In its final results for the 12 months to 31 December 2021, Open Orphan (ORPH ) reported record revenue and EBITDA profitability accompanied by “significant operational progress.”
Open Orphan reported record revenues for the period of £39 million, up from £22.2m in the year prior and representing 76% growth year-on-year, while the business saw a £9m improvement in profitability, generating EBITDA of £2.9m compared to a loss of £6.1m in the year to 31 December 2020 and higher than finnCap's forecast of £2.5m.
The Company’s order book grew by 11% to £46m in future contracted revenue, up from £41.6m in 2020, while cash and cash equivalents stood at £15.7m as at 31 December 2021.
Operationally, Open Orphan highlighted to investors that it had delivered “a strong and growing pipeline” of new challenge study contract wins over the year, including deals with four of the top 10 global biopharma companies among a growing client base of over 60 clients.
In addition to completing the world’s first COVID-19 characterisation study, which was proven to be safe and well tolerated, Open Orphan also substantially expanded the Group’s offering into the respiratory market, signing an asthma study with a top three global pharma company.
The Company also signed a contract to manufacture a SARS-CoV-2 Delta variant challenge agent with Imperial College London in 2021 as part of a Wellcome Trust-funded initiative.
Open Orphan opened a new quarantine clinic "on a capital efficient basis" to facilitate the growing demand for human challenge studies and bolstered its team with the appointment of former Non-Executive Director Yamin ‘Mo’ Khan as Chief Executive.
Post-period, Open Orphan continues to expand its pipeline of opportunities with a number of further challenge study opportunities at advanced negotiations across influenza, asthma, RSV, malaria and COVID-19. As at 1 June 2022, Open Orphan had an order book of signed contracts worth £64.2m which is expected to be recognised across 2022, 2023 and 2024.
The company acknowledged that this growth will be driven by the increased success and awareness of human challenge trials, and the development of new challenge models.
Earlier this year, Open Orphan commenced the development of a new influenza challenge model for an existing top five global pharmaceutical client and signed a £14.7m contract for the characterisation and challenge trial to follow. The Company has also since signed a influenza challenge trial worth £7.3m and RSV challenge trial contracts worth £5m in total.
It says a significant portion of its pipeline includes returning Big Pharma customers, as well as ‘a wider group of new clients who have observed the benefits of human challenge trials.’
It noted that these post-period developments reaffirm the Board’s expectations of a profitable growing business with revenues in the region of £50m in 2022. As a result, the Group says it is now well positioned and well capitalised to deliver sustainable long-term profitability.
Yamin ‘Mo’ Khan, Chief Executive Officer of Open Orphan, commented: “2021 was a milestone year for Open Orphan; the Group achieved record revenues, and recorded full year EBITDA-profitability for the first time - a significant turning point for the business.”
“The Group won a record number of human challenge study contracts, serving four of the top 10 global biopharma companies and more than 60 clients in total. We were proud to make a significant contribution to the UK Government’s response to the pandemic by completing the world’s first COVID-19 characterisation study, which furthered our understanding of COVID-19 disease progression. Importantly, the Group accomplished this whilst investing in operational improvements, with volunteer screening and quarantine capacities expanded during the year.”
He added: “Post-period end, we have continued our momentum from 2021 into a strong start to trading and significant contract wins. In my new role as CEO, I look forward to driving further growth across the business this year and converting this substantial progress into value for our shareholders.”
View from Vox
Analysts at finnCap said these FY21 results provides them “with the confidence that the company should deliver on FY 2022 forecasts,” adding that it shows that hVIVO “is a trusted partner for global players seeking to leverage the increased adoption of challenge models.”
While year-end cash of £15.7m (net debt £15.4m) was consequently better than expected, management is focusing on driving utilisation rates at its facilities, helped by its expanded recruitment programme, which enables it to provide volunteers for Phase 2 and 3 field trials.
In particular, Open Orphan’s hVIVO subsidiary, which has already seen a steady increase in flu studies over the past 18 months, expects to see an increase of several challenge studies.
Following hVIVO’s recent facility expansions, the business can now offer its services beyond the core challenge study offering such as the recently announced vaccination site contract.
Notably, its most recent contract saw hVIVO deliver one of its key objectives which is to utilise all of its services to a single client. In fact, this is the first time hVIVO has been engaged to conduct a study of this kind with all three parts of the contract being covered by its services - the manufacturing part, the characterisation study and the challenge study, respectively.
Khan says the revenue from the contract is expected to be recognised across 2022 and 2023. Shares in Open Orphan were trading 10.17% higher at 16.25p following the announcement.
Looking ahead, Khan believes that hVIVO can expect to see more agreements of this kind, particularly as the demand for these deals has been accentuated by the recent pandemic.
As the threat of influenza increases, government agencies and biopharmaceutical companies alike will be preparing for a high flu season this winter. In the longer term, Kahn said he is also seeing more research being conducted for flu studies to help prevent future pandemics.
finnCap has reiterated its 44p target price, based on a sum of the parts valuation. "Of this, the core business is valued at 33p (4.4x 2022 EV/Sales), which reflects the strong revenue growth (+33%) and arguably the group’s unique expertise and strategic positioning" it said.
Follow News & Updates from Open Orphan: