Good afternoon, ladies and gentlemen. Welcome to the hVIVO Investor presentation. Throughout today's recorded presentation, investors will be in listen-only mode. Your questions are encouraged and can be submitted at any time. Just type them in the Q&A tab, press send, and we'll get through to that in the Q&A part. The company may not be in a position to answer every question received during the meeting itself. However, the company can review your questions submitted today and will publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'm sure the company will be most grateful for your participation. I'd now like to hand over to the management team from hVIVO. Stephen, Mo, good afternoon.
Thank you very much, and welcome everyone to hVIVO's first half of 2025 trading update. This was presented by myself, Yamin 'Mo' Khan. I'm the CEO of the company. I've been here since February of 2022.
I'm Stephen, I'm the CFO of hVIVO. I've been with the company for about eight, nine years now. I was CFO in October 2022.
Thank you very much, Stephen. Without further ado, we'll go straight into the obligatory disclaimer with regards to all public listed companies and straight into our trading update. I just want to give you some top highlights of our trading update. We will have another IMC hopefully in September where we will be able to give you further updates on some of the operational progress we made with regards to integration, delivering the new service, and so forth over the time being. Top highlights with regards to the financial update: we intend to recognize just over GBP 24 million of revenue for the first six months of this year at an EBITDA margin of around 12%. Our cash as of June 30th is GBP 23 million, and the weighted order book stands at about GBP 40 million too.
We have a very good strong sales pipeline, and we've seen some good, good growth and incoming interest in the first half of 2025, which I will go into a little bit more in a few minutes. We have completed the acquisitions of CRS towards the end of January and also Cryostore towards the end of February, and the integration for those two companies is well progressed now and well on its way to formatting into a single company. As we move forward, you'll see us reporting our financials in a little different manner across service lines rather than companies. On the right-hand side of the slide, you can see the four service lines that we will be reporting on as we move forward. The reason behind this is the fact that multiple different units of the hVIVO Group work together now to deliver the same service line.
The key really here is that for the client and the customers to sign one contract, on the back of one contract, multiple units within the hVIVO Group work together to deliver those services. As an example, human challenge clinical trials. These are typically conducted in London by the hVIVO team, but they also work together with the H Lab department, providing laboratory services for the challenge trial patients, and working with Venn Life Sciences to provide medical writing services as well as data management and biostatistics. For one single contract, we have different facets of the company working together to deliver that service. H Lab similarly works across the H Lab here in Canary Wharf. We're also the new entity we acquired earlier this year in Greenwich by the name of Cryostore, for consultancy that remains with Venn Life Sciences, mainly based in the Netherlands, and for clinical services.
This is now a wider range of portfolio of services that we're offering to our customers. Whereas historically we really conduct some pure patient recruitment and clinical site services, now with the addition of CRS, we can offer phase one, phase two clinical trial services, as well as renal and hepatic impairment clinical trials to our customers. Even with those trials, CRS works with Venn Life Sciences to provide the medical writing services as well as the data management and the biostatistics services. You can see across each service line, different companies and different colleagues have to work together. I'm really pleased that our integration is working so well. Our colleagues are now working on same project teams to make the whole process much smoother and much easier for our customers. Now we'll ask Stephen to give an update on our financials.
Just looking at the revenue, I think the positive thing here of the GBP 24.2 million is that we did start with a new facility, really focused last year on building and diversifying our services. You can see clinical services at hVIVO Lab have grown significantly year on year. It's good to see that we are diversifying and that is coming through in our figures now and we're beginning to see the results. That diversification is not only in services, it's also in therapeutic areas and customer base. With Cryostore, at least with CRS, we did acquire some very decent clients that we weren't previously really trading with at all. We are seeing more cross-selling opportunities and we expect these services to continue to grow. Obviously, the other thing is we did have some cancellation fees and that's obviously higher than normal.
