Oxford Biomedica’s (OXB) FY19 results highlight strong operational momentum despite capacity constraints. OXB is investing for future growth and its 84,000 sq ft state-of-the-art bioprocessing facility OxBox is on track to produce commercial grade batches in Q220. Deals made include expansion of its commercial supply agreement with Novartis by five years and R&D partnerships with Santen and Microsoft, followed post period with the BMS/Juno licence and supply agreement. We expect further platform deals to be announced in 2020, as OXB exploits its position as the only FDA-approved, commercial-scale lentiviral vector (LVV) manufacturer in the US. In the long term, much value resides in OXB’s ability to develop and monetise its own gene therapies, an out-licence deal is also on the cards and OXB plans to move several proprietary gene therapy assets into the clinic in the next 12 to 18 months.
Companies: Oxford Biomedica
Following the 2017 commercial launch of partner Novartis’s Kymriah (a CD19-targeting CAR-T that is approved for pALL and DLBCL), Oxford Biomedica (OXB) is the only FDA-approved lentiviral vector manufacturer worldwide. Validation of its capabilities continues with the recent licence and clinical supply agreement (LSA) with Juno Therapeutics (part of BMS group), a pioneer in cell and gene therapy research. The LSA grants Juno a non-exclusive licence to OXB’s LentiVector platform for its application in a number of novel CAR-T and TCR-T programmes. This is a significant deal, albeit early stage, in terms of multiple programmes and further diversifies OXB’s revenue streams. As these assets move towards approval, commercial manufacturing supply provides further upside. Our valuation of OXB increases to £718m.
Oxford Biomedica (OXB) is a pioneer and global leader in the development and manufacture of commercial-scale lentiviral vectors (LVV), a critical component of cell and gene therapies. Ongoing investment in manufacturing capacity and R&D is imperative to reap economic returns in this highly innovative and potentially lucrative therapy area, which has witnessed a step up in investment globally. Multiple deals in 2019 included an expansion of its commercial supply agreement with Novartis by five years and R&D partnerships with Santen and Microsoft. We expect further platform deals to be announced in 2020, as OXB exploits its position as the only FDA-approved commercial-scale LVV manufacturer. In the long term, much value resides in OXB’s ability to develop and monetise its own gene therapies. We value OXB at £692m.
Oxford Biomedica (OXB) has announced the expansion of its commercial supply agreement with Novartis by five years. While expected, this removes any uncertainty around the future of the partnership and is a validation of OXB’s investment in new manufacturing facilities. Novartis is now committed to paying OXB a minimum of $75m (for vector batches) in manufacturing revenue over the five-year extension. Additionally, OXB will be paid a mid-single digit £m facility reservation fee. As part of this, OXB will dedicate some of its new 7,800m2 manufacturing facility (OxBox) to Novartis while also ensuring that at least two of its GMP facilities are capable of commercial supply, essentially ensuring a dual-sourced supply if the need arose. We value OXB at £692m vs £673m previously.
Oxford BioMedica (OXB) is a gene-based medicine viral-vector biopharma company. It offers vector manufacturing and development services, while developing proprietary therapies, with its LentiVector® platform. Growth in gross income and profitability were driven by new licensing deals in 2018. Despite steady growth in 1H’19 group sales (bioprocessing and commercial development), a reduction in licensing income resulted in a first-half operating loss; the absence of significant deals in 2019 has also dampened the shares. Although interim results were in line with our expectations, they highlight the importance of 2H’19 for a full-year profit.
Oxford Biomedica’s (OXB) interim results highlight strong operational and financial momentum to date. The Novo Holdings equity investment (£53.5m) in May has enabled OXB to fully repay the debt facility, effectively strengthening the balance sheet. It is investing ahead of increasing demand for its lentiviral vector manufacturing capacity with the build-out of OxBox. The new facility will more than double capacity and is expected to be ready for commercial vector production in H120. Top-line growth continues to benefit from the near-term ramp-up of Kymriah and rapid advancement of partnered asset AXO-Lenti-PD (Axovant), crystallising in a $15m development milestone payment. We value OXB at £673m.
