hVIVO plc (HVO) Earnings Call Transcript & Summary

Good evening, and welcome to the Open Orphan Plc Final Results Investor Presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Mo Khan, CEO. Good afternoon.

Thank you for that, and good afternoon, everyone, dear investors. I'm very pleased to present our full year '21 financial results. This is my first presentation on our annual results, so I'm even more pleased than normal to be talking to you. We'll go through the slides, present you the key highlights for '21. We'll also provide a very thorough financial overview and then we will finish by going through the Q&A. We have already a large number of Q&A already submitted previous to the call, and I'm sure we'll get more questions as we go through this call. But without further ado, we'll go through some of the slides. The normal disclaimer. I'm Yamin Khan, also known as Mo, I'm the CEO of the company. I joined as a non-exec for Open Orphan in October of last year, took on the CEO role on the 24th of February. I have a long history in working in CRO and biotechs, helping growing CRO businesses and also getting them acquired to private equity firms. I'll ask Leo to quickly introduce himself now.

Good evening, everyone. I'm very happy to be here tonight. My name is Leo Toole, CFO. I've been with the company since September 2019. I have over 15 years of experience in life sciences across med tech, pharma and, most recently, in the clinical research space. And before that, I spent some time in FMCG across Europe. Mo?

Thank you, Leo. So straight on to the numbers as we move forward. So our 2021 numbers, I believe, were excellent. I'm not saying that that's our goal going forward. But if you look at the change from 2020 to '21, I think you'll agree it's a tremendous increase. So we have recognized a GBP 39 million worth of revenue, that's a 76% increase year-on-year, which is indeed good news. We have GBP 2.9 million of EBITDA. That's a GBP 9 million turnaround in EBITDA. Now these are very good numbers compared to year on to year. But of course, I consider these to be baseline numbers, something to build on, and we expect to improve on both of these numbers by the end of 2022 and beyond. We had GBP 15.7 million in cash at the end of the last year. So all of these results really are in line with the guidance we provided in the quarter 3 of last year. We are the leaders in challenge trials without doubt. We have more than 60 studies to date in execution. We have over 9 active challenge models across the respiratory anti-infective and also parasitic models. And we have to date inoculated over 3,000 healthy volunteers. All of these numbers are record-breaking and world-leading with regards to performing challenges across the industry. On the operational excellence, on the delivery side, as you know, recruitment of healthy volunteers is one of the key challenges. We have FluCamp, a very influential platform to recruit healthy volunteers. We screened over 84,000 healthy volunteers last year through this platform. Typically, the challenge studies are valued between GBP 5 million to GBP 10 million. We've seen an increase in the number of subjects required to complete a challenge study because the sponsors, our clients, are beginning to see the benefits of the data from the challenge studies and they are now actually conducting more and more complex studies and increasing the sample size, in other words, recruiting more subjects per study. And the other great advantage of the challenge trial compared to a typical field-based or Phase II trial is that they can be completed within a 10-month period. So the sponsor is able to get really good efficacy signals for their products within a year and we are able to recognize revenue within the same time frame. As we move forward, I believe we are well positioned for growth. We have increased our bed capacity. So we currently have a total of 62 beds, and this includes beds to conduct Phase I trials, and we plan to conduct non-First in Human Phase I trials as we move forward this year into next. We have increased our capacity in March by moving to our new screening facility, and we're now capable of screening up to 1,000 healthy volunteers per week. Our current backlog as of the 1st of June is GBP 64 million, which is a record for the company. We have 100% commitment from our clients for the revenue we have projected for the end of this year of GBP 50 million, but we have also already got a significant portion of revenue signed up for 2023. For those of you who may be new to Open Orphan, Open Orphan consists of 2 subsidiaries. First one is hVIVO, which was acquired in 2020. hVIVO really focused on conducting a human challenge trial, and I'll go through what a human challenge trial is in a few minutes. The second subsidiary is Venn Life Sciences. And Venn Life Sciences really focuses on the early clinical development for clinical trials and for products, both small molecules and larger biologicals. Between the 2 companies, we are able to offer a fully integrated Phase II challenge program. Venn Life Sciences partners are based in Breda in the Netherlands and in Paris. They provide clinical design and also the biometric services for the challenge that is, as well as providing stand-alone services to their respective clients. hVIVO, the main hub being in East London in Whitechapel includes the 2 quarantine facilities in QMB as well as the Whitechapel Hotel, and the screening facilities in Plumbers Row, which is open in March. We also have an additional screening facility in Manchester. So we are expanding the reach of the FluCamp initiative to be able to recruit and screen patients from a greater breadth of area. So where does hVIVO come from. Well, hVIVO dates back to the mid 40s when the common cold unit was formed. Two of the leaders of the common cold units in the late 80s went down to form a company called Retroscreen. Retroscreen changed its name to hVIVO, which was eventually acquired by Open Orphan. So we have a lot of experience, a lot of history in conducting human challenge for us. In fact, the common cold unit was conducting cold challenge trials back in the '40s and the '50s and so on. So for us, we have a long history. We know how to work with the regulators and the ethics committees to get approval. We know how to conduct these challenges safely. We've had an excellent safety record over the last 80 years that we have been conducting challenge trials. We were the first CRO to conduct a SARS-CoV-2 challenge trial globally, and that was conducted very safely with some excellent data. In fact, that study was published in Nature, a leading scientific journal. We also use FluCamp, as mentioned, to recruit our patients. We have a number of indications already. These include influenza, RSV, malaria, asthma and COPD. So we're continuously expanding the indications we're working on to be able to tap into the increased market. We've already seen an increase in the number of clinical trials conducted in RSV and influenza. But on top of that, we're trying to tap into the respiratory market and be able to conduct challenge trials in areas such as asthma and COPD. We currently have a large asthma trial ongoing. The U.K. really is a great place to conduct the challenge trials. We have a very favorable regulatory framework compared to the United States or the EU. In the United States, you require an IND to manufacture a challenge agent and also to conduct the characterization of the dosing study. In the U.K., you don't have to do this. And also in the EU, again, the characterization study needs to go through a regulatory framework. This delays and costs more with regards to developing a challenge agent. Again, in the U.K., we have the MHRA and we work with the MHRA very closely. We don't need to obtain regulatory approval for the first part, but of course we conduct the studies under MHRA's guidance and regulatory approval for the actual challenge studies. So what is a human challenge? Well, a human challenge is a challenge that involves 3 phases. First, there's a screening phase. So we have to ensure that the healthy volunteers that we are screening are fit and healthy and able to sustain the inoculation of a potential virus and the quarantine period. Once a healthy volunteer goes through the screening period and passes that, then if it's a vaccine trial, they will get vaccinated. And 30 days later, they're going to quarantine and be inoculated. And during that period, they will be observed very, very closely on a daily basis. Once the quarantine period is complete, the third phase includes the