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Hardman & Co

Oxford BioMedica Eying up long-term value

Oxford BioMedica (OXB) is a specialist, advanced therapy, viral-vector biopharma company. It offers vector manufacturing and development services, while developing proprietary drug candidates, with its LentiVector® platform. 2018 saw significant growth in gross income, the majority through licensing deals. A new R&D collaboration deal with Santen, coupled with the recent equity financing and debt repayment, demonstrate OXB’s deal-making ability and its strategy to secure future, long-term potential. Near term, this R&D arrangement will provide modest additional profit, adding confidence to OXB’s new net cash status in 2019.

  • Strategy: OXB has four strategic objectives: i) delivery of vector development services that embed its technology within partners’ commercial products; ii) bioprocessing and commercial manufacture of vector; iii) out-licensing of proprietary candidates; and iv) investment in R&D and the LentiVector platform.
  • New R&D deal: Santen Pharmaceutical Co. (Santen) and OXB have agreed to collaborate in developing a gene therapy for an inherited retinal disease. The financial details have not been disclosed, although the potential royalty is high at up to 10%. Commercial development income will increase in the short term.
  • Equity investment: OXB recently signed an agreement with Novo Holdings A/S for an equity investment of £53.5m, at £6.90/share, representing 10.1% of OXB’s enlarged share capital. This greatly strengthens the balance sheet, with OXB repaying in full its debt facility with Oaktree Capital on 28 June 2019.
  • Risks: OXB’s mid-term sales model is dependent on successful progress of partners’ clinical trials and commercialisation of LentiVector-enabled products. OXB is investing heavily in infrastructure for manufacturing capacity and in personnel, which could potentially affect the bottom line depending on deal flow.
  • Investment summary: OXB is an exciting company with market-leading technology. It has been extensively validated through large deals with leading (bio)pharmaceutical partners and through grants from the UK government. On expectations of further milestones in 2019, OXB is now profitable, net cash positive and cashflow positive at the operating level.

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