Here's the full text from the Roth report:
OXB.L: Gene Therapy, IP and Relationships
Galore; Initiating at Buy
We are initiating coverage of Oxford Biomedica with a Buy rating and 18p price
target. With two technological platforms, a deep and expandable pipeline and
revenue-generating manufacturing services, we believe Oxford represents an
attractive value proposition. Oxford's various pipeline assets have amassed
a significant body of evidence demonstrating proof of concept and promising
efficacy data including the Phase II study of ProSavin in Parkinson's disease
patients.
Oxford Biomedica is a biotechnology company developing novel gene therapy
and immunotherapy drug candidates for use in a variety of indications with
unmet medical needs, including ophthalmic, CNS and cancer indications. The
company has two technological platforms, LentiVector-based gene therapy
and 5T4 tumor antigen-based immunotherapy.
As visibility grows in the U.S. for Oxford BioMedica we believe it presents an
attractive investment case to U.S. investors based on 1) broad based physician
and investor enthusiasm for gene therapy and 2) a recipient of royalty revenue
from the anticipated approval of Novartis' CTL019, CAR-T therapy and 3) has
delivered validating pharma partnerships
The LentiVector platform introduces one or more genes into cells in order to
restore the functions of these genes’ products. Seven LentiVector assets are
in development, two of which are licensed to Sanofi (SNY-NC).
The second platform is based on the tumor antigen 5T4, which is the focus
of the company’s oncology program. 5T4 has been shown to be expressed
on multiple tumor types and can be used to develop immunotherapy-based
approaches. The 5T4 platform has two pipeline oncology assets, both in
clinical development and the 5T4 antibody drug conjugate (ADC) is in a Phase
I study in advanced solid tumors conducted by Pfizer (PFE-NC).
The company also offers manufacturing capabilities and services with
production of GMP grade lentiviral vectors. Of particular note is that the
company manufactures Novartis’ (NVS-NC) CD19 CAR-T immunotherapy,
CTL019, which represents a potentially significant source of revenue.
Upcoming 2015 milestones include final RetinoStat Phase I data, readout
from TroVax Phase II ISTs in ovarian cancer and mesothelioma, data from
MoNuDin preclinical studies and long term followup data from ProSavin Phase
II patients. In 2016 Oxford expects to initiate OXB-102 and EncorStat studies.
Company Overview
Oxford BioMedica is a biotechnology company developing novel gene therapy and immunotherapy drug candidates for use in a variety of indications with unmet medical needs, including ophthalmic, CNS and cancer indications. The company has two technological platforms, LentiVector-based gene therapy and 5T4 antigen-based immunotherapy.
The LentiVector platform has seven pipeline assets with five in clinical development, two of which are licensed to
Sanofi (SNY-NC). The four ophthalmic assets in clinical development are 1) RetinoStat for wet AMD, 2) EncorStat for corneal graft rejection, 3) StarGen for Stargardt disease (Sanofi) and 4) UshStat for Usher syndrome type 1B
(Sanofi). OXB-102/ProSavin are being developed for Parkinson’s Disease. The 5T4 platform has two pipeline
oncology assets, both in clinical development. The two clinical stage assets are TroVax, currently being studied in
ovarian and mesothelioma investigator sponsored studies (ISTs) and the 5T4 antibody drug conjugate (ADC) is in a
Phase I study in advanced solid tumors conducted by Pfizer (PFE-NC). The company also leverages its
manufacturing capabilities and services offering production of GMP grade lentiviral vectors. Of particular note to us is that the company manufactures Novartis’ (NVS-NC) CD19 CAR-T immunotherapy, CTL019, which represents a
potentially significant source of revenue.
Key Investment Drivers
• Growing U.S. visibility and attractive investment case. As visibility grows in the U.S. for Oxford
BioMedica we believe it presents an attractive investment case to U.S. investors based on 1) broad based
physician and investor enthusiasm for gene therapy and 2) a recipient of royalty revenue from the
anticipated approval of Novartis' CTL019, CAR-T therapy and 3) has delivered validating pharma
partnerships.
• Two clinical stage technological platforms with multiple candidates and proof of concept data –
Oxford has two established platforms, lentiviral based gene therapy and 5T4 antigen based immunotherapy.
The company has conducted several proof of concept studies with preliminary efficacy data backing their
use in ophthalmic, CNS and cancer indications.
• Platforms offer expansion opportunities into new indications - We believe these platforms can be
leveraged for expansion of Oxford’s pipeline into a variety of indications which can be treated with gene
therapy. These opportunities offer the potential for additional future revenues as well as attractive and
advantageous business development opportunities.
