Small Company Champion & Lemming Investors Research and Newsletter Updates

Sunday, 8 November 2020

Open Orphan - Part II

 

Friday, 6 November 2020

Open Orphan - Part II




                                      

                                          





In my original cover piece of Open Orphan (ORPH) on the 30th October 2020, I indicated the company is not a one-trick pony play on covid-19. The company has a portfolio of 8 viral challenge study models which are: 2 FLU, 2 RSV, 1 HRV, 1 Asthma, 1 cough and 1 COPD viral challenge models. East London Queen Mary Bio-Enterprise facility is now close to fully booked until the end of 2021. It is the world leader in testing antivirals and vaccines. What makes the company so attractive to the large pharmaceuticals and government agencies is the fact it has the world's largest database for infectious diseases. However, it must be said the Covid-19 part of the business, namely the world's first company to take part in human for the Covid-19 challenge vaccine trial appears to be an area the retail investors is chasing the money. But wait, there is more to Open Orphans as I will explain a little later in the follow-up.


It is worth noting no more fundraisers' are expected, the last raise was for £12m in May, of which it still had m of this last week, giving at a total of £21.5m plus £10m received on Monday from the UK government, plus £2.5m announced on the 5th November - assuming I have not misheard Cathal's strong Irish accent the company should have somewhere in the region of £34m of cash.

With more £multi million contract wins anticipated it is likely Open Orphan will offer special dividends to shareholders. I don't believe there are any dilutive share options due in the future to the board. I think Cathal referred to these type of options being granted as theft. I'm not sure I agree with this unless the board are amply remunerated. Thus no lifestyle pay packets for the board, Cathal is on £140,000, and he is the highest-paid member of a well-run board.

Due to the company's specialist facilities and database which has positioned the company ahead of any other company in the world, which meaning it has become the goto human vaccine challenge company, thus well-positioned to become rapid cash-cow, with estimates of £4m worth of contracts each month in Q3, with Q4 looking to accelerate the income stream's which could expand at warp speed if the company has as some of us suspect the unnamed US biotechnology company now partnered by their hVIVO arm are involved with Trumps Warp Speed Project.

Operation Warp Speed was introduced in early April 2020, after a round-table meeting with Trump, Pence and industry executives at the White House on March 2. It will promote mass production of multiple vaccines based on preliminary evidence allowing for faster distribution if clinical trials confirm one of the vaccines is safe and effective. As part of the funding the US government has allocated $10 billion for Operation Warp Speed through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, with $6.5 billion designated by Congress for countermeasure development through BARDA, along with $3 billion for NIH research. For the moment we do not know if Open Orphan is part of this project - For now, Cathal Friel is keeping a tight lip. Imagine how exciting, fascinating this project could be for us?

Probable M&A Activity (it is no secrete)

I will focus on Imutex as this has the most potential in terms of value for shareholders, which I believe will be returned in the form of a dividend. Open Orphan has a 49% ownership interest in Imutex - picked up for beans. Earlier this year its hVIVO unit reported successful phase IIb trial of a potential flu vaccine for its FLU-v. This has resulted in a joint-venture peer-reviewed article written in a scientific journal. The data from FLU-v 004 challenge study underlined its ability to reduce mild-to-moderate symptoms of the illness. The publication of the results in the periodical ''npj Vaccines'' follows results from a separate field assessment of the drug, which revealed “cellular and humoral immunogenicity” from a single dose of adjuvanted FLU-v. Meaning the vaccine immediately provoked an immune response.

If as expected Imutex meetings with FDA regulators in the USA ahead of further trials, this should pique interest from M&A suitors.

Open Orphan chief executive Trevor Phillips: “Progression to larger phase III studies with FLU-v can further describe the cellular immune response and evaluate how the vaccine interacts with influenza disease,” Open Orphan chief executive Trevor Phillips.

CEC Cathal Friel: “The need for better, more broadly protective vaccines against influenza is a high priority worldwide, and few new vaccines have demonstrated efficacy in humans as seen in the results of the challenge study for FLU-v 004. “This is the first universal influenza vaccine that has shown this protection from influenza and reduction of symptoms in late-stage studies and together with the highly statistical immune results reported in a peer review article means that the risk of failure in a phase III setting is greatly reduced compared with entering into phase III studies with no efficacy data.”

No doubt revenues are anticipated to grow at pace in the coming months as bed capacity/occupancy increases, if not sooner...probably sooner because of the CEO. Cathal Friel is a man on a mission to gets things done. I am sure we all expect news on this front from Holland and the USA soon. All of this I believe to be just c90 per cent of the business if I understand Cathal Friel.

It is fair to say Open Orphan has struck gold with its acquisition of hVIVO shortly followed by the acquisition of CHIMagent for a nominal fee. Leaving aside the relatively poor performance before Open Orphan opportunistic, or should I say insightful vision. Along with VENN, these little beauties have transformed the company in a matter of a few months, moreover, have not proved to be a cash drain on the company, but have fitted into a brilliant strategy almost seamlessly and the bonus, that they are already producing a lot of cash with much more to come. Which means Q4 group profitability I believe to be at a NET cash level.
 
