Open Orphan PLC (LON:ORPH) Chief Executive Officer Cathal Friel caught up with DirectorsTalk for an exclusive interview to discuss the new hVIVO contract signed with a European biotech company.
Q1: You’ve just announced the signing of a new contract with a European biotech company for the provision of an RSV human challenge study. Can you just explain for us what the study entails?
A1: Very simply, what we are doing is, on behalf of a large European biotech company, we’re testing the efficacy of a new vaccine, basically, for RSV.
Now, what is RSV? RSV is a mild version of the flu, lots of people have it but in children and older people RSV can be quite nasty so it’s quite a common cold.
What we’re doing is using our RSV challenge study model to test their new vaccine, very simply, and we also couldn’t do it had it not been for our 24-bed quarantine clinic here in Whitechapel in East London. Really excitingly, a challenge study is really like a Phase I trial so we need data management statistics and medical writing skills as part of the contract and they’re all coming over from our Venn colleagues.
So, it’s our first contract, we’ve only just put these two companies together 6 weeks ago and here we are, the two teams working hand in glove to deliver a fascinating contract.
Q2: What does this study mean for the company?
A2: It means we think we were going to fix these acquired Venn Life Sciences and then in the last month acquired hVIVO both of them lovely, small but struggling AIM-listed companies doing pharma services.
So, it means for Open Orphan, how do you fix loss-making companies? You take out costs but you also must increase revenues so everyone knows that we have been aggressively taking out costs but this reassures the market that we’re not only cost cutters, that we can deliver. Bear in mind this is a £3.2 million upfront, almost, in the next 3/4/5 months, but the much bigger back-to-back study, the pivotal study is nearer this year and we’ve already announced that would be in the region of £7 million.
So, for a company, hVIVO didn’t do an awful lot more than that in the previous years’ revenue, it’s a pretty good start. All £10 million won’t be recognised this year but from our end we’re making it clear that quite an amount of it will come in and be recognised this year.
Q3: What are the timescales involved in the study?
A3: I think I kind of alluded Giles that this is kicking off pretty rapidly so we’ve made clear that all of the £3.2 million will be recognised in the coming months and then we hoping, it’s not guaranteed, but if everything goes well in the pilot study then the full pivotal study will sign and kick off at the end of this year. So, we would expect a substantial part of that not only will be recognised but will come in later this year.
Bear in mind, the beauty about hVIVO contracts, they’re cash flow positive, we get a large percentage up front on signing, w get milestone payments so it’s not like some contracts that are backloaded, hVIVO contracts are cash flow positive because big chunks of the cash comes upfront.
Q4: What else in going on in Open Orphan? What should investors be looking out for over the coming months?
A4: Over the coming months, we’ve only had control of the two companies for 6 weeks so I think this is a good start, I know some in the market might have been disappointed, they thought we should have had this contract some weeks ago. Look we’re 6 weeks in, we’ve got probably one of the largest contracts ever, it’s a joint contract, we couldn’t have done it without our Venn colleagues, their data management skills and their medical writing skills so I think more of the same.
To fix these companies, we want to be profitable, we’re going to be profitable. We’ve taken two loss-making companies, we’ve done the easy work, stripping out costs, now we want to demonstrate to the market we can grow the top line and get some solid contracts in. We’d like to end the year with a nicely profitable services company doing exciting work.
Separately, people are saying we’re ok, we’re Britain’s only, and one of Europe’s only, virology companies so we’d hope and expect in the coming period of time to be talking more about what we can do to help with the coronavirus and so that’s work in progress.
All I can say is that we’re certainly in that space and we’ll make it our business to be involved in it but until there’s news flow, I’d prefer not to talk about it but there will be news flow.