follow-up period. For antiviral studies we conduct, we inoculate the healthy volunteer first with the viral agent and then we treat them with the antiviral drug. And then we monitor them as before. We conduct these studies here in London. We have a genetic screening program where we're able to screen patients on an ongoing basis, 5 days a week, sometimes 7 days a week, depending on the demand. We stratify the volunteers into 2 groups, so the active group and the placebo group. And at the end of the day, our Venn colleagues in Paris, they collect the data, they analyze the data and they compare the 2 groups to find out whether the study drug was effective or not. We can do this within a 10-month period in a challenge study, which typically would take maybe between 2.5, 3 years in the field. So this is really a fast and efficient way for our clients to get a really early indicator of the efficacy, of the effectiveness of their drug in a given indication. So why do pharmaceutical companies do a challenge study? Well, there's a huge and wide array of reasons which are listed here on this slide. I'm not going to go through each one, but I'll mention some of the key highlights. One is that these clients can derisk a Phase III program. So as an example, Novavax is a company that conducted a Phase III RSV vaccine trial which failed in Phase III. Bavarian Nordic were not too far behind them, but they decided to postpone their Phase III program and instead conduct a challenge study to get a firm view of whether the drug was effective or not. Following the positive results of the challenge trial, they were able to obtain breakthrough stages within the FDA, okay, which means effectively they take up to 2 years in regulatory time lines and increase their marketing period for their drug. On the back of that, we have seen an increased interest in similar studies. So we have clients coming to us now wanting to do RSV challenge trial to get the same data and to be able to get breakthrough status or fast-track status with the FDA. We have done this a number of times. It's one of the key reasons why there's been an increase in interest in challenge trials as a study program. We've also been able to save significant time by conducting challenge trials for our clients and also, in some cases, a client is able to obtain emergency use authorization by conducting a challenge trial only. And lastly, our biotech clients, smaller clients, they're able to move into Phase II much more faster and be able to increase their valuations in the market. I think there's one more important point. In pharmaceutical development, if a drug fails, you want that failure to happen early, not at Phase III stage. And our challenge studies are really good way of ensuring that your drug works before you spend the big bucks on a Phase III program. So again, challenge studies have proven to be a very useful tool for sponsors, both big pharma and small biotechs, in their vaccine and antiviral development. We're now expanding this model to respiratory and parasitic research, too. I briefly mentioned FluCamp. FluCamp is our recruitment platform and we have invested heavily in the software and technology used to be able to recruit and engage our healthy volunteers. For those of you who have any knowledge of clinical research and clinical trials, you know that 80% of the trials that are delayed are delayed because of poor recruitment. In fact, more than half the trials that are canceled are canceled due to lack of patient enrollment. This is a key obstacle in clinical research. There are not enough people in the world willing to take part in clinical trials. And this is the main reason why we have invested heavily in a recruitment platform. And as you can see from the 2 charts shown here below, we have seen excellent results. So far, 100% of our studies have been completed on time with regards to recruitment, and we want that to continue to happen. Our generic screening keeps our 0.25 million active volunteers in an existing database. As I mentioned earlier, we're able to now screen over 1,000 healthy volunteers per week. And that's a huge amount. One of the constraints of challenge studies, of course, is that you have to have [indiscernible] to be able to enter the trial. In other words, you can't have antibodies against the challenge agent that we are studying. For this reason, we typically lose 80% to 80% of our healthy volunteers. One of our key goals going forward is to be able to monetize these healthy volunteers. And I'm pleased to say that we have this year been awarded a site study. A site study is basically a field-based nonchallenge trial and doesn't have the same restrictions for [indiscernible]. So we're able to utilize the same resources and same facilities to be able to conduct a nonchallenge trial in a Phase II field-based environment. And this is something we aimed to do this year and I'm pleased to say we have delivered. And now we have an ongoing nonchallenge Phase II trial in the company. Our client base is extensive and variable. We work with 4 of the top 10 big pharma on our repeat business. There have been lower customers that have got really good results from the challenge studies we've done to date. There's a whole variety of small- to mid-sized biotechs and bio pharma, both in hVIVO and also in Venn Life Sciences. And finally, we also work with some leading academic sites and non-profit organizations, who have shown keen interest in our scientific knowledge and expertise that we use to build our models. One of the key things about challenge studies is that the powering of the sample size and the design is really key. And we have over 30 years of experience and over 60 studies, which we use to make sure that we optimize study design and make sure the client gets the most out of a challenge trial, okay? We have over 60 clients that we served last year and 80% repeat. This is, again, excellent numbers. One of the things I'm extremely pleased with that we have started doing is the fact that we are now cross-selling between Venn Life Sciences and hVIVO. Two of the challenge trials that we have been awarded this year have been previously Venn Life Sciences clients and that's wonderful to see. We are also now utilizing Venn Life Sciences resources in conducting the challenge trial, both in protocol design and also the biometric, the data management and the biostat services at the back end. Again, as I mentioned earlier, I'm also pleased that we were able to get our first site study awarded. This will make sure that we're able to recognize additional revenue from the same resources and facilities, as I mentioned, but also through the same screening process, more or less. And I think this is key for us. We want to build on this and continue to add more revenue streams and improve our profit margins moving forward. Some of the added value we're bringing into the company, we've added the malaria model, as mentioned earlier. We're now aggressively marketing this across the different companies working in this area, and we hope to have a parasite-related study either this year or maybe towards the beginning of next year. We're also working on additional recruitment strategies to make sure that we can monetize to 85%, not just by doing our own site study, but also maybe working with third parties and selling some of those leads and volunteers. We also launched our Phase II site study, as mentioned, and expanding our laboratory services. So one of the key skillset really is that we have a very extensive and knowledgeable laboratory stock, especially when it comes to virology assets and biomarker development. And this is something I'm looking forward to developing further. We are looking to get the CAP certification in Q3 of this year, followed by UKAS certification. As soon as we have the first certification, we'll be able to sell our lab services to third parties in nonchallenge trials. At the moment, most of the work conducted by our lab services is done through our challenge studies. This is something we can expand. There's no reason why our lab cannot perform assays for nonchallenge studies on behalf of third parties. Finally, we are making sure that we are complementing the hVIVO and the Venn Life Sciences services. One of the things we're also adding is ATMP services or Advanced Therapy Medicinal Products Services to the armory. This is something that we know the market will continue to grow. And Venn Life Sciences is placed in the right time to make sure that they make the most out of this area. I'll now hand over to Leo to give an update on the financial aspects.

