Major deal to supply Novartis CAR-T programmes

OXB is a specialist gene and cell therapy viral-vector biopharmaceutical company. It offers vector manufacturing and development services, whilst retaining its own proprietary therapeutic candidates. Above service-fees, OXB will receive royalties on commercial products developed with its LentiVector® platform. OXB has made two significant announcements during the past week which reduce risk and greatly improve sentiment towards the stock. First, refinancing of its existing loan with a new, more favourable debt facility from Oaktree Capital. Secondly, a deal with Novartis to supply vector for use in the manufacture of certain CAR-T therapies.

• Strategy: Oxford BioMedica has four strategic objectives: delivery of process development services that embed its technology in partners’ commercial products; commercial manufacture of lentiviral vector; out-licensing of proprietary candidates; and investment in R&D and the LentiVector platform.
• Novartis deal: Extending its existing relationship with Novartis, OXB will supply clinical and commercial vector for CTL019 and other (undisclosed) Chimeric Antigen Receptor T cell (CAR-T) therapies. Key points are $10m upfront, >$90m from a minimum off-take contract over three years, plus royalties on net sales.
• Debt refinancing: A new $55m loan agreement was signed on 30th June with Oaktree Capital which is being used to repay the significantly more expensive existing loan from Oberland Capital, saving OXB ca.$1.2m per annum, whilst also freeing up the $10m unusable cash that is ring-fenced.
• Risks: There are inherent risks in clinical trials and commercialisation, particularly in innovative areas such as gene therapy. Oxford BioMedica does not have a controlling stake in commercialisation of partner candidates, and its current strategy is contingent on commercial vector manufacture for partners.
• Investment summary: OXB is at an interesting juncture. Heavy investment in state-of-the-art GMP manufacturing facilities for production of gene therapy vector has enabled the deal with Novartis, placing the group on the cusp of significant service income and royalties. Forecasts suggest OXB will turn EBITDA positive in 2017, and become profitable overall at the EBIT level in 2018. Bioprocessing royalties are likely to result in significant upside potential in the near future.