Good afternoon, ladies and gentlemen, and welcome to the hVIVO PLC investor update. Throughout today's presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Please simply type in your questions at any time and press send. Given the attendance on today's call, the company may not be in a position to answer every question they receive during the meeting itself, however, the company can review all questions and publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and I'm sure the company will be most grateful for your participation. I'd now like to hand over to CEO Mo Khan. Good afternoon.
Good afternoon or good evening. Thank you very much for the kind introduction, and welcome to everyone out there in the audience. You are here to listen to our 2024 update and also the announcement of our first acquisition in our M&A strategy. So, without further ado, we'll drill straight into it. This is our normal compulsory disclaimer. I'm Yamin ‘Mo’ Khan. I'm the CEO of hVIVO. I've been here just under three years. My anniversary is coming up in the next couple of weeks. I'm here with Stephen.
I'm Stephen. I've been with the company for now eight years. We've had a good year.
He's the CFO.
Yeah.
Okay. So, just drilling straight into our presence. So, you already know we have a fairly large presence here in the U.K. with our 50-bed facility in Clearwater Court in London, where we're sitting at the moment. We also have Venn Life Sciences with presence in the Netherlands and also in France, in Paris. Now, we've just completed the acquisition of two clinical research units from a German full-service CRO called CRS. The first unit is in Mannheim, which is a 96-bed unit just south of Frankfurt. The second unit is in Kiel, just north of Hamburg in northern Germany, which has around 24 beds. So, as part of our strategy, we will always reiterate that we will be looking to acquire the right Phase I unit to complement the Phase II services we currently provide to our clients so we can provide a much broader end-to-end integrated clinical development services.
And I'm very pleased that CRS is fully on board. We think that we can help CRS in broadening their level of services. CRS can also help Venn Life Sciences and also hVIVO to broaden their level of services. And together, we will form a formidable partnership and company under the hVIVO umbrella to be one of the prominent early-stage clinical development providers in Europe. So, who is CRS? So, CRS was founded in 1977. They've run just under 2,000 clinical trials to date. They have, over the last six years, inoculated or treated 7,000 patients and volunteers in their trials. They have a long history of providing quality service, all done with people of technical expertise, with high levels of safety. Even last year, they were inspected by the FDA from the U.S., and they passed the audit with flying colors.
We, as a company, were aware of them a long time now because our Venn colleagues have previously worked with them to provide some Phase I services. They're renowned within the industry for delivery of quality service. They have gone through some hard times with regards to sustainable margin levels. On the back of that, we've been able to acquire the company for around EUR 10 million, which is less than 50% of the total annual revenue of the company. Stephen will give a little bit more color on some of the financials. The two units, so the one in Mannheim, the larger unit, focuses on Phase I trials and also on proof-of-concept Phase II trials in a number of different therapeutic areas, including cardiometabolic, dermatology, and immunology trials.
The unit in Kiel is a very specialized unit, one of the leaders in Europe in providing clinical trial services in patients with renal and hepatic impairment. This is a very specialist skill set, very technical, and they're one of the world leaders in that, and one of the reasons why we have acquired CRS is not only to broaden the services we offer, but get that specialty of services and also being part of a much bigger market than the human challenge trials. Because remember, every drug developer has to run a Phase I and a Phase II trial to get to marketing, whereas human challenge trials are not a requirement from a regulatory point of view, so I'm very pleased with the fact that we've been able to acquire a company that has a long, successful history in running these trials.
So, the length of experience they have, the relationship they have with the big pharma clients, and the repeat business of over 50% speaks volumes to the capabilities and the experience they have in this field that we are looking at. So, why CRS? So, there are a number of reasons why we felt that CRS is the right asset for us. Over the last couple of years, we've been reviewing a number of potential assets for acquisitions. And for one reason or another, they've not fitted the bill for us. But we felt that CRS ticks most of the boxes we were looking for. So, first of all, they can provide Phase I capability, which includes first in human. They also do a lot of trials in patients for proof of concept. They've got multiple sites.
Thereby, if you add them to what we offer here in the U.K., now suddenly you're offering multi-site international clinical site capability. So, we can run Phase II and Phase III trials in five locations. It also gives us access to up to 200 beds across the two companies. We also know that as a Phase I and a Phase II provider, CRS currently is not able to provide full breadth of service. So, with the addition of Venn Life Sciences' consulting services and Venn France's biometric services, we can now offer a much broader pool of service. So, as an example, CRS typically outsources its biometric services. So, every single trial they win, they have to look for a partner or a subcontractor to conduct the data management, the biostats, and the medical writing services. Now, we have those services in-house as part of Venn Life Sciences' offering.
Going forward, CRS will be able to offer the full spectrum of clinical trial services to any clients going forward. This automatically will bring our margins higher. Secondly, of course, it improves the level of service we provide to our clients because we will be in full control of all the services we're providing rather than working with third parties and potentially getting issues and problems. Also, from a client point of view, no client wants to work with multiple vendors for one project. Having that one project all being outsourced to a single entity means that they will get a better level of service, as I said.
