Oxford Biomedica is optimistic against the odds

Falling sales and widening losses are almost never good news for a company’s share price. Cell and gene therapy group Oxford Biomedica (OXB) saw its shares rise 11 per cent on results day, having struggled so far this year, after it unveiled underwhelming figures but promised better times lie ahead in 2024.

Like several of its peers in the UK life sciences sector, the company is fighting to establish new revenue streams in the wake of the pandemic. Oxford Biomedica first entered the public consciousness when it agreed to manufacture the AstraZeneca (AZN) Covid-19 vaccine in 2020. 

The loss of revenue from this contract was a key contributor to the company’s downgrade in revenue expectations for the full year. Management is now guiding for some £90mn in sales, a third down on last year, having previously forecast a slight decline from 2022.

However, the group is anticipating a rapid turnaround: by the end of next year, it has said it will achieve a “broadly breakeven” operating Ebitda figure. It’s also aiming to achieve a doubling of this year’s revenue by 2026. These targets might explain investors’ bullish turn, but some analysts remain sceptical.

“In light of the challenging market conditions [...] and limited commercial traction for most gene therapies, we struggle to reconcile these ambitions with broader market dynamics,” broker Numis said in a note. 

Oxford Biomedica also revealed it’s in talks to buy the viral vector manufacturing company ABL Europe in a bid to increase its traction in the EU and "meet client demand". Given the company’s expanding pre-tax losses, we’d like to see some evidence of this demand before committing. Hold.

Last IC view: Hold, 448p, 25 Apr 2023