The human challenge clinical trial and consultancy services were lower year on year. We did issue a revenue guidance in May and we're holding to that of GBP 47 million for the full year 2025. The only other thing to point out on this slide is that of the GBP 24.2 million, GBP 5.2 million of it was delivered by CRS acquisition and Cryostore of GBP 0.3 million. Talking about EBITDA, EBITDA's circa 12%. It really has benefited from a positive impact from the operational efficiencies. If you remember, last year we had launched a new facility. We've got rid of two previous facilities in QMB and in the Whitechapel Hotel. We've consolidated one facility here in Canary Wharf and we've started seeing those operational efficiencies. We saw them at the end of H2 2024 and they have continued through in this year as well.
Obviously, because of the lower revenues on human challenge clinical trials, our cost management, we've been looking after our costs and growing and really directing some additional spend where we are looking to diversify our revenues. Cancellation fees definitely help. If you think about cancellation fees, these are made up of a facility fee. What we charge our clients is a booking fee and that becomes the cancellation fee. That booking fee is made up of a facility charge plus staff, but an element of that staff is very flexible. It's what we call bank or temporary staff. Usually, on a normalized basis level of trading, it'd be about 25% of your headcount. Your operational headcount would be bank staff. If you think about it, we've had higher than normal cancellation fees.
About 25% of that cancellation fee is flowing through to the bottom line because we're not incurring that variable spend. Looking at headcount compared to this time last year, our headcount is 25% lower. That's a combination of flexing our temporary staff as well as getting some efficiencies from consolidating our facilities and delivering on some operational efficiencies by having combined facilities. We do continue to invest in technology and to automate our businesses. We did launch CREO on our screening facilities this year, and we'll be getting some savings from that as we go into a recruitment program. Just a reminder, this is an EBITDA. 12% is excluding any exceptional items, and for the half year, exceptional items amount to about GBP 1.4 million, covering the acquisition and some minor restructuring costs. EBITDA is now expected to be a low single digit loss, an improvement on our previous guidance.
We have a healthy cash balance of GBP 23.3 million. We have no debt, and at the beginning of the year, we had GBP 44 million. The cash has reduced for two main reasons. First of all, the acquisitions account for about GBP 14 million of the movement, and that includes exceptional items and also includes some working element of those acquisitions. That's GBP 10.5 million of consideration in acquiring those businesses. The other half of that reduction is coming from deferred revenue and the lack of advance receipts from new HCT trials coming on board. We continue to manage our costs tightly. We do spend a little extra in lab because we're trying to build the lab business up a bit more, and that's the only area where we're spending a little bit more year on year. Cash is being retained to deliver on that diversification strategy.
Thank you, Stephen, for that. As we look forward towards the full year of 2025 and what we've done this year, this half of the year for the order book at the end of 2024 after June 25th is about GBP 40 million, and as you can see, it's not a positive that there is GBP 40 million, but it's positive that there is greater diversification in the order book. The clinical services and the H lab proponents have now significantly increased compared to historical times, and that's very positive. By the way, the order book doesn't include any uncontracted work, including the potential work going forward coming from Juliet. On the upside, one thing very positive about this half of the year is that the total value proposal in the first half of 2025 is double that of the first half of 2024. We've seen strong interest across the board.
Not only have we received inbound requests for more human challenge clinical trials, but that's also true for our laboratory services and our clinical services. We expect to see, hope to see, some of these opportunities convert into contracts, and we're rebuilding that order book as we move forward. Our new pathogen models that we've established in the recent months for flu B and HPV, again, we've seen good interest in all of those, and the pipeline remains great, and 60% growth in the CRS opportunities has been recognized over the last six months. Overall, we're very optimistic that the future looks very strong. As we look to increase the sales pipeline, we now also look to build that order book back up again.
