Broker backs hVIVO 2026 rebound

Shore Capital has reiterated a Buy on hVIVO with a 25p fair value—more than five times the current 4.8p—arguing that an improving biotech funding backdrop should restore demand for the specialist CRO after an 18‑month period of order‑book shrinkage and contract cancellations. The broker points to recent signs of a cycle turn (about $3.2bn raised in one day by US biotechs, biotech indices up ~30%, and reduced political pressure on US drug pricing) and cites two potential near‑term catalysts: a possible record ILiAD BPZE1 Phase III contract and a large pharma project with internal financial approval pending a final decision next year. With a market cap of £33m and net cash of £23m implying an enterprise value of roughly £10m (≈0.6x LTM EV/EBITDA, 1.5x incl. leases), Shore sees significant upside if contract wins materialize, though management warns recovery may be slow and may not gather momentum until 2026.

Analysis

Shore Capital has reiterated a Buy on hVIVO with a 25p fair value versus the current 4.8p share price, implying more than fivefold upside based on the broker's thesis. The notes position hVIVO as a specialist contract research organisation whose performance has been hit by an 18‑month period of shrinking order books and contract cancellations.

The broker highlights an improving funding backdrop for biotech as the driver of renewed demand: eight US biotech follow‑on raises totalling about $3.2bn in one day, main biotech indices up more than 30% year‑to‑date, and reduced political noise on US drug pricing. Shore argues stronger client balance sheets and takeover/licensing activity are easing the cycle headwinds that constrained trial starts and CRO bookings.

Timing and contract risk remain decisive. Management cautions that recovery is likely slow and may not gather momentum until 2026, while two potential catalysts—a likely record ILiAD BPZE1 phase III contract and a large pharma project with internal approval awaiting final sign‑off next year—could materially re‑rate the shares. Valuation metrics cited show a market cap of £33m with £23m net cash (EV ~£10m), equating to 0.6x LTM EV/EBITDA (1.5x incl. leases), which Shore interprets as an undervaluation if contract wins materialise.

Key Decisions for Investors

• Consider a selective, size‑conscious accumulation on weakness given Shore Capital's 25p fair value and the company's low EV relative to LTM EBITDA, but limit position size until contract wins are confirmed
• Treat confirmation of the ILiAD BPZE1 phase III contract and the large pharma project's final decision as primary catalysts; re‑rate exposure materially only after contract awards or clear order‑book recovery
• Use the £23m net cash cushion as partial downside protection but implement risk management (stops or hedges) because management expects a slow recovery that may not accelerate before 2026
• Monitor biotech funding flows, index momentum and US drug‑pricing headlines as directional indicators for client willingness to commence trials and for the sustainability of CRO demand