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Greend100 Thanks for that excellent post. Good to see some reasoned, sensible analysis on here.
Thanks for sharing.
Simon Thompson places a conservative valuation on HVO of 19p per share but this is just for the core business. He acknowledges that in addition to this there are a number of "hidden balance sheet value" items namely DIM and HVO's share of Imutex and PrEP Bio. He notes rightly that market conditions are not conducive to monetising the value in these assets right now and that it is difficult to value them. Nevertheless "FinnCap has given it a stab, valuing them at £60m, or almost the same as Hvo's entire market cap." This is what excites me. It make take time but the value of these assets in not reflected at all in HVO's share price and one day CF will, I am sure, "surprise and delight" shareholders by monetising these assets.
https://www.investorschronicle.co.uk/alpha/2022/11/17/ride-the-boom-in-vaccine-research/
"Shares materially undervalued" says Simon Thompson.
It's been a tough time for EMR and the market generally but there must come a point soon when the constant flow of good news triggers a major re-rate. Yes this is a speculative buy, but with the positive sampling already gathered on existing developments together with this major new late stage opportunity, ECR has multiple shots on goal. If just one of those shots hits the back of the net ECR is likely to be worth many multiples of its current market cap. GLA holders.
I think your analysis must be right Father Ted as the RNS points out that:
"US and European patents have already been granted with claims to the treatment of severe influenza, which is characterised by symptoms that persist or recur for more than two days without signs of resolution, with a p38 MAP kinase inhibitor inhibiting the release of pro-inflammatory mediators from endothelial cells and pro-inflammatory cytokines from immune cells. These granted patents offer protection until at least 2037."
Excellent news indeed.
Looks like possible preparation for a NASDAQ listing for Open Orphan. Often done by reverse takeover into an existing NASDAQ listed company. My guess is that it won't happen until the Autumn at least in view of the markets at the moment. Positive news nevertheless.
JS confirmed in his most recent presentation that POLB001 has potential peak sales in excess of $275m for influenza alone in Europe and the US and patents through to 2038. POLB could additionally monetise rights for the Far East and the rest of the world. Then there are the other potential applications (I won't mention the "C" word). This really could be a blockbuster and we are just months away from a potentially transformative out-licensing deal. Yes there are risks as with all pharmaceutical development but JS is confident and in any event POLB has multiple shots on target with its other products (and product devices) in development. Then there is what might come out the AI research. Really very exciting times.
Apologies cannot add the link but here is an extract which makes the point:
"The main issue for analysts with the operating profit figure is that it is stated after depreciation and amortisation. These numbers are particularly subjective and therefore may be prone to ‘creative accounting’ and manipulation.
Analysts, therefore, often prefer EBITDA ie, earnings before interest, tax, depreciation and amortisation. Depreciation and amortisation are unique expenses that are non-cash and expenses related to assets that have already been purchased."
Insert ****** to replace the *****
For anyone interested in understanding the difference between different measures of profits including why many analysts prefer to use EBITDA please see the following article:
https://******.co.uk/insights/article-detail/insights/2016/06/06/pbit-and-ebitda-understanding-the-basics
This is why companies are often valued by analysts based upon multiples of turnover of multiples of EBITDA. My understanding is that Orph has been consistently EBITDA positive since Q4 of 2020. All will be revealed tomorrow.
Still in limbo (apologies for the typo).
No my Barclays shares are ins till in limbo. Not that I care too much as I'm looking to hold for a minimum of 2/3 years. Folk don't seem to have factored in that if the data from the human challenge studies starting this month is positive, POLB 001 could be commercialised as early as the end of this year/beginning of next. The value received from that one deal could easily be multiples of the entire current market cap.
We don't know what the EBITDA number is going to look like for 2021 yet so if you use a multiple of earnings instead - Orph are forecasting a minimum of £50m revenue for 2022 (excluding any covid work which may yet materialise). Using a conservative multiple of 2.88 (as per the Pitchbook data) that equates to a market cap of £144m. At the higher end of their suggested range of 4.77 that equates to £238.4m. You need to add on to this the cash in the business (say £15m to be conservative) so say between £159m to £253m. As the current market cap is only £100m this suggests the share price should be between 59% and 153% higher. But this ignores the value of the spin offs yet to come (Poolbeg was worth 4p). So I would add on a conservative 10p for the spin offs.
I would argue that the higher revenue multiple is justified as this is a rapidly growing business and applying the multiple to the 2022 forecast revenue fails to take that into account. Revenue of £60 for 2023 has been suggested for example and continued strong growth after that.
