Open Orphan plc (LON:ORPH), a rapidly growing specialist contract research organisation (CRO) and the world leader in testing infectious and respiratory disease products using human challenge clinical trials, has announced its audited final results for the 12 months ended 31 December 2021.
Financial highlights
· Record revenues of £39.0m (2020: £22.2m) achieved representing 76% growth
· £9m improvement in EBITDA generating £2.9m (2020: £(6.1)m)
· Cash and cash equivalents as at 31 December 2021 of £15.7m (2020: £19.2m)
· Significant EPS improvement in 2021 to (0.01)p per share (2020: (1.80)p)
· Order book growth of 11% to £46m future contracted revenue as at 31 December 2021 (2020: £41.6m)
Operational highlights
· Delivered a strong and growing pipeline of new challenge study contract wins
o Served four of the top 10 global biopharma companies in 2021 among a growing client base of over 60 clients
· Substantially expanded the Group’s offering into the respiratory market signing an asthma study with a top three global pharma company
· Completed the world’s first COVID-19 characterisation study which was proven to be safe and well tolerated
· Contract signed to manufacture a SARS-CoV-2 Delta variant challenge agent with Imperial College London, as part of a Wellcome Trust-funded initiative
· Opened a new quarantine clinic on a capital efficient basis to facilitate the growing demand for human challenge studies. This new facility, The Whitechapel Clinic, added 19 quarantine bedrooms for future challenge studies
· FluCamp screened c. 84,000 volunteers for human challenge studies in 2021 (2020: c.68,000); supported by the cost-efficient expansion of volunteer recruitment centre
o New London FluCamp volunteer recruitment centre – converted former coffee shop adjacent to the existing QMB facility
o New Manchester FluCamp volunteer recruitment centre
· Significant CRO experience added to the Board with the appointment of Yamin ‘Mo’ Khan as Non-Executive Director, who was appointed CEO post period end
· In June 2021, completed a distribution in specie to the Company’s shareholders, through the demerger of certain non-core assets into Poolbeg Pharma
Post-period end highlights
· Commenced 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
· £7.3m influenza challenge trial and £5m RSV challenge trial contracts signed
· Launched a new Malaria human challenge model and was awarded by an existing Big Pharma client to act as a vaccination site for a Phase II field study
· Opened a new primary FluCamp volunteer recruitment facility in Whitechapel, increasing bed capacity by 44% from 43 beds to 62 beds, and opened a new Manchester volunteer recruitment centre at the same cost as the old facility, but with four times the floor space, doubling the Group’s volunteer screening capacity to 1,000 per week
o Facilities expansion enables the Group to broaden the scope of the business to offer additional clinical trial services outside of its traditional core challenge study offering
Current trading and outlook
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.
Open Orphan’s pipeline of new opportunities continues to grow with a number of further challenge study opportunities at advanced negotiations across influenza, asthma, RSV, malaria and COVID-19. This growth is driven by the increased success and awareness of human challenge trials, and the development of new challenge models. A significant portion of our pipeline includes returning Big Pharma customers, in addition to a wider group of new clients who have observed the benefits of human challenge trials.
Our Venn Life Sciences subsidiary continues to deliver specialist drug development consultancy services across non-clinical and clinical development, pharmacology, CMC and biometry services, acting as a trusted partner to an extensive range of clients.
These developments reaffirm the Board’s expectations of a profitable growing business with revenues in the region of £50m in 2022.The Group is now well positioned and well capitalised to deliver sustainable long-term profitability.
Yamin ‘Mo’ Khan, Chief Executive Officer of Open Orphan, said: “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.
“Post-period end, we have continued our momentum from 2021 into a strong start to trading and significant contract wins. We increased our bed count from 43 to 62, doubled our volunteer screening capacity, and also expanded the scope of our business to offer additional clinical trial services, where we have already signed our first contracts, establishing new revenue streams for the business. We also launched our new Malaria Human Challenge Model, which I believe has further consolidated our position as the leading provider of human challenge trials in infectious and respiratory disease. 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.”
