hVIVO’s (HVO) shares jumped 15% this week on the back of a glowing write up from the Investors’ Chronicle's closely-watched small cap stock picker Simon Thompson.
The latest buy recommendation from Mr Thompson came on the back of the clinical research organisation’s (CRO) breakthrough in Asia Pacific, which hVIVO has identified as a key growth region. Last week, the company landed a £5.2m contract with a major client in the region, its eleventh award since the start of 2022 taking its order backlog well beyond the £80m reported in early September last year.
As Mr Thompson points out, hVIVO is currently the only CRO focused on challenge studies for infectious and respiratory diseases with an expanding portfolio of more than 10 human challenge studies that helps its clients develop more effective treatments, more quickly. It works with four of the world’s 10 largest biopharma groups.
“A chart break-out above the November high (14.5p) looks a real possibility, and would be a bullish signal worth following, opening the door to a run up to my conservative looking target price of 19p, well below those of Liberum Capital (21.6p) and FinnCap (44p)”, Mr Thompson concludes. He points out that the shares trade on a forecast cash-adjusted PE ratio of just 16x for 2023 and 14x for 202, “hardly exacting for a business that is expected to deliver 60 per cent cumulative EPS growth over the 2022-24 forecast period”.
Growing recognition
Simon Thompson isn’t alone in his admiration for hVIVO. The Daily Mail’s Midas column included the company in its tips for 2023, noting that Pfizer had used the company’s human challenge trials as part of its research into RSV, a leading cause of death among infants. Pfizer is hoping to launch a vaccine this year.
In addition, broker FinnCap has selected hVIVO as one of its top picks for 2023. “hVIVO is the undisputed leader in human challenge studies”, it said in a recent research note. “Increasingly, pharma clients are recognising the benefits of challenge studies, which are conducted in a controlled environment with known inoculation dates, unlike traditional Phase II field trials. This generates much richer data sets to the principal as well as the regulator, which will determine more quickly and cost-effectively the trial design for the larger pivotal Phase IIb/III clinical trials. There are over 2,500 active vaccine, anti-viral and respiratory compounds currently in development. This is likely to grow, given the rising interest in infectious diseases”.
The broker expects sales to hit £54m in 2023, noting that 95% of the year’s sales are already contracted. It has a price target of 35p.