hVIVO plc (HVO) Earnings Call Transcript & Summary

Vox Markets Podcast with Justin Waite. Nothing in this podcast is intended as investment advice, and the people in this podcast may hold positions in the stocks they talk about. Do not buy anything based solely on a tip or recommendation. Please do your own research. And joining me on the podcast right now is Cathal Friel, Executive Chairman of Open Orphan, ORPH. A good day, Cathal, Thanks for joining me.

Justin, it's a pleasure. Thank you very much for having me on.

You know what, you've been very, very busy and your interim results over the first 6 months. And I know it's almost you could look at it, you've been even more busy in the second half. And so it's pretty back-weighted, but it'll be nice to see what you've achieved in the first 6 months. But before we do that, Cathal, as always, there's -- you've got a lot going on there, for people not quite familiar with the company, just give them a brief summary, what you're about, Open Orphan, please.

Yes. Look, Justin, basically a very short snapshot. We're turnaround specialists. We acquired 2 small struggling AIM-listed companies. We put them together. We took out the overheads and we've broaden them and now they're really profitable. We're the world leader in the testing of vaccines and antivirals, using human challenge study clinical trials. And both were loss-making and what we're about now is ensuring by Q4, we'll be profitable. So that kind of sums up where we're going.

Yes, absolutely. Okay. So interim results for 6 months ended at 30th of June, of course, it's historical, but you're very busy anyway. You're getting busy as the year goes on. So like I say, it's a game of 2 halves, and it's getting better in the second half of the game. But let's go through, first of all, operational highlights for the first 6 months of the year, if you could, Cathal.

Yes. Look, as you said, it's a game or a year of 2 halves. The first half, bear in mind, we only really got control of this company, formally at the end of January, but really, we only got operational control about March. But the great part is, look, we've tailored costs, we've turned it around, we've integrated and really the operational highlight with GBP 14.5 million at end of June. And we're guiding the market by the end of this year, end of December, we'll have very substantially higher cash. That's -- customers are paying cash upfront, deposits, and we're generating cash. So that's the way to go. The highlights, there's not massive revenue in the first half of the year. But you've seen we've been announcing a GBP 4 million deal every month in recent months. There are deals for execution immediately. So yes, so look, really, really happy. Yes, being operationally profitable, took maybe next a month or 2, but we're clearly guiding the market. Q4, we're on target, and we're going to deliver profitability.

Yes. Well, it's -- got your RSs and read them, it's contract -- the contract. And you look at the first half, I thought there'll be more revenue than that. But when you realize it stops in June and you've been continuing to do the contracts and be getting bigger as we've gone on. So take a sort of look at both periods, for example, we're now at the end of Q3, brings up the speed with some of the contracts you've signed since the end of H1, if you could, because that's where we are, I suppose.

Yes. Look, do bear in mind, when we took over the end of January, the company had no contracts, had no business, people -- we were we lucky, the pandemic helped us. But also staff really rolled together, and I think that would be good at disclosing contracts. Some of the contracts definitely we got lucky with, but some of them, I don't -- not sure if the former management team would have closed them. Unlike business, if you close a couple of contracts, they bring in more. So look, the second half, really, we're really looking at an exciting lots of deals closing, lots of revenue. And the big part, we're telling people, in the second half, the business had never -- this is at hVIVO, we've never been more than 25% occupancy. We're now making it very clear going into next year -- within the next month, we'll have it booked out for 12 and we're targeting 18 months in advance. So very shortly, our quarantine clinic in East London will be full until Christmas next year. And the real trick is have it booked out 2 years in advance, then we can start really making things efficient. Does that make sense?

Yes. Well, I'm looking to -- even 2 recent contracts you've announced are more than H1's entire revenue. So that's the magnitude of things. And it's going better, like you say. And I mean how -- as far as the outlook for the rest of the year, how much can you take on? I mean everyone likes to think there's unlimited upside. But where's the limit there? I mean are you -- can you expand? I know you've got a 24-bed clinic there. Can you expand that? Or where can you go? What's the upside here?

