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My thanks too Slimbo, very interesting notes.
Rare to see professional level notes here. Thank you
Thanks Slimbo79. Great post. Informative & troll-free!
I went to the UK Investor Show today, where OO had a booth, and managed to have 5-10 mins chatting to Mo, who I thought came across well. I didn't ask anything I thought he wouldn't be able to provide an answer on (ie price sensitive), with the key points as follows:
- he recognises the need to under promise and over deliver in order to gain the trust of institutional investors in particular, and said that this is very much his default style as a scientist
- I shared a chart Cathal presented back in Sept 2020 showing the revenue and cost dynamics of challenge trials, indicating the potential for high gross margins at high capacity utilisation, and he agreed that's definitely the case (I've seen people on twitter referring to OO as a 20% gross margin business, and whilst that may have been the case in certain years, the high operational gearing of the facility means it should be much higher than that going forward, and Mo said there'd be no point bothering with the business if it was going to stay at 20% GM)
- in the past they've just said yes to whatever date clients wanted to start trials, but they'll now only commit to starting trials in a certain month / quarter, giving them the ability to dovetail with other trials thus increasing the utilisation rate (and thereby the gross margin)
- he confirmed my thought that the incremental overhead requirement of the new services (eg the recent phase II field study) is relatively small, so they're very high incremental margin
- he said they haven't been that proactive on sales in the past, more reactive, and that's changing
- as part of that, they're speaking to clients about their longer-term plans for the first time, to hopefully extend the order book years ahead, which should further improve their ability to maximise capacity utilisation (and could presumably underwrite any further capacity utilisation [my interpretation rather than something Mo said])
- there's still a big education process to do about the merits of challenge studies, but awareness is obviously increasing all the time, and in some cases investors are insisting that the companies they invest in do them, as a quick / relatively cheap way of assessing efficacy etc
- even though they pay travel costs for people travelling to London for screening, having screening facilities in Manchester too makes a big difference because people might previously have had to take a couple of days off to travel down to London
- some interesting anecdotes as to why people choose to do challenge studies - the cash if obviously a big driver, but some people just want a break from partners / kids :)
That's all I asked about - nothing about spin-offs etc, as they're just the icing on the cake from my perspective
Might not be anything new there, but hopefully vaguely useful / interesting to some anyway.
Also listened in on a chat Jeremy was having on the Poolbeg stand. Again came across well. Said everything's going to plan, other than the sh