We're hoping to see more movement in the pharmaceutical markets, and with the CROs recently reporting good numbers, we think there's a turnaround in clinical trial research and more contracts being signed on the integration side. Just to give you a quick overview of what's happened prior to financially, both sets of companies, including Cryostore, in fact, have merged well together. We recognized some synergies and identified some savings. We have new pricing models across the three companies, and we are instigating the financial system. We run hVIVO across the group. Operationally, the teams are well aligned. One thing you have to note is that even though CRS and hVIVO provide clinical trial services at different development stages, the different departments involved are basically identical. We have been able to align our patient recruitment, our project management, our QA, and other departments across both companies into one end.
I'm really pleased to see now different people, different colleagues from different companies working together on the same project. That's really positive progress with regards to the integration on the business development. On the sales and marketing side, we now have one coherent team at the group level who are now selling services across the portfolio of the hVIVO group. That means that we have the capability now to provide a much broader service than each entity could have done on its own. That means that the opportunities we've been able to identify are much greater. For example, where previously CRS would outsource a proportion of their clinical trial work they would win, now they can do that all in-house with the additional capabilities that Venn Life Sciences provides, especially towards the back-end services of a clinical trial.
I expect to see more of this going forward, working both ways, with Venn giving work to CRS, CRS to hVIVO, and so on. The outlook as we go forward, the synergies have been realized. We expect the CRS to continue to progress this year and hopefully be EBITDA accretive in 2026. Cryostore, of course, is very profitable. It's a much smaller company, but we are investing in Cryostore and we are increasing its capacity to store samples. A little bit of a background on CRS. CRS has two units, one in Mannheim and one in Kiel, that we control. There's also a third unit that we work with in Berlin. You can see from these two pie charts that they work mostly in phase one and in phase two trials. Their largest therapeutic area they're working in is cardiometabolic diseases.
These are diseases related to either heart or obesity or diabetes and so on. The average size contract of CRS is around EUR 1 million. This is much smaller than a human challenge clinical trial. On the other side, the sales cycle is much shorter, so they're able to identify new opportunity and close their contract in a much shorter time frame compared to the larger human challenge clinical trial contracts that we see here. We've seen the cross-selling opportunity already realized and contracts being signed. I myself have visited a number of the CRS customers and they're all impressed by the CRS longevity, the history, and the quality of the people who work there. I think with some more investment in sales and marketing, we think we will be able to turn CRS around.
In fact, we have already seen a really good quarter in quarter two of this year with regards to new business awards for CRS, and 2/3 of those awards have been in cardiometabolic diseases. As most of you know, obesity right now is one of the most popular indications with regards to clinical development. The market size is already huge, and it looks to grow in the coming years. For that reason, the R&D spend in obesity is also fairly significant and again increasing year on year. Our Chief Medical Officer at CRS, Dr. Thomas Forst, is an endocrinologist. He's a key opinion leader and a subject matter expert in this field. We are utilizing his skill set and his experience as well as the skill set of the team in Germany to be able to promote our services. We are seeing record numbers of obesity trials being signed.
Germany, in fact, is the third largest provider of clinical trials after the U.S. and China in obesity. Between the U.K. and Germany, over a quarter of all obesity trials run in Europe are run there. We know we are in the right area. We have got good experience with this indication, and we hopefully will use the expertise CRS has to grow the business across the group and hopefully diversify away from infectious diseases so that we don't just become a one trick pony. We can offer human challenge clinical trials in infectious and respiratory diseases and then phase one and phase two trials in other therapeutic areas, including cardiometabolic and dermatology. For those of you who follow the market, there have been significant headwinds in the life sciences industry.
This stems from the significant changes in the Department of Health and Human Services in the United States from the assignment of RFK and also the leaders in the FDA, the CDC, the NIH, and many other government organizations in the U.S. This has impacted somewhat some of the FDA timelines and increased volatility in the market. Drug pricing with regards to most favored nation pricing and drug tariffs are still potentially on the board. The changes in vaccine policy have also caused a certain level of uncertainty, and this is underpinned by the lack of funding for biotech, which has been there for 2-3 years. These are the headwinds that we've seen and have impacted our own pipeline as well as several other CROs. On the other hand, some of these headwinds are now settling.
