There’s a FTSE stock in my portfolio that looks like it’s just done a couple of rounds with Mike Tyson (the young version). It’s down 26% in just 10 days and now trades for 22p.
The stock is hVIVO (LSE: HVO), a small-cap from the FTSE AIM 100 index. There’s been no significant news published during this time, other than Octopus Investments (the firm’s largest shareholder) increasing its stake from 12.32% to 13.32%. That’s a positive sign.
So what’s going on here? And is this a chance for me to buy more shares? Let’s dig in.
Ask questions later
hVIVO conducts human challenge trials for biopharma companies, which involves exposing healthy volunteers to pathogens under controlled conditions. These provide quicker data, cut costs, and can speed up the clinical trial process.
Now, exact figures aren’t publicly disclosed, but it’s safe to assume that a substantial portion of hVIVO’s business is involved in testing vaccine candidates. And here’s the issue with the share price.
Donald Trump has nominated vaccine sceptic Robert F Kennedy Jr to be the next US health secretary. He’s promised to let Kennedy “go wild on health”.
If he gets this position (which looks likely but isn’t certain), his potential influence over vaccine policies might have significant implications for hVIVO.
For example, he could use his public position to cast doubt on the efficacy of vaccines, potentially leading many American families to skip them. This might force pharmaceutical companies to deprioritise vaccine research and development (R&D).
Pharma firms frequently receive research grants from federal bodies for vaccine R&D. This funding could be cut, resulting in less trials taking place.
These risks appear to have caused investors to sell the stock now and ask questions later.
H1 results
In H1, hVIVO reported record revenue of £35.6m, which was 30.6% higher than the year before. The EBITDA margin was around 24%, up from 19% in H1 2023.
Looking ahead, the company has set a medium-term revenue target of £100m by 2028. That would be solid growth from last year’s £56m.
In the H1 report, CEO Yamin Khan said: “We have full visibility over our expected 2024 revenues…I believe we have laid the foundations for strong performance in the months and years ahead.”
After this sell-off, the stock trades on a forward price-to-earnings (P/E) ratio of 13. That looks dirt cheap and I reckon it will claw back some losses if management offers a reassuring trading update.
Of course, if the opposite happens, the stock could fall further.
What to do?
I won’t get into the weeds on vaccines here. But it’s no coincidence that the deadly smallpox virus was eradicated in 1980 after a global vaccination campaign. Outbreaks of Covid, measles, mumps, polio, and much more, are also down significantly.
Longer term, I have confidence in the fields of vaccine R&D, human challenge trials, and the progress of medical science.
However, facts and investor sentiment are two separate things entirely. And the medium-term future is cloudier for hVIVO’s orderbook growth than it was just a few weeks ago.
I recently took the opportunity to buy a few more shares at 21p. So I clearly don’t think it was madness for me to invest after the 26% drop. But I won’t be chasing the stock any lower.
