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07 Jul 2020
Oxford BioMedica : Gene therapy going viral, but ROCE unattractive - Sell
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Oxford BioMedica : Gene therapy going viral, but ROCE unattractive - Sell
Oxford BioMedica plc (OXB:LON) | 328 91.8 9.3% | Mkt Cap: 327.8m
- Published:
07 Jul 2020 -
Author:
Dr Jens Lindqvist -
Pages:
39
Oxford Biomedica is a leading Contract Development and Manufacturing Organisation (CDMO) in the field of lentivirus vectors (LVVs), a well-established platform technology for gene transfer. The company’s strong industry position is evidenced by a number of collaborations, licensing & supply agreements with major advanced therapy companies, including Novartis, Juno Therapeutics (BMS), Orchard Therapeutics and Bioverativ (Sanofi).
We expect continued strong top-line growth for the foreseeable future, powered by an ever-expanding industry pipeline of advanced therapies with a gene transfer component. We expect revenue growth from £64m in 2019 to £101m in 2021e (a mix of process development, manufacturing and licencing revenue), which could prove conservative in the event of additional, major CDMO agreements.
The proprietary pipeline continues, however, to be a drag on profitability. Sanofi’s recent decision to return rights to SAR’459 and ‘869 has left AXO-Lenti-PD (Parkinson’s) as the only progressing, clinical-stage proprietary programme, and recruitment into the SUNRISE-PD Phase I/II trial has been slow. We await a potential licensing of OXB-302 in particular with interest, but economics could prove back-loaded.
We initiate coverage with a Sell on valuation grounds. We expect the OxBox facility to enable sustained profitability from 2021e, but the continued re-investment requirement (£62m CapEx over 2020-22e, following £67m over 2014-19) dampens expected cash returns. Our valuation implies a TP of 574p (CDMO activity 432p, AXO-Lenti-PD 142p).