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They mention 17% EBITDA, they’re not going to go to EBIT until after audit I expect.
Exceptions/DA have typically been £2.5-£3mn, so net profit should be around £6mn. Think that’s a significant improvement on last year (£200k from memory).
Superb results on all metrics…
- EBITDA at > 17% puts them 12 months ahead of broker forecasts. Finncap had them at this level end of F23.
- Cash level huge, dividend will attract some new investors, but still leaves cash for acquisition.
- Suspect above is linked to SP improvement, other larger CROs must be looking at it - niche growing profitable market you can’t address organically.
Share the same view Shandy…
Previous years have been lumpy between H1 and H2 so think it’s just a timing thing (can’t be that difficult to do business planning as primarily assessing 10-12 contracts only - a little flippant on my part).
FY21 was £22mn H1 and £15mn H2, so can be varied and fully get why they want to remove that lumpiness…increased order book, broadening services through Hlab and ideally more chunky run rate business from Venn will help with that.
They called out c£50mn at the Capital Markets Day (2nd Nov), and it was the “Vox markets 2022 in Review” on the 20th Dec where MK stated “aligned to still deliver £50mn in revenue…” so should be thereabouts along with decent profitability - fundamentally changes the financial metrics/ratios analysts see along with making acquisition business cases more credible - in my view they’ll be acquired this FY.
While helpful to some degree, would still like more detailed info from them - no idea on rev forecast, costs of operation, cash burn to get up to capacity, or scale of development if only using profit from sales etc…
Is £17mn m cap good value - no idea… think it has potential but would like more data from them - q and a through investormeet or similar would be useful…
Interesting week coming up!!
At the Capital Markets Day (2nd Nov), MK stated c£50mn for FY22, and then only 3 weeks ago, re-iterated £50mn rev for this year, so must be nailed on. Assuming 14% EBITDA (their number) gives us £7mn, which aligns with Finncap view for FY22.
If DA costs are consistent with last year at £2.5-£3m would expect an EBIT of £4mn. (noting it’s a trading update rather than results so probably won’t guide on net margin this close to year end).
Gives some nice potential headline stats though for Weds morning…
? Revenue up 28%
? EBITDA up 140%
? EBIT up over 500%
Key question then turns to forward looking period…
Hvivo and FInncap previously calling £55mn, Liberum £60mn for FY23. Think £55mn will be a disappointment given 85%+ booked, and only in Jan still.
(Liberums note 4th Jan stated 90% visibility and only 4 days in at that point)
Personally, I think £60mn is a given, it’s just whether they are confident to call it out or not - only takes one trial to be delayed (for whatever reason) to put it in jeopardy so suspect they’ll forecast lower with the aim of exceeding it in a further trading update later in the year)
In terms of wider narrative, we know MK won’t discuss non-core assets (already confirmed by IR), but would hope some SP momentum can be achieved off any of the following:
1. Service expansion - already seeing this but would be useful if there’s a story around potential inorganic growth here.
2. US expansion / listing
3. Vaxart - latest position / Omicron CS update
At that point, still seems good value. On FY23…PE ratio would only be c x15 on forward looking view (exc non core assets), whereas the likes of Icon and Ergomed are in the x40-50 bracket.
Anyway, just imho…
I’m expecting an Imutex RNS in H1 - it was 30th Sept since last update, can only be one of two scenarios… imv…and will only be a “what’s happening next” RNS…
1) Going to do a ph2a for multivalency - don’t see Hvivo being involved in this case, (least preferred scenario)
2) In vitro study was enough to back up the 2018 ph2b and they can progress to ph3 - but Hvivo sell out before (or dilution of share if funding secured for a ph3 study and Hvivo can’t get a buyer) - don’t see Hvivo helping to fund it, and if investment for a ph3 is secured, opportunity for Hvivo to sell out?
Would ideally see it sold, but an active ph3 would put Imutex in the £200mn bracket (albeit after securing £50mn to run a ph3) just imho…
Good post Dubliner - same mindset as your last paragraph.
I did ask the question to investor relations last week (not just about DiM, also Prep and Imutex) - didn’t get a reply, but chased again earlier today - will advise if I get an insightful response.
Just exploring ValiRx a little more - does appear on the surface to be undervalued given the number of assets and two of these being through ph1…would have expected MC to be £50-£100mn…
I couldn’t find any info on the following, seems some informed posters here, so hoping you may be able to fill the gaps please?
1) Cathy Tralau-Stewart seems to have been acting CSO for a while, any ideas as to why it hasn’t been made permanent as yet?
2) TheoremRX - initially looked like funding was hoping to be secured end of FY21 and then Q1’22, seems to be a holding pattern at the minute, any views on likelihood of this coming to fruition? Seem to be seeing more acquisitions and funding in this sector in recent weeks so seeing if there had been any movement / expectations for progress here?