But also, as most of the clients they work with are biotech , it helps them from a resourcing and managing point of view to make sure they don't need a large team to oversee the delivery of these clinical trials across the group. They also bring to us a new group of clients. 80% of our clients are U.S.-based. 99% of CRS clients are European-based. So, we add a whole new pool of potential clients that we can now approach and cross-sell to. In addition, for Venn Life Sciences, they can provide the early drug developer services to the clients they're looking to get into Phase I. Because prior to Phase I, of course, there's some pre-clinical work, and Venn Life Sciences offers pre-clinical consulting services as well as CMC and clinical PK and so on.
All those fit really well with regards to the services that currently CRS offers to their clients. So, overall, a number of reasons why we felt CRS is a good asset to target and a good partner. And we've had hand-holding calls with them today to introduce ourselves to them. And they're very excited and very proud to be part of the hVIVO family. And we're very pleased to have them on board. And this, of course, is the start of our M&A strategy. And we will continue to do further bolt-on acquisitions as we move forward. So, this gives you a little bit more details on the different service lines that we are currently offering. And on the right-hand side, as you can see, the building icons, which indicate whether that service is currently being provided by Venn Life Sciences, hVIVO, or CRS.
And so, you can see we're not adding any new service lines. Our goal here is to acquire an assays that provides adjacent services to what we currently offer. We can basically use the same system and the same infrastructure to develop and grow these service lines. But also, it means that they're giving us greater breadth. You can look at the addition in the purple boxes of new therapeutic areas, new increased database of healthy volunteers and patients, new types of studies. For example, whereas we only conduct human challenge trials, CRS has the ability to conduct Phase I and Phase II, but also single ascending dose trials, multiple ascending dose trials, drug-drug interaction, bioequivalence trials, PK/PD studies. A much broader variety of Phase I and Phase II trials than we currently offer. I think that speaks a lot to how it complements with us.
So, for example, any PK/PD studies will require pharmacokinetic programming analysis. And our Venn Life Sciences are world leaders in providing that level of service. So, combined together, they'll be a force of nature in going to biotechs and pharma who look for early-stage clinical development program services. So, for a whole wealth of reasons, I believe that this could be a very, very good acquisition for us. And also, on the other hand, a very good partner for CRS in their kind of plan to grow the company across all of these service lines. One of the key reasons we also look at Germany, Germany being the third largest market when it comes to clinical research. So, it's up there with the highest country in Europe. But they're renowned for early-stage, early-Phase clinical trials.
The level of quality and the level of safety is one of the key reasons why that is. The German authorities are also keen to attract more clinical research at this stage of the development programs to their country. And with that, they've almost halved the timeline for the regulatory review of new protocols for Phase I trials. So, they're trying to incentivize, attract more trials coming into the country. And you can see from the bottom left, we're adding to the therapeutic areas that we are currently working with at hVIVO by adding the CRS capabilities on top of that. We're also, of course, enlarging the potential pool of volunteers and patients who have access to by adding the Mannheim metropolitan and the Kiel/Hamburg metropolitan area for future clinical trials. We, of course, we're broadening the revenue stream, as I talked about.
You can see the number of clients that have worked with the longevity of some of these clients. The loyalty is great. As I mentioned, over 50% of their clients are repeat clients, which is really a good sign of the quality of their deliverables. On the right-hand side, those couple of donuts, if you focus on the green segments on those two donuts, you can see it's increasing from the last five years or so to the recent couple of years. That basically means that the number of trials they're running with patients is increasing, which is great news for us. One, patient trials typically have larger contract value because they tend to be more complex, and of course, it costs more money to recruit a patient to a study than a healthy volunteer.
Secondly, patient studies can typically be run in multiple sites, whereas healthy volunteer Phase I trials tend to be a single site. So, this basically gives us the potential to run the study CRS are running in Germany, also in London with hVIVO. So, you're basically multiplying the number of sites that are running the same trial, thereby recruiting more patients and increasing overall the group revenue. So, this also speaks volumes to why we have decided that CRS is a good company for us to acquire. Diversification in clients and in therapeutic areas. So, if you look at it by revenue, so this is basically how much revenue we generate per therapeutic area. As you would imagine, we are dominated by infectious diseases through our human challenge trial concepts we conduct here. But they have a whole rainbow, a whole variety of therapeutic areas.
It gives us the potential to access these clients and cross-sell Venn Life Sciences and hVIVO services, including patient recruitment, for example, field studies and lab hLAB services, the laboratory services we launched late last year. And if you look at the right side, it illustrates the point I was making earlier. We're dominated by U.S. clients. They're dominated by European clients. So, although we do have some overlap in clients in large, we are working with different clients. So, there's no reason why we can't approach our clients and CRS approach their clients and pitch the services of each other to offer a more full of service to the existing clients for each party. I'll now ask Stephen to give you an update on the financials for 2024 and more details on the financials behind the acquisition.
Thank you, Mo. And good evening, everyone.