Thank you very much, Mo. So this slide gives a snapshot of our key financial performance that we touched on at the top of the presentation. Firstly, revenue. We delivered GBP 39 million in revenue, up from GBP 22 million in 2020. And that represents a 76% revenue growth year-on-year. And we'll touch on the drivers of that in a moment. In relation to EBITDA, as well has been driven by revenue growth. We also worked hard to deliver a restructuring that we had started in 2020 and deliver additional productivity gains, which drove a swing of GBP 9 million in terms of EBITDA. And we'll touch on that in a few moments. All told, that led to an operating profit of GBP 600,000, and significant improvements on our earnings per share. Our year-end cash was GBP 15.7 million, again, very, very healthy balance to work with as we go forward. That was down from the prior period, and that reflected some one-off costs related to the capital reduction that we did in June last year as well as costs related to the spin out. It also reflected normal maintenance-related CapEx for our facilities and some equipment we acquired for our trials and the normal cycle of cash and timing related to R&D tax credits and client payments. Lastly, in relation to our order book, we finished in a very strong position of GBP 46 million. And that number is actually increasing right now to GBP 64 million at the end of May and puts us in a very, very strong position going forward to deliver revenue for the end of 2022 and into 2023. Lastly, just to note, as I touched on a moment ago, we completed a distribution in specie to the company's shareholders by spinning out assets that eventually became part of Poolbeg Pharma. Now just to give a little bit more color on our revenue growth of 76% year-on-year. So critical to this was the broadening of our client base in hVIVO as well as ongoing steady growth in the Venn business. All told, we had 10 active studies in 2021 versus 5 active studies in 2020. And that drove the significant growth. Now COVID, our work with the U.K. vaccine task force with Imperial College was an important contributor to that growth, but it was far from the only element that drove the growth last year. So while COVID was an important part of our mix, we are not dependent on COVID going forward into 2022. And therefore, we're now focusing on our broad portfolio of challenge models and other service lines going forward. I touched on Venn a moment ago. Now Venn, if we strip out some of the old clinical operations revenues that we restructured, the Venn business grew single digit -- solid single-digit growth last year. And both of those businesses in Paris and in Breda are contributing strongly to help us deliver our challenge models and are delivering important cost savings to the bottom line. Some more graphs here just to give a flavor, more color on revenue. Clearly, our mix shift has changed. hVIVO is now 80% of our mix, the Venn division is 18% of our mix, both contributing very, very strongly, as I noted a moment ago, in relation to doing data management and biostatistical services. Importantly, we are also seeing our existing client base within the Venn division as being an important source of leads for challenge work in London. And that's what we had expected when we merged both businesses, this notion of cross-selling. Another important measure that we're seeing is the profile of our client base is improving steadily over time. We now have 11 clients who are doing in excess of GBP 1 million in revenue. And we expect that to continue as we broaden our client base, as we maintain and build these recurring relationships with big pharma. So that's a really important measure as we go forward. Similarly, we're looking at our revenue per employee growing 50% year-on-year. And that's really important because it's demonstrating that we're getting increased billability of our employees, we're getting increased utilization across our employee base, and over time we're also working on how we drive increased productivity of our teams, and I'll touch on that in a moment. So again, to touch on our net EBITDA performance. Overall, we delivered GBP 2.9 million in EBITDA for 2021, that reflected an important swing of GBP 9 million year-on-year. Now that GBP 2.9 million represents an EBITDA margin of about 8%. And stand-alone, that is not where we want to be. And we want to continue to drive and grow that EBITDA margin, notwithstanding that we had an important turnaround year-on-year. Now our target for the coming year is to deliver double-digit percentages in terms of EBITDA margins and continue to grow that progressively over time. We're going to do that by focusing on driving utilization of our facilities, driving utilization of our core team, and driving productivity of our core team. As we look to grow revenue, we're also going to be trying to keep our overheads and SG&A flat as much as possible. And in so doing, we get really strong operating leverage on our business and that will further contribute to drive our EBITDA margins up over time. So we are happy with the progress made to date, but we think there's a lot more to come as we target to grow our EBITDA margins in the near future. So I'll now pass back to Mo to share some perspective on market opportunities.

