Open Orphan plc (LON:ORPH), (to be renamed hVIVO plc (LON:HVO) effective 26 October 2022), a rapidly growing specialist contract research organisation (CRO) and the world leader in testing infectious and respiratory disease vaccines and antivirals using human challenge clinical trials, has announced its unaudited interim results for the six months ended 30 June 2022.
Financial highlights
· Revenue of £18.9m (H1 2021: £23.2m), with a strong order book for delivery in H2 2022
o Management reiterates full year revenue guidance of c. £50m, underpinned by robust trading in July and August and record contracted order book increased nearly threefold to c. £70m as at 30 June 2022 (H1 2021: £25m)
· EBITDA growth of c.10% to £2.3m (H1 2021: £2.1m) with significantly increased EBITDA margins of 12.1% (H1 2021: 8.9%)
· Cash generative with cash equivalents of £15.9m (H1 2021: £14.9m) as at 30 June 2022
Operational highlights
· Agreement with Vaxart Inc. to develop an Omicron COVID-19 human challenge model with the intent to conduct a subsequent Omicron human challenge study in 2023
· Commenced first full-service influenza challenge model programme for a top five global pharmaceutical client (£14.7m contract)
· Other significant contract wins include £7.3m influenza challenge trial signed with a European biotech, £7.2m respiratory syncytial virus (“RSV”) human challenge study with top five global pharma company and £5m RSV challenge trial signed with a European Biotech
· Modest investment in hVIVO’s facilities enabled the Group to significantly expand screening capacity:
o Doubled volunteer screening capacity to 1,000 per week
o Opened a new primary FluCamp volunteer recruitment facility in Whitechapel, increasing bed capacity by 44% from 43 beds to 62 beds
o Opened a new Manchester volunteer recruitment and screening centre
o hVIVO’s primary lab at QMB expanded and new satellite lab facilities were added in the new screening sites in Whitechapel (East London) and Manchester
· Broadened the scope of the business to offer Phase II / III field based studies
o First contract awarded by existing Big Pharma client to act as a vaccination site for a Phase II field study
· Launched a new Malaria human challenge model to offer anti-parasite challenge models
· Yamin ‘Mo’ Khan appointed Chief Executive Officer in February 2022, strengthening Executive Management Team and bringing significant CRO experience
· Martin Gouldstone appointed Independent Non-Executive Director, adding strong corporate development experience in the CRO, healthcare and pharmaceutical sectors
Post-period end highlights
· £10.4m contract for a new full-service challenge model development programme with an existing top 5 global pharmaceutical client
· £6.2m Influenza human challenge study contract with US biotechnology company Cocrystal Pharma Inc.
· hVIVO’s laboratory received College of American Pathologists (“CAP”) accreditation increasing its marketability to provide third party laboratory services
· Revenue for July and August of c.£9m with cash balance of c. £20m as at 1 September 2022
· As announced this morning, the Group intends to change its name to hVIVO plc, which it expects to take effect on the AIM market of the London Stock Exchange and the Euronext Growth Exchange on 26 October 2022
Current trading and outlook
As at 1 September 2022, Open Orphan’s order book of signed contracts has increased further to c. £80m, which is expected to be recognised across 2022, 2023 and 2024, and remains well capitalised with a cash balance of c.£20m.
Over the period, Open Orphan has further grown its pipeline of new opportunities, with a number of advanced negotiations ongoing with new and existing clients across the Group’s world leading portfolio of human challenge models. This growth is being driven by the Group’s competitive position as market leader coupled with the increasing demand for human challenge services in the rapidly expanding infectious and respiratory disease clinical trials market.
Management is committed to the long-term growth of the Group and is focused on strengthening its position as a partner of choice to the global biopharma industry, to which it counts four of the top 10 global biopharma companies as regular repeat clients. To further drive future growth, the Group has expanded and diversified its offering, and is currently adding new challenge models to its portfolio such as Omicron and a new influenza strain. In addition, hVIVO has expanded its screening facilities, adding new lab and clinical services. Furthermore, Venn has expanded its service offering into new areas including Advanced Therapy Medicinal Products services (ATMP) as it continues to deliver its services to a wider range of clients.
