RE: Spin off11 Jan 2022 11:15
Pulled this together…hopefully below gives a measured view to newcomers…
Orph positives…
- Growing market opportunity. Ignoring market size hyperbole, at ground level, increasing pipeline, contract size and value.
- While possibly tarred as Covid play, lot of growth in Influenza space, which suggests as Covid goes endemic, a significant growth opportunity there from the private sector.
- Only company who has run a covid challenge study, in only country that has run a covid challenge study.
- If influenza generates c £25mn this FY, you’d expect an endemic Covid CHIM to do at least that as incremental business…(markets might not see the benefit here but an endemic Covid will be hugely beneficial to Orph)
- Endemic progression of Covid gives greater likelihood of MHRA approval for commercialisation of Covid challenge studies.
- Credibility in industry. Repeat business, strong and growing reputation. Referenced in investor presentations from likes of Pfizer.
- Increased contract values push cash straight to bottom line, benefit in 2022 figures rather than 2021 so trading update would be useful.
- Revenue growth. £22mn in FY20, c £40mn FY21, likely to be >£60mn in FY22. Current £50mn guidance for FY22 all but met, incremental £6mn due for Delta characterisation study (assuming it happens - manufactured but not a given it proceeds, given Omicron now dominant…but not sure where you stop there…).
- CF has significant skin in the game at 7%, but B Buckley also has significant holding.
- Management team very impressive, both mgmt board and NEDs. A Catchpole, L Toole, M Treacey, A Wildfire, Adam French…all come across as highly capable and well considered outside the business.
- Cash generative. No need for future funding.
- Economies of scale from revenue growth. While some costs will be direct and scale with revenue, CHIM development, management overhead, QMB costs etc… will create an economy (aside from increased price point for contracts).
- Compelling IP and technical expertise in an acquisitive, cash rich CRO sector.
- Known end point, albeit 2022 at some point.
- Prep spin out likely to be worth c 2p a share.
- Imutex (when it finally happens) should be 5-7p being relatively modest. Hvivo paid £20mn for their stake a few years back, it’s since been through ph2, increasing value. Also the ph1 completed on AGS-v Plus. If collectively these were £50mn (feels very modest), that’s 7p+ a share.
- DiM in a strong growth space and big opportunity but difficult to quantify. If we take a ÂŁ25mn float plus fund raise, would give 3-4p.
- These spin off assets would be c 12p of current share price, leaving 9p on the Core business, or mcap of ÂŁ60mn-ish.
- Assuming a ÂŁ60mn turnover and x4 multiple, the Core could be worth 36p a share.
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