hVIVO plc (HVO) Earnings Call Transcript & Summary

Good evening, and welcome to the hVIVO plc investor presentation. [Operator Instructions] Due to the number of attendees today, the company may not be in a position to answer every question received during the meeting itself, however, can review all questions submitted, publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Mo Khan, CEO. Good evening, Sir.

Thank you. Well, thank you, everyone, for your precious time given to us on this Tuesday evening, as I said, in early April, where we announced our full year 2023 update. I'm very pleased to have gone on board. Really go straight into it. This is the normal disclaimer. I am Yamin Mo Khan. I'm the CEO of hVIVO. I've been CEO for just over 2 years, and I've got a long history in working at a contract research organization, or CRO. I'm joined here by our CFO, Stephen.

And I'm Stephen Pinkerton, CFO from October 2022. I've been with the business for over 7 years. And yes, that's it, really.

Thank you, Stephen. So welcome, and we get straight into the presentation. For those of you who may not know who hVIVO is, well we are the world leaders in conducting human challenge trials in infectious diseases and respiratory diseases. We have a huge -- a large human challenge trial unit here in London. We also have several offices across the country, including a screening site in Manchester. We are due to open the world's largest human challenge trial unit later on this year, in Canary Wharf, and I will talk about that later in the presentation. We also have a second subsidiary called Venn Life Sciences, who help in conducting our human challenge trial, who also provides stand-alone early clinical trial, clinical development, clinical services, which fits in well with what hVIVO does. As a company, as I mentioned, we are the world leaders in human challenge trials. Human challenge trial is a niche way to develop antivirals and vaccine is, in fact, expedite in the way we can develop drugs and take them forward to Phase III. Our mission, as stated here, is delivering today's health care by empowering tomorrow's innovation. And we believe that human challenge trials and the concept of human challenge trials will be the future and the norm in the future of how we expedite and get vaccines and antiviral to patients much faster. I'll give you a brief summary of our year of 2023, with some key numbers. So we did hit our GBP 56 million target in revenue. This is what we guided towards early on last year. We also hit GBP 13 million in EBITDA, which is around 23.3% EBITDA margin. And when you look at the GBP 13 million EBITDA, it's actually a 44% year-on-year increase, and that's actually slightly ahead of guidance. So a really good result and a great effort by everyone at hVIVO in not only delivering the increase in revenue, we're also delivering that at a really high margin. On top of that, we have GBP 37 million in cash as of 31st of December last year. This shows that not only is our business model a profitable business, but also a hugely cash-generative business model. We have a weighted order book of around GBP 80 million as of, again, end of last year. And this basically means that we have over 90% of our revenue target for this year already contracted. And we are guiding towards GBP 62 million revenue target for this year and hopefully at a sustainable EBITDA margin. I will now hand over to Stephen to provide a little more details on some of the key financial parameters for 2023.