Executive Chairman’s Statement
For the year ended 31 December 2021
Introduction
I am pleased to report on trading for the year ended 31 December 2021, a period in which we continued our strong momentum. The Group reported substantial revenue growth of 76%, with total revenue (incl. other income) of £39.0m (2020: £22.2m), and more importantly a transition to positive EBITDA of £2.9m (2020: £(6.1)m). 2021 was also a year of considerable operational progress; the Group conducted a record number of human challenge trials and successfully completed the spin-off of Poolbeg Pharma plc, which listed on the London Stock Exchange in July 2021, giving our shareholders a stake in Poolbeg Pharma plc through the distribution in specie shares.
In the two years since we acquired hVIVO, we have transformed the way that it runs human challenge trials by both reducing the time taken to complete a study, from 18 months to six months, and substantially increasing the Company’s capacity and capability to run more studies; increasing our total quarantine capacity to 62 beds. In addition, we have focused on expanding the Company’s human challenge trials to include non-viral disease indications such as asthma, and by making new challenge models available to our clients, including COVID-19 and malaria.
Furthermore, as a result of the pandemic, hVIVO and the UK received worldwide recognition as a world centre for conducting human challenge trials. This was a direct result of successfully completing the world’s first COVID-19 human challenge trial mid-pandemic. The pandemic also highlighted the significant value of human challenge trials which provide human efficacy data in a fraction of the time and cost it would take to complete a normal field trial. As a result of these initiatives, the global market for human challenge trials has increased significantly and as the world leader in the provision of these studies, we expect the business to deliver an increasing number of challenge trials year on year going forward.
Strategic delivery 2021
Below is an outline of the Group’s achievements in 2021 across key business revenue streams and market trends.
Human challenge / clinical services
2021 was a record year for hVIVO’s core human challenge trial business, with the Company delivering a strong and growing pipeline of challenge study contract wins across our world leading portfolio of human challenge models. The Company is benefitting from a significantly expanded market for infectious and respiratory disease products, with four of the top 10 global biopharma companies working with us in 2021.
In 2021 we successfully collaborated with a client who funded the rapid and cost-efficient conversion of the unoccupied Whitechapel Hotel located immediately beside our existing QMB facility, into the Whitechapel Clinic, a 19-bedroom quarantine clinic. Following the successful delivery of this trial to the client, we continue to operate the Whitechapel Clinic for challenge trials. This expanded our existing quarantine bedroom capacity to 43 (which was subsequently increased post-period end, providing us with access to 62 beds).
We also converted a vacant lot adjacent to the existing QMB facility into a new FluCamp volunteer recruitment screening centre. Similarly, we expanded our FluCamp screening facilities with the opening of new facilities in Manchester. These projects were completed at minimal cost and the expansion enabled us to screen 84,000 volunteers for human challenge studies in 2021.
COVID-19
2021 was a pivotal year for the UK and its attempt to emerge from the COVID-19 pandemic, and I was proud of the significant contribution that our team made to this. As a commitment to help the UK government to fight the pandemic, the team at hVIVO worked tirelessly under difficult conditions in the midst of a pandemic, to deliver a COVID-19 characterisation study to provide unique insights into COVID-19. The results of the study were published in the peer reviewed scientific journal ‘Nature Medicine’ in February 2022. It is a testament to the hVIVO team and their knowledge and commitment that this study was completed safely and in a timely manner. The study was conducted in partnership with the UK Government’s Vaccine Taskforce and Department of Health and Social Care (DHSC), Imperial College London and the Royal Free London NHS Foundation Trust. Additionally, we were contracted to manufacture a SARS-CoV-2 Delta variant challenge agent with Imperial College London, as part of a Wellcome Trust-funded initiative.
The extensive worldwide coverage we received as part of this work raised Open Orphan’s profile as the world leader in conducting human challenge trials and highlighted the significant benefit of these studies to deliver critical human efficacy data.
While effective vaccines and antiviral treatments have lessened the impact of COVID-19 infection in human populations, the lasting legacy of the pandemic is a significantly enlarged infectious and respiratory disease market, which is expected to grow to in excess of $250bn by 2025. The Group is leveraging this significant market growth. With extensive relationships across the industry, a world class reputation, and an ability to continue enhancing and diversifying its offering, the Group is well placed to secure further work as a result of this renewed investment and focus on respiratory diseases.