Oxford BioMedica’s (OXB’s) interim results were broadly in line with our expectations for 2019. The decrease in H119 revenues to £32.1m (-9%) largely reflects the exceptional performance in the previous period, which was bolstered by strong licence income (H119: £13.3m vs H118: £19.9m) primarily from upfront payments with the Axovant and Bioverativ deals signed (£18.5m combined). Importantly, in H119 bioprocessing revenues grew 23% to £18.8m, which we expect was driven by the continued uptake of Novartis’s CAR-T Kymriah. Typically, bioprocessing revenues are back-end loaded so a stronger performance can be expected in the second half of the year. With OXB transitioning one of its GMP suites across to bioreactor processing in H119 and its new OxBox bioprocessing facility expected to be fully operational in Q220, we expect this growth to continue in the near term. We retain our valuation of £649m.
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Companies: AVO AJB AGY CLIG DNL DPP FLTA GTLY GDR KOOV MUR NSF OXB PCA PHP RE/ RMDL STX SCE TRX TON SHED VTA W7L
The introduction of IFRS 2 in 2004 generated considerable debate about the best approach for handling ‘share-based payments’ (SBP). While it is clearly a cost to shareholders, which should be included in the statutory reporting lines through the P&L account, the question arose as to whetherit should be part of our underlying EBIT calculation.
Companies: AVO AJB AGY ARBB CLIG DNL DPP FLTA GTLY GDR KOOV MCL MUR NSF OXB PCA PHP RE/ REDX RMDL STX SCE TRX TON SHED VAL VTA W7L
When advisers first start looking at business relief (BR) products, there is much to take in: the rules governing such products; the investment strategies being used; and what the investment risk is. It is easy to lose sight of the fact that, for non-AIM products, the investment is being made directly into a company or partnership, rather than a fund. It is, therefore, essential that governance is part of the diligence process.
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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.
Oxford Biomedica (OXB) and Santen Pharmaceutical have entered into an R&D collaboration to develop gene therapy vectors for an undisclosed inherited retinal disease. The collaboration will focus on generating preclinical proof of concept and includes a licence to OXB’s LentiVector platform, in addition to access to its manufacturing capabilities. OXB is entitled to an undisclosed milestone payment on Santen exercising the option to the LentiVector platform, as well as development milestones and an up to 10% royalty on net sales. This new collaboration continues to demonstrate OXB’s track record of signing partnerships and again validates its position as a leading global developer of lentiviral vectors. We retain our valuation of OXB at £649m. We do not currently include the Santen deal in our valuation, but will reassess this once more details on financial terms and development strategy (including indication) are available.
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, primarily through licensing deals, to deliver OXB’s first underlying operating profit. OXB is, however, carrying a significant loan of $55m, which is relatively expensive with an interest rate of 9% plus US LIBOR, and also exposes it to forex risk. Equity financing of £53.5m from Novo Holdings A/S has been agreed, allowing repayment of the loan and securing a strategic partner.
Oxford Biomedica (OXB) is a pioneer and global leader in the development and manufacture of commercial-scale lentiviral vectors (LVV), a critical component of cell and gene therapies (CGT). OXB has numerous value streams, including manufacturing, royalties and milestones on partnered product sales. Its technology and R&D pipeline have been validated by numerous partnerships (Novartis’s CAR-T Kymriah, Axovant deal for AXO-Lenti-PD). We believe the greatest opportunity lies in OXB’s own gene therapy R&D capabilities; higher investment now is imperative to reap future economic returns in this highly innovative and potentially lucrative therapy area. We value OXB at £649m.
Oxford BioMedica (OXB.L) receives strategic investment from Novo Holdings
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Kromek has received a material order from DARPA to further develop a biopathogen detector totalling $5.2m. This is an incremental market opportunity for the company and the majority of the contracted value is likely to be recognised in the company’s new fiscal period to April 2021.
Companies: Kromek Group
Many of the world’s best and most important products (eg Space exploration, nuclear medicine/power & the internet) were originally invented by the military. It’s happened again – but this time to combat airborne pathogens like Ebola, SARS/MERS and all manner of other biological nasties doing the rounds. You see on 10th December 2018, Kromek was awarded a $2.0m contract by DARPA (research arm of US Dept. of Defense) to develop a vehicle-mounted bio-threat detector. The idea being that this should be able to rapidly identify (within 1 hour) any dangerous germ that might have been released into the environment, say by terrorist groups, organised criminals &/or rogue states.