Thank you, Mo, and good evening, everyone. So much changed since our presentation in January, but I'll go through some of the highlights again. As Mo just mentioned, our revenue was GBP 56 million. That's 16% up from last year. Contributing to that was Venn consulting, our business in Netherlands that is an early clinical consultancy business. It grew over 30% in the year. So it was a great result and a strong performance from them. One of the things that underpinning our revenue performance, both in '22, '23 and into -- as we go into 2024, is these multiple bespoke full-service contracts that we have won. This is where we are manufacturing the challenge agent, characterizing that challenge agent and then doing a challenge study then. So in 2022, we had signed 3 and we're working -- and 2 of those carried over into 2023. And in 2023, we have signed 3, and some of those have completed and are now carrying forward into 2024. So that some strength of pipeline of work is seeing us well through in this business. We also recognize a bit of revenue relating to the sort of facilities accelerated, and Mo will touch on that a little bit further on. But this has to do with Canary Wharf and the build-out of that facility, we're able to recognize some of that revenue went through our P&L, where the cost of it actually sits on our balance sheet. So -- but this will -- both this and the fact that we have large studies and [ training ] helped us sort of reduce any impact from the MHRA delays. And we did have a few studies and a few amendments to our studies that were impeded by delays from MHRA in 2023. Going on to EBITDA, this is slightly better than we had in trading update. To be honest, we -- at trading update, we gave an indication of 22%, and this was just a sort of a conservative estimate where we thought we would land. And so we're very pleased with the 23% and the GBP 13 million. Underpinning this EBITDA is a couple of things. First to highlight is that during the year, we had 9 studies in quarantine unit. Now we have more studies that we're working on, but actually in the unit were 9 studies, different studies where we had volunteers for 9 different studies in the unit. And this compares to 7 in 2022. As well as that and -- is that we have -- we had a 31% increase in our volunteers in the unit in the year, so that is driving a much greater usage -- utilization of our staff and our facilities. And therefore, that is really sort of supporting the EBITDA margin. Further -- on top of that, we have a very good -- well, we had a number of studies that we had 5, we were screening for 5 different variants and something I call our recruitment leverage opportunity. Here, we get to charge all our clients for a recruitment of a volunteer. But when we screen them, we get 5 chances of putting that volunteer onto a study. And that cost saving is tremendous and is really supporting the EBITDA margin. So that's because we're running multiple studies concurrently at the same time across 5 different variants. And moving on to cash. And cash, same as we've obviously provided an update of GBP 37 million. Just to reiterate we are debt-free. We paid down -- this is after paying out the GBP 3.1 million dividend in 2023, and it's developed because we're very -- we've been profitable in the year. Our order book continues to grow and we get upfront fees from our clients, which are nonrefundable. So this is why our cash continues to grow. And it actually becomes the position how cash is generated is clearer on the next slide. This is our sort of cash flow statement to -- bucketed into sort of categories. On the left-hand side, the column is our opening cash position of GBP 28.4 million, and then our closing cash position on the right-hand side of GBP 37 million. And the graph buckets in between are highlighting how we move from the beginning of the year on our cash to the end of the year. So you could see GBP 13.1 million cash generated from operating activities. That's before working capital, and that's a 46% up on 2022. So I mean if you look at that, that's GBP 13.1 million. Our EBITDA was GBP 13 million, practically 100% flow-through. Very, very strong performance. Another thing I want to really highlight is that the GBP 4.1 million is a positive cash -- is a positive working capital movement. Because we extract from our clients a booking fee upfront, and also that our milestone payment plan relating to our work is in advance of the work that we deliver, generally, and provided our business continues to grow, we will have positive working capital. So as our business grows, we don't have to fund our working capital. It will fund itself. And so as we project going forward, we project and expect a positive working capital balance every year. Then we have the -- what we spent -- how we spent that some of the cash during the year is capital spend. We spent GBP 5.2 million, GBP 4.8 million of that was spent on Canary Wharf facilities, which I remind you, has been 90% funded by our clients, which as I said, so the facility fee that I just mentioned that we recognized partly in 2023, that was a very modest amount and the majority of it will be recognized in 2024. That is GBP 4.8 million is what we've completed on -- spend so far in Canary Wharf fit out, and that remains -- leads a balance of GBP 0.4 million, which is really a sort of a nominal amount just to replace existing equipment -- clinical lab equipment, no more than that. The dividend, which we've just touched on. And the net figure of GBP 0.5 million is the lease payments for year-on-year flat. And that was offset -- mostly offset by our interest on our deposits because obviously, we're sitting with a lot of cash. And at the end of the year, I think something like GBP 32 million of it was held in deposits, running around about 5%. And the other offset -- partly offset was we issued some options. And this is a cash impact of sort of exercise of options during the year. So that gets you to your GBP 37 million. And just to highlight again why this is a cash-generative business as we continue to grow. This is a typical study of -- a typical graph of a study, a particular study that we completed during 2023 is very -- a very good example of all the other studies as well. So the green line is highlighting the revenue recognition, and revenue recognition is a total cost incurred to date versus the total costs expected on the study. So as a percentage of completion -- cost completion model and how we recognize revenue. As we incur cost, we recognize revenue as a percentage of the total cost of the budget. But it is very [indiscernible]. It is very at a very granular level. So it's not at a very high level that we recognize the revenue. It is down to task and phase of each of those projects. So there's about 60 different lines on which we recognize the revenue. So it's quite accurate. But the point the dark line shows you the cash that we receive whilst delivering the study. And you can see that cash is always ahead, pretty much of revenue recognition right until the very tail end. You can see in the very first stage, we take the upfront fee of 15% to 20% of the contract value plus some service charges setup fees where we design the protocol. We design and we finalize the protocol with the client. We submit to MHRA. And at the same time, we then do refresh our budget. As soon as the budget is refreshed and finalized, then enter the client and we'll enter into an agreement with the CTA agreement and clinical trial agreement. Here, they will pay as a contract fee on signature. The screening fee will be the next milestone. The next milestone is the first inoculation, 25th inoculation or [ 30th ] inoculation and so on until you get to data lock and CSR report, which is a very final stage. It's only at the very final stages of the study that we go into an accrued revenue position. And you can see that cash continues through. Right at the very end, you can see there's a little jump up in the dark green. And that was because in this study, we had a small change order right at the tail end of the study. And that was agreed and transacted and therefore, the revenue -- the cash jumped up ahead of revenue at the very last stage of the study. So hopefully, that gives you a picture of why we are a cash-generative business. And if you sort of confirm the cash receipts that we received upfront and that we were always in a cash generative -- cash positive position on all our studies. Then the last slide is just to highlight, we -- at the trading update, we announced that we would be paying a dividend, and we are confirming that we're going to be -- where this business is committed to paying an annual dividend. And this is to reward our existing customers and also to attract investors that require a bit of a yield to invest. And we've always had to try -- we want to try and diversify our share register because different investors have different horizons, different motives for holding shares and different time lines, and that stabilizes the share price, and that's what we've been able to do. And this is why we're implementing this dividend as well. That's part of the reason. In arriving at that dividend policy, we also wanted to take into account that we -- whilst we are cash generative, and we've got quite a bit of cash on the balance sheet, we also wanted to use that cash to grow this business. We do want to hold on to it for mergers and acquisition activity. So we arrived at this by taking a dividend cover of about 6x of adjusted basic earnings per share, right? And we rounded it down. So it's actually -- the figure is around [ 6.3. ] And we expect that as that adjusted basic earnings per share grows, so will the dividend. But we do want to take into account that we do want to have a strong cash balance for M&A activities going forward. I think that's all I wanted to say on the dividend. Yes, I think I'm going to hand over back to Mo.

