Investment Summary

OXB, known historically as Oxford Biomedica, is a contract development and Manufacturing organisation focused exclusively on viral vectors used in cell and gene therapies, vaccines and oncolytic virus applications. The accelerating shift across the biopharmaceutical industry towards advanced therapies, the increasing reliance on outsourced manufacturing partners and the company's established LentiVector platform position OXB favourably to capture a structural growth opportunity. With a refocused pure-play CDMO strategy, expanding capacity, growing customer pipeline and improving operating profile, the medium-term outlook is attractive. We rate the shares a Buy.

Business Overview

OXB is headquartered in Oxford, United Kingdom, with manufacturing facilities in Oxford, France and the United States. The company is listed on the London Stock Exchange. OXB has fully repositioned itself as a pure-play viral vector CDMO, divesting its in-house therapeutics pipeline to focus on Partnership-based manufacturing for clients ranging from large pharmaceutical companies to specialist biotech firms. The company offers a broad range of viral vector services including lentiviral, AAV, adenoviral and other vector platforms, with capabilities spanning process development, analytical development, GMP manufacturing, Fill-finish and regulatory support.

The LentiVector platform is one of the most established lentiviral manufacturing systems in the industry, with proven scalability, regulatory track record and clinical-stage and commercial-stage customers. Following acquisitions of additional capacity in France and the United States, the global manufacturing network now provides geographic reach and risk Diversification. Customer partnerships include large pharmaceutical companies, biotech innovators and selected Vaccine programmes.

Sector Backdrop

Cell and gene therapies represent one of the most exciting frontiers of modern medicine. From CAR-T therapies in haematological cancers, to gene therapies in rare genetic disorders, to investigational programmes across solid tumours, autoimmune disease and ophthalmology, the pipeline of advanced therapies continues to expand rapidly. Viral vectors, particularly lentiviral and AAV, are critical enabling technologies for the majority of these therapies, used to deliver therapeutic genes into target cells. Manufacturing advanced therapies is highly complex, requiring specialised facilities, deep technical know-how, robust quality systems and significant regulatory expertise. As a result, most therapy developers, even large pharmaceutical companies, outsource at least part of their viral vector manufacturing requirements to specialist CDMOs. The total addressable market for viral vector manufacturing is expected to grow at robust double-digit rates over the coming decade, supported by the expanding clinical pipeline, the launch of new approved therapies and the ongoing shift in industry Economics towards outsourced manufacturing.

Investment Thesis

Our positive view on OXB rests on several pillars. First, the company is a globally recognised lentiviral vector specialist with deep technical capabilities, established quality systems and a long client track record. Second, the strategic repositioning to a pure-play CDMO has simplified the business model, reduced cash burn from therapeutics development and aligned the company's incentives with the structural growth of contract manufacturing. Third, the company has been investing in capacity expansion across its UK, French and US sites, providing the infrastructure to support both clinical-stage and commercial-stage customers. Fourth, the customer pipeline has been steadily growing, with both new contracts and expansion of existing programmes. Fifth, financial performance has been improving, with Revenue growth, Margin expansion and a path to sustainable profitability becoming visible. Sixth, the valuation embeds limited Credit for the long-term opportunity, providing an attractive entry point for long-term investors.

Growth Drivers

Specific growth drivers include the continued expansion of customer-funded contract manufacturing work, including process development, analytical method development, clinical-stage GMP manufacturing and commercial-stage GMP manufacturing. Several customer programmes are advancing through clinical milestones, providing visibility on potential commercial-scale manufacturing orders in the medium term. The integration of recently acquired manufacturing facilities expands capacity and capability, supporting both existing customers and the onboarding of new partnerships. Continued investment in process improvement, including Yield improvements, scale-up and adoption of suspension-based manufacturing platforms, improves cost competitiveness and supports margin expansion. New service offerings, such as fill-finish, analytical testing and regulatory support, expand the customer value proposition. Geographic diversification across the United Kingdom, France and the United States also reduces single-site dependence and supports global customer engagement.

Financial Performance

OXB has delivered improving revenue growth as the new strategic focus and capacity expansion deliver tangible results. Reported revenues have grown alongside the customer pipeline and bioprocessing Volume. Gross margins have been recovering as utilisation improves, process efficiency increases and overhead absorption strengthens. Operating losses have been narrowing as the company progresses towards sustainable profitability, with management indicating a target of high single-digit EBITDA margins in the near term and further improvement over the medium term. Cash Management remains a key focus, with the company funding ongoing investment from a combination of Operating Cash Flow and prudent Balance Sheet management. Capital-expenditure/">Capital Expenditure has been front-loaded to support capacity expansion, but is expected to moderate as the existing investment delivers returns.

Revenue visibility is supported by long-duration customer contracts, milestone payments tied to programme progression and growing commercial-scale manufacturing contributions. As customer programmes progress through the clinical development stages, the value of OXB's role typically increases, supporting price/mix improvement alongside volume growth. Multi-year master services agreements with major customers provide a foundation of contracted revenue, with additional incremental work supported by Demand for new processes, analytical methods and capacity. The financial profile is therefore expected to become progressively more visible, recurring and predictable, supporting a re-rating of the shares as the trajectory plays out.

