Member Info for Greend100

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+

Bookbuild closed by 8am tomorrow morning, all done and dusted I assume…

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

Dear oh dear…70 staff…what are they all doing…
No pipeline of note, targeting low margin manufacture, cash burn, likely raise needed in the not too distant.
Most likely scenario would be for someone with bigger pockets to pick up the business given investment on the operational side imv…only positive I can see at the moment…

Just reading this part…
“In vivo, nasal Foralumab did not modulate CD3 from the T cell surface at any dose.”
Would value the views of others, scientific papers never easy to read, but my inference was that while in vivo, it showed a good safety profile (a first), they only managed to elicit a positive immunological response in vitro, not in vivo?

Just a bit of comparison analysis on Hvivo vs Ergomed….

On revenue, while Hvivo doing 20%+ growth this FY, but a more modest 10% next year (probably understated) Hvivo initially seemed weak when compared to the 37% of Ergomed…
Digging into that though…3 acquisitions from Ergomed in the last 2 years…first 1 below impacting last years accounts…
1. Medsource acquired for $25mn in December ‘20. $19m turnover and $1.3m EBITDA.
2. Ashfield Pharmacovigilance acquired Jan 20 $11m turnover, $1m EBITDA. Acquired for $10mn cash… interesting ratio in buy price to turnover and EBITDA, especially as US based.
3. Adamas (UK based) acquired for £25m in Feb 22. £8.5m turnover, £1.8m EBITDA.

For Ergomed’s FY21 results, the Medsource figures should be newly added so their 37% growth drops to c 18% y-o-y…far more comparable with Hvivo at an organic level.

One point of note here…has been talk of the EBIT % for Orph at 12-14% currently…the EBITDA of two of those Ergomed acquisitions are 7% and 9% so Orph not exactly low…aspirations of 25%+ aren’t realistic imv.(recognising developing businesses will take a while to get past the capital intensity requirements of early growth phase)

Adamas, I’ve excluded, as they are in consulting so not comparable to CRO service).

Hoping Hvivo will do something productive with some of that cash pile in the way Ergomed have…!

In terms of other metrics between Hvivo and Ergomed…EBITDA = 14% vs 20% respectively.

Differing revenue levels will primary drive the difference here - Scale would lead to greater efficiency so should start to align as Hvivo revenues grow - SLT costs constant, flu camp improves timing of studies and reduces demand for agency staff, chim agent dev costs recovered across multiple studies aswell as improvements in business model e.g. malaria chim has reduced inpatient requirement, reuse of screened patients for other third party studies etc…)

One other interesting efficiency factor…Ergomed Rev/employee is c £100k…Hvivo is closer to £200k/employee… I assume due to the price premium in challenge studies relative to wider CRO activities…

Last one of note…level of cash held:

Hvivo £20mn (ish) = 40% of turnover
Ergomed £31mn = 26% of turnover

All the above suggests there should be a closer alignment between the two than the disparity of the respective market caps currently : Hvivo = £80mn, Ergomed = £660mn…

P/E suggests significant upside for Orph…

Ergomed = 50
Hvivo (based on FY22 expected) = 18
Hvivo (based on FY23 forecast and current SP) = 12

(did this a couple of days ago before sp started to move)

Results will be woeful…think that’s a given…not sure how they’ll treat the gov payment as resolved post accounting period.
Have no expectations on the existing cookie crumbs mentioned in previous RNS’s… but they’ve got decent working capital to start to drive some momentum, forward looking statement is everything…some positive noises and sp moves quickly, without that, yep…could see <5p, albeit briefly I suspect.

They’ve just added an additional 20 beds, and based on what they did at Whitechapel can stand up a new site for sub £2mn (inc yr 1 rent), so have the funds to expand if required.
Last RNS contract timing will more likely be down to client timescales than Hvivo capacity. If they could land 6 like that a year (had 10 contract wins last year), add in £8mn for Venn and you’re around £85-£90mn…EBITDA would be up to c. £10-£11mn and value would then be c 2.5-3x current SP value…not a giant leap by any means (and if anything eventually happens with DiM, Imutex, Prep…there’s a bonus to the core business value).

I think the blarney piece isn’t that relevant…most healthcare stocks have taken a worse trajectory than Orph…Trellus 70p to 11p….Renalytix 1100p to 50p…etc… Orph for 48p to 13p (adding in the 3p for Polb), not a horror show in comparison…
I think the delays on Prep and DiM haven’t helped…expectation of get rich quick rather than the slower burn of a stable CRO not as appealing to some…
As of FY21 it was only breakeven as a business, so still needed to prove it could deliver strong financial metrics…if this FY is £50mn (seems nailed on), £6mn EBITDA and £3mn EBIT then there is a base to work off. £55mn next year seems too modest to me…and that should bring about c £6mn EBIT…question for me is the growth aspiration needs to be greater. Ergomed did 35%+ last FY on 20% EBIT, which is probably why it has a 40+ PE ratio rather than the c15 of Hvivo.
While capacity isn’t an issue at the moment…make it an issue…bring in additional business development heads, look at inorganic targets…having the cash levels they hold, good place to be in terms of acquisition potential…
Financials are starting to look good, deliver on FY22 and it’s looking cheap…but think they need a more aggressive growth ambition…

Folk said that after Christmas when there was a 3 month gap in contract signings…signed 7 contracts worth £65mn since…
10 contracts worth > £85mn in last 12 months (exc Venn)…3 years ago they were doing 2 contracts a year…think it’s moving in the right direction…

I think the Vatic situation has been on the cards a while…
Results will be poor (think that’s well factored in), future trading update will be the interesting piece…lot of investment in operations but what is in pipeline as the business recovers from the vivid debacle and what does burn rate look like post efficiencies this FY…
Given both CY and CH have been involved in ABDX a long while, they’ve continued to purchase shares…if we just take Chris Yates…Finance background…economist by training…best part of 400k shares purchased in September…he clearly has confidence in the business direction…just need to see that morph into results now…

My recollection on Accustem…
It’s not a medical device, it’s effectively a piece of IP based around an assay which is more effective in determining the most
effective clinical path for certain types of breast cancer patients.
It’s been piloted in Turin, but needs to be commercialised hence the funding requirement (not for medical equipment, clinical drug development).
It was something along the lines of testing 20 genetic markers - benefit is that drugs can be used in a more targeted way (better for patient) and more cost effective for the healthcare provider.
They also had a further development (StemPrinter the original) called Spare which was in development and meant to be more effective.
Main question for me at the time was proof point in effectiveness / peer reviews, can’t understand why it’s taken so long if no clinical development path.
Also recall personal interest for GC having lost a partner to breast cancer.

I think there’s a difference with BBI, they were turning over £50mn and EBITDA around 15-20mn, ABDX have a long way to go…
Have they got the people and capabilities, definitely, can they get to the figures in your post, yes, eventually, but a long way to go.
Looking at some of the names arriving on this board, some folks are going to get stung by the rhetoric if they haven’t done their research. The company has struggled for cash, had to lay folk off, and got battered by the covid “opportunities”. I suspect SP will drop later this afternoon, and fall next week after the spike, so be wary - however, do your research and if happy for a steadier climb, abdx is one that should fair well in the coming months imv as they start to convert potential into results imv.