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Open Orphan Q&A: Expecting an exceptionally good second half (LON:ORPH)

Open Orphan plc (LON:ORPH) Chief Executive Officer Cathal Friel caught up with DirectorsTalk for an exclusive interview to discuss the operational and financial highlights from their interim results, post period activity and the outlook going forward.

Q1: Now, interim results for the first six months ended 30th June 2020, can you tell us about the operational highlights for the first six months?

A1: Look, it’s a year of very much two halves. The first half of the year, Open Orphan only acquired formally hVIVO end of January, but operationally we really didn’t get operational control until well into March and April.

When we acquired at the end of January, hVIVO had no contracts so it was pretty much not in great shape, however, our core task and what we’re really doing, we ensured we started getting contracts bedding the, integrating them.

So, really the core highlights in the first half, we’ve actually turned the business around, we got into the market, we’ve made it profitable, Venn Life Sciences and hVIVO have never made a profit in their life before. We’re now very much on target to making profits in Q4 and we’ve guided the market that way, which is a big turnaround in the previous, let’s say 10 years of both businesses.

Likewise, we’ve ended the half with about £14.5/£15 million cash in the bank, that cash we say got to grow and grow very significantly by the year end, Christmas, and that’s because we’re generating cash.

Other highlights are we’ve started to sign very serious and very major contracts  and we’re guiding that we’re going to have an exceptionally good second half and that’s already clear in the last three months of the number of very, very large contracts who have signed.

Q2: Can you tell us about the financial highlights?

A2: The financial highlights is that we’re guiding, most importuning and I keep emphasising it, is that we’re operationally profitable in Q4, likewise we’ll be building large cash reserves.

We’re guiding as well, but really importantly and financially, that this business, particularly the core business now is hVIVO’s human challenge studies. They’ve used the Queen Mary’s quarantine centre, never in the past had been much more than 20%/25% occupancy, they key to the financials is getting that to 100%. We’re now saying we’re at 100% occupancy and we will ensure it’s that way now at the moment for a year, and we’re guiding, within a month on whenever we sign the next contract which shouldn’t be too far away, we’ll be fully occupied for 18 months. That really puts the business on a firm footing.

Q3: Now, it’s been a busy period for you but post the period, as we now at the end of Q3, can you bring us up to speed with anything that has happened in the last three months since the end of H1?

A3: Post period end, this is end of really Q3 now we’re in, we’re really delighted.

We’ve signed a £4.3 million deal there earlier this week for one of our traditional RSV challenge studies, three weeks ago we signed a similar one, £4 million with Pfizer for an RSV challenge study so nearly every month now we’re on a roll, today. So nearly every month now we’re on a roll, it’s a £4 million contract each month so that’s pretty good.

Post period, we’re putting very significant contracts, our French subsidiary, likewise, are sending off really great contracts and our colleagues in the Amsterdam office is signing a contract with J&J.

So, post period, we’ve really got the business functioning as a proper business.

Q4: Just looking forward, how would you view the outlook for Open Orphan?

A4: The outlook is really exciting, we are the world leader in the testing of vaccines and antivirals through traditional human challenge study models but we did say we would be the first company to do a test COVID-19 using human challenge study models, a little bit controversial, but we’re there. We would hope to announce in a fairly, very close future.

There was a media leak about it last week in the FT saying we were close to a contract with the British government and that would be very exciting, we well down the track. Beyond the British government, we have a queue of large vaccine companies looking to sign up similar, basically, test COVID-19 vaccine and, as we all know, that’s a big piece of business.

The underlying business, every deal we’ve announced so far this year are non-COVID, bar one, we’ve announced one COVID-19 phase I trial. We’ve a really good business now in non-COVID testing vaccines and we have the COVID business so is a dual business and both of them firing on all four cylinders.

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