2024 was a record year for this business, both financially and operationally. A lot was delivered operationally, and I will touch on that later in the presentation. From a financial perspective, the metrics are really good. We delivered GBP 62.7 million, up almost 12% on last year. Some of the key factors behind that is we did have a record number of inoculations during the year. We introduced a new service, a field trial work. We won a contract in June, and we delivered it in Q4. 817 vaccinations, pretty much unheard of in the industry in terms of one unit delivering that amount of patients, participants in the study in such a short space of time in six weeks. And Mo, we'll touch on that in a little bit more detail.
I think also it's fair to comment on the fact that the GBP 62.7 million does include some facility funding. And we've discussed this in the past. It's really a fee that a big pharma paid us to deliver their study on time. And we've used this fee to deliver a Canary Wharf, our new facility. So, and that was GBP 4.3 million. So, when you move that onto the EBITDA margin, we've increased from 22% to 26%. Obviously, that facility funding is falling through. But it's also having to fund the overlapping of facility costs. We had three facilities running all the way up until Q3, running up until June, and then we had two up until the end of August running at this stage.
If you strip both the overlapping facility costs, which won't repeat, obviously, because we only got one facility in Canary Wharf at this stage and Plumbers Row, and the accelerator funding fee, we have an underlying performance, EBITDA performance of 23%. Still very healthy, very good for this type of business. I think the other thing we've been highlighting was that certainly at the interims, we highlighted that we could see the recruitment efficiencies coming through. We have invested in the VMS system. We have a very good team that do all the recruitment work for us. And they've got smarter, more efficient on using advertising spend. And that was in the first half of the year. But in the second half of the year, what we really saw was some clinic operational efficiencies come through.
And the key thing here to highlight is that year on year, total recruitment costs and total clinic operational costs are flat despite the increase in revenue. And it's a significant performance. The team have done very well in there. And to not forget that in that 23%, underlying 23%, we still continued spending money towards our new models. We have invested more in our hMPV model, which is quite prevalent with our clients in our pipeline. We have a new H3N2 flu model, and we have a new RSV B model all being developed. And a large portion of that cost flows through the P&L. We're continued investing in our technology systems. We're rolling out LIMS. We're rolling out an eSource system. And both of those go live next month, first week of February. And we also have invested in our recruitment system.
Yeah, so we've continued investing in that perspective. I think to highlight, clearly, cash is GBP 44.2 million, still up from last year. Clearly, we are a strong cash generation business, and that continues. Going on to what have we bought? So, CRS, the financial highlights. So, traditionally, this business, a few units have we purchased. Last year in 2024, they delivered €19.9 million. In 2023, €18.6 million. And it was more or less around that in 2022 as well. And EBITDA, they made a loss of €1.8 million for 2024, and they made a loss of €1.6 million in 2023. So, and then we bought it at an enterprise value of €11.1 million as of the end of December 2024. There's no debt. The liabilities are less than €0.5 million, mainly some pension liability and also a deferred revenue liability. So, that's what's driving that budget.
In what we paid, it was EUR 10 million for this business. It's definitely got to be a very decent price. I think we've got a good deal, very good deal, because it's less than one time's revenue. In fact, it's 50% of revenue because we're expecting this business to deliver some EUR 20 million for 2025. Now, you might question on that, why is that not much bigger than 2024? It's because they've changed their BD team, and that BD team is beginning to produce results. Some of that will, and so we expect a pick-up in 2026 rather than in 2025. Restructuring and transaction costs will be circa about EUR 2.5 million. Our EBITDA, the EBITDA loss for 2025 will be more or less in line with 2024, probably a little less than the EUR 1.8 million that they delivered in last year, 2024.
So, but we expect, because it is a very similar business, and this is the type of business that is very akin to what we do in many respects, we believe we can turn this business around and make earnings accretive in 2026. To that point, what are some of the things we are looking at doing? The top three services here, realization of synergies here, the top three biomedical services, medical writing services, and PK analysis. Quite a bit of that work is all outsourced currently by CRS. But we have Venn Life Sciences, a life sciences business that does all that work. So, immediately, that will not be outsourced going forward, and we will be doing that internally. And that should, and last year in 2024, they did some 800, just over EUR 800,000 in these services.
And obviously, we will be able to take on that work with very little additional costs. And that will obviously flow through to the bottom line and improve margins immediately. I've quoted a few things on operational planning. We are quite, we've learned to be very agile with hVIVO. We have a very agile team. We double book. We almost triple book clients into slots, whereas they are a little less. This is an aspect where we think we can put across to them is to double book and to be a little more flexible in how they schedule clients so they don't have empty space. And that way, I think we can get a lot more utilization out of their facilities. Project management, a good project management team. We have a good project management team, and there'll be some synergies there as well.
Key thing here is the business development. They have a good team. They've just created a pretty strong team on the business development area. In the beginning of the year in H1, the RFPs was minimal. Most of the pipeline has actually been delivered in the second half of the year with the new team, and we expect that to continue. So, I mean, I would have commented on that the order book was a touch low relative to the amount of revenue they're going to achieve in 2025. But that's definitely improving, and we expect that the order book as a percentage of revenue going forward will get much better going forward. The other thing in business development, some of the things is pricing. They've actually started changing their pricing. The existing management team have started recognizing that they have been underpricing quite a bit.