Thank you, Stephen. So hopefully, that gives you a summary of our 2023 performance when it comes to the financial metrics. As you can see, over the last 2 years, we've seen a sustainable growth in revenue, EBITDA, EBITDA margin and order book. So all the key parameters when it comes to the past performance of the company and also forward-looking indicators, we're seeing a positive trend across all that. And we hope to continue to do that as we move forward. So this year, we're guiding towards GBP 62 million. And as I mentioned, 90% of that is already contracted. So for us, I think we are in a very good place. But we're just starting the growth cycle. And hopefully, as you listen to the rest of the presentation, we begin to realize why we are bullish for the future and how we're going to continue to expand and grow the business as we move forward. So before we do that, I think one of the key things I want to address is the utility of the human challenge trial concept. So why are companies running more and more human challenge trials. So there's various reasons why this happens. When you look at the commercial market, so these are the biotechs and the pharmaceutical companies. The reason why they're running, it is, of course, biotech companies, for example, they want to get a signal of a fix or effectiveness of the drug in a very fast manner. And it means that they can either raise more money and run the Phase III themselves or more likely, they have a reason to be acquired by a big pharma. So ReViral is a case in point that got acquired by Pfizer for $0.5 billion on the back of a human challenge trial. Also, the big pharma, for example, Pfizer in this case, we're able to get fast track designation for their RSV vaccine, which is now on the market from last year. In fact, to date, they received additional data to expand the label for this particular vaccine. So again, both biotechs and pharma are able to get really good data. One of the other key trend has been that our clients are not just looking to compare their drug against a placebo arm. They're now using the human challenge trial model to get additional data. So one of the things we've seen is clients are not only looking at placebo versus active, but they're looking at different doses and which dose will work the best in a clinical trial setting. So this means, for example, we are running a trial with 3 arms. So this needs a placebo, at dose 1 and dose 2. Now that straight away increases the size of the human challenge trial by 50%. And of course, the biggest indicator for the contract value of a given clinical trial is the number of volunteers we recruit. So the more volunteers we need for each trial, the bigger that contract size. And as I mentioned, our clients are using human challenge trials for different purposes to get more insight into end points, into sample sizes, also into doses when they move into the Phase III as well as derisking a potential Phase III. From a regulatory point of view, we've seen very positive feedback from the FDA for at least 5 of our different clients, we've been able to get either fast track designation and/or breakthrough designation based on human challenge trials, which I think is really key as we make progress in making human challenge trials the mainstream and the main kind of clinical development pathway for developing vaccines and antivirus. The other key thing we've also seen is organizations such as the WHO issuing guidance on how to conduct a human challenge trial as well as Wellcome Trust issuing guidelines on how to manufacture challenge agent. CEPI, a nonprofit organization geared towards pandemic preparedness, had also issued a grant of over $55 million to help and assist academic sites into creating more human challenge agents for challenge trials, as well as standardizing the methodology of how challenge trials are conducted. All these goes towards in harmonizing how human challenge trials are conducted. And of course, as you know, with over 75 trials conducted and over 4,500 volunteers through our clinical trials, we are the world leader. In fact, we believe we have over 90% of the market -- of the commercial market, at least, and this market continues to grow on a daily basis. At an operational summary for 2023, some of the key indicators here are given is that we ran 9 different human challenge trials through our quality and process across 6 different challenge models. Now the reason this is important is the more challenge models we can run in parallel, the more efficiencies we can realize in our patient recruitment or healthy volunteer recruitment as well as increasing utilization, both from staff and also for the facility. And that really leads well into increasing our EBITDA margins, which are evident in numbers from last year. We also expanded our capabilities in labs. So you can see we had assays of over 112 samples conducted last year. And with regards to FluCamp, which is our brand name for recruiting healthy volunteers into our clinical trials, we had over 145,000 leads registered. With regards to some of the key operating highlights, I'm not going to go through each one as is there for everyone to see. But one thing I do want to outline really is that we did sign 2 master service agreements, one with a big pharma and one with a midsized pharma. Now this does not mean that these clients are not committed to conducting x number of human challenge trials, but it does show that their commitment that they are considering more than one human challenge trial with us, and this is why they are basically creating and agreeing a legal framework. So when they do come to the right time and the state to be able to run a human challenge trial, then the legal framework is already taken care of. And all you're doing is negotiating the project budget and the time line and you can move straight into conducting a clinical trial. So for me, this is a very positive sign and a good indicator for the future. And it also establishes us potentially as the sole provider of human challenge trials to these customers and also us gaining more repeat business from our current clients. We are also the only company that can provide end-to-end human challenge service. So this basically is divided into 3 subsections. So the first part, of course, is the manufacturing part. This is where we take a swab sample from an individual who has flu or RSV infection, and we use that to effectively grow a bank of virus, which we can use to basically challenge healthy volunteers. The second stage of this process is called the characterization study or effectively a dose-determining study, where we determine the right dose of the virus to give the symptom that we need to measure to be able to see a difference between a placebo and an active group. Once we have completed the characterization study, we then go out and conduct the full human challenge trial. And as Stephen mentioned, over the last couple of years, we've seen an increase in this full service conduct. And one point to remember is that once we finish the human challenge trial part of this component of this process, we are then free to use that challenge agent for other customers and other studies. And this is one of the key drivers for our expansion of portfolio. So we are continually adding new challenge agents. I think we added 3 or 4 last year. We are building some new ones this year. But we are basically waiting for demand from the market before we are going out and investing in new challenge agents. We are always renewing the challenges we have. When we add new challenge agent as we did with H1N1, for example, or flu B, these are very often funded by our clients who will provide the funding for manufacture [indiscernible] and the challenge trial. So FluCamp is a very important part of our provision of services, because FluCamp is the key brand we use to recruit healthy volunteers. Without the recruitment of these volunteers, we would not really have a good business model. Patient and volunteer recruitment is the single biggest reason why studies get postponed or canceled or even delayed. And for us, the fact that we have got such a strong team and a great system to measure the engagement of volunteers means that we are the leader in the U.K. with regards to how many people visit our website, how many people register on the website, how many people we screen and how it will go through, I think the trial [indiscernible]. You have to remember that conducting human challenge trial is a very strenuous exercise. The criteria for people qualifying into this challenge