The problem with major institutional presence in small-cap companies is that share trades are few and far between. This means that when someone is either selling or buying, the share price movement is magnified. Hvivo (HVO) is increasingly finding this to its cost. The share price more than halved during the two weeks to 10 April, prompting management to put out a statement in an attempt to reassure investors.
A company spokesperson confirmed that there hadn’t been many share trades during the period and that no large institutional shareholders had made any significant share sales. The extreme share price movement of the past few weeks was merely a case of more sellers than buyers, they said. So why the sharp decline in sentiment towards the biopharma company?
It began to turn in 2014, after the group switched its focus from scientific services to high-risk, early-stage drug development. And the new identify hasn’t been an easy ride. In late March, the group’s novel flu jab, which is meant to work against multiple strains of the virus, failed to reach its target in a clinical trial. The Flu-V – which the company is developing alongside pharma start-up PepTCell – had no impact on the number of virus particles in the flu patients tested, although a number did show improved symptoms.
That is particularly concerning considering the amount the trial has cost. In the six months to June 2017 Hvivo burned through £10m of cash, leaving it with £15m of net cash on the balance sheet. A combination of research and development tax credits and invoices from its historic services businesses helped lift the cash position to £20m at the end of 2017, although that was still down from £26m year on year. However, if its rate of spending continues it won't be long before management is forced to return to the market for more funds. It raised £21m via a share placing in 2015. In fact, broker Numis forecasts just £1.5m of net cash by the end of the current financial year.
