It’s obvious there’s a lot of money in infectious disease at the moment. After all, a pandemic is ongoing, and all of the vaccines and antivirals we hear about in the news take a lot of funding. Indeed, whether it’s from governments or big pharma, the money is pouring in.
So, if it were to turn out that one company had already been focusing on infectious disease for years, the considerable first mover advantage this would offer would catch anyone’s interest in the current environment, right?
And what if that same company was also already working with the UK government on a ground-breaking COVID study, with multiple contracts rolling in for all kinds of diseases?
Well, this is exactly what Open Orphan (LON: ORPH) offers investors right now. And here, we catch up with the company’s chair, Cathal Friel, to cover the latest–and also the biggest–in its increasingly long line of contract wins.
Open Orphan makes the most of a sudden funding surge
As Friel has pointed out before, the infectious disease market is on track to reach $250 billion annually by 2025, a date that is fast approaching. It’s a massive acceleration for the sector from less than $19 billion in 2018.
As Friel notes:
“The top ten pharma companies in the world found that there was no money in vaccine development, so they stopped. It was not seen as a high growth, high-value, exciting area. But, post pandemic, there's a whole range of new vaccines that have been rolled out because it's clear the governments around the world are screaming out for them.”
Clearly, times are different, and the sector is booming like never before.
Plus, with variants like Omicron and Delta emerging all the time, investment must continue.
“People's awareness has risen, which has also driven heightened government awareness. I think the big issue with infectious diseases is that there was no money spent in vaccines and no money spent in antivirals. But I don't know if there'll ever be another pandemic, because they're now spending the money to avoid it,” says Friel.
So, it’s a flourishing sector. That much is obvious. But what makes Open Orphan stand out?
Open Orphan takes advantage of infectious disease head start and its established high barrier to entry
Long story short, Open Orphan got there first.
As mentioned, plenty of other companies made an exit from infectious disease. But this firm chose to build and expand its position in the sectors instead. This means that, with money at last coming into the sector, it appears to be in an excellent position to reach out and take it.
Importantly, Open Orphan offers something only very few companies were doing in the pre-COVID world, and that few have the capacity for even now: challenge studies.
What is a challenge study? It’s a type of human trial where healthy participants volunteer to be infected on purpose with a disease. Unlike the rest of us, who have to make do recovering at home, volunteers recuperate in a safe, controlled, clinical quarantine environment.
Plus, challenge studies can let pharma companies know if their product works after only six months. For comparison, it takes up to two years for studies in the general population.
hVIVO, Open Orphan’s challenge studies business, is one of only a handful of companies able to run these trials. Right now, demand is soaring as companies race to see if their new vaccines and antiviral treatments work.
“There's more products in development around the world for Covid than any other indication. I think there's something like 1,000 Covid-related products in development globally, and every one of them could be tested using challenge studies. So, we're sitting on what could be one of the world's most exciting companies right now. Can we do that many? I'm not sure, but certainly we don't see any sign of our business slowing down.”
Contracts keep flowing in as Open Orphan scales up
But the critical point here is that, while COVID challenge studies present Open Orphan with excellent financial upside, they are far from the only weapon in the firm’s war chest.
In fact, as mentioned earlier, the $13.4 million flu contract the company recently signed with a biotech firm sets a new record for deals of its kind.
The as-yet-unnamed US company is testing an antiviral. The challenge study is set to start at hVIVO’s state-of-the-art facilities in the second half of 2022.
Shortly followed by another flu challenge study contract for £5 million, this deal means that Open Orphan has now signed contracts for 95% of its 2022 forecasted revenues before the 12-month period has even begun.
When the company took over hVIVO in January 2020, Friel says, it was already “the world leader in testing vaccines and antivirals for thirty years”. Back then, it was just running two to three challenge studies per year.
To go from just two or three to ten in 2021, with the company aiming for fifteen in 2022, is remarkable.
Clearly, the company is making the most of the opportunity available here – adding a new quarantine facility in London as well as two new volunteer recruitment centres. It is also adding to its portfolio of challenge study models to include more and more diseases.
“We're really scaling the business, and that doesn’t happen by accident. We're rolling out new models. We've announced a new malaria model, we're doing asthma studies, and generally we're expanding our portfolio of models while doing the day job,” Friel explains.
Add in the recently positive results from challenge studies in flu and RSV, and it’s clear that Open Orphan is caught in a whirlwind of activity.
Company in “great shape” going into 2022
Friel is nothing but confident in our interview. He’s determined to make the most of the infectious disease sector’s sudden surge in funding and improve performance even further.
“The future looks very good from what we can see. At the moment, we have 95% of our order book in place for next year, which has never happened at the company before. We forecast £50 million next year and we think the surprise will all be on the upside in 2022, with no COVID revenues being counted for in our £50 million forecasts.”
Open Orphan’s shares are up more than 400% since January 2020. For 2021 alone, however, they are down slightly.
Given plans are already underway for the firm’s busiest year yet, alongside the fact that it expects to record a profit for 2021, there are plenty of factors that could lead to a price rise.
“We’ve ended the year in great shape. We’re making money, and there’s a good bit of cash in the balance sheet. To be honest, we couldn't be more optimistic about the future at the moment. It’s looking rosy for us.”
It’s rare to speak to a company with this level of potential. Open Orphan is a first mover on the scene of an incredible explosion in activity, determined to seize every chance to succeed.