Open Orphan plc (LON:ORPH), a rapidly growing specialist contract research organisation and a world leader in vaccine and antiviral testing using human challenge clinical trials, has announced its unaudited interim results for the six months ended 30 June 2021. These results show a continued pattern of profitability from Q4 2020 to a firmly profitable position delivering a positive EBITDA profit of £2.1 million compared to an EBITDA loss of £4.1 million in H1 2020. We look forward to achieving record revenues in 2021 in our first full year of EBITDA profitability with recent contract wins and exceptional pipeline growth fueling revenues into 2022.
In the past 12 months, the Company has received international recognition and media attention for its excellence in delivering human challenge studies as a partner in the world’s first COVID-19 human challenge characterisation study. The Company now has a broad range of human challenge study models, focusing on leveraging the major growth opportunities presenting in infectious and respiratory disease markets, including RSV, Influenza, Asthma, hRV, COPD and Malaria.
Profitable Financial Performance in H1 2021:
· Continuing from a profitable Q4 2020, the Company has moved the business to a firmly profitable position with losses consigned to the past
o 242% reported revenue growth in H1 2021 (£21.9m) versus H1 2020 (£6.4m). Other income grew to £1.2m in H1 2021 from £0.7m in H1 2020
o EBITDA profit of £2.1m (2020: EBITDA loss of £4.1m)
o Revenue has more than tripled reflecting six active challenge studies in H1 2021 vs two active challenge studies in H1 2020 and a solid performance in Early Clinical / Biometry Services
o In H1 2021, non-COVID-19 related work accounted for 75% of revenues
o Gross margin has grown from 6% to 28% of revenue, reflecting that the Company is driving substantial operating leverage through cross selling, restructuring, functional integration and operational productivity
· Cash and cash equivalents were £14.9m at 30 June 2021, primarily reflecting the operating cashflow cycle of the business with new contract prepayments expected in H2 2021
· The Company has executed a share capital re-organisation as an important enabler to progress the monetisation of non-core assets via distribution of dividend in specie. In June, it completed the first distribution in specie back to the shareholders worth £26.2m at 16 September 2021, in relation to the demerging of certain non-core assets into Poolbeg Pharma Limited.
Operational highlights
· Delivered a strong and growing pipeline of new challenge study contract wins across a broadening range of challenge studies including influenza, RSV, hRV, Asthma, etc. Strong growth from Big Pharma clients which will deliver revenues across H2 2021 and into FY 2022
· Continued to diversify services offering and associated activities such as virus manufacturing and lab services enabled by CAP and UKAS accreditations which are progressing, as well as the development of new challenge study models (Malaria, COVID-19) as part of its broadening portfolio of challenge models
· Leveraged its state-of-the-art facilities, including the new 19-bedroom quarantine facility (Whitechapel Clinic) beside the existing 24-bedroom Queen Mary’s BioEnterprises Centre facilities also in Whitechapel (QMB). All COVID-19 characterisation study activities conducted in the 19-bedroom quarantine facility in Royal Free Hospital in London. We have delivered a record volume of quarantine studies on an increasingly cost-efficient basis with ample capacity to further grow the business
· Increased volunteer recruitment capacity through the opening of a new volunteer screening centre in Manchester and also a new dedicated street level screening facility in QMB increasing screening capacity to 520 visits per week
· Disease in Motion® launched as a first step towards its spin off as a standalone company, with the intention that the value will be delivered to our shareholders via dividend in specie in the same format as was successfully completed with Poolbeg Pharma plc. This unique data-focused platform has multiple infectious disease applications for a wide variety of end users including big tech, wearables, pharma and biotech companies
Post-period end
· Multiple high value human challenge study contracts signed – £5.7m Influenza study (September 2021), £8.1m asthma study (August 2021), significant hRV & Influenza study (July 2021)
· Successful Phase 2a RSV human challenge studies completed for a top tier pharma company and for Bavarian Nordic highlight the value of human challenge studies, their role in mainstream clinical trial design, and hVIVO’s industry leading position
· Successfully monetised the first non-core asset via spin-out and AIM IPO of Poolbeg Pharma plc through a dividend in specie to Open Orphan shareholders, which was non-dilutive to existing shareholdings in the Company
o As of 16 September 2021, the Open Orphan shareholders’ value in Poolbeg Pharma plc is £26.2
o Poolbeg Pharma raised £25m in fresh funds from new investors in an IPO in July 2021
o Created substantial value for Open Orphan shareholders who received these dividend shares in Poolbeg Pharma with no income tax due as part of a HMRC approved statutory demerger
