shareholders. Our 24-bed quarantine facilities in the UK are best in class for vaccine and virus-related development and put us at the forefront of emerging virus risk management stemming from the Covid-19 pandemic event which is ongoing at the time of writing, in particular with a focus on developing the world’s first Covid-19 challenge model. The Group is also focussed on expanding service revenues by actively selling laboratory services to third party pharma companies and by developing antibody testing services to accurately identify an individual’s antibody status, having previously used its virology laboratory principally to service its internal clinical activities. In addition, the Group continues to develop a ground-breaking Genomic Health Data platform which can now also be populated with hVIVO’s global leading collection of infectious disease progression data.
The last year has seen significant change first through the reverse merger of Open Orphan DAC and Venn Life Sciences Holdings plc (subsequently renamed Open Orphan plc) in June 2019 and secondly through the merger of Open Orphan plc and hVIVO plc in January 2020.
· The existing Open Orphan business has focused to complete and replenish some long-standing full-service clinical research projects and to build longer term relationships through multi-year contracts in our early development business. Combined with the continued deferral of certain full-service projects, this has resulted in reduced revenues in the period. Despite this, the Group has started the work to plan and implement a major restructuring of our operations to drive efficiency and competitiveness while investing in the Genomic Health Data platform.
· In 2019, hVIVO continued making great strides to transition its business from a focus on viral asset development to a focus on testing the efficacy of vaccines, antivirals and respiratory disease agents through the provision of its own proprietary inhouse developed and grown versions of disease specific viruses, known as challenge studies. It has developed and is exploiting a strong pipeline of major pharmaceutical players with a focus on vaccine and anti-viral drug development. In addition, hVIVO holds a 49% share of a Joint Venture called Imutex Limited to develop vaccines against influenza (FLU v) and universal mosquito borne diseases (AGS v).
Results
Reported results for Open Orphan plc are summarized on page 3 and are covered by the schedules and notes from pages 18 to 54 of these Financial Statements (and in particular reflect reverse merger accounting treatment under IFRS 3 and IFRS 10 of the combination of Venn Life Sciences Holdings plc and Open Orphan DAC as of 28 June 2019). Results for hVIVO plc (on a stand-alone basis) are presented for reference. In addition, pro-forma results for Open Orphan plc (formerly Venn Life Sciences Holdings plc on a stand-alone basis and excluding any impact of the 28 June 2019 combination), Open Orphan DAC (on a stand-alone basis and excluding any impact of the 28 June 2019 combination) and Open Orphan plc (on a combined basis including the impact of the June 2019 and January 2020 combinations) are outlined for reference.
| Open Orphan plc(As reported) | hVIVO plc(As reported) | Open Orphan plc(formerly Venn Life Sciences Holdings plc -proforma resultson a stand-alone basis and excluding any impact of the 28 June 2019 combination) | Open Orphan DAC(proforma resultson a stand-alone basisand excluding any impact of the28 June 2019combination) | Open Orphan plc(proforma results on a combined basis and including the impact of the 28 June 2019 and 17 January 2020 combinations) | ||||||
| 2019€’000 | 2018€’000 | 2019£’000 | 2018£’000 | 2019€‘000 | 2018€‘000 | 2019€‘000 | 2018€‘000 | 2019€‘000 | 2018€‘000 | |
| Revenue (incl. Other income) | 4,039 | – | 15,092 | 13,626 | 9,854 | 14,291 | – | – | 27,061 | 29,712 |
| Operating (Loss) | (5,837) | (1,611) | (5,893) | (13,427) | (6,469) | (2,367) | (763) | (1,611) | (14,249) | (19,174) |
| EBITDA before exceptional items | (4,311) | (1,611) | (3,785) | (8,862) | (5,053) | (1,432) | (763) | (1,611) | (10,130) | (13,072) |
| Loss for the period | (6,543) | (1,656) | (6,973) | (16,833) | (6,442) | (4,775) | (1,025) | (1,656) | (16,524) | (25,481) |
| 2019€’000 | 2018€’000 | 2019£’000 | 2018£’000 | |||||||
| Non-current assets | 5,144 | 1 | 10,759 | 9,638 | ||||||
| Current assets (excl. cash) | 4,264 | 36 | 4,385 | 5,227 | ||||||
| Cash | 1,219 | 165 | 2,276 | 13,368 | ||||||
| Total Assets | 10,627 | 202 | 17,420 | 28,233 | ||||||
| Equity attributable to owners | 3,350 | (1,656) | 10,685 | 17,333 | ||||||
| Non-current liabilities | 1,205 | – | 2,233 | 20 | ||||||
| Current liabilities | 6,072 | 1,858 | 4,502 | 10,880 | ||||||
| Total equity and liabilities | 10,627 | 202 | 17,420 | 28,233 |
Outlook
The recent merger with hVIVO reflects our goal to leverage a broader service offering to an enlarged and combined customer base, while driving restructuring and integration of core support functions into our headquarters in London. The recent placings of £5.3m (before expenses) in January 2020 and £12.6m (before expenses) in May 2020 allows us to complete this transition in the first half of 2020 and we are confident that we will see the positive impact of these changes in the second half of 2020. In addition, we will invest to develop a world-first challenge study model to address Covid-19 while expanding our laboratory service offerings to develop antibody testing services to accurately identify an individual’s antibody status.
Traditionally, the testing of vaccines and antivirals had been somewhat of a Cinderella industry, however, following the advent of the Covid-19 pandemic it is clear that for the months and years ahead the development of new and novel vaccines and also the testing of such vaccines and antivirals will be one of the fastest growing areas of the pharmaceutical industry. In recent decades, governments and pharma companies around the world completely under-invested in new vaccines and the onset of Covid-19 caught them significantly off-guard and as such there is a huge capital investment program underway around the world to roll out an extensive range of Covid-19 and importantly non Covid-19 vaccines to ensure that the world is not caught unprepared in future pandemics.
We have substantially reduced overheads and right-sized the management team including combining the CEO and other senior roles in both Venn and hVIVO. We have also brought forward some long-serving and excellent line managers and heads of departments, flattening the organisation structure and giving them more autonomy and responsibility to successfully run their own areas and this is proving very effective both for the company but also most importantly for the individual managers as well. In turn, this has completely transformed the culture of the enlarged business to one of vastly more open communication, sharing of knowledge and a much faster decision-making process.
I am very excited for the year ahead and I am confident that we have created a soon to be profitable, fast-growing business which is creating value for all our stakeholders.
Cathal Friel – Executive Chairman
23 June 2020