Board changes
We strengthened our Board with the appointment of Yamin ‘Mo’ Khan, initially as Non-Executive Director on 13 October 2021 before he was subsequently appointed CEO, post-period end, on 24 February 2022. Mo brings 25 years of CRO experience to his role, and I have thoroughly enjoyed working with him since he joined the Group. Mo has had a significant impact on the business, and we were delighted that he since accepted the position of CEO. Mo brings extensive industry specific insights that we will leverage to deliver on our expanding pipeline of opportunities, and I am confident Mo will continue to drive the Group’s upward trajectory.
In July 2021, Professor Brendan Buckley, Non-Executive Director, and myself collectively purchased a further 1,320,754 ordinary shares at 26.5 pence per ordinary share, which increased my shareholding to 7.0% and Brendan’s shareholding to 1.2% of the Company’s issued ordinary share capital. I hope this demonstrates to our shareholders the Board’s commitment to the business and our desire to drive shareholder value to match our considerable financial and operational growth and momentum.
In April 2022, we appointed Liberum Capital Limited as our Nominated Adviser and Joint Broker. We are delighted to be working with Liberum which is ideally placed to introduce Open Orphan’s fast growing, profitable and sustainable business to new investors.
Summary
In a pandemic-hit 2021, the Group achieved record revenues, transitioned to making an EBITDA profit, and made significant operational progress. The business conducted a record number of human challenge trials and has established itself as the world-leading provider of human challenge trials in the rapidly expanding infectious and respiratory disease market. Our work in COVID-19 enabled us to demonstrate our unparalleled expertise to a wider audience, and the market is now clearly recognising the value that human challenge trials can offer.
The business is firmly profitable and remains well capitalised with a cash balance of £15.7m to help drive the business forward and to realise further value for our shareholders. I would like to thank all of our employees for their incredible efforts this year, and our shareholders for their continued support.
Cathal Friel
Executive Chairman
6 June 2022
CEO Statement
For the year ended 31 December 2021
Introduction
2021 has been an exceptional year for Open Orphan with our subsidiary, hVIVO, strengthening its position as the world leader in human challenge trials and our drug consultancy subsidiary, Venn Life Sciences, consolidating its position as a leading provider of integrated clinical development solutions. Since joining Open Orphan, initially as a Non-Executive Director and later transitioning into the role of CEO in Q1 2022, I am excited by the significant opportunity for the Group to capitalise on the substantial increase of investment in respiratory and infectious diseases by global pharmaceutical and biotech companies.
In this time, I have witnessed the substantial demand for hVIVO’s human challenge trial models, and our ability to efficiently deliver key human efficacy data to support our clients’ clinical development programmes. I am also excited by the growth prospects of Venn Life Sciences, offering a complete end-to-end service to our clients’ drug development programmes, from pre-clinical to late phase clinical development.
The exceptional delivery of our services would not be possible without the commitment of the team across the Open Orphan Group. Their dedication and hard work through the challenges of the COVID-19 pandemic was exemplary and their unique knowledge and expertise sets the Group apart from our competitors. I would like to thank them for their excellent contribution to our success in 2021.
Strong financial results
The Group achieved record revenues (incl. other income) in 2021 of £39.0 million, representing a substantial increase of 76% on 2020. A large portion of this revenue is attributable to hVIVO’s human challenge trials, which gained global publicity in 2021 as they continued to grow into the mainstream drug development pathway. The Company completed human challenge trials with a number of top 10 Big Pharma and smaller biotechs such as Bavarian Nordic (RSV) and SAB Therapeutics (influenza). The Company also continued to support the UK Government’s Vaccine Taskforce resulting in the completion of the world’s first COVID-19 challenge study and the manufacture of a SARS-CoV-2 Delta variant challenge agent with Imperial College London. In addition, Venn Life Sciences also performed strongly across its early clinical, non-clinical development, CMC, and biometry services.
The Group was EBITDA positive in 2021, with an EBITDA of £2.9m compared to a £6.1m EBITDA loss in 2020. The Group benefitted from its post-acquisition restructuring plan and a record year of revenue, while also ensuring disciplined cost management in the period. The Group remains well capitalised with cash and cash equivalents of £15.7m as at 31 December 2021. Furthermore, in June 2021, we completed a distribution in specie to the Company’s shareholders, through the demerger of certain non-core assets into Poolbeg Pharma.
