Open Orphan FY19 results point to a transformational 2020
Vox Markets
RNS Newswire
07:28, 24th June 2020

Open Orphan  (AIM; ORPH FOLLOW) has announced its Full Year results to 31 December 2019. Whilst the financial results illustrate some of the business combinations for the first time, investors will be most interested in the post balance sheet events, which include the annualised costs savings from combining Venn and hVIVO and progress on COVID-19 related activities.

Financial Highlights 

Whilst reverse merger accounting makes analysing the results slightly more difficult, the key points for investors include Proforma (results on a combined basis and including the impact of the 28 June 2019 and 17 January 2020 combinations) total revenue for the period was slightly lower at £27.06m (FY18: £29.71m) with adjusted EBITDA loss significantly reduced to £10.13m (FY18: 13.07m).

There were however significant exceptional costs incurred during the period, not least the £0.8m relating to the transactional costs of the acquisitions undertaken in 2019.

Cathal Friel, Executive Chairman of Open Orphan, said: “Since the reverse takeover of Venn in June 2019 we have been building the foundations of a soon to be profitable business in Q3 and a rapidly growing CRO pharmaceutical services Group with all loses in both companies confined to the past.”

“Despite having taken out a lot of the senior management including both the CEO of Venn and the CEO of hVIVO as part of rightsizing the management team within Open Orphan, we have brought forward some long-serving and excellent line managers and heads of departments flattening the organisation structure and giving them more autonomy and responsibility to successfully run their own areas and this is proving very effective both for the company but also most importantly for the individual managers as well” he added.

Post Year End

Looking forward, the business will be looking to operate as two business units with the first CRO business related activities serving large pharmaceutical, biotechnology and medical device organisation as one business unit and the second business unit relating to the development of a data platform for rare disease patients in Europe.

The Company expects to reduce the cost base further with annualised savings of €2.0m in hVIVO and €3.0m in Venn respectively removed since the merger in January 2020 with further annualised cost savings of €2.5m in the merged entity expected to be implemented by the end of the current financial year to 31 December 2020.

But perhaps most Importantly for equity investors currently on the shareholder register, ORPH is currently focused on;

  • Developing the world’s first challenge study model clinical trial to be able to test the efficacy of the large number of Covid-19 vaccines that are in development
  • Developing an antibody testing service with capacity for up to 3,000 tests per day using the Quotient testing instruments which is one of the few able to offer 100% accuracy 

Reassuringly, the Company moves into the 2H20 period with a strong balance sheet through placings of £5.3m in January 2020 and £12.6m in May 2020 to fund the delivery of both the near-term milestones above and develop its broader strategy to build an enlarged and combined customer base across drug development and CRO services.

Shares in Open Orphan have more than doubled in the three months from 24 June 2020, opening up a further 1% to 12.13p in early morning trade following publication of the results.

Outlook 

Post completion of the merger with hVIVO this year, Open Orphan and now represents a highly differentiated specialist pharma group with complementary CRO services.

Cathal stated “The merger with hVIVO, post period end, has given us a full-service business, with world class facilities, motivated colleagues and a strong pipeline of work and transforms out business into the world leader in the testing of vaccines and anti-virals through human challenge model clinical trials.”

The Company stresses the ‘unprecedent growth opportunities’ as Big Pharma focuses funding on Covid-19 and respiratory diseases resulting the development of a strong pipeline of opportunities, for both Covid-19 and non-Covid-19 challenge studies along with the wider CRO services offered by the Group with a Strong pipeline of work to build H2 2020 revenue, targeting operational profitability by Q3 2020

From a corporate action point of view, Open Orphan is looking to both achieve a further €2.5m of cost synergies from the business in H2 2020 and monetise its stakes in other non-core investments such as its 49% stake in Imutex, 62.5% in PrEP Biopharm and its 100% stake in an immunomodulator.

The recent funding has clearly provided sufficient balance sheet strength to both deliver on the opportunities established in 1H20 and invest to develop a world-first challenge study model to address Covid-19 while expanding the Company’s laboratory service offerings to develop antibody testing services to accurately identify an individual’s antibody status.

In closing, Cathal said “I am very excited by the combination of Open Orphan and hVIVO. We have a fantastic team, substantial revenue potential and the opportunity to grow a profitable business in the year ahead.”

Open Orphan is an important constituent of the Vox Markets COVID-19 Index, which can be found here

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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