It was interesting to note that Octopus Investments has this week upped its stake in hVIVO (LON:HVO), the company that operates the world’s largest commercial human challenge trial unit.
The investment group now holds 7.61% of the group’s equity, having increased its stake by 72% to a total of 51,804,020 shares.
Last Tuesday some 49,372,402 shares were traded in the market, which was more than twenty times the daily average.
Octopus has boosted its holdings in the company from 20,175,000 shares on the 4th July – so it is quite a confident signal for investors to follow closely.
The Business
The company is a rapidly growing specialist contract research organisation and the world leader in testing infectious and respiratory disease vaccines and therapeutics using human challenge clinical trials, providing end-to-end early clinical development services for our broad and longstanding global client base of biopharma companies.
Capital Markets Day And Trading Update
On Wednesday 17th July the group held a Capital Markets Day at which it invited analysts, institutional investors, and media to see its new state-of-the-art facility in Canary Wharf.
hVIVO runs challenge trials at its new facilities, which were opened earlier this year, and it is the world’s largest commercial human challenge trial unit, with highly specialised on-site virology and immunology laboratories, and an outpatient unit.
On the same day the company also announced a Trading Update for the six months ended 30 June 2024.
It showed that revenues in the first half year to end June were 30.6% ahead at £35.6m, while the company expects that its EBITDA margins will be around 24% (19.1%).
The end period cash balance was £37.1m (£31.3m).
Its contracted order book was £71m at the end of the first half, with 100% of FY 2024 revenue guidance already contracted and showing good visibility into 2025.
The group reaffirmed its full year revenue guidance of £62m and anticipates that EBITDA margins will be at the upper end of market expectations on the basis of the strong performance in the first half of 2024 and full visibility for the remainder of the year.
The company stated that its organic growth strategy is also underpinning its medium-term revenue target of £100m by 2028, the majority of which is expected to be achieved through sustained organic growth complemented by small, strategic bolt-on acquisitions.
CEO Yamin ‘Mo’ Khan stated that:
“The results of H1 2024 reflect the hard work, flexibility and commitment of the team.
During a period of significant activity including the build-out and move to a new facility, we have not only materially increased our revenue but also further improved our margins.
The concurrent running of three different facilities helped to boost our revenues for H1 2024, creating an expected H1 2024 weighting.
We have full visibility over our expected 2024 revenues and continue to deliver on our sustainable growth strategy.
The orderbook remains strong in spite of record revenue delivery in H1 2024.
The recent Omicron characterisation study contract and the award of our largest field study to date are two key sales highlights for H1 2024.
In addition, the current sales pipeline includes several advanced stage opportunities that we expect to convert in the coming months.
The outlook for hVIVO is positive as we welcomed our first volunteers into our new facility at Canary Wharf - the world’s largest human challenge trial unit.
I believe we have laid the foundations for strong performance in the months and years ahead.”
Analyst’s Views
After the recent Capital Markets Day and Trading Update, analysts Stuart Harris and Chris Donellan at Cavendish Capital Markets, are a lot more positive about the group’s ability to reach its revenue target in due course.
For the current year to end December they are looking for revenues to rise to £62.0m (£56.0m), with adjusted pre-tax profits of £12.2m (£11.9m) and earnings fractionally ahead at 1.4p (1.3p) a share.
For next year they see £67.4m revenues, £14.0m profits and 1.6p of earnings per share.
The brokers have a Price Objective of 42p on the company’s shares.
My View
The corporate progression of this £204m capitalised company has been steady and extremely focussed.
The group’s shares, which touched 37.35p in April 2021 have since been down to a 10.25p low, before edging gradually better to the current 29.50p.
I consider that the broker’s Price Objective is very achievable.