Customer delivery
Open Orphan has firmly established itself as the world leader in the provision of human challenge trials, offering the largest portfolio of commercial challenge models to a range of clients across Europe, North America and Asia Pacific. The Group serves a wide array of biopharma companies. We worked directly with four of the world’s 10 largest biopharma companies in 2021, a number of them as repeat customers. In addition, we also worked with a variety of biotech companies, who tend to have fewer assets and thus place great importance on quickly and efficiently achieving key human efficacy data. hVIVO’s challenge trials can provide a fast and cost-efficient route to efficacy data, often resulting in a key value inflection point.
Open Orphan served over 60 clients in 2021 with around 80% year-on-year repeat business. Our goal to become a long-term partner for our clients is now being realised.
The Group achieved significant contract wins in H2 2021 in influenza, RSV and asthma challenge trials. The majority of the revenue relating to these trials will be recognised in 2022, positioning the Group to deliver continued growth into 2022, and beyond.
As hVIVO’s challenge studies continue to gain a foothold into the mainstream clinical pathway, a number of our clients achieved notable successes in 2021, which further validates the benefits of human challenge trials. Two of our clients obtained
Breakthrough Therapy designation from the US Food and Drug Administration (“FDA”) as a consequence of the successful clinical data achieved from hVIVO challenge trials:
· Our successful Phase 2a RSV challenge trial for a Big Pharma client which completed in 2021 enabled them to obtain Breakthrough Therapy designation from the FDA for the prevention of lower respiratory tract disease caused by RSV in individuals 60 years of age or older
· The FDA granted Breakthrough Therapy designation for Bavarian Nordic’s RSV vaccine candidate, MVA-BN® RSV. hVIVO successfully conducted a Phase 2, double-blinded, placebo controlled human challenge trial to assess MVA-BN® RSV using its RSV human challenge study model
Breakthrough Therapy designation can significantly shorten the time to market for recipients, enabling clients to gain a competitive advantage. The receipt of Breakthrough Therapy designation by these high-profile clients has directed further attention to our challenge trials across all indications, leading to numerous new inbound enquiries and enhanced growth of our pipeline.
It should be noted that one of the impacts of the COVID-19 pandemic has been to increase public and industry awareness across all viral pathogens and release R&D funding across a number of indications.
Outlook
As the new CEO of the Group, I am keen to build on the significant milestones the business has achieved in 2021 while also expanding the Group into new challenge models, adding new revenue streams and expanding our facilities. The future looks exceptionally bright across all areas, with evidence of the benefits already coming to fruition.
Challenge Models
The human challenge trial model will remain the core business for the hVIVO team and we will be aggressively marketing our challenge models to new and existing customers in 2022 and beyond. We expect the influenza and RSV models to continue to attract significant interest across the entire market; from smaller biotechs to larger Big Pharma customers. Funding in the development of vaccines and antivirals across the infectious disease space continues to increase as the life sciences industry looks to address the next potential pandemic. The indicators for hVIVO are very positive with huge interest across our portfolio of models and notable challenge trial wins already in 2022; one in influenza and the other in RSV, in addition to our largest ever commercial challenge programme win with an existing top five global pharmaceutical client.
This engagement will include the manufacture of an influenza challenge agent, the characterisation study to identify a dose that causes a safe and reliable infection in healthy volunteers and the challenge trial which will help determine the efficacy of a number of different vaccine candidates for the reduction in incidence of symptomatic flu infection and disease severity in healthy volunteers. This contract win helps to re-affirm our position as a “go-to” partner for an increasing number of global biopharma companies.
The HRV-asthma model will also be active in 2022 and beyond as we look to increase our position into the respiratory field, building on the landmark HRV-asthma challenge study signed with a top three global pharma company in H2 2021. In addition, we will be establishing a foothold in the anti-parasitic market as we look to establish our newly launched malaria model and target our first study in malaria or a related indication in 2022. The anti-parasitic market is experiencing an increased volume of funding and we are already witnessing the influx of enquiries from potential clients about running a challenge trial.
COVID-19 Challenge Model
hVIVO has already shown its ability to deliver a COVID-19 challenge trial safely and in a timely manner. We have pride in leading the world’s first COVID-19 challenge study and helping the UK government in the fight against the pandemic.