trial is very strict. In fact, we worked out that it's easier to get into the University of Oxford than getting into one of our clinical trials because of the strict criteria. And we've given you some breakdown of the various parameters we measure. So you can see the age group is fairly young people. We estimate the average age of the person going into quarantine is around 31 years of age. And you can see from the people who log in to our website, the gender breakdown is more or less 50-50. We also have made some changes with regards to the volunteer experience. So one of the things that we did was we bought a kitchen in-house. We're giving freshly prepared food to our volunteers. And as a result, we've seen significant improvements in the scores we're getting from the volunteers who have been through our quarantine process. The graph here shows you the number of leads we are generating. So these are people who are registering on the website, showing interest in our challenge trials. Now one -- as you can see, we have consistent level of people who are interested in our clinical trial, which is a great thing. But one of the other key factors we also shown this year that we've been able to reduce the cost to get this leads on board. And that's really good for us because it means that we can fulfill the quarantine at a lower cost and partly -- this is partly due to the improvements in our internal processes, but also in running concurrent trials using different challenge models. So effectively, we're able to screen an individual multiple times, so that increasing the chances of getting into one of clinical trial than just screening them for a single trial at a time. So I still mentioned Venn Life Sciences showed a 30% increase in revenue year-on-year, which is a great effort by that team. We also increased the head count. The great thing about the Venn Life Science model, of course, is that they have a high level of repeat business, up to 75% of the customers come back more business. And one of the other things that people sometimes forget is that Venn Life Sciences has an integral part in the conduct of human challenge trials. So the protocol writing, which is effectively a manual of how we run a challenge trial for a given drug is written by the Venn Life Sciences team. hVIVO in London then recruit the patients. We screen the patients here. We then put them into quarantine. Venn Life Sciences is responsible for collecting the data, for analyzing the data and producing the final clinical study report which goes to our customer. So both subsidiaries are working hand-in-hand in a very complementary manner to make sure we deliver a full service to our customers. We also opened up a very small office in Leiden last year. And the main reason behind this is to take advantage of the huge number of startup biotechs in that region. And for Venn Life Sciences, who are very, very good at providing stand-alone early clinical development services, to utilize that biotech part and gain more exposure and gain customers. And we've already seen some success in that. One of the key factors we have mentioned last time was that we had recruited some experts in ATMP with one step in medicinal products, such as cell and gene therapy consulting expertise. I'm pleased to say that now we have signed contracts in that field. So what are we doing as we move forward? So one of the key forward-looking indicators, of course, is the order book. At the end of 2023, our order book stood at -- our weighted order book stood at GBP 80 million. What we do is we take each award that we have, each contract we signed, and we sign a probability factor as to what is the probability that we will recognize the full value of that contract. And by that, we calculate, we aggregate the sum, and we communicate that value to you guys. And the reason why we do this is because clinical research is notoriously volatile, not so much for us, and I'll explain why. But generally speaking, in CROs, projects very often get delayed or postponed or even canceled. We make sure that we only communicate the numbers that we are comfortable with, with regards to the project being going to the finish. But one of the key differences between us as the CRO versus the standard CRO model is that we have a 15% to 20% upfront payment that is nonrefundable. So if the client was to cancel the project, then they will lose that upfront payment. And the key reason behind this is because when a client signs a contract with us, they are dedicated and allocated a space in the quality room. And of course, if they, for whatever reason, cancel the project, then they would basically mean that we will lose that space and we couldn't potentially allocate it to and the client, and that's what the cancellation fee is for. In addition to that, there is a postponement fee. So depending on how much notice we can and how long the postponement is, there's a postponement fee allocated to any delays from the client side. The order book, as you can see, as I mentioned earlier, goes well into 2025. 90% of this year is already contracted. You can see already, we're seeing a good number of quarters in '25, seeing order book recognition. And this is the longest visibility we've seen in the history of the company. So very pleased that our sales team has done an excellent job in making sure that the order book has continued to be fulfilled, even though we are recognizing more and more revenue. One of the other things I wanted to talk about really is to give you a little bit more breakout, more color on the order book. One of the things that I wanted to do is make sure that we have diversification in our order book. So we're not really relying on one project or one client for majority of work. So on the left-hand side, you can see the breakdown of the order book by customer. And you can see client A and client B are big pharma clients, which is great to see because we know they're much more stable and they get the study to finish. And third, in place here is Venn Consulting and they've got multiple clients in that. And then we have client D, which is a midsized pharma. And then, of course, we've got other pharma and biotech clients. In the middle, you see the same breakdown by projects. So you can see we've got multiple projects with same client. So the risk we have with regards to cancellation, the postponement is a lot less than it was maybe a couple of years ago, even maybe 18 months ago. We've added new clients. And on the right side, you can see we've added a new challenge agent. So the diversification of the order book by challenge agent is the best it's ever been. This is not to say that a client will cancel or all our clients will cancel all of the project with a certain challenge agent. But for us, we need to make sure that we diversify any risk. If there is a downturn in the demand for one particular challenge agent, we have worked in other challenge agents that we can recognize. But the rumors that we heard previously, for example, that -- or this could potentially be the end of the RSV market, have been proven to be untrue. We still see a large demand for RSV work, which is great to see. The other item I wanted to cover is how this order book is burned across the coming 12 months. So you can see each month how many volunteers we are contracted to deliver to all our clients. So you can see it's very healthy pipelines. But the key thing I want you to focus on is the fact that each bar chart here is a different color. This means that we are recruiting against multiple challenge agents each month. And this is really good because this is -- this means our conversion rate from the website leads into a healthy volunteer making into quarantine improves, because we can screen the same individual for influenza, H1N1, for H3N2, for example, and RSV at the same time. So if an individual comes in for screening and have failed to go into H1N1 trial because, for example, they may already have immunity against that virus, that variant, we can screen the same blood second time and the third time and hopefully get them into a clinical trial. But that's not to say it still is a very, very big job to get all of these healthy volunteers. I think we screened 17,000 people that came through our doors. We took their bloods last year to fulfill this proportional work. This is kind of a big task and is one of the key reasons, I believe, is also a hurdle for new competitors coming into the market. So one of the big milestones for us this year and the company is going to be our move to Canary Wharf. What we've