hVIVO plc (HVO.L) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the hVIVO FY '25 Trading Update. [Operator Instructions] Before we begin, we'd like to submit the following poll. And as usual, I'm sure the company will be delighted with your participation. I'd now like to hand over to the management team, Stephen, Mo, good afternoon.

Good afternoon. Thank you for that. So just before we start, thank you very much for taking the time out to listen to this presentation. I'm Yamin Mo Khan. I'm the CEO of hVIVO. I've been here around 4 years. I have here with me, Stephen.

I am Stephen Pinkerton, and I've been with the company for about 8, 9 years, coming up to 9 years now, CFO for the last...

Thank you. So this is the trading update for full year 2025, the unaudited trading update. We will provide the full audited results coming up in April of 2026. One of the things we have changed from previous years is that we will try and focus giving more detailed information in our April and September updates rather than in January. As you can imagine, these are very busy times and it's very difficult to gather all the information in one place for all of you. But this is something we will be going forward in line with most publicly reported companies, I believe. So as we go into this, this is the obligatory disclaimer that we have to go through. And what I'll do is I'll basically have Stephen go through the numbers first, then I'll describe some of the key highlights of the company and how we've reorganized ourselves in the new service lines, talk a little bit about the market and where it stands at the moment, and we'll close by providing you some evidence of why we feel the outlook is for return to future growth. So this will be a fairly short presentation, but we will then give the opportunity to all of you to text in your questions. So in the meantime, I'll hand over to Stephen to provide some color into the numbers.

Good evening, everyone, again. Just to highlight that these key financial numbers are unaudited financial highlights. And obviously, they have to go through due diligence and process. So these represent our expectations as you see the numbers today. Revenue is GBP 46.7 million. This compares to GBP 47 million that we guided in May 2025. So we are in line with guidance, we would say, obviously, somewhat lower than 2024, and that has been touched on and talked about on the macro changes in the U.S. affecting HCT trials. However, we have done well in the EBITDA. We are expecting a positive low single-digit adjusted margin. That's a positive figure, whereas consensus and guidance was a low negative/positive sort of an EBITDA loss. So that's an upside in terms of performance of the business. And this is due to 3 factors. One, we did have a strong November, December, where we were delivering high volume of volunteers on to site studies, a Phase II and a Phase III. I mean that's because of the volume and because of our recruitment database, the margin is somewhat better. Also, CRS signed a number of contracts in November and December that allowed them to recognize some revenue for the work that they have completed. But obviously, the main factor that is driving the positive EBITDA margin at this volume of work is the high level of cancellations that we experienced in 2025. And one has to understand, we have these contractual protections in our contracts on HCT contracts, and those cancellation fees do not attract any variable spend. And so those cancellation fees flow straight through bottom and we have maintained very strong -- managed our costs as tightly as we can in 2025. With this upside on EBITDA, our cash at the end of the year is looking at GBP 14.3 million. This is better than the market was expecting of about GBP 12 million. This GBP 14.3 million stands us in very good stead for -- and provides sufficient cash for our investment and our ongoing growth projections for this business. So we are in a good place. There is no debt on the balance sheet. And yes, it is somewhat lower than the 31st of December 2024. That difference has largely been spent on the acquisitions. So with that, I'll hand you back over to Mo.