The HHS appointments are now settled down and people now are working with them. I think that's been surpassed and we're now beginning to see some improvements in some of the numbers that the other CRS have reported, even just today. The U.K. life science sector plant here in the U.K. is promoting the clinical research in the United Kingdom. The regulatory authorities, the MHRA here and the BfArM in Germany have both revamped their startup timeline to shorten the setup period to run trials even faster, which would be great for us across both of those countries. The turmoil in the U.S. has also made the U.S. customers look abroad to place their trials to get more predictability in timelines. We of course are now open to a much broader therapeutic area, not just relying on infectious diseases.
The advantage and the utility of human challenge clinical trials still remains strong in the fact that it's faster and cheaper to get fixed data. On top of that, with the new FDA drive to reduce timelines, human challenge clinical trials provide a lot fewer data points for them to review to get to a decision of whether a drug is efficacious or not. All of those pointers are additional opportunities for us. One other item I have been asked about a few times with regards to vaccines and the potential reduction in R&D spend in vaccines and the reduction in uptake of vaccine by the general population. We feel that the direct consequence of that will be increasing infection rates. 45% of our human challenge clinical trials we have run to date have been in antiviral.
We are equally adept at running vaccine challenge trials as well as antiviral challenge trials. The opportunity for us is still there whether or not vaccine development continues apace. The science behind vaccine is still robust. It still trumps and we know there's still work. Finally, just to give you a quick outlook on the company. GBP 47 million guidance for the full year 2025 as we iterated in May of this year. We have seen an improvement in our guidance with regards to EBITDA from mid single digit to low single digits. This has been driven through some of the cancellation fees, cost cutting, cost management and also the efficiencies that have been borne out through investments in technology. We've seen increase in multi service contracts and cost selling opportunities and we hopefully will see more of that.
CRS will be EBITDA accretive in 2026 and we will hope to see a growth in the whole hVIVO Group come 2026. The fundamentals of the company are still very strong. We have a strong cash position. The facilities we have in place and the people, the systems, the processes are all built for growth. We don't need significant further investment for us to continue to grow up towards GBP 100 million in revenue. The market headwinds, they're still there, although we are seeing improvements and more activity from our clients. The diversification revenues, I mean this was our goal behind the acquisitions in any case, and we are seeing the fruits of that labor. Hopefully this will continue in the long term.
The strong sales pipeline, I think that's one of the key messages for all of you for this meeting because the significant increase in the pipeline that we've seen, and not just in human challenge clinical trials, but also clinical services and laboratory services, I think is a very positive sign going forward. As we bring some of those into contracts and improve our order book, we'll see a turnaround in the company.
Thank you, that's great. Mo, Stephen, thank you very much indeed for updating investors. Ladies and gentlemen, please do continue to submit your questions just while the guys take a few minutes to review your questions submitted already. I'd just like to remind you a recording of this presentation along with a copy of the slides and the published Q&A will be available via your Investor Meet Company dashboard. Firstly, thank you to everybody for engagement. Mo, Stephen, you got a number of questions from investors throughout your presentations. If I may just hand back to you guys and if I could ask you to read out the questions and give response where it's appropriate to do so, I'll pick up from you at the end.
Thank you. Yes, we have got a lot of questions, that's why we're having this webinar. Thank you for your participation. The first question, can the dividend be increased substantially? No, not really. We do want to conserve cash and we also want to use cash for M&A. The dividend that we did announce previously was a nominal dividend that was really to try and attract, and we were successful in that, to attract IHD funds to the shareholder register. We have no plans to increase the dividend substantially. How many staff have you let go? What's your cash burn per quarter? I guess this is for you, Stephen. How many staff have you let go? What's your cash burn per quarter?