Open Orphan, a niche Contract Research Organisation (CRO) and world leader in testing the efficacy of vaccines and antivirals, raised £12.6m (gross) to fund development of the world’s first COVID-19 challenge model. Compared with traditional trials, challenge studies can fast-track testing of vaccines and antivirals, with reduced costs and fewer volunteers. The company is in active discussions with 12 global vaccine manufacturers with regards such a challenge model. Given the paucity of lab testing capability in the UK, Open Orphan is exploiting its in-house virology lab to offer third-party services and commercialise a lab-based COVID-19 antibody test, for which it has UK exclusivity from Quotient. We initiate coverage with a target price of 19p, based on a sum-of-the parts analysis.
Companies: Open Orphan
FY results showed an adjusted net loss of £3.8m, with year-end cash of £2.5m – in line with the trading update at the time of the recent £14m placing. Near-term focus remains on the outcome of study SG016, and although the enrolment rate into the COVID-19 trial has slowed in recent weeks, with 98 out of the targeted 100 patients having been enrolled, top-line data is expected to be presented in July. The company also confirmed that the trial of SNG001 in COVID-19 patients within the home setting and to be conducted virtually has commenced. Additionally, MHRA gave approval to run an interim analysis (109 out of targeted 120 patients) without compromising the integrity of the COPD Phase II trial, with data expected to be presented in the summer: a busy summer, with two potential value inflection points. We reiterate a target price of 120p, of which c.80p relates to the use of SNG001 in COVID-19 disease, with the prospect of this being increased on successful Phase II outcomes for both COPD and COVID-19.
The potential of cell therapies is starting to become clear, and MaxCyte’s technology lies at the heart of many of these next-generation treatments. The pivotal role its platform plays is shown by ten major partnership agreements formed with leading cell therapy players over the past 18 months. These can earn pre-commercialisation milestones in excess of $800m, transforming MaxCyte’s medium- and longer-term revenues as the underlying programmes advance through clinical development. CARMA, MaxCyte’s proprietary cell therapy platform, is nearing a key inflection point, with Phase I data from its lead asset due in 2020. Management is targeting CARMA to be self-financing by 2021. We raise our valuation to £260m (340p/share), from £195m and 341p, with the core business alone valued at £158m (206p/share).
Avacta is leveraging the antibody-like properties of Affimers for Therapeutic and Diagnostic applications across multi-billion dollar markets, including testing and treatment for COVID-19, building a differentiated pipeline and global partnerships. The near-term key is the roll out of its SARS COV-2 antigen tests, including potentially one of the first Point-of-Care tests to-market, offering game-changing commercial scope, sufficient to significantly accelerate the clinical development of its Therapeutic pipeline.
Companies: Avacta Group
Synairgen (SNG.L): Preliminary 2019 results | Yourgene Health (YGEN.L): COVID-19 testing service launch and business update
Companies: Synairgen Yourgene Health
4D pharma has announced its FY’19 results for the period ending 31 December 2019. Results are in-line with our expectations, although the reported cash position of £3.8m does not reflect the Group’s current position because since period-end 4D pharma has completed a £22m equity fundraising. Cash runaway is now indicated until the end of Q4 2020 on current activity levels. This takes them through key potentially value-adding readouts expected in 2020, including full results from the Phase II programme of Blautix in IBS in Q3 2020, and additional oncology data for MRx0518 from the now completed Part A of the Phase I/II study in Q3 2020 and two ongoing Phase I biomarker studies in H2 2020. Management also flagged that the ongoing recruitment into the Phase I/II asthma trial has been impacted due to Covid-19, although this is somewhat offset by the initiation of the Phase II trial in hospitalised Covid-19 patients. 4D pharma continues to seek a partner for this Covid-19 programme and recently published a presentation supporting the scientific rationale for MRx-4DP0004’s use in Covid-19 hospitalised patients. The MSD collaboration continues to progress well and management are actively pursuing additional research collaborations that could create additional value for shareholders. Year-to-date the Group has made excellent progress progressing its clinical pipeline, and we look forward to these key potentially value-creating readouts later in 2020.