Look, absolutely. Look, the market is waiting and wondering. We are banging out to GBP 4 million contracts and won there every month. However, the big one is we announced in start of March, we were going to be the world's first person doing COVID-19 challenge studies. That's on track. We'd be remiss not to say something, a bit of a leak in the press last week. We can't really comment on that other than we did say in our own press statement that we're in advanced negotiation with a range of parties, and we hope to announce them sometime soon regarding our launch partner. If we sign that contract, it will be in an alternative facility because we won't be doing COVID-19 in East London facility. Our East London, Whitechapel is booked out pretty solid at the moment. So we will -- and we're well down the road to using a temporary alternative facility. So yes, there's lots of ways to expand what we have, but there's not that many choices for our competitors, but we do know how to expand it. So we're very excited building it out, expanding it. And then don't forget the Venn business is now flying along rather nicely. So like as we said a year of 2 halves. We have lots more to do. We've got Imutex assets to -- noncore asset to monetize this year. And yes, I think just everything we hope to do, we've done. And hopefully, we'll do a little bit more than people expect to -- [ into ] Christmas.

Yes. On a personal level, I think quite modestly, but you must have exceeded -- I mean when you first started off, you've got a plan in your head and you knew what you wanted to do, but you must be sort of be pleased with how it's performing to plan.

Yes. I think Justin, when you and I started talking about just over 14 months ago when it was Venn Life Sciences, our share price was about 2p. Look, the only difference: a, we got lucky and to say it's good to be lucky, in general; but b, look, execution, execution and execution, getting things done. Let's say, earlier this year, we acquired hVIVO. It had absolutely no revenue, no contracts, now some did fall in place, but I think it's freeing up the proper hard-working people in the company and just moving fast. So look, really happy. We've moved very fast. We've a lot done, as I say it, a lot more to do. I think we need a trickier name and business generally, as don't [ fire around ], just do things. Some of them will be wrong but as long as there are more things right. And yes, no, I think we generally have been quite lucky. And I kind of emphasize much, along with certain teams within them and along with certain teams within hVIVO, line managers, hardworking staff going back some of them 15 years, have been unbelievably available. As we took out that layer of bureaucracy that was weighing them down, they've really shone. So no, really excited. I think that will be -- hold tight and let's see where we all get in the next 6 months.

Yes. I do know -- I know as I -- so you are quite modest there because there's more than luck because, obviously, as you came on, when you first came on the podcast when you started raising money, I realize you raised twice the value of the company at twice the share price and brought 2 institutions on board, I thought, what? That's pretty much unheard of. And so it's more than luck, isn't it? You are driving this.

Well, look, let's be honest. We have a very non-COVID business, every deal we announced are won in the last 9 months have been non-COVID related. So we have a really good primary business, but the COVID did help it, but then we have a COVID business. So a combination of both. If and when COVID eventually goes, we will still have a very sticky, profitable challenge study business. But not -- look, January, we've had, as I say, this pandemic has been bloody awful. But some people have done that -- or it's done us no harm, put it that way. And I think, look, we're very excited with what we've done. And as I already said, a lot more to do in the 6 months ahead.

Yes, yes. Marvelous step. Okay. Well, I've got to say your follower count has done very well on Vox since you started this journey, Cathal. And so a chance to add to that right now, if someone is listening, likes the sound of the progress you're making, they're not following the story. Give me 3 reasons why they should hit that follow button and add Open Orphan to their watch list, please.

Well, first, Justin, I think, look, we're heavily invested as a management team. We're equally aligned with all our shareholders, but really importantly, like I said, we will be raising no more money. We've cleared over GBP 14 million. At the year-end, we would like to have more money in the bank than our market cap 12 months ago. So that's a good target. That's because we're generating cash from customer deposits and the losses have gone away. The next reason is we think we can build a really nice exciting business. And we're telling people, there's not a 5x or 3x, but we want to try and raise our share price 50% every 6 months and 100% over 12 months. That's a really nice target. So we don't surprise the market on the upside. We don't surprise it on the down side. A steady growth stock is what we're aiming for.

Yes. Marvelous step. Cathal, good to chat you, and hopefully, we catch up in a not-too-distant future. Thanks very much.

Justin, my pleasure. Thank you very much.

The Vox Markets Podcast with Justin Waite. Nothing in this podcast is intended as investment advice, and the people in this podcast may hold positions in the stocks they talk about. Do not buy anything based solely on a tip or recommendation. Please do your own research.