These developments, in addition to an exceptionally strong start to H2 2022, reaffirm the Board’s confidence of meeting current expectations for FY2022. The Group remains well positioned and well capitalised to deliver sustainable long-term profitability targeting double digit EBITDA profit margins of between 13-15%.
Yamin ‘Mo’ Khan, Chief Executive Officer of Open Orphan, said: “I am pleased to report that the Group has leveraged the strong foundations laid in 2021, continuing its profitable momentum into 2022. Importantly, the Group achieved double digit EBITDA profit margins for the first time, a key goal for the business following the first full year of EBITDA profitability last year. In the second half, we expect revenues to grow considerably and profit margins to increase further as a number of significant contracts signed earlier in the year enter the clinic.
“Going forward, I am highly encouraged by the Group’s market-leading position, expanding addressable markets, and very substantial order book. With an order book of signed contracts worth c. £80m as at 1 September 2022, we have excellent forward visibility into H2 2022 and 2023, which gives us confidence in our ability to sustain our considerable organic growth over the long term. The Board expects to deliver full year revenues in line with guidance, and we look forward to the rest of 2022 and beyond with confidence.”
CEO Statement
Introduction
I am delighted with the progress the Group has made since my appointment as CEO earlier this year. During the period, we have made significant strides, building on the strong foundations laid in 2021, enabling the delivery of long term revenue growth and sustainable profitability.
Sustainable growth in profitability
The Group has continued its momentum following our first full year of profitability in 2021. Increased operational productivity and efficiency has contributed to an improved EBITDA margin of 12.1% (2021: 8.9%) during the first half of 2021. In H2, we expect to see further utilisation and productivity gains, with the Group targeting double digit EBITDA margin of between 13-15% for the full year.
The Group delivered £18.9m of revenue in H1 (2021: £23.2m). We remain very confident of achieving our target of c. £50m revenue for FY 2022, supported by our record contracted order book of c. £80m as at 1 September 2022 and our increased operational capacity.
The Group is very well capitalised with £15.9m cash as at 30 June 2022 (2021: £14.9m) and net cash post period end of c. £20m as at 1 September 2022. As a result, the Group is well positioned to deliver future growth.
Customer delivery
The Group is a trusted partner to the global biopharma industry, with world-class capabilities in challenge agent manufacture, a unique portfolio of human challenge models, and specialist drug development and clinical consultancy services. The Group has an extensive range of Big Pharma and biotech clients, many of which are repeat, multi-year customers.
hVIVO signed five significant contracts in the period, across RSV, influenza, and COVID-19, with the revenues from these contracts set to be recognised across H2 2022 and FY 2023, further contributing to our robust contracted order book, which stands at c. £80m as at 1 September 2022.
Biopharma companies are increasingly seeing the significant benefits of the early human efficacy data that can be generated from human challenge studies. In H1 2022, two of our clients obtained Breakthrough Therapy designation from the US Food and Drug Administration (“FDA”) because of the successful clinical data achieved from hVIVO challenge trials.
In March, we expanded our hVIVO facilities, including doubling our FluCamp volunteer screening capacity and increasing our number of beds. This allowed us to expand the scope of the business to offer additional services including clinical field trial services. The increased volunteer recruitment capacity enables the Group to recruit larger cohorts more quickly, cementing our position as a leader in volunteer recruitment. We now also have the potential to utilise volunteers who are not suitable for challenge trials into non-challenge trials.
Our primary hVIVO lab at QMB has been expanded and new satellite lab facilities have been added in our new screening sites in Plumbers Row (East London) and Manchester. In addition, we received College of American Pathologists (“CAP”) accreditation, increasing hLAB’s marketability to provide third party laboratory services including virology, immunology biomarker and molecular testing. This is the first step towards expanding our standalone lab services business, under the hLAB brand and will be an additional revenue driver for the Group.
Outlook
We look forward to building on the excellent progress that we have made during H1, as we deliver on our core business for our clients whilst also leveraging our newly diversified offering.