We think we can help them on that pricing much faster because we bid for the same type of work to some extent, and we'll be able to leverage our pricing with their pricing and get a stronger unit, a better pricing out to the market faster. Quality assurance, they have a strong quality assurance. They have a great team. They have done very well in their quality. They have come up with very good shining audits from that perspective. Back-end services, obviously. I think one of the things on back-end services is the finance. The financial information is very limited. It is entity-driven. You get a management account, which is telling you the performance of that company. It does not break it down into divisions or departments. It does not add KPIs to it.
They don't track the units and the delivery and try to mix the costs of things with the number of units delivered to see how they're performing going forward. And with that sort of enhanced sort of information that we do in hVIVO, being stretched across to them, we'll be able to identify efficiencies and improve operations. So, we're not expecting to invest huge amounts of money in stocks. Maybe some time, definitely. We do have very good systems. We have a CRM system, which we will leverage and ship across to them. We have a recruitment system we know is paying off and doing very well. And we will want to leverage that and stretch that across the system. So, we're deploying our existing systems. We're not actually recreating it.
Yes, we'll have to spend a little bit of money probably to accelerate that work and the delivery of those new systems into CRS. We are launching a clinical eSource system. It goes live in the first week of February. And we will be looking to deliver and stretch that into CRS. It will be a very good opportunity to test that system and move that forward. And a few couple of words on our culture. I mean, hVIVO, we are very KPI-oriented. Every team has and every function has sort of a KPI, a key measure of performance. We monitor it. We discuss it every single month. We debate what's changed, what's improved, and how we're going to fix it going forward. We have a business project program, which we meet also on a monthly basis. We look at that. We track it.
We take tasks and actions, and we follow up and deadline it. And we empower our team to deliver more and to take ownership of what they are delivering. We're very transparent in our operations and our business performance. We have quarterly meetings, but we also share the information that what's happening in the business very well. And I think all that will work very well within business. They're a great team. And I think they'd be very interested in this type of initiatives that we do. And finally, I think most important, we believe in rewarding all employees for success. And that's something we'll roll out to them. And with that, I'm going to hand you over back to Mo, who will give you the highlights of our business for 2024.
We're the world-leading human challenge trials. And we have run over 70 of these types of trials.
And we are effectively broadening the number of pathogens that we can run these trials with. And we're also updating the portfolio of pathogens that we are running these trials with. So, 2024 was a milestone, a transformative year for us. So, we moved into this new 50-bed state-of-the-art Canary Wharf facility, which is the world's largest human challenge trial facility, which is a great relief for us considering the numbers that we also deliver at the same time. We also added a range of new challenge models and updated the challenge models. We launched three new service lines: hLAB, field studies, and patient recruitment. And I will go into detail in a couple of those as we move forward. We built a new hMPV challenge model. So, hMPV is human metapneumovirus, which has recently hit the news with its increase in prevalence in China earlier this year, I think.
We also launched and completed the world's first human challenge trial in Flu B. So, a lot of work from an operational point of view was delivered in 2024 at a really good, efficient level because that's what has given us these remarkable EBITDA margins. As we look forward into 2025, we still believe that the human challenge trial market is going strong. We totally understand and appreciate that in the second half of last year, there was a decline in signing. It wasn't due to lack of interest or drop-in queries. It's purely due to the sales life cycle taking longer. So, our customers and the industry, generally speaking, they weren't committing to projects and putting pen to paper and signing these contracts. And a number of reasons for this. So, there was the issue with the U.S. elections.
The assignment of RFK as the head of Health and Human Services was also another pointed reason why this happened. But late last year, towards the end of last year and beginning of this year, we've already seen this trend has bucked. And we've seen we signed a GBP 11 million-plus RSV contract. Late last year, we signed a lab contract. We signed the LOI for ILiAD for the Phase III trial. And we have a few hot opportunities we'll be signing in the next couple of months. So, it has turned around. We have seen positive signs that clients are more committed to funding these trials and starting to negotiate contracts where previously they've really been on hold. And as we look forward to the markets, we see an increase in interest in the challenge models in mucosal vaccines.
So, these are the vaccines you take either orally or through a nasal spray. Antivirals, especially RSV antivirals, we've seen an increase in interest for those. hMPV, as I mentioned, our brand new model is something else we're looking at. And we're also currently working on developing an Omicron challenge model too. So, all of this combined, I feel very bullish that the challenge trial market will continue to grow and develop. I do want to say at this stage that people will have seen the drop in share price. And this has been mainly due to the fairly flat year-on-year core business revenue if you remove the GBP 4 million facility fee we recognized in 2024. But you have to remember, this is basically a delay in one single contract signature because our challenge trial contracts, as you know, have grown in size.