We reduced our staff by about 24%, as I presented. The vast majority of that was through bank staff, temporary staff. We have lost. We've got some efficiencies, and it's mainly been achieved through attrition rather than actual active programs. We've had some smaller active programs just to fix the business up a little bit. There we go, 24% cash burn rate. We're delivering GBP 47 million. We're expecting low single-digit loss. That will give you a sense of what our cash burn rate is per quarter on an aggregate basis. That gives you enough sense of it.
Thank you. Why haven't you diversified into China and India or the APAC region in general? Both China and India are not really pro human challenge clinical trials, so we wouldn't want to be establishing that kind of facilities there. India, generally speaking, focuses mainly on generics rather than branded products. It's not a huge market for us, but China could be. We are focusing on winning more work from China to run as challenge trials or as phase one trials in Germany. We've had some success with Japanese customers and we continue to work in the Asia PAC region going forward. Why is Venn Life Sciences not signing new contracts in Europe? They do sign new contracts. Actually, they've signed quite a lot of new contracts, but their consulting services, typically the value of the contract they sign is fairly small relative to human challenge clinical trials.
That's probably the reason why they're not significant enough to instigate or trigger RNS. The management have lost the confidence of the market. What is your plan to bring back confidence? If you look at the share price, that does reflect where the market sits. Our goal really is to grow the business. If we go back to what we did in 2023-2024 and build on that in 2026, that will hopefully have an impact on the share price moving forward. The starting place for that is winning more work. We are very focused on the sales and marketing side of the business right now. We have built up the sales pipeline. The next step is to convert that pipeline into order book and then convert that order book into revenue with good margins, and that's what we are focusing on.
We have been told that hVIVO are the biggest in the world at what it does with extremely little competition. That's true. We believe we have over 90% of the market share in commercial human challenge clinical trials. We have the largest facility of its kind and these are facts. These are not opinions. Yet, we don't seem to have won a contract in six months or so. You're right, we haven't signed a significant size contract in the last six months or so. We had signed some good contracts earlier this year and also last year, which unfortunately did cancel. On the other side, the sales pipeline that I talked about includes some very, very large human challenge clinical trial opportunities as well as opportunities in some of our newer challenge models. We look to convert those in the coming months. When will things start to improve?
We've already seen improvements with regards to new opportunities, but the next stage, as I said, is to convert that into contracts. Are shareholders who bought at GBP 0.15 ever going to get your money back? I hope so. Stephen and I have bought shares in the company not so long ago. We have full confidence in the company, in the people, in what we do, in our business model, and we believe we are underpriced right now. You know, with the continued momentum we have established in the last few months, we hope to return to the previous days. What is the status of the letter of intent with Iliad? Are we expecting an order and if so, when? We have signed the letter of intent as previously announced. We are waiting for the full contract to be signed, but this opportunity is still ongoing but not fully contracted yet.
When can we expect to hear about new contract wins? Hopefully very soon. It's been a long time since we heard a win. If so, how much longer do we need to wait? It's impossible for me to tell you exactly how much longer we need to wait. There's a two-party progress with most contracts. The customer needs to decide when they want to start a trial, when they want to outsource, and when they will sign the contract. We of course work with them to try and tie the deal as soon as we can and that is a goal for the company. Also remember, we are signing contracts all the time. We only announce significant size contracts. What do we have next? Will you be breaking down the revenue? I guess this is one for you, Stephen.
When will you be breaking down the revenue and margin of the four service lines going forwards?
Not as such, because it's quite, it's still, you know, those services are delivered by all four legal entities. You have to have a really good breakdown. I don't really agree with sort of allocation processes. It is important to highlight those different services because it's quite clear that when we bid for that type of work, we know that our margins are different across those different services. We will track it. If that becomes an option that we can get something meaningful out of, we will certainly highlight that. If you have a lot of human challenge clinical trial work, our margins are very good. If you're doing clinical services, the margin is lower because it's a more competitive environment.
Okay, another one for you, Stephen. Given the GBP 21 million drop in cash versus year end and GBP 11 million spent on acquisition, it looks like free cash flow was a - GBP 10 million in H1. What drove that negative cash flow?
