hVIVO (HVO) , a contract research organisation specialising in human challenge trials, announced a £16.8m contract with an existing top five pharmaceutical client to test its respiratory syncytial virus (RSV) antiviral drug candidate using the hVIVO RSV human challenge study model.
The contract includes the expedited manufacturing of the RSV challenge agent, a confirmatory challenge cohort and a multiple cohort challenge trial. The purpose of the trial is the evaluate the efficacy of the antiviral candidate against RSV infection in healthy adults and identify the most effective dosing ahead of later stage clinical trials.
hVIVO said revenue from the contract will be recognised across 2023, 2024, and 2025, with the majority being recognised in 2024. hVIVO will commence GMP-compliant virus manufacturing activities immediately, which is expected to complete in H1 2024. Upon completion of manufacturing, the company expects to confirm infectivity of the new RSV challenge virus batch in a small number of healthy volunteers recruited via its FluCamp platform.
Subject to the successful completion of the above, and the receipt of relevant regulatory approvals, hVIVO expects to start the RSV human challenge trial in H2 2024. This will be a randomised, double-blinded, placebo-controlled Phase 2a study.
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hVIVO has announced another major contract for its RSV challenge agent, which has become a go-to model for its clients developing RSV vaccines. The contract is another end-to-end full service offering that hVIVO has already provided to several clients. Markets reacted positively to the announcement, sending HVO shares 9.4% higher in early trade.
Demand remains high for hVIVO's growing portfolio of human challenge studies, which offer significant benefits to biopharma companies - namely fast and cost-effective data that enables fast-tracking larger Phase 2 trials. The challenge study announced today will take place at hVIVO's new state-of-the-art quarantine facility in Canary Wharf, which is on track to be operational in H1 2024.
Separately, hVIVO reported revenues slightly ahead of previous market expectations. Continually improving operational efficiencies, coupled with facilities funding that will benefit both FY23 and FY24, has resulted in EBITDA margins exceeding 20% for FY23. Consequently, hVIVO now expects EBITDA to be ahead of previous market expectations. With the addition of today's £16.8m contract, hVIVO has clear visibility into FY24.
hVIVO is now juggling several large contracts with an orderbook 11% larger this year and significantly diversified across multiple clients, challenge agents, and geographies. The move to the new expanded facility in H1 2024 will see a further increase in revenue potential with more quarantine beds and the ability to conduct multiple studies simultaneously and faster.
hVIVO continues to be highly cash generative as evidenced by its doubled cash balance in 1H23, even after the payment of a £3m special dividend in June 2023. Underlying free cashflow (before the payment of the special dividend) was £6m in 1H23, reflecting strong EBITDA growth and upfront customer payments.
Investors continue to buy HVO, driving shares 84% higher year-to-date.
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