So, if we had signed that RSV contract six months earlier, we have recognized the majority of that contract in 2025, and we would have had double-digit growth. So, I don't want you to mistake a delay in signing of a single contract and say, "Oh, this is a trend in the human challenge trial market." It's not. We've seen the number of inquiries coming in, the proposals we have sent out to clients, the sales pipeline, all of those metrics remain strong. The one gap that we're now seeing a turnaround in is from sending out the proposal to getting signed. And we have seen shortening of that. And we expect to see improvements in our signings and in our order book going forward.
I do want to mention this, the ILiAD contract, the LOI we recently signed for a Phase III Bordetella pertussis or whooping cough challenge trial. There's a number of reasons why this is important. I think that the market has somehow missed the importance of this trial. First of all, from hVIVO's point of view, it will be our largest ever challenge trial that we've run with regards to the number of inoculation we expect to achieve. Secondly, it will be our first bacterial challenge trial. That's huge. It's also our Phase III trial. We've run 70 trials, as I mentioned before. All of them have been at a Phase II stage. This is a Phase III. Thirdly, it's a pivotal Phase III trial. What does that mean?
Well, that means that for the first time, as far as I'm aware in the history of challenge trials, the client has got support from the FDA that if they run this challenge trial and design it, they're looking to design it right now, the data from this challenge trial, if positive, can be used to support their marketing authorization. Now, that's huge, not just for hVIVO, but also for the challenge trial market. So, just think about that for the moment. So, remember, every other challenge trial we have run to date is not mandatory. So, it's a Phase II proof of concept where the client is either looking for more scientific data, or they're looking to see which vaccines to exclude from further development, or they're looking to find out which endpoints to use or de-risk the Phase III program, and so on.
All good reasons to do a challenge trial, but not mandatory. This is a mandatory trial that has been supported by the FDA, so this is why I feel that this could be a huge milestone for the challenge trial market, and we, as the world leader in doing this type of work, really are in front of the queue to take advantage of any changes in the market, and this is something that, of course, I'm not going to predict the future today, but the signs for this and the fact that this sets a precedent with regards to a regulator is really key, and that's why I'm very bullish that going forward, we could see more of these types of trials, and these trials are much larger than your typical Phase II trials.
Just to kind of point this out, a Phase III trial in the field with indication such as whooping cough would cost at least 10 times more than what it costs to run it as a challenge trial. So, financially, it makes total sense. From a timeline point of view, this takes less than half the time of a traditional field trial. So, now, I'm not saying here that the FDA and the EMA and the MHRA aren't tomorrow and are going to go and change all their regulatory guidelines and put challenge trials at the front of the queue for future pivotal trials. But this is a first great sign. And I always talk about the fact that we are advocating the regulators to use challenge trials in a much more intrinsic way.
This is a first sign, and it's a great sign for us that we're able to partner with ILiAD to do this trial and get this much-needed vaccine to patients faster. Whooping cough is a terrible disease, very debilitating, especially for young kids. The fact that 200,000 people die of this almost every year, and the fact that the current vaccines are decades old and their impact is waning, it's important to do these challenge trials, hopefully get good data, and then get approval to get this vaccine to patients who need them badly. The field study, so you know, in September of last year, we launched our clinical site activities in order to do non-challenge field studies, basically recruiting healthy volunteers, giving them the vaccine, and then following them through. We ran this trial late last year.
We signed this GBP five million plus contract, our first major field study contract. And please see, we delivered over 800 volunteers in a very short time frame in just over six weeks. And you can see on the bottom left here, a quote, a very positive recommending quote, a couple of metric quotes from the client stating how well we have performed. And not only have we delivered operationally, but to a really good level of quality, which is great to say. And on the back of that, we assigned a number of other trials, albeit at smaller contract value, but it does show that we are capable of doing this. And we are now using this vaccine case study as a way to market these services to new customers.
We're looking to increase the field studies offering we have in London, but also in combination with the sites in Germany, we should be able to offer a much bigger pool of volunteers and patients to our clients moving forward. Our hLAB brand, which we also launched in September of last year, has its own website now. We've also created a booth so they can attend their own conferences and promote the hLAB business. Very pleased to announce earlier this year already a good hefty contract when it comes to the size of laboratory contracts. This was acting as a central lab for a global influenza trial. Very pleased to see success as CRS do more Phase I and Phase II trials. We have the opportunity to potentially pitch virology and immunology laboratory services to those clients when and if relevant.
Our lab here in Canary Wharf, it has got a CL3 status. It's been approved by the HSE, and it's fully functional. And everything is working as it should be. And having people on site now gives us the capability to not only cater for the in-house challenge trials we run, but also do standalone lab work. And that's something we will look to build going forward. And together with field studies, add additional portfolio of service lines to the organic growth model we have at hVIVO. The pipeline is getting better. So, we have GBP 67 million of net order book for the combined group. This, by the way, excludes the ILiAD potential contract because, as I said, we signed the letter of intent. So, that still remains in a pipeline. And we can see the pipeline being distributed across different service lines.