Cheers!
I think to get a fundraise away 15% below current price is pretty good in this market (seen some real horror shows in the last quarter)..,
Think you can question credibility / honesty, whether it’s a useful use of funds and whether if you are going to raise, should they have looked to go further so it doesn’t come round again any time soon…(but assuming market conditions improve, just go in for what you need now to avoid unnecessary dilution) but an extra £1.5mn in the coffers at 11p doesn’t seem bad to me…
Valid point RB…
I think this year is critical on the growth strategy…last couple of years i think they’ve had enough to think about (cost improvement, covid, flucamp, capacity etc…), would like to think with a deal maker like CF in the background they would be looking at opportunities now…having said that didn’t get the impression from the Capital Markets Day it was being actively addressed…
(Mo’s background being wider CRO - would hope he’s looking at breadth of offering beyond just challenge studies - reduces the lumpiness issues he’s mentioned aswell)
Just to play devils advocate…
Ergomed turnover c 2.5x Hvivo, EBITDA difference will be similar based on FY23 forecast. They’ve applied an aggressive inorganic growth strategy typically picking off compatible businesses for c £10mn a time…
£650mn market cap, c 8x Hvivo with just a 2-3x greater turnover/EBITDA
PV ratio c 3x hvivo’s.
Part CRO, part PV…decent US footprint…
Think Hvivo cash getting to a level where they could start looking at acquisitions - think the SP benefit would be greater looking at investing in broader CRO activities rather than giving a 0.5p dividend…imv…
With the RNS with Vaxart being end of Jun ‘22 and challenge agent manufacture taking c 4 months you would think an agent would be available for characterisation study some time around now. If characterisation is c 6 months including results / review, my punt would be end of Q2 to announce a full omicron challenge study. You would think other pharma clients will be aligned for similar studies, whether omicron in isolation or in conjunction with rsv/flu at that point?
I don’t get the delusions of grandeur piece…they are legacy assets (in case of Imutex, from 2016), which Hvivo are seeking to sell…there’s no aspiration to stay in clinical development as far as I can tell.
As mentioned previously, the Flu-v work in 2022 made sense to make the asset more attractive for investment, and would expect Hvivo to seek to sell at a sensible price.
The in vitro study was significant because it investigated the activity of FLU-v against five different influenza strains, which is pertinent to its intended use as a broad-spectrum influenza vaccine. The Phase 2b study and human challenge study back in 2018 showed that FLU-v was safe, able to elicit an immune response and reduce mild to moderate influenza symptoms, and was ph3 ready, but the candidate still required examination against a wider set of influenza strains to justify the universal tag – the in vitro study was a precursor to studying FLU-v’s broad spectrum capabilities in a wider in vivo study…whether they can go straight to a ph3 or need another ph2 to establish the universal proof point remains to be seen, either way I doubt it will be with Hvivo.
…big difference between company and share performance…on the former, think they’ve made significant strides…how and when that translates to share price who knows…
Personally think trading update in Jan is critical for triggering corporate investors and M&A potential…
Parking non core assets and just looking at Hvivo…biggest improvement for me this year is the flu camp numbers…they’ve nailed that which sets them up going forward…
- doubled in 3 years, makes trial timings predictable, operations more efficient and additional revenue stream for non-challenge studies.
- Think the figure bandied around was 80% of trials delay/fail due to recruitment issues…0% in Hvivos case, and shows good foresight if you are to continue to grow the business.
On financials looks like £50mn is nailed on, c£7mn EBITDA and £4mn EBIT. EV multiples increasing to c 20x (although skewed with US valuations), but given forward view for FY23 would see EBITDA of c£9mn (not far off a given, with 80% of revenue contracted) start to build up a decent valuation. Would like to see a step change and push for a higher growth figure for FY23, but organic growth consistent with leading CRO players like Ergomed. If they can keep growing the cash pile, inorganic growth comes into play, personally think that’s 12 months away (unless Hvivo is bought sooner).
Interesting soundbite in a CRO M&A research paper I was reading last week…
“…businesses with earnings before interest, taxes, depreciation, and amortisation (EBITDA) of GBP5m are contenders for potential acquisitions. “Companies smaller than this may struggle if they don’t have the firepower, unless they are backed by financial investors”
Given turnaround, should start to see growing interest in H1 next year…comes back to trading update again
On spin offs, Prep will just be announced at some point, can’t imagine it will be telegraphed…a year since it last nearly went and market is showing some signs of improvement - not sure it can be used as an excuse going into FY23.