• Validation by multiple partnerships and licenses – Oxford is continuing to establish its reputation as a
leader in the gene therapy and now immunotherapy space which is validated by the multiple partnerships
and licenses it has established with Novartis, Sanofi, GSK and Pfizer. We believe these partnerships are
boosting Oxford’s visibility and reputation and priming it for further opportunitiesin our belief
• Manufacturing services offer potentially substantial royalties – Oxford’s GMP grade manufacturing
services present attractive revenue generating opportunities for the company evidenced from its deal with
Novartis, supplying the CD19-coding lentiviral vector for Novartis’ CTL019 CAR-T therapy. With a predicted
launch in 2016/17 and peak yearly sales predictions reaching beyond blockbuster status, the company is
poised for significant growth and substantial royalty revenues, in our belief.
• Key Risks
Clinical Risk – As with all drug development stories, clinical studies have an inherent risk of negative data
readouts. Should negative news flow come from ongoing clinical studies, the stock could be negatively
impacted in a significant manner. Additionally, we believe there is added layer of risk to the Oxford business
based on the novelty of the technology approach.
• Regulatory Risk – Should Oxford BioMedica’s products successfully complete pivotal registration studies,
there is no guarantee that regulatory agencies would approve these products. Unforeseen issues may arise
during clinical development which could impact the approvability of a therapeutic candidate.
• Financing risk – As with all non-profitable biotechnology companies, funding is continuously necessary to
fund operations and ongoing clinical studies. Should Oxford BioMedica encounter problems in raising
sufficient funds to continue its operations, this could significantly impact the stock’s valuation.
Upcoming Milestones
Based on discussions with management and recent investor presentations in January 2015, we anticipate the
following milestones.
2015 Milestones:
• Further IP licenses/manufacturing/process development contracts
• RetinoStat Phase I final data expected; ready for Phase II and/or partnering
• Identification of new product development candidates
• Readout from TroVax Phase II ISTs in ovarian cancer and mesothelioma
• Readout from MoNuDin preclinical studies
• Longterm followup data of ProSavin Phase II patients
2016 Milestones:
• First patients in OXB-102 clinical study
• First patient in EncroStat clinical study
• StarGen/UshStat development milestones
• Glaucoma-GT preclinical data
• CAR-T 5T4 preclinical data
Valuation Methodology
We assign a Buy rating and 18p price target on shares of Oxford BioMedica (dollar to pound conversion rate of
0.647738 as of 3/2/15). Our valuation of Oxford BioMedica is based on our probability-weighted clinical net present
value (NPV) model. We believe this method is appropriate in capturing the value of the clinical stage pipeline. It
allows for the flexing of assumptions based on key factors such as chance of success, peak sales estimates, and
year of commercial launch. Our current valuation of Oxford BioMedica is spread over the majority of the company’s
pipeline. Of our 18p target, 63% of the valuation contribution comes from the company’s internal pipeline
development candidates and 37% comes from outlicensed product candidates. While the majority of the pipeline
candidates are in earlier stages of development (indicated by low projected chances of success), we point to the
overall value contribution coming from the blockbuster potential of several of the drugs. A level of conservatism in our
valuation model comes from our assigned multiple and discount rate for which we apply the historical values for large
pharma (17.0x P/E and 15% discount rate) rather than the sometimes inflated non-profitable biotech multiples in the
30-40x range.
Key to our assumptions for our NPV model is our variable pricing depending on the product and indication. Gene
therapy products have garnered premium pricing with the lead being Glybera and its $1.4 million price tag for the
therapy. When looking at Oxford’s pipeline, we make the following pricing assumptions: 1) EncorStat for cornea graft
priced at ~$15,000 per cornea, 2) ProSavin/OXB-102 priced at $150,000 for the treatment course, 3) StarGen and
UshStat priced at $250,000-300,000 for treatment course based on their orphan status and 4) RetinoStat priced in
the range of $30,000-50,000 per eye and this is based on the competitive landscape for AMD taking into
consideration Eylea and Lucentis.
Valuation upside potential – As mentioned above, our valuation of Oxford BioMedica is spread across the majority
of the pipeline with no one drug providing disparate contribution to the valuation. We see upside potential to our
valuation based on 1) increasing the chance of success for a particular indication and increasing the peak sales
numbers should any of the products gain more market traction than expected and 2) including other products and/or
indications into our valuation as they enter clinical studies. As an example, we currently do not include Glaucoma-GT
and MoNuDin in our valuation since they are preclinical stage assets.
Valuation downside potential – As with the majority of companies in clinical development, there exists the risk of
failed or inconclusive clinical trialswhich could lead to downward pressure on the stockWhile early stage products increase the underlying risk, we believe that Oxford BioMedica’s risk has been mitigated somewhat by spreading it
over a broad pipeline.
Financial Outlook and Summary
Oxford BioMedica ended 1H14 with £18.3 million in cash, which we project provides runway for approximately 18-
months. We are projecting losses of £10.6 million for 2014 and £12.9 million for 2015, or (0.41p) and (0.46p) per
share, respectively. For 2014 and 2015 respectively, we expect R&D expenses of £14.0 million and £17.5 million and
G&A expenses of £3.7 million and £4.1 million. Expenses will focus primarily on driving clinical trials across the
company’s development programs.
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