· Additional 1.3m shares in Open Orphan, valued at £350,000, purchased by Company Directors (Cathal Friel and Prof. Brendan Buckley)
Outlook
· Post-pandemic, the infectious and respiratory disease market is seeing exponential growth, with an expected global market value of $250bn by 2025. This is resulting in a vastly increased market for Open Orphan to test a new range of infectious and respiratory disease products as the world leader in the provision of human challenge studies
– The Company is experiencing a major increase in negotiations, contract wins, and repeat contract wins with Big Pharma, while also seeing increased wins from biotech companies with major deals expected to now sign in Q4 2021 driving revenue in 2022
– Open Orphan is expanding its focus and service offering in providing infectious and respiratory disease challenge studies
· Full year guidance of c. £40m revenue (incl. other income) with full year EBITDA profitability for FY 2021, with non-COVID-19 work expected to represent c. 70% of FY 2021 revenue mix. While 2021 will represent record revenues for the Company and a return to full year EBITDA profitability, it is somewhat behind analyst expectations as the anticipated COVID-19 challenge studies will now likely commence in 2022 on foot of the successfully completed quarantine phase of the Human Challenge Programme characterisation study
· Year-end cash balances expected to close in line with the half year position of £14.9m
· Targeting revenues in the region of £50m for 2022 in non-COVID-19 work, reflecting signed contracts and contracts in advanced negotiations, ongoing momentum in the core business and ongoing market growth. COVID-19 revenue for 2022 will be in addition to this and will depend on the eventual timing of these studies
· The Company continues to work towards the monetisation of all remaining non-core assets and to hand these back to Open Orphan shareholders via dividend in specie allowing the Company to focus on its core offering
– These spin-offs / demergers offer an excellent opportunity for shareholders to maximise value in separate shareholdings in both exciting pharma product commercialisation companies, in addition to a profitable and world leading CRO
– Opportunity to complete spin-off of Disease in Motion® platform along with plans to monetise the other non-core assets, namely the Company’s 62.6% stake in PrEP Biopharm, and 49% stake in Imutex Limited
Cathal Friel, Executive Chairman of Open Orphan plc commented:
“Open Orphan has delivered very strong progress both operationally and financially. The Company’s H1 2021 revenues grew by 242% versus H1 2020, which continues a pattern of profitability from Q4 2020 and transitions the business to a firmly profitable position, having delivered a positive EBITDA profit of £2.1 million in H1 2021. The business is now well positioned to capitalise on the significant growth in the infectious disease market, which is expected to grow to in excess of $250bn by 2025 and we have seen our business development pipeline grow accordingly.
“I am delighted and hugely satisfied with the fantastic turnaround and team effort by everyone in the Open Orphan organisation; they have completely transformed the business following the acquisition of both hVIVO and Venn in the past two years. These two companies are now fully integrated and, in the process, we have created the world leader in the testing of vaccines, antivirals and other infectious and respiratory disease products using human challenge studies. With a broadening portfolio of human challenge studies, we are well placed to continue working with Big Pharma and biotechs alike to move their products through the clinic as the infectious disease market experiences one of the largest pharmaceutical growth cycles ever, with the market expected to grow significantly by 2025. We look forward to further progress and a profitable H2 as the business continues to attract additional clients.
“Additionally, we will look to provide further shareholder value through the monetisation of our non-core assets, as we did post-year end with the successful spin-out, listing and distribution in specie of Poolbeg Pharma plc.”
Analyst Briefing
An online briefing for Analysts will be hosted by Cathal Friel, Executive Chairman, and Leo Toole, Group Chief Financial Officer, at 9.30am (BST) on 20 September 2021 to review the results and prospects. Analysts wishing to attend should contact Walbrook PR on openorphan@walbrookpr.com or on 020 7933 8780.
Investor presentation
OPEN ORPHAN PLC is pleased to announce that Cathal Friel and Leo Toole will also provide a live presentation relating to H1 2021 Interim Results via the Investor Meet Company platform on 20 September 2021 at 6:00pm (BST).
The presentation is open to all existing and potential shareholders.
Investors can sign up to Investor Meet Company for free and add to meet OPEN ORPHAN PLC via:
https://www.investormeetcompany.com/open-orphan-plc/register-investor
Investors who already follow OPEN ORPHAN PLC on the Investor Meet Company platform will automatically be invited.