Thanks. Looking at the potential market opportunities, one of the things you need to be aware of, with the challenge studies in itself, we are creating the market as we go along. We are educating academia, scientists as well as pharmaceutical companies into the usefulness of the data that the challenge studies are providing in the development of antiviral vaccine and other products. And this is something we're now seeing in the field. So I mentioned the 3 companies that have already obtained fast-track or breakthrough status with the FDA following good challenge study data. So overall, infectious diseases, the market continues to grow. In fact, the infectious disease clinical trial market currently stands at $5.5 billion. And we're seeing 2 key triggers for increasing challenge studies. One is a change in the regulatory attitude with regard to challenge studies and the ability for clients to shorten their time lines when it comes to registration of the product by using challenge study data. But secondly, the COVID pandemic. The COVID pandemic has raised the profile of viruses and antivirals and vaccines to the highest level possible. We've seen an increase in funding from biopharmaceutical companies, nonprofit organizations and so on. And the number of clinical trials currently being conducted in this area is higher than ever. And we think this will continue. I believe that the increase in interest in influenza and RSV has been triggered by the COVID pandemic. Most scientists agree that a potential future pandemic will be due to an influenza variant and this is one of the reasons that we've seen a huge increase in the number of influenza studies that we are conducting. And I think this will continue for the foreseeable future. So looking at this growth in vaccines and antivirals. So you can see, before the COVID pandemic, because the COVID pandemic itself has increased the sales market of the year, the antivirals and vaccine, but prior to the pandemic, you can see vaccines and antivirals were only second to oncology. So already, we have a large market base. So the number of clinical trials in Phase I and Phase II in antivirals and vaccines is huge. Now this is our key market. We target medicinal products, antivirals, or vaccines that are in early phase. And from this, we look at what indications these products are in. And you can see on the right-hand side, the 4 key areas that we look to work in. So there's currently 144 influenza vaccines in the pipeline. 144 in influenza, 104 in COVID, 39 in malaria, and over 13 RSV. So we have a large pool of potential studies to work at. On top of that, we know the number of challenge studies per product is also on the up. So this is where is the exponential growth in the number of challenge studies being conducted. Our pipeline at this moment in time is the highest it's ever been. And I think that says a lot. Due to the COVID and also the FDA change in view, we're now able to increase the number of trials we are seeing. So a quick summary. So we're giving a guidance for year-end of GBP 50 million positive EBITDA. We expect the EBITDA margin to be double-digit percentage wise. And we're continuing to drive efficiencies and increase productivity to achieve that. Of course, my main message to you is not to say that 2021 was a wonderful year. No, it wasn't a wonderful year, but it was a great step from 2020 to '21. It's a major step in the right direction. And we hope to build on that going into 2022. And that's where we'll begin to see better margins, increased margins, able to show higher revenue and also higher EBITDA. So my last slide is really a case of why invest in Open Orphan. Open Orphan is the world leader in this field. There's nobody who comes close to what we do. The scientific expertise we have, the number of years of experience we have in conducting challenge trials, the number of challenge trials, the portfolio of challenge agents, and the number of healthy volunteers we have been updated is second to none. We are, without doubt, the world leader in designing and executing challenge trials. There's now an increased adoption of challenge trials globally and we're seeing clients both from Europe and from the United States. We have already a developed infrastructure. We know that the market entry hurdle is really high for someone to come in to develop a challenge agent, to establish a quarantine facility, and then to be able to get enough data to show that the challenge model actually works is very hard. And we have already shown multiple times that our challenge models work, and we have been able to show that the drug is effective, or not in some cases, okay, but we know the challenge model does work and we use that to assess the efficacy of our product. We'll continue to expand our recruitment efforts with regards to FluCamp and also the screening capacity. Our client base really has good variety. We're not relying on any one single client to provide us with major amount of revenue. We have breadth across both small biotechs, mid-pharma, as well as large pharma. On top of that, we're also currently working with some really key leaders in academic sites. With regards to growth, I mentioned, with regards to our pipeline, our backlog is GBP 64 million as of 1st of June. That is significant, okay? We now, of course, need to work on ensuring we deliver those studies. But at the starting point, this is the best position that Open Orphan has been in its history. And on top of that, we're now able to identify new revenue streams and recognize revenues on top of what you already have, with the same infrastructure, same resources, I'm talking about the site studies that we're currently running. And that is the end of the presentation. Thank you.