done is we basically split this new facility built out into 2 phases. So Phase I is to build out the 50-bed quarantine floor. And I'm pleased to say this is now complete. The commissioning audit is happening next week. And if that is successful, we plan to have our first quarantine in Canary Wharf come towards the end of April. This again is ahead of time line to have the full 50 beds available for quarantine. And one of the key reasons for this is because we have one of our clients who wanted to accelerate their trial, and we've been able to accommodate them into the new facility. This facility will be at the end, CL3, a category level 3 pathogen compatible. It means that we could potentially run challenge trials in [indiscernible], for example as well as other category 3 pathogen, which I think is key for us. We have new updated rooms. As you can imagine, this is a fit for purpose building for human challenge trials. It is the world's largest challenge trial facility. So I think we all should be proud of the fact that the U.K. is the world's leader in conducting human challenge trials and both the largest facility in the world. As we go forward, each bedroom here is a single quarantine unit. It means that it gives us a much greater ability to run concurrent trials compared to the restrictions we have at the moment. It also brings our multiple builders under one roof. So long term, we're hoping, we know that this will give us a potential to realize up to [ GBP 90, GBP 95 ] in revenue and also improve our margin by bringing everyone together, on top of the automation initiatives that we have planned, which I will talk about in a second. The second phase involves the lower floor, which includes the laboratory and also the offices. That is planned to be ready by the end of June, with the CL3 lab to be planned by the end of July. And this is also going on track. Now this lab will be much bigger than what we currently have. Our current lab space really is just about enough for us to cater for the human challenge trial to run. Our goal is that we will market hLABs, which is our laboratory brand going forward, so we can conduct stand-alone nonchallenge trial lab assays. And this is one of the growth areas we expect to see as we move forward. We also will have an outpatient section within the Canary Wharf facility. This is -- the reason behind this is that we want to be able to run Phase II and Phase III outpatient clinical site studies. And this is one of the additional revenue streams we have planned for our growth to hit the GBP 100 million revenue target in 2028. I mentioned with regard to the automation. So we have 3 very large initiatives currently in different places -- different phases of implementation. The laboratory information management system or LIMS for short, Phase I and Phase II is complete. So we already have certain automation within our central lab, but we also complete all of this in [indiscernible] by the end of this year. Once the management system is already fully implemented, of course, there will always be ongoing continuous improvement, but we are using a system that will help us manage our volunteer, improve how we engage with the volunteers as well as get more leads in and convert a higher fraction into quarantine. Finally, the third initiative we will -- we are planning this year, let's complete the Phase I, will be the e-consent or e-source. This basically means that we will have all our medical health records of our individual in electronic format. This, of course, will be more efficient, and it will improve quality as well as speed. So all in all, these initiatives are all under the way, in some way and format. And we hope to realize full potential and the efficiencies of this come 2025. As a whole, the CRO market continues to grow. So you can see here by 2030, it has estimated the global CRO market will sit at $124 billion. And you can see in the chart that the number of trials that either planned or being conducted in the different pathogens, and you could potentially put in a challenge trial. Our model [ 4 ] continues to be consistent, if not a trend, of course, is growth. So this suits us well because this is the stage and these are advices we could potentially use a challenge trial model against. With regards to potential competitors, well, I talked about CEPI, for example, increasing investment in the development of human challenge trial modules. We have a small company established in Australia called Doherty Clinical Trials. They are looking to develop human challenge trial modules. The Dutch government has issued a grant of EUR 9.5 million to a couple of local nonprofit organizations to develop a challenge trial unit to prepare for the next pandemic. And I'm very pleased that all these is happening now because this basically raises the profile of human challenge trials. So I expect us to see an increase in market awareness. So we expect to get more requests coming in. And being the company that has done the most human challenge trials, has the patient recruitment database and the widest human challenge model portfolio, I believe we are in a really good place to take use and make use of this increase in the market. The growth drivers towards going 2028. So rest assured, we are a human challenge trial CRO, and we remain a human challenge trial CRO. This is our major niche. It's like the biggest advantage we have in the market, and the revenue continues to go up. So we will continue to do develop and market the challenge models we have. We are looking to expand and add more challenge agents into our portfolio. In addition, we will add more revenue to the revenue stream that talked about, so the hLAB, the clinical trial site services as well as voluntary repurposing. So all of these, of course, will increase our revenue. We expect this to get us to GBP 90 million in revenue coming 2028. And then we also have plan for M&A activity to add GBP 10 million in revenue in 2028. Now the M&A process is active now. We are looking for targets. But one of the key message I want to give to you is that if we don't do any M&A activity this year, it's not a failure, okay? Remember, we are in a niche service. We are the world leader. It's not like the other 5, 10, 20 challenge units that we can go and acquire. The key thing is to find the right target at the right price and the right fit. And for that, we may have to wait a little longer. But our goal is to bolster what we have and have bolt-on M&A assets, M&A targets to what we already provide. So just to reiterate, our guidance for 2024, we expect to hit GBP 62 million to try and sustain our EBITDA margin. We expect to see 1H weighting in this -- this year. This is driven by 2 factors. One, we did have a small cancellation with regards to our hMPV characterization study. We finished the manufacturing and recognize that revenue. We did not complete the characterization study and -- but we did get the cancelation fee for that. We've also been asked by our client, as I mentioned earlier, to accelerate one of the studies. So we are pushing that more into H1. And with the combination of both of those factors, we expect to see a higher H1 weighting compared to H2. But in the meantime, of course, there may be additional projects coming in that we may still be able to run later on this year. But we just want to kind of give a full transparency and give the metrics by today. We expect to see H1 weighting -- rather H2 weighting, which I think is also is not a bad thing and the fact that you can deliver and get to your target of GBP 62 million in time. We mentioned 90% of the revenue already contracted, and we have visibility going into 2025 and an order book of GBP 80 million. So in summary, I hope the numbers we have provided you today show that we have a robust model is definitely profitable. It's obviously sustainable and the margin continue to grow. And we will continue to build on that. I always have this [indiscernible] promise that we'll deliver and we'll continue in the same manner. The Canary Wharf facility is a live facility that will help us get to the next level, and that will be a 50-bed. As I mentioned, the larger facility of its kind in the world, and we will be adding new challenge agents. GBP 62 million of revenue already guided for. And we also have an annual dividend policy announced. And just remember, the main reason for this isn't to have large amounts of dividend payout. This is a nominal or a modest dividend that we are paying out to attract new institutional investors. Thank you very much for your attention.

