“Home testing kits can sell from anywhere between £70 to £100. Do the maths…”
Open Orphan : Cashed up and ready to go?
Open Orphan has been one of Aim’s stand-out performers so far in 2020. Starting the year with a share price of around 5p, its stock shot up to 16p in mid-May and is now resting around 12p after raising at 11p. Open Orphan may not have seen the same staggering rise (or crushing falls!) as other Covid-19 plays but for the long term view, the company looks in a solid position and is not just a one trick pony.
The reason for much of the share price increase is obviously due to Covid-19. Open Orphan’s subsidiary, hVIVO, is in the thick of the current pandemic, with an antibody test that was launched last month. The company, listed in London and Dublin, raised £12m in an oversubscribed share placing in May and has made several encouraging announcements in the weeks since. So, is now the time to get involved for the next push up?
Who are Open Orphan?
Founded in 2017, Open Orphan listed on Aim in June 2019 through a reverse takeover of Venn Life Sciences Holdings. The company is a clinical research organisation that specialises in testing vaccines and anti-virals through the use of human challenge clinical trials.The company – led by executive chairman Cathal Friel and based across London, Dublin, Paris and the Netherlands – has two main CRO businesses: Venn Life Sciences and hVIVO.
What role has it played in fighting the pandemic and what else is it doing?
Open Orphan completed the acquisition of London-based hVIVO in January this year, just in time for it to play a key role in fighting the Covid-19 crisis. In June, the company launched the hVIVO Covid Clear Test, which they believe is the “most accurate antibody test available to UK employers”. It has been only positive news for the company since then.
Open Orphan announced a staggering deal with NASDAQ-listed Swiss firm Quotient to produce Covid-19 antibody tests at a rate of 3,000 per day. Home testing kits can sell from anywhere between £70 to £100. Do the maths…With the UK government’s commitment to ramp up testing to help reopen the economy, this could be a major revenue generator for the company moving forward.
In mid-June, Open Orphan announced in one of the world’s oldest and best known medical journals, The Lancet, results of a “mosquito saliva vaccine” developed by Imutex Limited, in which it owns a 49 per cent stake with Seek Group. The first trial of AGS-v, a first-in-class “mosquito saliva vaccine” in humans indicated that the vaccine is safe and induces a strong immune response in healthy volunteers. The treatment is designed as a “transformational vaccine”, the first ever mosquito synthetic saliva vaccine designed in to protect against mosquito-borne diseases carried in the saliva such as Zika, Malaria, and Dengue Fever. Cathal Friel, said: “We are delighted with the results of this very important and successful trial of Imutex’s universal vaccine for mosquito-borne diseases“
A few weeks ago Open Orphan announced that it had signed three new contracts to allow third parties to use hVIVO laboratory services.
Friel said: “We are now continuing to sign additional new virology services contracts with third party customers and, as such, this is delivering upon one of our key commitments from when we acquired hVIVO earlier this year that, as part of our growth strategy, we were going to expand the range of our service offerings to third party pharmaceutical and biotech companies. I am excited by this area of growth for Open Orphan as we seek to maximise the value out of our fantastic facilities in East London.”
How confident is the company?
Think beyond Covid. The funds recently raised will be used to bolster its balance sheet and expand its suite of world-leading vaccine clinical trial services. There are a number of non-core vaccine product assets which the company intends to monetise moving forward.
Among these non-core assets is a potential candidate for a universal flu vaccine: Flu-V. This was developed by Imutex, a 49% partnership between hVIVO and SEEK Group. By creating a potential vaccine for various strains of flu it would be transformational for the company.
With most countries now facing the possabilities of a second wave of Covid as well as the annual re-emergence of “normal” flu, Open Orphan could not be in a better position.
Cathal wants a big pay day
The deal with Imutex alone could be worth a large sum of money. Spinning off Imutex into a high-profile NASDAQ listing could bring a hefty dividend for Open Orphan shareholders, far higher than the current share price.
Cathal Friel has substantial skin in the game. He has just under a 7% holding in the company, amassing over 45 million shares, whilst Invesco own almost 8% of the company.
So, what do the analysts think?
A recent article from Simply Wall Street flagged that the company, which reported a loss of €6.5m in 2019 – may be on the verge of breaking even or perhaps profitability.
Based on conversations with two analysts, the article reported that “the consensus to breakeven is near”. It reported that the analysts expected Open Orphan to make another loss in 2020 before turning a profit of €6.8m in 2021.
In late June, Finncap analysts predicted that Open Orphan can generate cost savings of €7.5m. The broker reiterated its price target of 19p following the release of subsidiary hVIVO’s 100%-accurate Covid Clear test. This is the most accurate test on the market and hVIVO/Open Orphan is targeting its antibody testing services directly to the large employer groups as part of getting Britain’s employees back to work safely and helping the economy.
Exciting times ahead for Team Open Orphan…
Here, Cathal Friel speaks to investors at the recent Proactive One2One Virtual Event…
The author was paid for this article but does not hold shares in Open Orphan.