Octopus Investments recently increased its stake in hVIVO (LON: HVO), which operates the world’s largest commercial human challenge trial unit. The investment group now holds 7.61% of hVIVO’s equity, raising its stake by 72% to 51,804,020 shares. Last Tuesday, trading volume reached 49,372,402 shares, over twenty times the daily average, indicating strong investor interest.
Company Overview
hVIVO is a rapidly growing specialist contract research organization, leading in testing infectious and respiratory disease vaccines and therapeutics using human challenge clinical trials. The company offers comprehensive early clinical development services to a global clientele of biopharma companies.
Capital Markets Day and Trading Update
On Wednesday, July 17th, hVIVO hosted a Capital Markets Day, inviting analysts, institutional investors, and media to its new state-of-the-art facility in Canary Wharf. This facility, opened earlier this year, houses the world’s largest commercial human challenge trial unit with specialized virology and immunology laboratories and an outpatient unit.
The company also released a Trading Update for the six months ended June 30, 2024. Key highlights include:
- Revenues for the first half of the year increased by 30.6% to £35.6m.
- EBITDA margins are expected to be around 24%, up from 19.1%.
- The cash balance at the end of the period was £37.1m, compared to £31.3m.
- The contracted order book stood at £71m, with 100% of FY 2024 revenue guidance already contracted, providing good visibility into 2025.
hVIVO reaffirmed its full-year revenue guidance of £62m and anticipates EBITDA margins at the upper end of market expectations, driven by strong first-half performance and full-year revenue visibility. The company aims for medium-term revenue of £100m by 2028, primarily through organic growth and small, strategic acquisitions.
CEO Statement
CEO Yamin ‘Mo’ Khan commented on the results:
“The results of H1 2024 reflect the hard work, flexibility, and commitment of the team. Despite significant activity, including the build-out and move to a new facility, we have increased our revenue and improved our margins. Running three different facilities concurrently boosted our H1 2024 revenues. We have full visibility over our expected 2024 revenues and continue to deliver on our sustainable growth strategy. Our order book remains strong, and recent contracts, such as the Omicron characterization study and our largest field study to date, highlight our success. The outlook for hVIVO is positive as we welcomed our first volunteers to our new facility at Canary Wharf, the world’s largest human challenge trial unit. We have laid the foundations for strong performance in the future.”
Analyst Views
Following the Capital Markets Day and Trading Update, analysts Stuart Harris and Chris Donellan at Cavendish Capital Markets are optimistic about hVIVO’s ability to meet its revenue targets. The project:
- Current year (ending December) revenues to rise to £62.0m (from £56.0m), with adjusted pre-tax profits of £12.2m (up from £11.9m) and earnings slightly increasing to 1.4p (from 1.3p) per share.
- For next year, they forecast £67.4m in revenues, £14.0m in profits, and 1.6p in earnings per share.
The brokers have set a Price Objective of 42p for hVIVO’s shares.