Increased revenues and profit margins
Increased recruitment capacity and new revenues streams in conjunction with our record order book of future contracted revenue underpin our confidence in achieving our current expectations for FY2022, with continued growth in FY 2023. This is further demonstrated by strong trading performance with revenues of c. £9m across July and August 2022.
The investment in our facilities expansion has further enhanced and diversified our revenue potential. We signed our first contract under our expanded services in May 2022, acting as a vaccination site for a Phase II field study for an existing Big Pharma client’s RSV vaccine candidate. The work associated with our expanded offering can be performed by utilising our existing staff and infrastructure. For future contracts that may involve the sourcing of volunteers, we will also be able to leverage our FluCamp database of volunteers that were previously found to be unsuitable for challenge studies, generating additional high-margin revenue streams for the Group.
Challenge models
We expect our influenza and RSV challenge models to continue to be the key revenue drivers for the core business. However, we are seeing increased interest across the entire spectrum of infectious and respiratory disease, driving our pipeline to record levels.
We signed our largest commercial challenge programme contract with an existing top five global pharmaceutical client earlier this year, worth £14.7m. This includes the manufacture of an influenza subvariant challenge agent, and a subsequent characterisation study and challenge trial. Furthermore, we recently signed a £10.4m contract with another repeat top 5 global pharmaceutical client to manufacture a new influenza challenge virus, leveraging an existing in-house generated challenge model. The Group will subsequently conduct a human challenge trial to test the client’s antiviral product. These full-service contracts are significant growth drivers for the Group.
In June 2022, we announced the development of the world’s first Omicron human challenge model and we remain on track to complete the challenge agent manufacture. Following manufacture, we intend to conduct a characterisation study followed by Omicron human challenge studies in 2023.
We continue to see significant interest in our HRV-asthma model as we look to increase our penetration in the respiratory market. Furthermore, the launch of our malaria model is attracting substantial interest and we are in line to conduct our first anti-parasitic study in the near future.
Venn Life Sciences
Our Venn Life Sciences teams in Paris and Breda continue to deliver exceptional drug development consultancy services enabling its clients to bring their products to the market quickly and efficiently. Venn is a trusted partner to an extensive range of clients, and our highly skilled scientific team have helped nurture several long-term client relationships.
Venn’s offering is highly synergistic with hVIVO, with preclinical work leading to follow-on clinical programmes providing an end-to-end early clinical development service. This was illustrated by the £5m RSV human challenge study contract signed in March 2022 with a European biotech, resulting from pre-clinical work completed by the Venn Breda team.
Order book and pipeline
Our contracted order book has increased to record size, growing threefold to c. £70m at 30 June 2022 (H1 2021: £25m), and growing further to c. £80m as at 1 September 2022. This gives us clear visibility over our revenues until the end of FY 2023 and beyond. I have been delighted with our ability to secure these contracts showcasing the value that our Big Pharma and biotech clients attribute to conducting a challenge trial.
Name Change
The Group has announced its intention to change its name to hVIVO plc, which is expected to take effect on the AIM market of the London Stock Exchange and the Euronext market on 26 October 2022. The Board believes that the name change better reflects the Group’s core human challenge and early clinical services business, where the hVIVO name has strong brand recognition, as well as aligning the Group more closely with its long and established heritage.
Summary
We are committed to the long-term growth of the Group and are focused on strengthening our position as the partner of choice to the global biopharma industry. I am delighted with the progress that we have made in H1 2022. The team has made great strides in winning significant new contracts, realising efficiencies to improve profitability, and expanding our facilities to address the increased demand for our services. Our newly diversified offering and upgraded operational infrastructure, coupled with the surging interest in human challenge trials and the wider growth of the infectious disease clinical trial market, means we are well placed to deliver on and continue to grow our order book and leverage new opportunities. I am excited by what the future holds for the Group and our ability to deliver long term sustainable growth.
Yamin ‘Mo’ Khan
Chief Executive Officer, Open Orphan plc
8 September 2022