That's fantastic. Mo, Leo, thanks indeed for the presentation. [Operator Instructions] Just want the team take a few moments to review those questions submitted today. I'd like to remind you the recording of the presentation, copy of the slides and the published Q&A can be accessed via your investor dashboard. And obviously, due to the number of investors in the call today, we have had quite a few questions come through. So the team may not be able to get around to answering all of those but, of course, we'll review them. Mo and Leo, as I say, we've had a number of questions submitted both prior to the event and throughout today's presentation. Thank you to everyone for submitting those. Can I please ask you just to read out those questions and give responses where appropriate to do so, and I'll pick up from you at the end.

Absolutely. No, thank you for that. Okay. So we have kind of multiple pages of questions, to be honest. So I'll be surprised if we'll be able to go through all of them, but I'll try my best with help from Leo. So starting with this one. So how are you going to increase margins in the core business? The one for you, Leo.

Thanks, Mo. Well, we touched on it in the presentation, but really there's 2 things. Firstly, driving operational efficiencies by increasing quarantine occupancy, increasing productivity of our work, and using new technologies to speeding up the way we work. And we're continuing to invest in technologies in our labs and in our recruitment processes. The second area is really, as Mo touched on earlier, how do we broaden our services and get better utilization out of our facilities. Site services covering how we can utilize our resources, using new accreditation for labs and working to sell unused recruitment leads. Mo?

Thank you, Leo. Second question we have here is, considering the previous announcement of a GBP 7.3 million influenza contract, I see this was part of a potential GBP 75 million weighted pipeline. Have there been any discussion with new contracts outside of this weighted figure? Well, I think you have to kind of appreciate and understand that the weighted pipeline is a living document. It changes literally every day. The new proposals are added, a loss is removed, as well as proposals that we are converting to an award. So it really depends on the current status. So I can assure you that the current pipeline is the highest it has been. The current weighted pipeline is also the highest it has been in the history of Open Orphan. So we're in a healthy position. But I think the backlog figure is especially significant in the fact that, that is signed work that we have in-house, that we now have to execute on. So I think we have a very healthy pipeline. I have visibility over the next 9 months with regards to ensuring we have sufficient utilization of the capacity of the beds we have. So I believe in the short to mid-term, we are in an excellent position. Of course, that doesn't mean we rest on our laurels, we'll continue to sell aggressively and continue to build on the pipeline and the backlog as we move forward. As regards to the GBP 7.3 million influenza contract recently awarded, will there be any more of this value to be signed this year? Well, after the GBP 7.3 million, we did sign a GBP 14.7 million contract. Now this was the largest single contract in the history of Open Orphan. This contract included a characterization study and also a challenge study. On top of that, a month before this, we also signed a manufacturing contract with the same client. So all in all, we have the contract to manufacture the challenge agent, conduct the characterization study to find the right dose, and then conduct the actual challenge study. Now this is the first in the industry as well as the first for Open Orphan. Now I think this is something that shows that the big pharma has the real confidence in our ability not only just to conduct the challenge study, but to be able also to manufacture the assay challenge agents. Nobody else as a single provider can perform all the services in-house. And I think this is one of our key USPs. Another one for you, Leo, I think. How is Open Orphan being affected by inflation? Where are costs increasing in the company?

Yes. Thanks, Mo. Look, everyone's aware of the macroeconomic environment right now in the context of coming out of the COVID pandemic and the situation in Ukraine. We're monitoring that situation very, very carefully, and we are seeing some pressures across our cost base. Our reaction to it is twofold. Firstly, where possible, we are adjusting our pricing and our bids to make sure we're maintaining our appropriate margins on our contracts. And that's working with our clients and doing that proactively. Secondly, very, very importantly, prudent cost management across all business areas. And that's just business as usual for us. And we judge that those 2 actions will help us mitigate inflation as much as possible.