Imutex has shown some positive news this year (see Sept RNS) - progression shows alignment between Hvivo and which was a previous concern, but typical of pharma industry, moves slowly unfortunately - personal view is Imutex assets worth c £40mn to Hvivo…realising it though is a different matter…
DiM frustrates - don’t buy you need to spin out to launch it, no reason it couldn’t be done in-house. Personally think it’s harder to do than initially thought and hoping Martin Gouldstone NED appointment helps progress quicker. Interesting BB was referencing value of it in the Poolbeg Investor presentation so assume still on the table…
Cash burn seems odd - either factoring in contract wins or cash receipts from gov… must still be burning around £300-400k a month given employee numbers etc…
All for an LTIP, but 7p seems ridiculously low (not sure if terms state length of time above that level, as spikes to that on a sniff of good news), would have rather seen more significant award but at 25p+
Given they have £4mn (ish) in cash, last years headcount of 150 to 130 to now 70, would suggest annual administrative expenses of £6.6mn last FY would be £4mn ish this year…(assume administrative costs include rates, energy etc….), so a max 9-12 months before they run out of cash…and assume they’d need to put wheels in motion for new funding from Spring.
However…they talk about pipeline in the annual report…
- We have seen an encouraging uplift in contract development opportunities across a range of areas and we are expanding our contract development team to support this increase in activity.
- We believe contract development will become a significant driver of revenue growth in the short-term and beyond, and will also drive increased opportunities for technical transfer and manufacturing over time.
Technical transfer is the process of optimising and scaling up the production processes of a developed assay for manufacture and the production of three batches to allow validation and verification of assay performance. We currently have two active technical transfers that should be complete in H1 2023. We stopped one transfer due to the instability of the product’s manufacturing process (due to issues with the functioning of assay as provided to us by our customer).
- We have a number of additional transfer opportunities within our pipeline which we are looking to bring in during the remainder of calendar year 2022 and in 2023.
- We have continued during 2022 to manufacture lateral flow tests for customers across human health, animal health, plant health and environmental testing. A key objective is to grow our manufacturing base through successful transition of tests into manufacture and importantly these will build “annuity income” to underpin future revenues.
It’s a punt..,can see argument both sides on this one…uplift in activity vs cash burn…heads or tails?
Personnel, both direct employees and advisory board seem very credible…been a long wait, but looks quite promising…
I think mRNA will come to the fore, but a while yet, still pre-clinical and room for a number of people at the party anyway…otherwise wouldn’t have multiple rsv vaccine devs etc…
I think Imutex is progressing better than folk think…While it is phase 3 ready, the phase 2b trial back in 2018, while proving efficacy, was only focussed on two strains. So while the science would suggest it should be multivalent, it needed the proof point before you spend £50-100mn on the field study (and to get the buy in from investors to do so!).
The in vitro study rns at the end of September didn’t get the recognition it warranted in my view. It is absolutely fundamental to securing investment for a phase 3 (q is whether they want/need a ph2 proof point first or having passed ph2 previously they jump to ph3).
It proved efficacy against 5 strains…and both A and B strains…
A-H3N2
A-H1N1
A-H5N1
A-H7N9
B-Yamagata
Proof point being that by Flu-V targeting the stem rather than the head it achieves effectiveness beyond other single strain effective developments. (which target the head which is prone to mutation)
Key part of this for me is that the research group in September ‘22 all featured in the 2018 study, and involved both Gregory Stoloff (Seek) and Olga Pleguizuelos (Conserv) - good to know they’re actively working on it rather than it being sat on the shelf as some feared!
I did seek confirmation from IR who advised the following:
The in vitro study was significant because it investigated the activity of FLU-v against five different influenza strains, which is pertinent to its intended use as a broad-spectrum influenza vaccine. The Phase 2b study and human challenge study showed that FLU-v was safe, able to elicit an immune response and reduce mild to moderate influenza symptoms, but the candidate still requires examination against a wider set of influenza strains – this in vitro study was a precursor to studying FLU-v’s broad spectrum capabilities in a wider in vivo study.
Whether this now progresses straight to a phase 3 - following on from the phase 2b completed in 2018 - or seek to prove the broad spectrum capabilities in a 2a/b study first remains to be seen. Either way, major step change from where it’s been in the last couple of years. Personally think that was solely down to covid (lack of flu cases, covid focus) but now seeing it moving forward again.
At this point, it’s value stand alone would be £60-100mn, albeit Hvivo having 49% of that…
However, given ConserV is a “late stage Vaccine Development company” which aligns with Kimbell Duncan’s background, and Hvivo aren’t any type of vaccine development company (but their spin off Poolbeg’s mantra is to “bring innovative infectious disease products through to inflection point”), I would have thought this will spin out sooner rather than later, personal punt…suspect an in-house 2a challenge study will come first…with the value proof point on multivalency to meet said infl