Long-Term Industry Outlook

The long-term outlook for cell and gene therapy manufacturing is structurally attractive. Industry analysts project the global cell and gene therapy market to expand to multiple tens of billions of dollars over the next decade, with hundreds of programmes in clinical development across rare diseases, oncology, autoimmune disease, ophthalmology, neurology and other therapeutic areas. Many of these therapies rely on viral vectors as the delivery vehicle. The complexity of viral vector manufacturing, combined with the limited number of specialist providers, supports a favourable Supply-demand dynamic for established CDMOs. As more therapies progress towards regulatory approval and commercial launch, demand for commercial-scale GMP manufacturing is expected to grow particularly rapidly. OXB's positioning as one of the few global viral vector specialists with proven scalability and regulatory experience provides a strong foundation to participate in this expanding market.

Operational Capabilities and Technology

OXB's technical capabilities are a key differentiator. The LentiVector platform supports multiple cell line systems, process development from research to commercial scale and analytical methods aligned with regulatory expectations. The company is investing in suspension-based bioprocessing, which provides higher productivity and scalability than traditional adherent processes. AAV capabilities are also being expanded to address the broader gene therapy market. Analytical method development, characterisation and stability studies support customer regulatory submissions. The combination of process flexibility, regulatory experience and quality discipline provides a strong technical foundation for continued customer engagement.

Commercial and Customer Outlook

OXB's customer base now includes large pharmaceutical companies, mid-cap biotech, specialist gene therapy companies and academic institutions. Customer engagement spans early-stage process development through to commercial manufacturing. The company has been investing in business development, Customer Service, technical project management and regulatory consulting to support a more comprehensive customer experience. As customer programmes progress through the clinic, OXB benefits from rising volumes, more complex services and longer-duration contracts. The conversion of clinical-stage customers into commercial-stage customers, supported by regulatory approvals of the underlying therapies, provides a multi-year revenue runway.

Capital Structure and Investment

OXB has been managing capital allocation between continued investment in capacity, technology platforms and operational excellence. The strategic divestment of in-house therapeutic programmes has reduced cash consumption and aligned investment with the highest-returning aspect of the business. Selective acquisitions have expanded the capability set and geographic footprint. The balance sheet is being managed prudently, with funding sourced from a combination of operating cash flow, customer pre-payments and selective external capital. As cash flow improves and capacity utilisation rises, the financial profile is expected to become progressively self-sustaining.

Valuation Perspective

OXB trades on metrics that reflect a still-emerging financial profile, with valuations anchored more in revenue and capacity than in current Earnings. Comparison with broader CDMO peers suggests scope for re-rating as the company demonstrates a track record of profitable scaling, expands its customer base and continues to deliver on its strategic plan. Long-term discounted cash flow analysis incorporating conservative revenue and margin assumptions points to meaningful upside from current levels. The optionality embedded in the Long-term Growth of cell and gene therapies provides additional upside potential.

Key Risks

Risks include customer programme attrition due to clinical failures or strategic shifts; manufacturing operational risk inherent in complex Biologics processes; capacity utilisation risk if customer demand growth is slower than expected; competition from other viral vector CDMOs and from internalisation of manufacturing by large pharmaceutical companies; foreign exchange and macroeconomic exposures; and the financial cycle of small biotech customers that may be affected by capital market conditions. Continued regulatory evolution of advanced therapy manufacturing requirements introduces both opportunity and complexity.

Sustainability and Strategic Outlook

OXB's contribution to cell and gene therapy manufacturing supports the broader healthcare system's effort to deliver transformative therapies for serious diseases. The company has set sustainability targets across its operations, including emissions, energy use and waste reduction, with continued investment in modernised facilities supporting environmental performance. Workforce development, scientific collaboration and customer partnership underpin the broader stakeholder engagement framework. The combination of mission, technical capabilities and stakeholder alignment supports a credible long-term strategic outlook.

Management and Strategic Execution

Under recent Leadership, OXB has executed a clear and disciplined strategic repositioning. The decision to divest in-house therapeutic programmes and focus exclusively on viral vector CDMO services has simplified the business model, improved capital efficiency and aligned management focus with the highest-returning aspect of the business. The leadership team has been strengthened with executives experienced in CDMO operations, biopharmaceutical commercialisation and customer engagement. A renewed emphasis on operational excellence, customer service and process improvement has been driving tangible results across the manufacturing network. The board, including specialised industry experience, provides strategic oversight and ensures alignment with Shareholder interests.

The strategic execution has been supported by acquisitions that strengthened the company's global footprint. The Acquisition of manufacturing Assets in France and the United States provided immediate capacity and capability expansion, while integration efforts have been focused on standardising processes, quality systems and customer service standards across the network. The combination of organic execution and inorganic expansion provides multiple levers for value creation as the cell and gene therapy market continues to expand.

Conclusion: Why We Rate OXB a Buy

OXB is one of the few pure-play viral vector CDMOs with global manufacturing capability, deep technical expertise and a refocused strategic model. With the cell and gene therapy market expected to grow strongly over the coming decade and outsourcing demand structurally rising, OXB is well placed to capture a meaningful share of the opportunity. As the company executes on capacity expansion, customer growth and margin recovery, the financial profile is expected to inflect favourably. We therefore rate OXB a Buy. The combination of a differentiated technology platform, established customer base, expanded capacity and clear strategic focus provides a strong foundation for long-term value creation, supported by powerful tailwinds from the broader cell and gene therapy market.