Open Orphan (ORPH ) Has released its half year report for the six months ended 30 June 2020, which included the first six months of hVIVO group (“hVIVO”) following its acquisition by Open Orphan Plc on the 17 January 2020. 

From an operation perspective, it has clearly been a very productive and successful period for the Group culminating in the successful integration of hVIVO and closing several significant contracts during the period.  

From a financial perspective, investors can now see the initial cost synergies successfully delivered by the integration of hVIVO with over £10m of cost savings now expected to be achieved by the end of 2020 on an annualised basis.  

However, the key highlight for investors is the positive outlook with profitability and strong cashflow expected in 2H20. 

Operating Highlights 

The Group announced the acquisition of hVIVO had become unconditional for £13m in record time during January and successfully completed the integration to create a World leading Group for human challenge studies during the period. 

Across other parts of the Group, the Dutch early clinical development services also achieved growth during the period with the French operations being refocussed towards biometry services. 

Financial Highlights 

Whilst comparatives to previous periods is difficult due to the acquisition of hVIVO, the Group delivered revenue of £7.1m (1H19: £11.6m) for the six month period on a cost base of £7.08m and Adjusted EBITDA was therefore a loss of £4.7m (1H19: loss of £4.7m) on a pro-former basis. 

Contracts signed during the period include: 

  • Several RSV human challenge studies with both European and US customers worth an aggregate value in excess of £14m  
  • A large contract with a global leader in vaccine development 
  • Launched COVID-19 antibody testing partnership with Quotient Ltd. 

Clearly from the pro-former results, management have already taken approximately £5m off the cost base for the period with annualised cost efficiencies now expected at approximately £10.1m by the end of 2020. 

Cash and cash equivalents as at 30 June was £14.7m following two successful placings on 31 January 2020 raising GBP £5.3 million at 6.1p per share (before expenses) and another on 22 May 2020 raising GBP £12.6 million at 11p per share (before expenses). 

Cathal Friel, Executive Chairman of Open Orphan, said: “Since we acquired hVIVO in January 2020, we have achieved what we set out to do. We have created a leaner more efficient businesses, removed excess costs and we are now a truly unique clinical research organisation (CRO) that is the world leader in the testing of vaccines and antivirals through the use of human challenge clinical trials. We have secured larger, more profitable contracts with both large pharma and the leading vaccine developers globally. We have delivered upon our aim of improving revenue streams through the delivery of several new revenue lines including the provision of laboratory services to third parties. We have reinvigorated both the Venn Life Sciences business and the hVIVO business during the first half of 2020 and have created a strong foundation for future growth.” 

Post Period End 

Post 30 June, the Group acquired the CHIMagents team in July, reinforcing hVIVO’s position as the world leading services company in the testing of vaccines and antivirals through human challenge study clinical trials. 

Furthermore the Company has signed several further contracts with large multinational pharmaceutical companies for further RSV human challenge studies, first-in-human Phase I COVID-19 vaccine study, the first-in-human clinical pharmacology trial signed with Carna BioSciences and signed a  data management contract with a major European pharmaceutical company for statistics and medical writing to support a 750 subject oncology study. 

Whilst no announcements have been made progressing plans to monetise two of the non-core assets, the 49% stake in Imutex and the 62.6% stake in PrEP, we understand discussions with various interested parties are ongoing. 

Shares in ORPH have climbed strongly over the past three months from 11.5p to close yesterday at 18.38p, 

Outlook 

The Group reported an exceptionally strong outlook reflecting a long pipeline of contracted work and new projects at an ‘advanced stage of negotiation’ and is targeting profitability and positive operating cash flow for 2H20. 

Furthermore, as of September 2020, the Group announced it is close to having the hVIVO quarantine clinic block booked with conventional challenge studies until December 2021 and if current trends continue, to have the clinic fully booked out for the next 18 months to two years with conventional challenge study contracts. 

In addition to conventional RSV studies, the Group is also exceptionally well positioned to deliver the world’s first Coronavirus human challenge study model to test a range of COVID-19 possible vaccines and has confirmed it is in ‘advanced discussions and negotiations’ with a range of potential customers, including the UK Government. 

“Looking ahead, I am extremely excited by the potential for this business, we have entered a decade of significant spending on vaccines and antivirals by both governments and pharma companies around the world. The Open Orphan Group including hVIVO and Venn Life Sciences is ideally positioned to capitalise on this increase in vaccine development expenditure. Earlier this year we set ourselves the target of being profitable in the second half of 2020 and I am delighted to confirm that, despite profitability taking a few months longer than expected, we are on target to be operationally profitable in Q4 2020.” Cathal Added.