Fantastic Mo, Stephen. Thank you very much indeed for the presentation. [Operator Instructions] I'd like to remind you the recording of the presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. Mo and Stephen, as you can see, had a number of questions that have come through, no surprises always. So thank you to all the investors that have submitted those. If I could just hand over to you just to start at the top and read out those questions are appropriate to do so, and I'll pick up at the end.

Thank you. So yes, we have a lot of questions. Thank you for your interest, and thank you for staying with us into this evening. So I'll shoot through this questions and answer as many as I can between myself and Stephen. The first one is, is there any program to monetize the noncore assets? So as I mentioned before, the noncore assets are really an upside. For us, our current focus is in developing and increasing the human challenge trial market. So not only the portfolio of challenge agents we have, but also adding new challenge agents. And that's our key goal. We are in conversations with regards to the noncore assets. But when that happens, that does come to fruition. But of course, that will be an upside for everyone. Is there any latitude for expanding our human challenge trial offerings into non-infection diseases? For example, drugs for autoimmune diseases like psoriasis, where continuous monitoring of inflammatory markets will be desirable, combined with controlled volunteer diet and activities. This is a question for somebody who knows the subject really well. So we have to be careful because we do want to diversify, absolutely. But core business really is providing human challenge trials for respiratory and infectious disease. And our team have the experience and the expertise in that. So that's our core goal. And that's what we want to do. We haven't really covered all the challenge model that we can do. So for example, Zika or dengue or whooping cough, there's so many out there that we haven't really worked on. I mean, COVID is another example. So I think that's our core business. That's what we are marketing aggressively at the moment. But this is something potentially to add in the long term. Of course, there are other things like allergen testing or for example, asthma allergy testing. So there's lots of different aspects of human challenge trials that are conducted globally, but we really haven't focused on the autoimmune at the moment. I think this one is for you, Stephen. What is the right tax rate to model? Why do you recognize R&D tax credit and other operating income and not as a contra account in the tax line?

