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Positioning for profitability

Significant cost reductions and operational efficiencies implemented since FY18 expected to drive FY20 operating costs down by £11m compared to FY17

Expanded service offerings enhance future revenue opportunities

Strong pipeline of contract opportunities for 2020

Targeting profitability in 2020

hVIVO plc (AIM: HVO), an industry leading clinical development services business pioneering human disease models based upon viral challenge, announces its interim results for the six months ended 30 June 2019.

Financial Highlights: Significant reductions in Admin and R&D costs combined with growing revenues, positions Company well for future profitability

• Revenue up 22% to £5.9 million (H1 2018: £4.9 million)
• Adjusted loss from operations* reduced 27% to £3.7 million (H1 2018: £5.0 million)
• Adjusted EBITDA loss reduced 29% to £3.1 million (H1 2018: £4.4 million) trending towards future profitability
• Cash and cash equivalents of £4.0 million at 30 June 2019 (31 December 2018: £13.4 million) impacted by contract cancellations
• Research and development expense down 60% to £1.1 million (H1 2018: £2.8 million)
• Admin expenses down 22% to £3.8 million (HY 2018: £4.9 million)
• Ongoing efficiency initiatives will protect gross profit margins going forward

Post period

An R&D tax credit refund of £2.4 million was received from HM Revenue & Customs on 4th September 2019.

* Adjusted loss from operations excludes provision against virus inventory of £0.6 million (H1 2018: nil)

** Adjusted EBITDA loss is equal to Adjusted loss from operations plus depreciation and amortisation of £0.5 million (H1 2018: £0.4 million) and share-based payment expense of £0.09 million (H1 2018: £0.3 million)

Operational Highlights: Good progress with further cost cutting and operational efficiencies supporting business turnaround, but cancellations of contracted work impacts cash position

• Continued progress on business turnaround and implementation of operational efficiency measures, primarily driven by headcount reductions and process improvements have significantly reduced the operating cost base. These actions are expected to deliver an £11 million reduction in operating costs in FY20 compared to FY17
• Key operational improvements will bring costs in line with services revenue, supporting business turnaround and enabling profitability
• Further validation of hVIVO's respiratory syncytial virus (RSV) challenge model
• Unprecedented levels of contract cancellations, due to client portfolio prioritisation, impacted cash position at a time when business turnaround and efficiencies are still to be fully realised
• Pipeline of opportunities for 2020 looking strong and the Company enters the second half of the year with a robust backlog of contracted work, despite cancellations, to enable full year revenue growth
• Active discussions ongoing for business development opportunities within Imutex Limited (joint venture) - FLU-v, AGS-v

Dr Trevor Phillips, Executive Chairman, commented:

"In the first half of 2019 we have continued to rationalise the Company's cost base to further reduce our operating costs and improved our operating efficiency. We have made progress in expanding our service offerings to enhance revenue opportunities, delivered further successful client studies and extend our position as a leader in viral challenge studies. hVIVO is now operationally stronger, better positioned to both succeed in its core business and  be profitable in 2020.

During the period, we experienced what for hVIVO, was, an unprecedented level of late contract cancellations as some of our clients reprioritised their pipelines, which will continue to impact revenue in the second half of the year. At the beginning of 2019, we were on track to show a substantial revenue increase on 2018, and whilst we still anticipate exceeding market expectations for revenue for the full year, these cancellations have tempered the revenue growth and had a negative impact on our cash position. As a service business, where quality and delivery are essential, we had already operationally geared up for this high level of study activity and this, combined with the lost revenues, has impacted our cash position. That said, we have continued to make progress on implementing efficiencies and process initiatives and expect the operating cost base to be significantly lower by year end, enabling us to become profitable and generate cash based on achievable revenue levels in 2020.

In addition to the core services business, we continue to explore options for the FLU-v vaccine programme. We have engaged in multiple business development discussions, some of which are still active. We are also establishing schedules for meetings with key regulatory authorities, FDA and EMEA, where we hope to gain further insight into some of the key areas of interest expressed by potential partners.

Following the significant adjustments to the business that we have implemented and despite the high level of contract cancellations, I am confident that hVIVO is now well positioned for further revenue growth and to achieve profitability."

For further information please contact:

hVIVO plc	+44 207 756 1300
Trevor Phillips (Executive Chairman) Anesh Patel (Interim Finance Director & Company Secretary) Fleur Wood (EVP, Investor Relations & Communications)
Numis Securities Limited	+44 207 260 1000
Freddie Barnfield / Huw Jeremy (Nominated Adviser) James Black (Corporate Broking)
FTI Consulting	+44 203 727 1000
Simon Conway / Victoria Foster Mitchell

 

Notes to Editors:

hVIVO is an industry leading clinical development services business supporting product development for customers developing antivirals, vaccines and respiratory therapeutics.  Leveraging human disease models in human rhinovirus (HRV), RSV, Influenza (Flu) Asthma and chronic obstructive pulmonary disease (COPD), the hVIVO platform illuminates the entire disease cycle in people from healthy to sick and back to health. Based in the UK, market leader hVIVO has conducted 56 clinical studies and inoculated over 2900 volunteers.

To read the full statement, please click here.