Thank you, Stephen. Good update. So I mean, overall, if you compare us to '24, of course, it's been a challenging year for 2025, but we have delivered on the numbers that we reset during 2025. In fact, a couple of the parameters that Stephen described were ahead of expectations. So a good solid result. Of course, we want to return to growth in 2026, and I will describe how we achieved that for the next 12 months. Some of the key highlights though from 2025, of course, a key highlight is the acquisition of Cryostore and the CRS sites at Kiel and Mannheim. So Cryostore is a biobank storage provider for biological and clinical samples based out of Greenwich, and they're doing tremendously well, and we are recognizing revenue and profitability as we had expected during our due diligence process. The second acquisition is the CRS sites, and both of them are now doing well. In fact, CRS was cash positive for quarter 4 of 2025. We expect them to be EBITDA accretive in 2026 as we had previously reported. So for us, the addition of these new acquisitions gives us a much more fuller service. So if you imagine, previously, we had the consulting service or preclinical service platform, and then we had the Phase II, and we focused really mainly on infectious diseases and challenge trials. Now we can provide consulting services, preclinical services. We can do Phase I or first-in-human clinical trials and do Phase II clinical trials as a CRO as well as Phase III at a site. So we offer a much more conclusive end-to-end platform for our customers so we can hold their hand effectively, especially for small to midsized biotechs who don't have large amount of resources to outsource these types of programs or trials. So for us, having this new end-to-end platform offers a great resilience and also diversification in what we're offering. In addition, this acquisition, especially CRS diversifies our therapeutic expertise. So we're no longer just an infectious disease CRO doing human challenge trials. We are also now running trials, especially in respiratory field trials, the non-challenged Phase II, Phase III trials as well as specializing in cardiometabolic trials especially in obesity and diabetes, which, as I'm sure most of you know, are now key areas for clinical development after what Novo Nordisk and Eli Lilly especially achieved with their products. We've also strengthened our Board with the addition of a new Nonexecutive Chairman and also a new Nonexecutive Director, both of whom have got long-term experience, both in executive position and Board positions in public quoted companies. As I mentioned earlier, we did reorganize ourselves across 4 different service lines because we feel that this is the best way to meet our customers' needs. So firstly, we have the consulting services under the BenLife Sciences banner mostly, but also some of the other entities within hVIVO we're providing consulting services. So this is where our consultants, our experts are helping our customers, both biotech and pharma in reviewing their preclinical data and PK data, looking at the CMC formulation of their drugs and also helping them put together dossiers for regulatory bodies and walking them through as to what is required to get into first-in-human clinical trial. And typically, historically, these consultants would recommend third-party Phase I units. And this is something we have now in-house. So it gives us the capability of giving a more full service to our customers. The second line is really a clinical trial. So this is nonhuman challenge trial. So this comes from all the way from first-in-human trials to Phase III clinical trials. So we do first-in-human Phase I trials in Germany. On top of that, we can do drug-drug interaction studies, food effect studies, TQT studies, renal and hepatic impairment trials. All these are very specialist type of clinical trials that are undertaken by Biotechs and Pharma doing the development of the drugs to make sure it's safe and effective before it is given market authorization. And on top of that, of course, we continue to do Phase II and Phase III clinical site services where we act as a clinical site and recruit patients for our clients on behalf of other CROs. So as one of the examples to this is the fact that we recruited around 817 patient volunteers for the Cidara Phase II program in 2025. The human challenge trials. So having said that we are diversifying into other indications and other therapeutic areas, it's important not to forget that we are still the world leader in human challenge trials. But the key here is that we no longer solely rely on human challenge trials. So HCT still pulls a good proportion of our sales pipeline, but they no longer dominate that. So this is our diversification into non-HCT and also different phases and different therapeutic areas. And the final service line is, of course, laboratory. So when we moved from Plumbers Row to Canary Wharf, we tripled the laboratory capacity. I'm really pleased we did that because as a result, we've been able to accommodate, for example, the Cidara clinical trial program, where