So the answer to the first question is most of our profits are in the U.K., so we'll be subject to corporate tax -- U.K. corporate tax rates. So that's the rate to pretty much use in your modeling. Why do we recognize R&D tax credits? That's more of a historical thing. That's way I've done. I have seen it done both ways. I've seen a number of reports where it is other income and other places where people have it within the tax line. I quite like it separated because it highlights 2 different things. You're paying normal tax, it goes on the tax line and R&D taxes is something additional that you get from the government. And it is a cash received. So whereas the other one is a cash payment. So I quite like them separated, but there are 2 ways of seeing it around and it's historical and at this stage, I kind of think of leaving it that way.

Thank you very much. Can you give us an insight -- any insight into why there is a H1 weighting this year and how the order backlog as well? I hope I've answered that question during the presentation. So as I mentioned, the hMPV characterization study as well as acceleration of another life project coming in earlier. The order backlog, again, hopefully, you've see in the chart. We've given you a quarter-by-quarter breakdown of when we expect the backlog to be recognized into revenue. With the cancellation of the hMPV characterization, are there other candidate companies looking at developing a vaccine that could then take this further? So yes, I mean -- so I'm not sure if I answer this correctly. So we have a hMPV [indiscernible] that's ready to go into a characterization study. So we have that and we hold the IP on that. So we are currently looking for companies and partners who are looking to develop a vaccine or antiviral against hMPV. And once we have that, of course, we will then work with them to characterize this hMPV virus, find the right dose and then conduct a challenge trial. So this is basically -- is a new challenge agent, a new challenge model that we will look to develop, adding on to the portfolio of the challenge agents we already have. I hope I answered that question appropriately. How do you guard against the risk that someone may fall seriously ill within your facility and lead to negative headline risk to the company? What safeguards can you put in place? It's a really good question. So in clinical research, of course, there is a certain level of risk. So we have liability insurance coverage across a number of factors. So for example, for error [ submission ], for any side effects of the challenge agents or even the investigational drug that we are testing. Our screening process is very strict. As I mentioned, we will screen out over 99% of the people who register on our website. So it's very strict. On top of that, we don't do any first in human clinical trials. All the trials we run, that drug has really been in humans in a Phase I setting before it gets to the Phase II human challenge trial setting. On top of that, we've had over 4,500 healthy volunteers go through our quarantine facility and have inoculated with different challenge agents with no severe safety issues. Finally, just to reiterate maybe, every challenge agent we have manufactured [indiscernible] manufacture is the wrong word, to be honest. But effectively, the seed, the virus comes from a person who has got that infection naturally. So we're basically growing that far as somebody has COVID-19. So it's not something that we use or mutate in any way. I think that's key. So you can imagine for RSV or influenza, this is out there in the field. We take it from a laboratory or a hospital, and we grow that, we purify it, we sequence it to make sure that it's the right strain of the virus we're looking for. We characterize it to some with a low dose, and we increase the dose to make sure we get the right level of symptoms before we use it in a challenge trial. So hopefully that gives you some reassurance as to all the steps we undertake before we actually use it in a challenge trial. How many of the top 10 pharmaceutical giants are using [indiscernible]? So around 4 that we know of. I don't believe there is a big pharma that is running human challenge trial with a third provider, at least in the respiratory and ID space that we are in. So we have full access to the market. And in fact, almost every big pharma client we have has come back to us for multiple challenge trials. So we've had repeat business from all of our big pharma clients. Any news on new models such as C.difficile, Norovirus, strep pneumonia, dengue, Chikungunya, Zika? Excellent question. So you've really done a good job here in identifying the potential challenge model we can look forward to. So as for example, Norovirus challenge trials have been run in the U.S. Strep 2, dengue has also been done in the U.S., even Zika challenge trial has been done in U.K. academic site -- sorry, U.S. academic site. And that's one of the important point, though. We rarely invent new challenge models. This challenge module -- models originate in an academic site where academics are conducting this trial on a small scale to study the scientific progression of viral infection. And we basically take that model and we basically big size it, and we commercialize it and to help develop our clients' products. But one of the key things we have changed not so long ago is that we're really looking for our customers to come and partner with us in the development of new challenge model. So you can see from flu B, for H1N1, even for hMPV, we had a client who was interested in that challenge model before we invested in to develop that further. And we continue to seek customers and we give them the opportunity to discuss the different models that are available, including these ones. And as soon as we have a client interested, we will, of course, help develop this challenge trial. Will we ever see a commercial COVID human challenge trial? Any companies considering this now? So as you know, we have run a COVID challenge trial that was sponsored by the U.K. government. But since then, of course, no for the COVID work. None of our revenue this year at the moment is estimated to come from COVID trials and order book, there's 0 COVID related to work. So we really are a non-COVID [indiscernible]. But I do think as we move forward, there will be more interest in COVID challenge trials. Especially as we move into the next generation of vaccines, which, for example, oral vaccines, or also multivalent or combo vaccine, which work against more than one virus. And these are something -- some areas of potential growth for us as a company focusing on conducting human challenge trials. One for you, Stephen. I think this one, stripping out the Venn Consulting acquisition and the Canary Wharf cost, reimburse customers, what would organic revenue growth have been?

Right. So Venn Consulting accounts for about 12%, 13% of revenue. And so -- and it grew over 30%. We're not giving away what the Canary Wharf reimbursement from our customers has been. But the underlying margin -- organic growth is pretty close to the 16% that we disclosed overall for the business. It probably is 1% or 2% lower than that.