We expect that to continue to grow. The challenge trial pipeline does dominate this. The key reason for that is, one, the typically much larger contract. Two, the sales life cycle is much longer because it's much more of a technical sales compared to CRS or Venn Life Sciences or the lab work for that matter. So, at any given time, the challenge trial pipeline would always be much bigger because they stay in the pipeline Phase for much longer. In September, I also communicated to you that we had GBP 40 million worth of near to midterm opportunities. I'm pleased to say GBP 15 million of those are already signed. We have GBP 25 million remaining. We are confident we will sign all of those in the first half of 2025.
But just to be clear, we have added additional opportunities on top of that GBP 40 million that we are currently working on. So, the pipeline of work remains strong. And we continue to grow that. But of course, our pride has to be to convert that pipeline into order book, into revenue and margins. So, what is our outlook going forward? So, we gave the forecast for 2025 in our RNS. We said we would look to achieve GBP 72 million in group revenue, inclusive of CRS. It will be weighted till the second half. But you would expect that considering the slowness of signatures I pointed out in the second half of last year. People have seen a poor reaction to the share price as a result of this announcement. But we believe that's been mainly due to the fact that it's a flat year-on-year core business revenue.
But if you remove the facility fee, you'll see it's a robust revenue we're giving for 2025. But I'm bullish going forward as with this increased signatures in challenge trials, especially we expect to grow the revenue. And we expect to get double-digit core challenge trial revenue in 2026. If you're a loyal shareholder, I'm very happy and very pleased that you are, then don't look at us as a short-term opportunity. Our goal is to achieve a GBP 100 million target by 2028. And right at the moment, I feel we are ahead of where we think we would need to be to achieve that target. This year, of course, with the CRS acquisition, you will see a dilution in our EBITDA margins. But even then, we are looking to do mid to high teens, which is a very respectable EBITDA margin in our industry.
Going forward, we will look in 2026. We'll look towards targeting 20% margin with a combined group as we continue to improve CRS and make them profitable. And it doesn't take a lot of work to turn that around in the sense that they provide services that we are already well aware of. But also, with the additional capabilities we're giving to them, they can keep more work in-house. And that will, of course, improve margins. We are still a cash-generative business. At the end of last year, we had around GBP 44 million in cash. Of course, we have used some of that to fund this acquisition. But as we move forward, we expect to generate more cash. Our hLAB business is going really well. Our site facilities are going great.
Our life sciences, we expect to boost as we move forward, especially with the help of the CRS business. We will continue to look at additional bolt-on acquisition if the fit is right and the service is right and the price is what we think is a fair value. But as we move forward, I remain confident of our mid- to long-term goal of 100 million GBP in revenue by 2028. That's the life. Thank you very much for your attention.
That's great. Mo, Stephen, thank you very much indeed for updating investors. Ladies and gentlemen, please do continue to submit your questions. Just using the Q&A tab on the right-hand corner of your screen, I'll try and have Mo and Stephen take a few moments to take those questions that you've submitted already.
I'd just like to remind you we're recording this presentation along with a copy of the slides and the published Q&A will be available on your company dashboard. Mo, Stephen, you've had a number of questions from investors. So, thank you to everybody for your engagement. If I may, Mo, just hand back to you if you take us through the Q&A and I'll pick up from you at the end.
Thank you. Thank you for that. Okay, let's get through as many of these questions as we possibly can. So, I think that there are a number of questions why the share price has reacted the way it has. I hope I have answered that question. I do think the market has missed the importance of the Phase III trial. That's for one thing. Secondly, the recent announcement of the signature of contracts I think shows a good trend.
And I'm confident we'll get a few more signatures in the coming months. So, that will signify a turnaround, let's say, in the signings. But the number of inquiries we're receiving still remains strong. And that's why I am bullish. The 2025 guidance of GBP 73 million, can you confirm if this includes the new facilities announced today? Yes, it does. I can confirm that. Are you concerned about what appears to be a decline in human challenge trials work? So, no, I'm not concerned. I think this is one of the reasons why I mentioned don't confuse the lack of signatures with a drop in the challenge trial market. I mean, as I mentioned, it basically takes one contract of around GBP 11 million to be signed six months late to have this impact on the revenue guidance.
And if that contract was signed six months earlier, as I said, we would have given double-digit growth in our core human challenge trial guidance. So, I don't see this as a trend in the market because the number of new requests we're getting, it continues to increase. And now we're seeing some of those pipelines being converted into order book. How do you plan to manage your growth strategy through acquisition given the inherent risk and time and cost of integration? That's a really good question. So, one of our strategies has always been to add the M&A to the organic growth. So, we started off with that mindset. And so, we are basically executing on that strategy. The second part of the strategy has been to only look at assays that have adjacent services to what we deliver.
So, we don't want to look at assays that provide services that are not linked to what we already provide. So, if you look at CRS, so Phase I and Phase II trials, we do clinical trials already. Okay, so if you look at our eSource system, if you look at our volunteer management system, if you look at our what's called the electronic trial master file systems and other systems like that, we expect just to expand the system we have here at hVIVO and make them available to our CRS colleagues. So, we're not looking to implement completely new systems or new domains or anything like that. So, that helps with the integration. Secondly, a lot of these projects are standalone projects. In other words, they can't be done by one entity. So, those projects will continue.