Thank you, Leo. Next question is, will demand for challenge studies drop off if a recession hits? How much of an essential cost are the studies for health care companies? So the answer to the first question is, I don't believe at all that the recession will have a major impact. Because of the current pandemic and the potential for future pandemic, I think infectious diseases is one area where we'll continue to see increase in funding, both commercial and noncommercial. So I do see a sustained growth in further research in vaccines and antivirals, especially. And with regards to the essential cost for the biopharmaceutical companies when they conduct a challenge trial, I guess the answer is what are the future benefits? So if you look at companies like Bavarian Nordic, who are able to cut their development time line by 2 years, how much is that worth? So you could argue that a year in marketing a blockbuster drug is $1 billion, so that's a potential additional revenue of $2 billion based on a challenge study spend of between GBP 5 million and GBP 10 million. So you can see the return on investment is potentially huge. When roughly will the CAP and UKAS accreditation be recognized? So the CAP audit will happen in July, and we expect to get accreditation within 60 days of that. The UKAS audit is currently penciled in for Q3. So we hope to have that certification by the end of the year. Next question, why have investor coms gone so quiet over the past 6 months? What's stopping the progress in business? So I hope I haven't been so quiet. I think we've got 20 RNS' already this year as compared to 29 for the whole of last year. We've announced 6 different contract awards. But going forward though, we will be more selective with regards to our announcement, because I think we are now mature as a company. We need to behave as a mature professional company. And we'll make announcement on key significant milestones, not everyday signings with regards to GBP 1 million or GBP 2 million contracts. And that's something we want to do going forward. We want to attract institutional investors in addition to our retail loyal investors. But going forward, we will be more selective in the RNS announcements. And that's not to say, we want to communicate with you less, we want to make sure we give you quality more than quantity. As regards to the World Vaccine Congress, the investor show event lately, are we likely to see anything as regards to potential new business or institutional investors buying shares? So yes, the World Vaccine Congress, in fact, was a very positive event for us. We talked to a lot of current clients as well as new customers. I attended that myself. It was also the first global congress on vaccines where challenge studies were discussed at the main stage, so I think a big step with regards to the acceptance of challenge studies in the vaccine arena. For your second question with regards to institutional investors, I'm glad to say that we have a new NOMAD on board, Liberum. I have met with them already a number of times. And with their help and our other brokers, we will be targeting institutional investors this year. So watch this space. We hope to have more institutional investors on board. This one is a very direct question. Where are the malaria contracts? Okay, so the malaria model is something new to us. It was finished developing in Q1 of this year. We're currently aggressively marketing this. Of course, as you can imagine, this is a new model for us. So it takes a while to win our first contract. But I have no doubt that in the near future, we will be able to obtain malaria or any other parasitic-related studies. And this is something that we're looking forward to develop and continue to work on really hard. Where are the COVID contracts? So I just want to state that we are not a COVID-only CRO. I don't believe that 2022, for example, will be a year where a substantial amount of our revenue will come from COVID. COVID did help us in the way that it highlighted the fare of our pandemic through a virus, potentially, and an increase in research in RSV, influenza and other such indications. But I don't believe that COVID will be our main step. We will be working more on COVID in the coming months and years, but I still see, in the short term, influenza making a major contribution, as well as RSV. And on top of that, I've talked about the asthma, the malaria, and the site studies to generate additional revenue, too. RNS of 1st June includes the study which is sponsored by hVIVO. Please explain. When we conduct the characterization study, we typically sponsor that study. It's not a freebie, it is still fully funded by a client, okay? But we act as a sponsor for regulatory terms. So we act as sponsor in the fact that we take responsibility for the delivery of the study, but it's totally funded by our customer. If I'm not mistaken, the move to the current location was not a budgetary matter, lower rent, larger surface area, it was also the intention to bring together the entire team in one location. Have the synergies worked out? And does this have consequences for future progress? So absolutely correct. So the reason behind the move, one, was to increase capacity. So now we are able to screen over 1,000 healthy volunteers a week. We have consolidated the office space. So I'm, for example, sitting a floor above our screening facility, which is downstairs, and I go down there on an often basis just to make sure everything is going okay. We also have a QMB facility and the Whitechapel across the road. Our rent now is lower than before and we have a larger area. And with the move, we're now being able to add the site services I talked about earlier. So all in all, I think the move has been very successful. And on top of everything else, I do expect to see synergies and hopefully increased productivity because we are located in the same office. As regards to our bed capacity, Mo, do we need to have enough to turn around business in a timely manner? Also, as regards to turning over more revenue to increase profits? So our current bed facilities are sufficient to make sure we hit our revenue targets for this year. Going forward, I believe by 2023, we have yet to finalize our revenue target, but when we do, I think we have sufficient capacity. One thing to note though is that in early 2021, we were able to build and implement a completely new quarantine facility within a 4-month time span. Now typically, a new challenge study takes 6 months from award to quarantine. So we will be able to build and fit a new part of the facility in time if the demand requires it. So I don't believe that capacity will be a constraint in increasing our revenue. Okay. Next question. Will you be looking for more facilities to support revenue growth? We always have a preidentified list of facilities that we know we can move into. So we have a facilities group in-house, and that's one of their jobs is to make sure that they have a list of preidentified facilities nearby that we can move into or convert to quarantine at a fairly short notice. So absolutely, this is something we're always on the lookout for. But as I mentioned, right now, there's no such demand. These are some of the questions on the share price. What concrete steps are you going to take to get the share price back on the road and deliver shareholder value? What would you call a success as new CEO with regards to getting back Open Orphan on track? So my goal is to make sure we have a sustainable steady growth in revenue, a sustainable steady growth in EBITDA and profit. I believe if we can deliver this quarter by quarter, year-on-year, it will be reflected in the share price. As you guys know, share price has a lot of external factors that we can't control. But what I can control is us converting our current backlog into revenue, getting new sales, more studies, and increasing revenue or profit margin. And I believe at the end, the market will reflect that. Our share price will increase if we were able to show a sustainable delivery. '21 was a good year; I am hoping that '22 will be a great year; and '23 even better. Why has there been no share buyback or dividend? Frankly speaking, I don't think this is a good idea at this stage. We believe we have some really good strong initiatives going forward that will help us to return on investment that will be greater than giving back dividends. So we've invested in new models. Malaria, for example. We are building the COPD model. We have built a new revenue stream in site services. We're investing in that. We're hoping to increase capacity and that will generate more revenue, especially after we receive certification for the accreditation. A few questions for Leo on finance. EBITDA was GBP 2 million at 6 months. Full year, it was GBP 2.9 million. Can you explain why we only generated GBP 9 million in H2?