We have also manufactured a challenge agent of the Delta variant and are working with world leading institutions to continue to research the SARS-CoV-2 virus. Our aim is to conduct further COVID-19 challenge trials in the near future. A COVID-19 challenge trial can quickly provide the crucial human efficacy data required to confirm early proof of concept.
Capacity Growth
To support Open Orphan’s rapid growth and consolidate its world leading position, we have expanded our facilities including increasing our screening capacity and our number of beds. In March 2022, our London FluCamp recruitment operation moved to a new low cost 12 bed facility. This enabled us to double the Group’s previous volunteer screening capacity, while significantly boosting our ability to identify and enrol study volunteers to deliver the significant volume of trials to be completed in 2022 and beyond. We also opened a new Manchester volunteer screening facility at the same cost as the old facility to increase volunteer numbers from the North-West region.
The increased capacity will ensure the Group maintains its world leading position through its volunteer recruitment arm, FluCamp.
New Revenue Streams
The increased scale of our volunteer recruitment screening facilities will allow us to broaden our offering to deliver new revenue streams, namely using the existing FluCamp infrastructure in London as a site for Phase 2 and Phase 3 field studies. The initial target will be to recruit healthy volunteers into field-based vaccines trials. We will target a range of current and new clients, leveraging FluCamp’s existing infrastructure to deliver research site services. This should act as a natural follow-on to a number of our clients who have completed Phase 2a challenge studies.
2022 is shaping up to be a breakthrough year for hVIVO’s highly specialised virology and immunology laboratory team, expanding its portfolio of customers to help grow the Group’s business. We plan to receive CAP and IOS 17025 (UKAS) accreditation for our laboratories in 2022. This should lead to further opportunities for our world class laboratory teams to deliver virology and immunology services to a range of clients.
Venn Life Sciences
Our Venn Life Science subsidiary continues to deliver specialist drug development consultancy services across non-clinical and clinical development, pharmacology, CMC and biometry services. Venn Life Sciences is a trusted partner to an extensive range of clients, and our highly skilled scientific team have helped nurture a number of long-term client relationships. We are experiencing continued demand across our comprehensive suite of services and we expect Venn Life Sciences to continue its upward trajectory in new areas, notably in advanced therapy medicinal products (ATMPs) and consulting advice for medical device companies.
Order book and pipeline
As at 31 December 2021, Open Orphan had an order book of signed contracts worth £46m (2020: £41.6m). This order book will be recognised across 2022, 2023 and 2024. Additional new project wins in 2022 have further enhanced our order book including a landmark £14.7m contract for an influenza challenge trial that includes the characterisation and completion of a challenge trial for an existing top five global pharma customer, a £7.3m influenza challenge trial and a £5m RSV challenge trial. This has seen our order book expand to £64.2m by 1 June 2022.
Open Orphan’s pipeline of new opportunities continues to grow with a number of further challenge study opportunities at advanced negotiations across influenza, asthma, RSV, malaria and COVID-19. This growth is driven by the increased success and awareness of human challenge trials, and the development of new challenge models. A significant portion of our pipeline includes returning Big Pharma customers, in addition to a wider group of new clients who have observed the benefits of human challenge trials.
These developments reaffirm the management’s expectations of revenues in the region of £50m in 2022, with the Group now delivering strong sustainable long-term profitability.
Summary
I am very satisfied with the strong performance of our business across the twelve months to 2021 as the Group became EBITDA profitable. We will build on this performance into 2022 and have set challenging and achievable growth plans across all areas of the business. We believe the operational infrastructure is in place to deliver on the exceptional contracted order book and pipeline of opportunities the business has, and we can already see the strategy coming to fruition. Our strategy is to continue to enhance and diversify our core and non-core offering, solidifying our world leading position in order to capitalise on the increased demand for human challenge trials and the growth in the infectious and respiratory disease market. We believe this will deliver growth on our revenue and EBITDA for our shareholders, continuously improve our employee satisfaction and ensure an efficient operational delivery to our customers.
As a Board, we are confident that we can deliver on our growth plans for 2022 and beyond as we continue to focus on the execution of our strategy to generate value for our shareholders.
Yamin ‘Mo’ Khan
CEO
6 June 2022
