Oxford BioMedica

De-leveraging the balance sheet

18 Jun 2019 / Corporate research

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.

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.

Equity investment: OXB has 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 and is a clear demonstration of the industry’s confidence in OXB’s growth potential.

Balance sheet: With the new cash arriving at the start of June, the loan is likely to be paid off as soon as possible, leaving the interim balance sheet ungeared and with gross cash driven by Capex timing and the cost of the fundraise. With the removal of ongoing interest payments, free cashflow forecasts are positive from 2020.

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 will affect the bottom line.

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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