All right. GBP 29 million in H2. Look, as context in terms of revenue, last year was a record year and 75% up on the prior period. That's really an important context. Within that year, probably the growth was slightly more heavily weighted towards H1 than H2. So when you look at the balancing of the profit performance, H1 was going to perform slightly better than H2, and that's reflected in the net margin numbers. Now we know that we actually could have done better in Q4 because we had a postponement of a challenge study into 2022 because of slightly delayed regulatory approval. So right now, what we've been working on this year is how do we make sure we're overbooked in terms of the amount of pipeline or amount of orders that we have, so that if there is a delay in any particular client study, we can replace that with a study that's already ready to go and therefore we mitigate that risk. And what's critical here is that we're trying to load-balance our studies more evenly across the year so that we don't have the highs and lows that can affect our profitability numbers. So that's what drove the slight imbalance on profitability between H1 and H2. Second question, what will you do with your cash? I think Mo touched on it in terms of new models, potentially new facilities and new revenue drivers. And we want to really explore how we drive revenue going forward, and we think that will deliver very strong returns for investors in due course. Has the company now received sufficient orders to achieve 2022 revenue target of GBP 50 million? Yes, we have. We're now 100% contracted for 2022 revenue. We're now focusing really on the important recruitment work and staffing work in our facilities to deliver those studies. What are your projected revenues, profit for 2023, if you want to get a PE ratio comparison to your peers that is needed? That's a really, really good point. I mean we know the benchmarks in the market. And while we've had a good year in 2021 relative to earlier years, we're not satisfied with where we are and we want to continue to grow. So firstly, we are very well positioned for growth in 2023 and we're going to guide on that towards the end of the summer. We touched on profitability as well a few moments ago. We're targeting to improve our productivity and our operations to deliver double-digit percentage EBITDA margins and continue growing those into the long term. So we're not satisfied at all where EBITDA is, and we're going to continue working towards improving that. Mo?

Thank you, Leo. A couple of more questions. Well, there's a number of questions on spin-off?. So I'll give you a brief summary. So why have the other spin-off not happened yet? What is causing the delays? Considering the economic climate, will actually anything be done this year as regards to spin-offs? Look, I think the current market is very difficult when it comes to IPOs and spin-offs and I'm sure you guys are very educated in that. So I don't know whether anything will happen this year, in fact. But one of the great things of me coming on as the CEO is that Cathal is now free to concentrate on the spin-off. So I know he's been working diligently on making sure that we have the right offerings when it comes to an IPO or spinout in the future. And he will be working very hard to make sure that the next spinout comes out. Of course, the current market really isn't optimal to do this IPO and spinout right now. So this is something that we'll wait and see. When the market changes, we'll be ready to go. When do you think we will list on Nasdaq? Again, to be honest, maybe a boring but a similar answer, I think in the current market, I don't think I expect to see something happen in that in the short term. But we are focusing and ensuring we deliver the key fundamentals of the business. I think that was all of the previous questions. We've got a number of questions on the current. So I'll try to go through as many of these. I don't think I will be able to, unfortunately. So good news on the increase in EBITDA, but there was also cash burn in 2021. Can you explain uses of that cash? Leo, do you want to take that?

Yes. I will. I touched on that in my piece. Look, we had some one-off stuff related to the capital reduction and the spinout. And we had a reasonable spend on CapEx related to maintenance on our facility and some equipment that we were using for our studies. And on top of that, you had some timing differences in terms of R&D tax credits that we recognized as revenue, but the cash for that was only going to come later on. And you've also just some normal ebb and flow in terms of cash receipts from clients. Some questions down the road is, how is cash right now? Look, our cash outlook is very good, it's very strong behind the client wins that we have had in recent weeks. The GBP 14.7 million contract is going to give us a really strong cash contribution because of the prepayment element there. We're well on track in terms of managing cash with our clients. Our receivables are in good shape. And we see the normal cash cycle is really healthy, in line with the improved performance of our business. So we feel we're in good shape there. Mo?