Companies: 4D Pharma
We are initiating coverage on specialist pharmaceutical services provider Ergomed. We believe it should prove relatively resilient during the COVID-19 crisis and has the fundamentals in place to execute its growth strategy. Ergomed announced impressive audited numbers for FY19, with revenue up 26% to £68.3m and EBITDA up 5.5x to £12.5m. The FY19 announcement is effectively Ergomed’s fourth profit upgrade for FY19 and a small beat on recently reset FY19 expectations. Ergomed trades at a discounted EV/EBITDA of 10.1x vs the contract research outsourcing (CRO) sector average of 11.5x (FY20). We value Ergomed at £186m or 399p/share. Ergomed’s strong organic growth is benefiting from a clear strategic focus on high growth pharma sectors, margin control and order book growth (up 15% to £125m in FY19, giving 90% visibility to 2020).
Following on from the Primestore MTM orders announced in April, EKF has received further orders worth $9.4m to be fulfilled between now and the end of July. This results in further upgrades to our already upgraded estimates, by 34% at the PBT/EPS level in FY20, with scope for further upgrades as and when additional orders are received. The Primestore device is proving its worth during the current Covid-19 pandemic. It deactivates viruses, bacteria, fungi and mycobacterium tuberculosis allowing safe sample handling and transport, greatly reducing risk of infection and enables samples to be transported at ambient temperatures, simplifying the significant logistical burden involved in transporting millions of samples. It is also worth reiterating that the sample collection device is agnostic as to which test is carried out on the patient sample, making this something of a picks and shovels play on the current environment. In addition to these US orders, EKF has now commissioned its facility in Wales and shipped its first product into the UK market this week. It has also begun the process to start manufacturing in Germany and will bring additional capacity on stream in the US in the near future. All of this is yet to be factored into estimates and represents additional potential sources of upgrades in due course. We continue to believe EKF is exceptionally well positioned in the current environment and is forming a crucial part of the supply chain required to significantly increase diagnostic testing capacity globally. EKF remains one of our Best Ideas for 2020, supported by a positive short and medium term outlook, strong fundamentals and a track record of meeting and beating expectations.
Companies: EKF Diagnostics Holding
Physiomics, the oncology consultancy using mathematical models and its Virtual Tumour™ technology to support the development of cancer treatment regimens and personalised medicine solutions, has today announced the completion of an £0.83m over-subscribed fundraise at 3.5p. This includes Director participation and the arrival of the Company’s first small-cap institutional fund onto the register.
Surgical Innovations has provided some useful context to the current trading environment. Whilst revenues are significantly down in Q2 so far, they are perhaps not down to the levels initially expected and there are some encouraging if tentative signs of life as hospitals prepare to recommence elective surgeries. The group’s cash position has increased to £1.65m (from £1.28m at the Y/E) and, with an undrawn £0.5m RCF and a new £1.5m CBILS facility, the group has £3.65m of available liquidity. This should be sufficient to cover its operational requirements for several months and to fund working capital as and when activity begins to pick up. Prior to the Covid-19 shutdown, momentum had been building in terms of market share gains, with new account wins in the UK and new distributor markets opening up globally. The company’s resposable model is ideally suited to the increased focus on sustainability, particularly reducing the use of single use plastics. With a number of new products expected to launch progressively over the next few years, we believe the company has bright prospects, once the short term challenge around Covid-19 has been navigated.
Companies: Surgical Innovations Group
Genedrive (GDR.L): SARS-CoV-2 test receives CE mark
Accelerating the COVID-19 Opportunity
Oncimmune has signed a new cornerstone agreement with Roche, having successfully delivered on an initial contract, using its SeroTag® biomarker platform to deliver insights into patient data collected during cancer immunotherapy trials. This is clear validation of Oncimmune’s approach and recognition from a frontrunner in cancer immunotherapy and diagnostics. It also demonstrates the potential of its expertise to advance the hugely promising field of Precision Medicine which can build on the remarkable advances already achieved in immune-oncology.