we are the sole virology lab for all the clinical sites around the world that are taking part in the clinical trials, and we're doing all the virology and immunology assays for the final primary analysis. So all of this means that we are diversified across different service lines. But the key here is if you look at the bottom up is that we now can approach our potential customers at any given stage in the clinical development for us to be able to nurture them through the development plan and also provide them with a service, where historically, for example, we would never been able to provide them with a Phase I service. We can do that. We can take a client from preclinical all the way to end of Phase III. And the different service line can support our customers at different stages in the clinical trial development. And we are already seeing some really good examples of cross-selling between our different companies, especially some of the new companies coming through the acquisition in 2025. So one of the challenges we faced in 2025, of course, was the macroeconomic situation, especially with regards to vaccines. I'm sure all of you had heard the status of the vaccines, which had been depressed to say the least in 2025. In addition to that, the biotech funding was also depressed. But we're now seeing positive signs for both. We've seen more biotech funding, more M&A activity. And we highlight on this chart some of the key therapeutic areas. So the orange bar at the end shows you the deals done in the different therapeutic areas in 2025. And if you compare that to 2024, the increases we've seen, especially in infectious diseases and cardiometabolic and respiratory are significant. And as an example, for us, this $9 billion acquisition of Cidara by Merck is a key milestone for us considering we were a key provider of a majority of the data in that clinical program. So very pleased for Cidara and for Merck that they have this asset, which they can now advance to Phase III and hopefully to market authorization. On top of that, we've seen increased activity across the other therapeutic areas. But for me, a lot of this M&A activity releases more funding for future programs. And for infectious diseases, if you focus on that, there's been some negative press, especially with regards to mRNA vaccines, which have led to, for example, mRNA -- Moderna, sorry, scrapping their late-stage development and Sanofi also making changes. But overall, for ID, I think there's some good news for the fact that, for example, the Cidara deal, the fact that Pfizer has struck a licensing deal with Novavax to use the technology and the hiring of Peter Marks, ex-FDA head for Eli Lilly to help them develop an ID franchise going forward. So I do believe there is a good future in infectious diseases. But as I said, we are no longer a one-trick pony. We can offer a substance in a variety of therapeutic areas as well as different stages of clinical development. This is the final slide to give you a little bit color on how we are going to achieve our growth in 2026. So we're saying that we will achieve high single-digit margin increase in 2026. This is driven by HCT and non-HCT opportunities. We have a couple of preferred partnerships signed up at CRS, where we are getting good level of repeat business. I've always mentioned that we've had an excellent sales pipeline historically, and that has always been the case. But I've also iterated that a lot of the sales pipeline was not moving. There was a lot of decisions being deferred into the future. But I'm pleased to say that not only we are seeing more decisions being made. So hopefully, we'll see more awards and contracts, but also there's a lot more variety in our sales pipeline, not only for HCT and non-HCT, but including laboratory work and field studies that make up our sales pipeline. In addition, full year '25, we made more new proposals submission than we did in 2024. So that, again, is a good indicator for future growth. We've also looked at our service line and identified key areas where we see growth. So we identified 4 key initiatives that we are implementing in 2025 -- in 2026, sorry, to make most of the current market. So one, we are really marketing hard on cardiometabolic diseases. We have Dr. Thomas Forst, a key opinion leader in endocrinology, who is helping us work with small, mid and big pharma to increase the amount of work we're doing in diabetes and obesity, especially. We've also seen good growth in respiratory. On the previous slide, you saw that respiratory has had significant amount of M&A activity in 2025, and that also will result in more clinical trials hopefully taking place in 2026. Lab capacity is much more advanced. We've acquired more space at Canary Wharf. We've acquired some new equipment. So we're doing ddPCR, for example. And this has given us capability, and we will be launching our NGS capability this year. So the outlook for 2026 is that we are very confident that we will see year-on-year growth. Appreciate 2025 was challenging, but we reiterate our guidance for 2026. Thank you for your attention.