Thirdly, CRS can now utilize Venn for the consulting services and also for the biometric services I talked about where previously they used a third party. So, if you think about that, the fact that they were able to integrate with a third party, now you bring that in-house, that should make it much more easier and much more streamlined to deliver these services. So, I'm not saying this is all going to be easy. But my point being is we're not acquiring a company that's providing completely different services. Their services are well aligned to what we already do. So, we will look to integrate them into what we do. We have to work with their sales and marketing team, for example, and integrate that as well as HR, finance, IT, and so forth. Of course, we do. There's no doubt about that.
I'm very confident in the fact that they hired some new salespeople late or mid last year. In Q4 of last year, they had the highest number of proposals coming to the pipeline. That sales team is already working. They're doing well. They're already seeing an upside to the number of RFPs coming and the requests for proposals. We just want to make sure we maintain that momentum and give them opportunity for growth. We said to them, we want to invest in people, invest in systems, and invest in infrastructure to make them the world leader in what they do. How will hVIVO process this is one for you, Stephen. How will hVIVO process the German business in financial reporting, i.e., finance in euros and different tax regulations to the U.K.?
In terms of doing the deal, we are going to structure it in a tax-efficient way. We've had some good advice from our German colleagues in setting the way to set up this group, probably through a loan system. We'll lend them the money to grow and to do what needs to be done. It's being set up. We're taking their advice. We're implementing it. I'm not going to go through the detail of how we are setting that up just yet because it's just being finalized as we speak. Otherwise, we'll be reporting the business in sterling ultimately to our investors and shareholders. We'll always highlight if there are any changes or drivers due to the currency change. We expect to sort of leverage our existing financial approach and systems. Certainly, they don't have a project accounting system.
We want them to have a project accounting system because it gives us much better information. We'll be transferring our existing system to them.
Thank you. Okay, this is a long question. I'm going to break it down to each one. The first question refers to the CRS profit margin. CRS has been loss-making for the past couple of years, correct? And will be earnings dilutive to hVIVO this year, correct? How long will it take you to turn the business around? We expect the business to deliver 5%-10% EBITDA margin come 2026. What profit margin progression do you anticipate in the next two to three years for CRS? And what mid-term sustainable margin can we expect? Do you want to cover that one, Stephen?
Yeah, sure. So, I mean, yeah. So, hVIVO is delivering, as I said, two to three percent.
CRS can get close to that figure, but it needs some scale, and I think with the new BD team on board, I'm expecting a pick-up in the revenue performance and the utilization of their facilities to get close to that figure in the future. We are expecting 2026 that our margins will improve and we'll get close to 20%.
Thank you. On contract signings, how much progress have you made in converting the GBP 40 million of pipeline opportunities for this year? Is the recently announced LOI included in the GBP 40 million? So we signed GBP 15 million to date. GBP 25 million is outstanding. Those are still near to midterm opportunities, and the LOI we signed is part of the GBP 25 million unsigned portion of the work. So that is still in the pipeline, not in the order book. What is holding back clients from committing signing contracts?
The market had a lot of uncertainty, as you know, generally speaking, depressed by tech funding, the U.S. elections, and so on. We've seen that improve now. Funding, to be blunt, was the major hurdle in clients making the decision to sign or not to sign. That has improved significantly. That's one of the reasons why we see an increase in signing as we move forward. How will you beat 2025 guidance? Beating our GBP 73 million revenue target and beating our mid- to high-teens EBITDA margins. That's how we would do it. Look, run more challenge trials. We have the capacity to do that right now. That will be one key. Win more work for CRS and Venn because they have the capacity to do a lot more Phase I and Phase II trials even with their existing infrastructure.
We don't think they need to invest a lot of money to grow the revenue. As I'm sure most of you are well educated in this type of work. As you increase the revenue and you fund all your fixed costs and you continue to increase your revenue, the high portion of revenue, suddenly you will see a huge exponential growth in the margin on that portion of revenue delivered. That's the key goal in improving our EBITDA margin for CRS. As I understand it, hVIVO pay up front and non-refundable fee, correct? Will the same terms apply to new acquisition? For certain contracts, yes, but also, please note that the value of each contract for CRS will be lower than the typical challenge trial contract.
Challenge trials are very complex because of the inoculation process and the quarantine facilities you need and the isolation you need for the healthy volunteers. So, that's why the value is much higher. But yes, similar algorithm will effectively apply to anyone booking the Phase I unit at CRS, either Mannheim or Kiel. Can bacterial challenge be used for testing new antibiotics, not just vaccines?
Yes, but not for all antibiotics. It depends on the severity of the disease. Our key criteria for selecting which virus or bacteria we can use in a human challenge trial really rests on that we don't cause disease that's too severe. There are no long-lasting impacts of the disease. And the disease is measurable. And it's approved by the ethics committee and the regulator. If all those kind of boxes are ticked, we can consider that bacteria or virus for a potential challenge trial.
Okay.
