Open Orphan (LON: ORPH) is planning to spin off its non-core assets and direct energy towards its fast-growing hVIVO challenge studies unit, which just won a £3 million contract. The separation will maximise value for shareholders while taking advantage of a challenge study boom.
Before Open Orphan acquired it, hVIVO made significant investments and developed an intellectual property portfolio around respiratory and infectious diseases. This includes flu drug HVO-001. The company will de-merge these assets, helping them to achieve their “full commercial potential”.
HVO-001, which will be renamed once the de-merger takes place, is a potential treatment for severe influenza. It could treat a “broad range of serious unmet needs in patients suffering from severe and fatal respiratory disease”.
The code name for the spin-off, set to take place in June, is Orph Pharma.
On top of this, it looks likely Open Orphan will later spin off its newly-created Disease in Motion platform. This will have the code name Orph Data.
A brand new platform
Disease in Motion is the product of more than 20 years of hVIVO’s human challenge studies.
Challenge studies involve purposefully infecting volunteers to gain insight into different diseases and their treatments.
The data has applications for various end-users. This includes big tech and wearables businesses, as well as biotechnology and pharmaceutical firms.
Speaking to Value the Markets, Open Orphan chair Cathal Friel explained that:
“We’re the only company in the world that, under very carefully controlled circumstances, has been making people ever so mildly sick while in a medical quarantine facility. We do this by deliberately infecting them with a targeted virus that we grow in-house to GMP standards, so as to test their immune response. In turn, this allows us to test a variety of vaccines, antivirals, monoclonal antibodies, and other infectious disease therapeutic products.”
This includes infection with flu, respiratory syncytial virus (“RSV”), HRV, Covid-19, and many others.
Over the past 20 years, hVIVO has built up one of the world’s largest databases of infectious disease progression data from its challenge study business.
Clients will be able to access this data through the Disease in Motion platform, with the unit set to spin off soon. Friel claimed that Orph Data has a good chance of completing an IPO before Christmas.
Critically, these spin-offs will allow Open Orphan to focus on growing its leading challenge study business.
At the same time, the company recently received court approval for a “reduction in capital”. This allows it to make a distribution in specie to shareholders as part of the proposed spin-outs. It also allows Open Orphan to make other distributions to and buy back its own shares.
As Friel puts it, the development “allow us to return value to shareholders as we go forward”.
Challenge study boom
Friel said the day for challenge studies has arrived as demand spiked in the wake of the pandemic. In previous years, hVIVO usually completed 2-3 challenge studies per year. However, that has increased to potentially 10 this year, with as many as 20 studies planned for next year.
Friel also explained the important differences between a typical vaccine trial and hVIVO’s challenge studies, which have made them so vital in overcoming the pandemic.
In an ordinary trial, major pharmaceutical firms like AstraZeneca (LON: AZN | NASDAQ: AZN) or Pfizer (NYSE: PFE | FRA: PFE) would find a large group of volunteers numbering tens of thousands. They would then inject half with the trial vaccine and half with a placebo. After that, companies wait to see who got infected and who didn’t.
A challenge study, however, involves a much smaller number of volunteers. The hVIVO Whitechapel QMB facility is able to take 24 at any one time. It new, second clinic in Whitechapel, can then take an additional 19 patients to supplement this. Furthermore, hVIVO has access to 19 quarantine beds in the Royal Free.
As with a larger trial, half of hVIVO’s volunteers get the real vaccine while the other half get the placebo. However, volunteers are brought into hVIVO’s challenge unit and isolated instead of being sent out into the world. They are then deliberately infected with the virus in a safe and controlled setting.
Volunteers then remain in the quarantine unit for around two weeks under the close supervision of hVIVO’s highly specialised team.
Friel also stressed to us that challenge studies are unique in being able to “show very clear efficacy within a very short period of time”. Generally, a major Phase III vaccine clinical trial takes several years. Challenge study can complete in several months.
The fight against Covid
The Covid-19 pandemic makes the benefits of these important trials very clear. When so many get sick every day, it is better to find out as quickly as possible if a vaccine works.
The UK approved the Pfizer vaccine for emergency use seven months after trials began. And that was the fastest approval ever for a vaccine by a very wide margin. It beat the previous fastest development time for a vaccine, from viral sampling to approval, of four years.
In terms of actions taken to combat the pandemic, hVIVO has overseen the manufacture of the challenge virus and the first-in-human virus characterisation study. This is taking place at the Royal Free Hospital London unit. The study is part of a UK government-sponsored partnership.
The characterisation study aims to find the smallest dose of the virus needed to cause someone to develop Covid-19.
On March 25, Open Orphan noted that the first three volunteers had completed the quarantine phase of their participation in the study. There were no safety concerns, and the participants were discharged. The study is ongoing.
On the topic of this important study, Cathal said the “eyes of the world are watching”.
Another Covid contract
Elsewhere, Open Orphan also recently unveiled an impressive £3 million hVIVO contract. The contract is with Imperial College London to develop a new SARS-CoV-2 challenge virus.
The challenge virus will be based on new emerging SARS-CoV-2 variants and used for future hVIVO-run human challenge trials. This will make it possible to compare vaccines and antivirals against different variants of Covid-19.
Once the manufacturing project is complete, an hVIVO-conducted follow on characterisation study could potentially take place. Friel said this demonstrated the firm’s unique ability to offer “an all encompassing solution” when it comes to human challenge trials.
After all, not only does the business develop challenge study models, including manufacturing the challenge virus, but it also assumes “responsibility for full trial recruitment” and can run the human challenge studies using its quarantine facilities in London.
Speaking of which, hVIVO’s own 24-bedroom QMB clinic and its new Whitechapel 19 bed clinic will still be used for its traditional challenge study research and is currently close to fully booked into 2022.
This includes another new £7.5 million human challenge study contract in RSV. It will test a product from an undisclosed US biotechnology firm.
Friel stressed the importance of this study, given that RSV is “the biggest killer of children under 12 months in the entire world” and has no known cure. Right now, only hVIVO has a challenge model able to test RSV, which can also make Covid-19 illness more severe.
By spinning off its other promising businesses, Open Orphan now has both feet firmly planted in the challenge trial space. The timing for this could not be better. These types of trials are now in the spotlight and the topic of infectious disease is so prominent.
Perhaps the brightest spotlight pointed at challenge studies has come from the World Health Organisation (“WHO”), which set out key criteria back in May 2020 for ethical human challenge studies of Covid-19.
The WHO remarked at the time that “well-designed challenge studies” can both accelerate the development of vaccines and “also make it more likely that the vaccines ultimately deployed are more effective”.
As Friel pointed out, traditional challenge studies had been looked at as part of a “niche offering”. Indeed, he highlighted that regulators such as the US Food & Drug Administration and the European Medicines Agency previously “didn’t look to include challenge studies as part of the regulatory pathway”.
However, Friel said that, today, challenge studies “are being mentioned by regulators all around the world as an important part of the process it’s being listed in many places as required”. This could mean big things for Open Orphan.
From the start of 2020 to present, Open Orphan’s shares have already multiplied in value many times over. With more activity than ever planned for the next year, soaring global interest in the company’s studies, and new contracts coming in thick and fast, that price could well climb higher.