Mo, Stephen, thank you very much indeed for updating investors. [Operator Instructions] Mo, Stephen, as you can see, you've had a number of questions from investors. Thank you to everybody for engagement. Perhaps Mo, if I hand back to you in your usual fashion and take us through the Q&A. Thank you.

Thank you for all the questions. We're here for you. So I wanted to make sure that you had the time and the chance to ask your questions. And I'm happy to answer all any questions because it's important for us to give you some confidence that we will achieve growth in 2026. So here we go. We've seen significant trading volume recently despite the share price remaining at near 52-week lows. Management showed confidence by purchasing shares personally in December. Does the Board feel the current market valuation accurately reflects the value of the order book and new opportunities? If not, why? No, we don't feel it reflects the valuation of the company correctly. But this is the current market we're in. I think a lot of other companies on the AIM stock exchanges are also suffering. And also, we've had the added hit with regards to missing our original 2025 guidance and the headwind with regards to the vaccine market, especially. Now we've allayed some of those fears. We've shown good numbers for 2025, a number of them are ahead of expectations. And the fact that we are going to grow in 2026 and maintain a good cash flow, I think we are still strong. So in my opinion, no, the valuation is currently not correct, and we hope to bring the valuation back to where we think it should be in the coming months. The share price just continues to decline. That's true. It is so very well painting an optimistic outlook, but we've heard this for years now. Those invested 5 years go on to happy. Well, to be honest, we've had 3 continuous years of really good growth, at least since I've been here at the company. 2025 was the first year where we've had a blip. And I hope you agree that the main root cause of that was macroeconomic events that we could not really control. As a company, our strategy, our model remains robust and strong and profitable if the business is there. But unfortunately, for multiple reasons that are outside of our control, we've had to overcome these headwinds. But going forward, as I say, we've derisked ourselves. We've acquired a company in a timely manner. We have multinational presence now. So that even derisks even further. So we are now prepared that if one typical -- one indication or one therapeutic area is impacted, we have other therapeutic areas and other countries to continue to ensure we meet our guidance numbers for 2026. The past 12 months have been a disaster for the company and the share price and investors are rightly furious. Why have we found it so difficult to generate any meaningful contracts? I totally understand your angle. The share price has gone the wrong way. I totally understand that. But the contracts have been difficult to sign, as I mentioned, for the reasons I've hopefully highlighted already. But we now feel that the momentum is changing. We have seen movement in our sales pipeline, more opportunities being advanced. I think -- and that is the start of the good story. We need to have a good sales pipeline. We need to convert that sales pipeline into awards and contracts and then do the work to recognize the revenue at a good EBITDA margin. And that's our goal as we move forward. Where are we with the ILiAD LOI? So the LOI was already signed as previously announced. We are now waiting for ILiAD to finalize their funding round. Following that, we will hopefully sign the full contract and move on. So that continues to be an opportunity in our sales pipeline at the moment. Why are you advertising to hire more permanent nursing staff? So it depends on the timing. So we are still very busy in the clinic. So we are running multiple clinical trials at the moment. So they require resources at different levels and different roles. So on an ongoing basis, of course, we will be recruiting good staff that can help us deliver the contracts that we have signed to date. It's been longer than I can remember since you guys won a HCT contract over 1 year, I think. This has devastated the share price. What can we expect to see us winning contracts again? So when can we expect to see us winning contracts again return to the good old days and get the share price back to what it was. So I hope that this year, we expect to sign more HCTs sooner rather than later. That is the plan. I'm confident that the fact that we are reiterating our guidance in 2026, which is a high single-digit growth year-on-year should give you some level of confidence that we expect to see growth in HCT. But in addition, let's not forget the non-HCT capabilities that we now have across a variety of therapeutic areas and a variety of clinical stages. Scrolling down here. Would it be correct to say that hVIVO hasn't yet recovered from a loss of revenue due to contract cancellation in 2025 and the base annual revenue has been reset at a lower level going forward, i.e., we are not going back to 2024 revenue level anytime soon. Stephen, do you want to get that?

Sure. So we have reiterated our guidance for 2026, and it is a single -- high single-digit growth. Much of that growth is coming through from our acquisitions. And as HCT returns back into the market and the pipeline is looking good, we feel there will be some upside on that on the -- delivering our revenues for 2026. Yes.

Thank you very much. Why are you not getting credit for the breadth and depth of services you can now offer? Your valuation really seem to fail to reflect this. I do agree with that comment. I'm sure you can imagine. It is a little bit of a conundrum that we've built at CRO right now with the foundation it has to deliver much more than it could have done even 12 months ago. So across many clinical stages, having the Phase I capability, renal and hepatic impairment, the cardiometabolic respiratory franchises. So -- but we, I think, need to show that we can deliver on those. So I have a feeling that we are being punished because of the profit warning last year, but also the market sentiment, I think, still needs to change. But our cause has to be, as an executive team to sign more contracts and do that work. And then hopefully, the share price will take care of itself. So when you say you are a debt-free business, if I remember correctly, didn't we buy the German business through debt? Does this mean you have paid off the debt for the purchase of the German business? Stephen?

So we are a debt-free business. There's no debt on our balance sheet. We did not use debt to acquire the German business. We used our own cash. It's the main reason why the cash -- well, a big reason why the cash dropped from EUR 44 million at the beginning of 2024 -- at the beginning of 2025 and stands at EUR 14.3 million this year -- at the end of December this year.