Thank you, Leo. How many new challenge models are you anticipating to have by the end of this year? Well, look, we're ongoing in our development of challenge models. I'm not going to give a number. To be honest, I think that's competitor intelligence in a way. So suffice to say that, yes, we have an ongoing development with regards to new challenge agents. We have a very strong scientific team that have over 30 years' experience developing these challenge agents. So we'll continue to look at this. The GBP 14.7 million contract we signed, that was a new challenge agent that we developed for that. So that was the last one we've done, but there will be more on this. The question is, what is the U.S. IND regulatory constraint? So to develop a challenge agent in the U.S., you have to submit what's called an investigational product, that's your impact, because they treat a challenge agent like a study drug. So effectively, you need to collect and submit all the documents that you would as if you were developing a new drug. In the U.K., those regulations do not apply. So a challenge agent is not considered a study drug. That's the main difference. Is the nonchallenge Phase II trial being used as a test and learn? Or is the ambition to build this as a regular offering? No, there's definitely ambition to build this as a regular offering. That is not to say it will become our core business. We are and will always be a challenge study CRO and that's the key, okay? Because that's our great strength. But there's no reason why we cannot bolt on and add on additional revenue streams. You mentioned using recruits that wouldn't be eligible for challenge trials due to antibodies for Phase II. Can you please elaborate? So effectively, to conduct a challenge trial, let's say in influenza, we need to make sure that individual doesn't have antibodies in their body against influenza. Because when they go into a quarantine and we inoculate them with or expose them to influenza virus, they will not become infected. So effectively, they can't take part in trial. So as part of a screening process, we exclude all healthy volunteers who have antibodies against the challenge agent we are studying. These patients or these healthy volunteers can now be diverted into a field-based Phase II trial, which doesn't have the antibody restriction. Please indicate the trajectory of growth of cost per employee versus growth of revenue per employee. I'm sure Leo can add to this, but just to say that the revenue per employee is increasing at a much steeper level than the cost per employee. Do you want to add anything, Leo?

Yes. Look, we are focused on driving billability of our permanent employee base, driving utilization across the piece, and driving productivity. And our goal is to continue to drive our overall EBITDA margin up, even while growing revenue. So net-net, cash EBITDA, so to speak, or absolute EBITDA, will be impacted by not only revenue growth, but the increase in margin. So they all go hand in hand. And that's how we know that we're delivering the real impact of those productivity improvements.

Thank you. Double-digit growth in EBITDA could be welcomed, but still modest 10% to 11%. There was early talk of a target of 30% for '22. Are you planning near the former or near the latter? Okay. So I'm going to be very realistic here. I don't want to overpromise and underdeliver. I'd rather underpromise and overdeliver. But realistically speaking, from where we're coming from, okay, to never being able to show a profit to a GBP 2.9 million EBITDA and, this year, increasing that margin even further, okay? I don't believe we'll get to 30% this year, but we're going to push well into the double digits. That's our goal. So long term, there's no reason why we can't pitch towards the 20s and 30s, okay? But this is not a short-term strategy. I think we have a good base. We need to make sure we win more studies, we execute more efficiently. Every department has KPIs and targets. So we're monitoring what we're doing and how long it takes us to do this. I want us to be a very efficient service provider and that's key. Once we're able to do that and deliver our studies on time, to budget, we'll be able to realize much greater EBITDA and profits. How much is Cathal involved in the business? He is very involved. He sits in the office next to me 3 days a week. We talk on a regular basis. The day-to-day running of Open Orphan is left to me, but we talk on a strategic level to see what we're going to do forward with the company. He is especially focused on the spinout, as I mentioned. But yes, he is still very heavily involved. But I take responsibility for the day-to-day running of Open Orphan. When will Mo buy shares in Open Orphan? Very soon. I'm talking to Cathal and our NOMAD to see when I have an open window to be able to buy those shares. How had the road show going or gone? Any new investors coming on board? We had -- [indiscernible] today, we met a number of brokers and analysts and potential investors and we'll continue to have for the rest of the week. I think the message is much stronger now that we are in a profitable situation and able to show a positive trajectory. I'm not saying we are where we should be. But I think we're showing a good trend. And I think this is what is attracting potential new institutions as future investors. How much is the weighted pipeline now? We're not currently disclosing that. But I will say it's higher than what we disclosed previously. Is Mo buying shares? I think I've answered that question. Why did it take so long to issue the final results? Really good question. And this is something we will fix for next year. So we'll give our interim results in September of this year for the first half. But going forward, we'll be looking to publish our annual report in April and then do first half in July and interims in September. So you're absolutely right for your comment. As a professional organization, we should be able to report our annual finances in early April, and that will be the aim going forward. Very impressed with the range and depth of your answers to us all. Thank you. Okay. I think we have taken enough of your time. I appreciate your time here. I know I'm new to this and most of you don't know me. I did meet some of you at the recent conference, but I'm here to drive the company forward and continue to increase on the revenue. I appreciate that the EBITDA itself isn't as much as it should be. But look, year-on-year, the turnaround is GBP 9 million, which I think is significant. But as we move forward, I'm sure we'll do bigger and better things. So thank you for your time.

Thank you also.

Mo, Leo, thank you indeed for updating investors today. I think you have covered off a number of those questions you can from investors, of course. The company will review all questions submitted today and will publish those responses on the Investors on the company platform. Can I please ask investors not to close this session, to be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. It's only going to take a few moments to complete and that's greatly valued by the company. On behalf of the management team of Open Orphan Plc, we'd like to thank you very much for attending today's presentation. That concludes today's session. Thank you, and good evening to you.

Thank you. Bye.