Thank you. Okay. There's a lot of questions, got 5 minutes left, I'm going to answer this in a fast way. So hopefully, you guys can keep up. From here on, should we look at hVIVO as a growth company or a stable dividend-paying firm? A growth company, although we will be paying a nominal or a modest dividend. Do you have statistics to show how concentrated your diversified, is your revenue by client or geography? Hopefully, you've seen that from our breakdown of the order book that I showed on one of the slides. Generally speaking, how many healthy volunteers take part in one of your challenge trial? And how long does a challenge section of the trials last? So the size vary depending on the reasons why the client wants to do a challenge trial. So at the minimum, I would say, it's around 60, 80, but it can go up to 2 under healthy volunteers. The actual quarantine part. So each -- so depending on the virus, the volunteers in the quarantine between 10 to 15 days, but the overall -- the kind of the beginning of the quarantine phase in the end typically takes about 2 to 3 months depending on the size of the project. But of course, for bigger studies, it could take longer than that. You have screened 17,000 people last year for trial participation. Correct. How many of those 17,000 turned out to be less than [Technical Difficulty] I would say, and maybe a little bit more than that, less than 10%, definitely. Are volunteers more than once -- are volunteers used more than once? So typically not. The only way we can use more than one volunteer is they can come back after 6 months and take part in a challenge trial with the different virus, not the same virus. Can you give a bit more detail on the financing of the new Canary Wharf facility? Not more than what we have already shared because we have to basically abide by our clients' confidentiality. We can't give out those numbers. Is there an advertising budget? Of course, there is for volunteer recruitment. You say you have 50-bed capacity. Do you have plans if you go and exceed? Yes. So Canary Wharf has the capacity to add 20 more beds, so we can go up to 20 beds -- sorry, up to 70 beds in total in Canary Wharf. To what extent do you view yourself as a possible acquisition target? That's a question that with an unknown answer, to be honest. You potentially have to ask a peer company or other global CROs for that. And our goal basically is to continue to grow the company and continue to hit our targets. Why Canary Wharf surely less prosperous area would attract a greater number of volunteers? So why Canary Wharf? Economically, the prime reason, to be honest, I'm not sure the same thing has add to that. A great place to be. But economically, it made sense after we assess different locations. And for the location of the volunteers, so we actually have a U.K.-wide reach. So volunteers come from all over the country. And we will continue to have the screening facility in Manchester, we will continue to have a screen study here in East London. And the only people will go into Canary Wharf would be the one that qualify the screening process and go there. So it's not an issue from that point of view. In view of the excellent cash position, would you consider the payment of a special dividend later this year? Not at the moment. Thank you, and welcome to everyone at hVIVO. Thank you for that. How was the dividend amount determined as it seems rather small, given the company's cash filed? Do you want to take it, Stephen?

Sure. I think I alluded to in the presentation. We looked at having been conservative to keep a robust amount of cash on the balance sheet. We looked at 6x cover of adjusted basic EPS. And as that grows, so will the dividend, and we really are looking to retain cash on the balance sheet for mergers and acquisition activity.

Thank you. With the new facility coming online earlier than planned, will you be looking to run studies at both facilities? Absolutely. And this is one of the reason why we think H1 will have a slightly higher weighting than the H2. So a good question. I hope would that make sense. Why does the company attend so many conferences? Is this the only way of generating leads? It's one of the ways of generating leads. Of course, it is. I was at the World [indiscernible] Congress last week, and we had a presentation that we gave out on human challenge trials. I mean, the key goal for us really is to raise the awareness. That's the key thing. We know there's a bigger market than we're currently aware of. So the bigger the platform for us to talk about human challenge trials, the more. You'd be surprised that even now at our booth [indiscernible], we have companies coming in asking us about what the human challenge trial is. So that work will continue to happen. And as I mentioned, people like CEPI, WHO, Wellcome Trust and other small academic sites are helping us in getting the message out there. Thank you for your questions. I think we've gone one past hour. So I'd like to close the question section now.

Fantastic. Mo, Stephen, thank you indeed for covering so many questions, and thank you for everyone for submitting those. Before redirecting the investors to provide you their feedback to, particularly important. Mo, can I just ask you for a few closing comments before we wrap up.

Thank you for that. Well, again, thank you for your time today. Hopefully, this is a good positive update for you. No kind of surprises. The only kind of surprise, I guess, would be that we have increased at a higher EBITDA margin than we have previously communicated and the fact that we've been able to get Canary Wharf up and running earlier than planned. We will stand by our guidance of GBP 62 million for this year and GBP 100 million goal coming 2028. So hopefully, you've seen over the last couple of years that we've basically delivered on the numbers that we communicate. Sometimes you may feel these numbers are conservative, but we communicate them as we see them, and hopefully, we'll continue to beat that number. So thank you for your interest and for your holdings for those of you are holders and for those of you who are not, what are you waiting for, really. Again, thank you for your time. Really pleased to be talking to you. And hopefully, we will be talking to you next time from the world's largest quarantine unit in the world. Thank you.

Fantastic. Mo, Stephen, thanks indeed for updating investors today. [Operator Instructions] On behalf of the management team of hVIVO plc, we'd like to thank you for attending today's presentation, and good evening to you all.