To add to the "constrained" debate, the business is forecast to achieve £40m turnover for 2021 which is far in excess of historic turnover. Plus a conservative forecast for 2022 of £50m plus for non-covid work (any covid work could significantly increase this) representing at least a 25% increase in turnover. That is impressive by any standards. CF has made it clear that adding new bed capacity it not a problem and will be done as and when the demand justifies it. Clearly it makes sense to ensure that existing capacity is fully utilised before incurring cost to add extra capacity.
So the core business really is flying with Mo Khan confirming that the pipeline is larger than it has ever been. In my view the core business itself justifies the broker target of 44p. The spin offs could significantly add to this. I would hope Prep would realise at least 3p per share. But Imutex and Disease in Motion should each achieve higher valuations. It is not difficult to imagine a situation in which the value for these sin-offs plus POLB already spun out could in the not too distant future exceed the market cap of Orph.
In the March presentation CF also indicated exciting plans for the growing cash war chest. My guess is that this might be an acquisition to help expand the business into wider Phase I/II trials. That would be a good use of the money and make Orph bigger and more suited to a NASDFAQ listing. He has also hinted at a possible merger with a larger CRO. Whatever others may think of CF (and he has got carried away in the past with his enthusiasm and missed timings) he is at heart a deal maker. Not only that but he is the single largest shareholder and he can only realistically realise the value in his investment by a sale/merger ( he has rightly said in the past that if he sold any shares the share price would plummet) so in my view once the spin offs have been done that will be his target. His interests in maximising returns for shareholders are perfectly aligned with other shareholders.
How do you like them apples?
Something stirring here...
Release the Kraken.
The stock market might not recognise the value of orph (at least for now) but if it doesn't do so soon, someone else will - a larger CRO for example. CF has a great track record as a dealmaker. After all he picked up this business for peanuts and has transformed it. The core business is flying. CF is the biggest shareholder and will do whatever it takes to generate maximum value for all shareholders (including himself). I would be surprised if Orph hasn't merged with/been acquired by a larger CRO before the end of the year. CF has hinted at this. The only reasons I can see to delay are (i) the grow the core business further so as to get a better deal (ii) to give time to complete the divestment of non-core assets.
That's not correct Herne. CF is on a very modest salary. He owns 7% of the company and so nobody suffers more than him when the share price goes down. His interests are therefore entirely aligned with other shareholders. I have no doubt he is working very hard to generate maximum value for all shareholders (including himself).
CF has always been concerned about a big sell off of POLB shares once the lock in expires. As I guess has everyone else - hence the current share price. This £1.6m buyback arrangement is clearly a mechanism to underpin the share price at 5.9p (e.g why would you sell at 5p if you can get 5.9p through this mechanism?). Unless there is a deluge of sellers after the lock in expires I think it should be effective and is a good idea. In any event if you look at the big picture, JS has so far delivered on promises made at the time of the IPO and is very credible. I am comfortable to hold for the medium to long term. I think there is a good chance of out-licensing POLB to big pharma by the end of the year and that could bring in big bucks. That should build confidence in the long term prospects. Of course it is speculative (that is the nature of pharmaceutical development) but POLB has "multiple shots on goal", is well capitalised and just one of these deals could bring in multiples of today's market cap. Well worth a punt in my view. Once the cliff edge of the expiry of the lock in has gone I would expect a gradual recovery in the share price back above the IPO price. Good luck to all holders.
I think what CF was implying in response to the question about DIM is that Orph might set up the DIM business and initially operate it as a subsidiary of Orph. The spin out would presumably follow later. I think this makes a lot of sense as it will be easier to generate a higher value for the spin out if the business has been operational for a period and is already generating revenues. CF has previously said that DIM would be revenue generating from the commencement of operations.
To me this makes a lot of sense. I personally don't think spinning off DIM immediately is essential. Operating it as a subsidiary of Orph would just enhance the value of Orph for the benefit of all shareholders. It's all about what value the market would place on DIM as a spin off. CF clearly thinks this is in the best interests of shareholders (and he is the largest one) so I'm happy to trust his judgment.
The "95% of 2022 budgeted revenue" relates solely to revenue which is guaranteed as contracts have been signed. This has been previously stated by CF. My understanding of what was said last night is that the £75m "weighted pipeline" must therefore be additional. Obviously there is by definition no guarantee that all or what proportion of this revenue will materialise or, if it does, whether it will hit this year's figures or next but nevertheless this is an impressive and reassuring indication of the rapidly increasng demand for Orph's services.
For completeness, my understanding of the £75m figure is that this represents the aggregate amount of all revenue currently under negotiation discounted to reflect the management's best estimate of how much of this will actually result in contracts. If even only 25% of that hits this years numbers then surely Orph will smash its target of £50m from non covid work? And then there is the covid work as icing on the cake.
I, like others, have been disappointed at delays in the spin offs but the core business seems to be flying.