Oxford BioMedica PLC (OXBDF)

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FT Buy OXB
https://www.thetimes.co.uk/article/biomedica-has-right-formula-for-growth-fxss7m8lx


It£s been a turbulent year for British biotech. Shield Therapeutics, Faron and ImmuPharma have all crashed on failed clinical trials £ leaving investors shouldering heavy losses.

Yet Oxford BioMedica (our business editor£s share tip of the year) is soaring. The cell and gene company£s stock has more than doubled this year, fuelled by lucrative deals it has signed with large drugmakers.

It inked a potential $842m (£623m) link with Axovant Sciences last week. The US start-up will license Oxford BioMedica£s early-stage treatment for Parkinson£s, which promises to halt progression of the disease. It paid a $30m upfront, including $5m pre-payment for manufacturing costs.

If Axovant is successful in commercialising the drug, conservative estimates put peak sales at £1bn. Oxford BioMedica stands to receive a royalty on every treatment.

The deal is a critical part of the strategy the company set out two years ago of spinning out or licensing its therapy pipeline rather than take on all the risk itself.

Oxford BioMedica is now worth £594.9m. However, the latest deal is not central to the company£s core valuation. Its key technology is a harmless virus (lentivector), which it uses to introduce DNA treatments into the cells of the patient and can be used in many therapy areas.

Its lentivectors are a key component of Kymriah, a new treatment for childhood leukaemia developed by Novartis. The drug has been approved and costs $475,000 per treatment. Oxford BioMedica earns a royalty from this medication, too.

The company made £37.6m in sales last year and is still loss-making. However, ebitda losses fell from £7.1m in 2016 to £1.9m last year. Moreover, the use of DNA to treat diseases is expected to grow into a $10bn sector with the company well-placed to take a share of this.

Oxford BioMedica raised £19.3m through an equity placing in March to expand its facilities. This will allow it to cut prices for its customers, and produce more of its lentivectors in one go £ increasing yield 10 times.

Biotech is not without its risks. Axovant£s share price plunged last September after an Alzheimer£s drug it bought from Glaxo Smith Kline failed in clinical trials. However, Oxford BioMedica£s strategy of spreading its risk and partnering with larger drug makers will stand it in good stead. The company£s stock is rising and is likely to climb further if more deals follow, as the company has promised. Biotech is risky, but £ as Oxford BioMedica is showing £ it can also come with great rewards. Buy.