Oxford BioMedica PLC

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

Rationale for Valuation – SELL at GBX 1,334.00

• OXB’s stock has yielded a stellar return of over 83% in the past year, while it is trading close to its 52-week high. Therefore, it is giving an attractive opportunity to book profit.
• The Company has a history of losses, while the cash flow from operations remained negative in FY20. The growth trajectory depends upon its ability to raise external financial resources on acceptable terms.
• From a technical standpoint, OXB’s stock price is trading in the overbought territory since it is trading close to the upper standard deviation of the Bollinger Bands, while the momentum oscillator 14-day RSI (74.40) reiterates the overstretched stance.
• Over the past five years, profitability margins (operating margin, EBITDA margin and net margin) have remained negative, while the industry median is positive.

Key Risks

• 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 resurgence of the new variant of Covid-19 cases.

Recent News

Director Change: On 27 May 2021, Dr Andrew Heath retired from the Board of OXB as a Non-Executive Director.

Financial Guidance: On 18 May 2021, AstraZeneca committed to increasing the number of batches required from the OXB in H2 FY21, the Group raised the revenue guidance from over £50 million to £100 million in FY21.

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

(Source: Company Website)

• During FY20, total revenues surged by 37% year-on-year, 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 on 31 December 2020 and £65.9 million at 31 March 2021.
• During the year, it also made partnerships/agreement with AstraZeneca, Novartis, Juno Therapeutics/Bristol Myers Squibb, among others.

One Year Share Price Chart

 (Analysis done by Kalkine Group) 

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative)

Conclusion

Despite the significant top-line growth, bottom-line items remained in the negative zone in FY20. Moreover, inflationary pressure, rising Delta variant Covid-19 cases, and other macroeconomic instabilities can keep the trading environment challenging. As we have achieved our short-term upside target, it is better to liquidate at the current level and will wait for a fresh technical level or growth catalyst to re-evaluate our stance in the short term. Presently, the stock price is trading in the overbought territory and can lead to share price consolidation amid macroeconomic uncertainties. We will re-examine the upcoming growth catalyst at a fresh technical level, and then capital plus gains can be reinvested for a better return. The stock made a 52-week high and low of GBX 1,348.00 and GBX 700.37, respectively.

Based on an exceptional yearly gain, macroeconomic instabilities, unfavourable valuation conducted above, we have given an “SELL” stance on Oxford BioMedica PLC at the current price of GBX 1,334.00 (as on 29 June 2021, at 7:05 AM GMT), while we look forward to reviewing that how Company capitalize on the upcoming market opportunities amid uncertainties.  

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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