Oxford BioMedica Plc

Oxford BioMedica Plc (LON: OXB) is a UK-based biopharmaceutical company, which is engaged in the research, development and bioprocessing services of gene and cell therapy. It is listed on the FTSE 250 index.

On 27 May 2021, the Company will hold its Annual General Meeting.

Investment Highlights – Hold at GBX 1,068.00

• The Company expects that revenues for the Group will grow strongly in 2021.
• The Company provides a positive outlook for 2021, supported by new major LentiVector® partnerships and manufacturing the Oxford AstraZeneca vaccine in a new vector type.
• On a trailing 12 months, EV/Sales multiple of the OXB is currently lower than the corresponding multiple of the Biotechnology & Medical Research industry. It reflects, shares are undervalued against peers.
• The debt/equity ratio recorded by the Company in the past two years was considerably below the industry median. In FY20, the debt/equity ratio was 0.12x.
• Capex for 2021 will be above 2020 levels due to the expansion being undertaken at both Windrush Court and Windrush Innovation Centre.
• From a technical standpoint, 200-day SMA (GBX 992.81) supports an upside potential.

Key Risks

• The Company is exposed to significant financial and operational risk due to the global pandemic.
• There is a liquidity risk as the company has been incurring losses since its inception.
• Also, the adverse US federal income tax regimes and fluctuating exchange rates can affect the financial condition further.
• Moreover, there is an emerging risk to preclinical studies and clinical trials with the outbreak of Covid-19.

Recent News

On 18 May 2021, the Company stated that it upgraded financial guidance for supply agreement with AstraZeneca (AZN) for manufacturing of Covid-19 Vaccine.

Financial Highlights (for the year ended 31 December 2020 (FY20), as on 15 April 2021)

(Source: Company Website)

• Total revenues surged by 37% YoY, with double-digit growth in Bioprocessing and commercial development activities.
• Operating EBITDA profit increased to £7.3 million as compared with the previous year (FY19: loss £5.2 million).
• Capital expenditure declined to £13.4 million against the prior year, while its cash balance was £46.7 million at 31 December 2020 and £65.9 million at 31 March 2021.
• It made partnerships/agreement with AstraZeneca, Novartis, Juno Therapeutics/Bristol Myers Squibb and others.

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters)                                                                                                             

Conclusion

In 2021, the Company expects revenues to increase, with growth in bioprocessing and commercial development activities. Further, it expects total cumulative revenues from the Oxford AstraZeneca COVID-19 vaccine and the Oxbox manufacturing facilities to be in excess of £100 million by the end of 2021. For 2021, the operating EBITDA is expected to be increased from 2020, while it also increased the R&D spend. Looking ahead, the Company will increase the number of partners programmes. Meanwhile, the Company achieved good growth in 2020, with several new partnerships and gained entry to the FTSE 250. Overall, the Company seems to be well-positioned to maximise the opportunities ahead. The stock made a 52-week low and high of GBX 700.37 and GBX 1,126.53, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” recommendation for Oxford BioMedica at the current price of GBX 1,068.00 (as on 18 May 2021, at 8:05 AM GMT) and will recommend fresh buying at the right time.

Open Orphan Plc

Open Orphan Plc (LON: ORPH) is a growing specialist CRO Pharmaceuticals Services Company. It is also the world leader in the testing of vaccines and antivirals using human challenge study models.

Investment Highlights – Hold at GBX 38.21

• As per valuation metrics, EV/Sales multiple of the ORPH is currently lower as compared to the corresponding multiple of the Biotechnology & Medical Research industry.
• In the last one year, the Company has delivered a sparkling return of ~187.88%, which was higher as compared to the FTSE AIM All-Share Index.
• Open Orphan has completed the acquisition with Venn and hVIVO and turned profitable in Q4 FY20.
• From a technical standpoint, 200-day SMA (GBX 25.82) supports an upside potential.

Key Risks

• The growth trajectory of the business could be impacted due to existing as well as emerging risks and uncertainties. Also, the increased competition can lead to the market share decline and income short fall.
• Moreover, the Brexit implications are causing higher costs, customer delays, longer lead times for customers, and longer product approvals.
• Adjacently, there are some operational risks arising from changing regulatory policies, loss of sensitive data through cyberattacks, and increased supply cost due to the Covid-19 outbreak.

Recent News

On 10 May 2021, the Company stated that hVIVO (a subsidiary of ORPH) had signed a contract with Imperial College London to develop a challenge agent based on new COVID-19 variants. The contract is worth around £3 million.

Financial Highlights (for the six months ended 30 June 2020 (H1 FY20), as on 30 September 2020)

(Source: Company Website)

• The Company had signed a contract with a global leader in vaccine development.
• At half year-end, the cash and cash equivalents were £14.7 million, with a fundraise on 31 January 2020 of £5.3 million at 6.1 pence per share (before expenses) and fundraise on 22 May 2020 of £12.6 million at 11p per share (before expenses).
• In January 2020, the Company completed the acquisition with hVIVO Plc, for a consideration of around £13 million in equity.
• Post completion of the merger, the Company expects to generate annualized cost efficiencies of £10.1 million by the end of 2020.

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters) 

Conclusion

In the last four months of 2021, the Company won several contracts. The Company has new projects at an advanced stage of negotiation and a strong pipeline of contracted work. It targets growth with strong operating cash flow in H2 FY20 and is on target to be operationally profitable in the fourth quarter of 2020. The Company stated that MHRA had approved to begin recruiting volunteers for the clinical trial.

The Company witnessed that all the elements of the Open Orphan business are delivering substantial revenues and renewal of existing long-term customer contracts. Overall, it is a fast-growing business which should be profitable soon as it has reduced overheads and rightsized the management team. Moreover, the opportunities lying with Covid-19 and respiratory diseases shall support the growth in the short-term. The stock made a 52-week low and high of GBX 11.00 and GBX 48.00, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance on Open Orphan at the current price of GBX 38.21 (as on 18 May 2021 at 8:02 AM GMT) and will recommend fresh buying at the right time. 

*Dividend Yield may vary as per the stock price movement.

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