That was really on the working capital, and it was a reduction in deferred revenue, as touched on in the presentation. If you think about it, we have had a higher volume of cancellations. Those cancellation receipts, we received the cash because those are booking fees. We received those, and they were already in our cash balance. Without replacing that with new work, we're not getting that in our deferred revenue. The answer is that movement is substantially due to deferred revenue and the lack of advance receipts on our human challenge accounts.
I see we run out of time, but we do have a lot more questions so I'll try and get through a few more of those if I can. There's another one on Iliad. I think I have answered that, so hopefully you have that. There's another question on the Canary Wharf facility being paid for by pharma. If so, presumably that was done with a view to utilizing your increased capacity. How soon are you expecting to benefit from this support? The deal with the big pharma clients that contributed towards the facility was a one-off cash payment to finance the build out of the facility. There's no other tie-ins from either party with regards to the utility of the facility. Can you give any further color on the advanced discussion around major HCTs? One is of course the Iliad we mentioned before.
We have another fairly large opportunity and on top of that we have a number of opportunities with U.S. and Asian clients working in infectious diseases. The proposal, what does this actually mean? We get what's called a request for a proposal from a customer. This is where a customer is saying I'd like to do this clinical trial, this is how many patients I need. Can you please provide me with a plan? We put together a proposal that includes how we intend to conduct that trial, how long it's going to take, what type of resources will be required, and what is the cost to the customer. That's the proposal. Once we submit that, basically what we say, a proposal has been submitted and that is a number that for the first half of this year is more than the whole of 2024.
That's why it's a really important metric with regards to forward-looking indicators. Once a sale contract is signed, how long does it take for the trial to start and drive revenue and equitable? It's a very good point. It depends on what type of contract. For a phase one trial it can take two or three months. For a challenge trial it can take five or six months before you begin to recognize substantial amounts of revenue. This all seems relatively encouraging. Thank you. However, the reality is that the share price is what most attendants are interested in. I totally appreciate that. Only new signed contracts seem likely to improve the share price. True. Do you anticipate closing any significant deal during the five months of the year? Yes. I mean as pipeline is encouraging both deals or accounts and I totally agree with that sentiment. Right?
The reason why I'm focusing on the pipeline maybe a little bit more than normal is because that is the step before you sign the contract. We know our order book is lower than historical numbers, so we look at the step before. If our pipeline and proposals submitted was low, then we would have another problem. It's good to see and it's encouraging that our pipeline and the proposals are going up. The next step is sign contract. We do hope to sign some significant contract before the end of this year. Ever since I've been a shareholder you have only been very bullish. However, the share price doesn't represent this. I think that's true to a point. I have been bullish and the last three years have been good reason to be bullish. We've seen a significant growth in revenue and significant improvements on the EBITDA margin.
This year we had a very good pipeline, a very good order book. We had a good number of projects signed but unfortunately, for reasons totally outside of our control, those projects were either cancelled or postponed and that impacted the share price and the numbers this year. For me I'm totally confident that in our business model that is sound, that people who work here produce a good quality work and going forward we will continue to see success. Is the AIM market a lost cause? That's a very philosophical question. I'm not sure I can answer that to your satisfaction. I don't think it is a lost cause.
From my point of view, I think AIM has a lot to offer for small to mid sized enterprises and hope that AIM as a market overall improves and the U.K. government can do something to incentivize institutions and retail to invest in more companies. I think I will leave it there. I'm already more than five minutes past. Thank you very much for attending the call. Really appreciate your participation and if you were interacted by a question, that's great. If you do have any further questions, please follow up through our website. Thank you.
That's great. No, Stephen, thank you once again for updating investors this afternoon. Please ask investors not to close this session. We will now automatically redirect you to the opportunity to provide your feedback in order for the company to better understand your views and expectations. This only takes a couple of moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of hVIVO plc, I'd like to thank you for attending today's presentation.