Smart Us of The World Largest Infection Disease Database
 
I am really excited about the monetisation of the world's largest infectious disease database. The excitement is centered around utilising the data in everyday consumable wearables. Previous management did not seem to understand the value they had until Cathal Friel arrived a shrewder Irishman, and these fellas are not known for missing much when it comes to turning muck into brass. I am not sure I can call infectious diseased much, unpleasant perhaps! No matter, they have considerable value as we are already witnessing, yet Cathal appears to have found another way to unlock more value in a way I find even more exciting. Let's face it, we will need to learn to live with Covid-19 for some time to come, and everyday affordable wearables could help the world live with infectious diseases that make us much more aware of them. 

The talk coming from Open Orphan (not just BB gossip), is Apple and Amazon, plus others, are seeking to use the database for wearable devices, smartwatches, health monitor devices, etc. These are often premium devices, especially if you are Apple or Samsung smartwatches brands. So, what is the market size for smart devices? As investors we shouldn't allow Apple's cash pile reported to be $1900bn to excite us too much - Apple didn't amass that cash pile by giving away money to smaller companies as a charitable donation, these companies a ruthless as I am sure their Chinese workforce would profess to their collective dismay. That said if anyone thinks Cathal, et al. at the company do not realise its worth and do not know how to pitch one corporate off against another are fools. Not many Open Orphan investors strike me as fools. 

Global Smart Devices Market - Huge and Growing Fast

The global wearable medical device market size was valued at USD 13.0bn in 2019 and is expected to witness a CAGR of 27.9% over the forecast period. The growth of industries such as home healthcare and remote patient monitoring devices is anticipated to positively influence the demand for wearable devices. In addition, increasing consumer focus on fitness and efforts toward leading a healthy lifestyle are expected to positively fuel the product demand.
More from the report here.

The Global Smart Healthcare Market size stood at US$ 141bn in 2019 and is expected to grow at 14.5% through 2030. Smart Healthcare is a technology integrated diagnostic tool used for treating patients and improving the quality of life using e-health, m-health and ambient assisted living services. Rising government initiatives for the digitization of healthcare infrastructure are driving the growth of the smart healthcare market.
More from the report here.

The number of connected wearable devices worldwide has more than doubled in the space of three years, increasing from 325m in 2016 to 722m in 2019. The number of devices is forecast to reach more than one billion by 2022.

Two important factors to the growth within the wearable devices market are primarily being powered by sales of smartwatches – shipments of smartwatches worldwide are forecast to surpass 100m in 2020. Apple, who unveiled their first smartwatch in 2015, currently dominate the smartwatch market and have held a share of around 45% since 2018. Another reason for the growth of the wearables market is the rise in popularity of wearable devices. Also referred to as earwear or ear-worn devices, this category is expected to soar over the next few years with shipments of devices forecast to increase by 45% to 105m units by 2023.
 
Any search you chose to do for smartwatches, or health monitoring devices will vary from the cheap and nasty, to the premium expensive kind. What is important as far as we are concerned, and Open Orphan, of course, is the fact the company has a very lucrative database of infectious diseases. Some of the world's largest companies are seeking to supplant in their wearable smart devices. While these devices may have been around for a while, and in some cases become a short-term fad for the post-Christmas fitness bunny, I think, as do Apple and Amazon, probably others, a new more important market has just opened up, one that has the potential to save lives as well as monitor health and wellbeing on an all-new level previously only health care professionals had access too. 

As I understand it. The idea is to license Open Orphan data to smart device manufacturer(s). These devices will have the ability to instantly warn the consumer they have contracted symptoms of an infectious disease, which will have a variety of alert levels related to the disease offering specific advice, like self-isolate, off you pop to hospital, etc. The £multi million questions must be who with? 

One option is to a global leader as a first-mover advantage on an exclusivity period. Naturally, this option would yield significant margins to Open Orphan by the market it would grab ahead of any other adopter because this would, of course, add significant value in today's pandemic environments. 

Then the second highest bidder? Or multiple companies and or government agencies. The moral standpoint I have is one of ethics and morality. (I make no apologies for my Master Mason and Christian beliefs) To my mind I think such ground-breaking technology should be made as widely available as possible because the alert system is lifesaving, track and traceability (IF AN OPTION) could become a problem if governments do not put financial safety nets in place for people contracting Covid -19 or ave some symptoms that require isolation, this being the only real negative I see for such devices as this would reduce its effectiveness. 

The other question is the pricing for such data access and alerts in real-time - will this price the ordinary mid to low salary consumers be priced out of the market, thus reduce the effect if it were not made available more widespread at affordable pricing levels? This must be a factor for opening up the world economy again...yes, it really has the potential to be this important. 

What price could be put on this new ground-breaking market to Open Orphan? Surely global governments have more buying power than any global Apple, Amazon type business. Hellfire, do they deserve this opportunity!


If you value this type of research, even if it has not enlightened you with anything new, it will have probably brought Open Orphan to potential new investors, that that is usually a good thing. Most companies need new blood for the next leg up through resistance. Please help support me because many hours go into these articles. Thank you for reading. Please share the links.

POPULAR COMPANIES