Waning vaccine demand puts Oxford Biomedica in the red

Oxford Biomedica (OXB) is working hard to transform its business in the wake of plummeting sales of the AstraZeneca (AZN) Covid-19 vaccine. The specialist drugmaker, which made its name in cell and gene therapies, has signed five new or expanded customer partnerships in the year to date. 

But these new agreements have yet to feed through to the bottom line in a meaningful way, and the company swung to an operating loss of £19.2mn compared with a £19.7mn profit in the same timeframe last year. 

Looking ahead, Biomedica appears to be positioning itself for transatlantic expansion as a contract development and manufacturing organisation (CDMO), or provider of outsourced drug development services. In January, the company announced it had entered into an agreement with Boston-based Homology Medicines to establish Oxford Biomedica Solutions (OBS), a maker of viral-vector-based vaccines. 

Biomedica has an 80 per cent stake in the new venture. Costs related to the acquisition drove operating expenses up to £56.2mn, while free cash flow generation slipped into negative territory at £30.5mn. At the end of last month, the company had £42.1mn of net cash on its books. With £64mn of short-term debt up for repayment in March 2023, investors have some reason to be jittery, at least short of any rescheduling.

While broker Liberum has said it anticipates a restructuring and partial repayment of the loan facility in the first quarter of next year, there’s clear reason to hesitate while Biomedica transforms. The integration of OBS is due to be completed sometime in the first half of 2023 and the business is expected to reach the Ebitda breakeven point in the first half of 2025. For now, Oxford Biomedica is a work in progress. Hold.

Last IC view: Hold, 600p, 20 April 2022