Shore Capital has maintained its Buy rating on hVIVO PLC, the specialist contract research organisation, with a fair value assessment of 25 pence per share.
This valuation represents a premium of more than five times the current market price of 4.8 pence, signalling substantial confidence in the company’s recovery potential despite a challenging period for the stock.
The investment thesis centres on improving conditions within the United States biotechnology sector and the anticipated positive impact on demand for hVIVO’s services. The contract research organisation has faced headwinds over the past 18 months, including a contracting order book and client cancellations, as biotech funding conditions deteriorated following the post-pandemic boom.
Shore Capital has identified emerging signs of a cyclical shift in the sector. Recent capital markets activity provides evidence of renewed investor appetite, with eight US biotechnology firms collectively raising approximately $3.2 billion through follow-on equity offerings in a single trading session this week. The transaction volume marks a notable recent high for the sector.
Leading biotech indices have advanced more than 30 per cent year to date, supported by increased merger and acquisition activity alongside strategic licensing agreements. Shore Capital suggests that strengthened balance sheets across the biotech sector will enhance clients’ willingness to commit to new clinical trials, a development that should benefit contract research organisations including hVIVO.
The broker notes that reduced political scrutiny surrounding US pharmaceutical pricing has also contributed to a more favourable operating environment, alleviating concerns about potential reductions in research expenditure by major pharmaceutical companies.
Timing remains the critical consideration for hVIVO’s recovery trajectory. Shore Capital acknowledges that a sustained improvement in the company’s human challenge trial business requires tangible contract wins before investor sentiment can materially improve. Management has cautioned that the recovery process is likely to progress gradually, with meaningful momentum potentially delayed until 2026.
Two significant commercial opportunities could accelerate this timeline. The first involves a potentially record-breaking contract with ILiAD for a pivotal trial related to its BPZE1 vaccine candidate, which is scheduled to enter phase three studies during 2026. The second concerns a project with a major global pharmaceutical company that has secured internal financial approval, with a final commitment decision expected next year.
Shore Capital’s valuation analysis highlights what it considers a substantial market mispricing. With a market capitalisation of £33 million and net cash holdings of £23 million reported at the interim stage, the enterprise value stands at approximately £10 million. This implies an enterprise value to EBITDA multiple of just 0.6 times based on the last twelve months, or 1.5 times when lease liabilities are included.
The broker contends that this valuation metric fails to reflect the intrinsic worth of a profitable, cash-generative business that maintains a unique market position within its specialised field. The assessment suggests that current market pricing does not adequately account for the company’s long-term earnings potential once sector conditions normalise.