Do you think a new U.S. administration will look to reduce regulatory costs of drug approval? This could lead to more customer interest in HCTs, as seen in the ILiAD. Somebody's been reading up. I totally agree with you. This is one of the facets we are exploring. The new administration has talked about streamlining the FDA and other government bodies. I think even yesterday, I think there was an announcement that they were offering eight-month redundancy severance payment to people who were willing to resign from these government bodies. To your point, human challenge trials are a much shorter, slimmer way of collecting the same data as you would in a large-scale Phase III trial.
Imagine the data that you need to make a decision whether the drug is effective or not that you get from a human challenge trial is identical to what you would get from a Phase III trial. The only difference, in a challenge trial, you need less than 10% of the patient population. The amount of data is a lot less. But it's powerful enough if you can show a difference between the active and the placebo group to make a decision on whether a certain drug is effective or not. This is a very astute point by whoever this person is. What else? How would you beat target revenue per year for hLAB? We do want to beat that, right? One thing is to improve on the portfolio or assays we're offering to the clients. We are looking to hire a BD person.
In fact, we already hired somebody, but we're just waiting for them to join towards the end of this quarter, secondly. We're going to invest in more marketing materials, including presence at conferences and also key events. And secondly, we're also open to acquiring small bioanalytical labs to help support our portfolio lab services we currently offer and potentially expand and diversify that. So, all of those initiatives we're looking at to continue to explore our hLAB. But even in the last three months, we've seen really an explosion in the number of pipelines of work we have seen for hLAB. And of course, we converted a large contract.
Can you confirm the whooping cough challenge trial will be the largest value contract hVIVO have signed based on it being the largest amount of volunteers?
So, unfortunately, I cannot confirm because we are bound by confidentiality with the client.
But I'm sure you can come to your estimation as what the largest trial we have done to date says about the potential value of this type of study. Do you or any senior management in hVIVO have any experience of working in Germany or closely with German companies? So, in my previous role as head of operations, I used to look after the German affiliate in Munich. I worked with a German team for over 18 years and managing them. We used to run, I mean, I can't remember now, hundreds of clinical trials in Germany through my tenure there. So, I have a very good experience in running clinical trials business there. In fact, some of the people working in CRS I know from history through working with German affiliates.
One for you, Stephen. Any plans for shareholder distribution this year and midterm?
Yeah, we've committed to paying a nominal dividend. We've pretty much set out the policy roughly around just over six times EPS cover. So, dividend cover by EPS is just over 6.2 times. So, we expect to continue that program. We have committed to paying a dividend. It will be nominal because we still want to keep the cash because we have plans on our M&A activity. And we have a strategy around that. And we're looking to grow this business further and beyond maybe the 100 million target we have set ourselves.
Thank you. Any other Phase III challenge that is being worked up?
No. I mean, I would love to say yes. But I mean, it's very soon, right? So, we just had one signed up. So, it's the ILiAD signed up. So, we're looking forward to more, but not right now. But hopefully in the future.
Is there scope to add hLAB in Germany to support the units?
Of course, there is scope to do that. It depends on what type of assays we provide. I think you mentioned here in your question about hematology and biochemistry. So, these are very low-cost assays, hematology and biochemistry. For example, even here in the UK, we use the NHS provider for these types of assays because the routine, they do hundreds and thousands of these every day. So, the cost is very low. We typically keep in-house the more complex assays that cost more money, more time, require a higher level of technical expertise to run. So, thank you for the question.
I think we're done.
That's great, Mo and Stephen. Thanks once again, and thank you to everybody for your engagement this afternoon. Mo and Stephen, I know investor feedback will be particularly important to you.
I'll shortly redirect those on the call to give you their thoughts and expectations. But before doing so, Mo, if I may just come back to you for a couple of closing comments and then ask the investors for feedback.
Wonderful. Thank you for your time. I hope you find both Stephen and I very transparent in what we state. We have an ethos of underpromising and overdelivering. We've been very plain and honest with all our holders, retail or institutional. We have very loyal institutional holders who are supporting us in our strategy and expecting us to continue the mid- and long-term strategy in growing the challenge trial concept and going through acquisition. The CRS acquisition, I think, is very fitting with what we are providing and meets our strategic goals to get to 100 million. We've seen good investment in human challenge trial portfolio.
We will see expansion of that. We want to be able to expand into new areas such as hMPV. I expect to deliver some good news in that, hopefully, this year too. The share price, I appreciate, has taken a little bit of a downturn fairly recently. But I'm very bullish with what we do. We have a very strong foundation we've laid in 2024 with the new infrastructure, new building, and now with a new acquisition. We've seen strong examples of large contracts we've signed recently for both challenge trials and lab and other hot opportunities we're working on. I'm very confident in our long-term goals. As I said, I feel at the moment we are ahead of schedule on our 2028 goal of delivering GBP 100 million. Thank you, everyone.
That's great, Mo and Stephen. Thank you once again.
If you could please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order for the company to better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of hVIVO, we'd like to thank you for attending today's presentation. Good evening to you all.