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Writer's pictureMark Watson-Mitchell

hVIVO – Foundations Laid For Strong Performance In The Months And Years Ahead, Institutions Building Up Stakes Ahead Of Interims

Next Monday, 2nd September, will see hVIVO (LON:HVO) cancelling dealing of its shares on the Euronext Growth Market.


This is quite a sensible move by the £200m capitalised contract research group, it will consolidate trading of its stock into its primary AIM listing, especially as the company’s main operations, the majority of its employees, as well as most of its investor base are all in the UK.


Just imagine all of the associated costs and duplication of activities involved with maintaining its dual listings, a big chunk of which will now be removed.


The Business 


Based in the UK, the company is engaged in pioneering a technology platform of human disease models to accelerate drug discovery and in respiratory and infectious diseases, including flu, respiratory syncytial virus (RSV), asthma and common cold.


It considers that it is the world leader in testing infectious and respiratory disease vaccines and therapeutics using human challenge clinical trials.


It provides end-to-end early clinical development services to its large, established and growing repeat client base, which includes four of the top 10 largest global biopharma companies.


Its fast-growing services business includes a unique portfolio of 11 human challenge models, with a number of new models under development, to test a broad range of infectious and respiratory disease products.


The company has world-class challenge agent manufacturing capabilities, specialist drug development and clinical consultancy services via its Venn Life Sciences brand, and a lab offering via its hLAB brand, which includes virology, immunology biomarker and molecular testing.


The group also offers additional clinical field trial services such as patient recruitment and clinical trial site services by recruiting volunteers / patients for its studies by via its FluCamp volunteer screening facilities in London and Manchester.


hVIVO runs challenge trials in London - its new state-of-the-art facilities in Canary Wharf opened earlier this year and is the world's largest commercial human challenge trial unit, with highly specialised on-site virology and immunology laboratories, and an outpatient unit.


Recent Trading Update


In mid-July the company reported that it expects to show first-half revenues of £35.6m representing 30.6% revenue growth on H1 2023.


That increase was driven by exceptional operational delivery across the group, particularly with a record number of volunteer inoculations across multiple studies and a variety of challenge models running simultaneously.  


CEO 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 order book 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 View


At Cavendish Capital Markets, its analysts Stuart Harris and Chris Donnellan approve of the Euronext quote being cancelled, appreciating the cost savings.


Ahead of the company declaring its results for the six months to the end of June, due on Tuesday 10th September, the analysts are giving a 42p Price Objective on the group’s shares.


The are estimating that the current year to end December will show revenues up to £62.0m (£56.0m), while its adjusted pre-tax profits could rise to £12.2m (£11.9m), lifting its earnings up to 1.4p (1.3p) and paying a 0.2p per share dividend.


Jumping forward into 2025 they foresee £67.4m sales, £12.9m profits, 1.6p earnings and maintaining the 0.2p dividend.


In My View


I like the way that Mo Khan and his team have obviously impressed a number of the City investing institutions.


Fund manager Neil Hermon, the Janus Henderson fund manager, has recently added a wad of the group’s shares into the Henderson Smaller Companies Trust, he considers that Hvivo offered a relatively cheap and effective way to undertake accelerated drug development.


“The barriers to entry in this niche industry are high as the proprietary datasets about viral loads can only be built through experience.


The business is focussed on both organic growth, through the development of ancillary services, and inorganic growth.


Management has set ambitious medium-term revenue and margin targets and our investment gives us exposure to structural growth in this niche market.”


Earlier this year I was interested to note the gradual way that JP Morgan Asset Management built up its 7.04% stake in the group.


Then at the start of July, Octopus Investments bought another 1m shares, to add to its holding of 20,175,000 shares, taking it through the declarable 3% level, up to 3.10%.


11 days later it was up to 30,054,020 shares, representing 4.42% of the equity.


After another 7 days it was up to 51,804,020 shares (7.61%).


And it continued with another purchase on Monday 5th August, pushing it up to 54,438,725 shares, a neat 8.0% holding.



In my view patient investors should be adding HVO shares, now 29p, to their growth portfolios.

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