Oxford Biomedica to grow gene therapy business

Before the pandemic, Oxford Biomedica (OXB) was a relatively anonymous cell and gene therapy company. But then a contract to manufacture the AstraZeneca (AZN) Covid-19 vaccine boosted its profile – and its share price – to new highs. 

Momentum behind the stock was bound to wane once the virus became endemic and demand for the jab receded. This meant the company had to convince investors that it had a credible plan for future growth. Its success in this endeavour has been somewhat mixed thus far: the shares have fallen 20 per cent over the past year, following on from a steep drop in early 2022.  

However, investors can be quietly pleased with the company’s full-year figures for 2022. Revenue of £140mn exceeded analyst expectations by £10mn (and was only just short of the £142.8mn generated in the previous year). This performance was helped by the launch of a Boston-based subsidiary, OXB Solutions, which specialises in the manufacture of adeno-associated virus (AAV) gene therapies.

These treatments use a modified virus as a method of delivering therapeutic genetic material into living tissue. They are considered one of the most important technologies in the emerging field of gene therapy. 

Oxford Biomedica’s operating profit and Ebitda numbers benefited from the £60mn sale and leaseback of its Windrush Court lab facility in Oxford. This resulted in a better-than-expected operating loss of £30.2mn for the year, and an adjusted operating cash profit of £1.6mn. 

Meanwhile, the company’s total expenses increased by 50 per cent to £162mn due to inflation-linked price rises and costs related to the integration of OXB Solutions. It’s perhaps worth noting that the group’s operating loss figure is roughly double what it was in 2019 – meaning it's in a slightly more precarious situation than it was pre-pandemic.

Management has also indicated that total revenues for this year are likely to be lower than in 2022 given the drop-off in vaccine manufacturing. Analysts at Stifel are bullish, citing the fact that the company “continues to grow and diversify its client base with more than 30 programmes now ongoing”. 

The firm expanded or amended existing agreements with some big pharma clients, including Bristol Myers Squibb, last year – which Stifel said is “an encouraging sign of ongoing demand for its services”. 

There are very few London-listed companies working at the cutting edge of biotechnology, which makes Biomedica an interesting prospect. But with earnings per share back in the red, we’re holding out for stronger evidence of progress. Hold.

Last IC view: Hold, 460p, 15 September 2022