Oxford Biomedica Share Discussion Threads

[takeiteasy] 12/3/2024 18:38

A bit like the ref at Anfield this week with the kick on the chest incident - but so true Harry.

If everyone plays safe you get the most bland possible reporting and analysis - but I do respect the logic of our house broker and have aligned the portfolio appropriately based on this revised assessment :)

There seem so few genuine small cap recovery plays the news will get out there shortly I suspect...dyor etc

[harry s truman] 12/3/2024 18:28

I'm sure I remember someone here in the distant past (maybe Dom) lamenting that when we all bought yesterday's news each morning then the quality British newspapers were the best in the world. Conversely, in our world of instant news 24/7, then those same names are just websites where an ad revenue against clicks on a page demands a constant stream of quickly prepared stories. Maybe there are still old hacks somewhere and an editor who will give them a few days on a story, but I suspect not many.

OXB told us a week ago today that they were revising their annual growth forecast up from more than 30% to more than 35%.

They also told us that this year revenue will be £126 million to £134 million.

So it takes a minute to work out that 2025 will be £170 million to £181 million.

Why not do that and type OXB on track for record sales next year, smashing the exceptional covid years? And the answer is of course because they don't want to stick their head over the parapet.

[small crow] 12/3/2024 17:17

Serum Institute News;

[cousinit] 12/3/2024 16:27

I'm not sure how they put together Tempus, but they decided to link the Board change back to the forecast announcement that was almost a week old.

Someone from RBC giving the Times a nudge maybe?

A nice write up ending with a fence sitting hold.

[connello] 12/3/2024 12:43

Many Thanks Harry.

Looking forward to OXB re-entering the FT250.

[brucie5] 12/3/2024 11:36

Redwing, would be interested to hear your target with investment case - or otherwise! This doesn't need to be a 14+ share price to make it attractive at current level. But if it does, I'd certainly like to know the other shares you're holding!

I'm holding on for £4, fwiw; which will make me more than happy.
;)

[dominiccummings] 12/3/2024 11:15

Fair comment. I too have commented that investors don't like change of market, absorption of companies taken over, completely new management.
We 'old hands' know better, but 'outsiders' don't.

[redwing1] 12/3/2024 11:02

Hi Harry. I think everyone appreciates your detailed reporting on this stock (much better than many contributors to ADVFN). I think that you make a very plausible case for a long-term rerating of OXB, but I just wanted to put both sides of the argument.

One thing that many investors do is to irrationally anchor to historic prices. I don't think comparisons with the £14+ that this reached are valid at all. This business has not only lost its covid business, it has also pivoted away from its other core area (even if some of that still remains) to become a CDMO. The price may well rise but that will be determined by how successful is as a CDMO.

[harry s truman] 12/3/2024 10:44

Tempus in The Times today

Oxford Biomedica

As part of Oxford Biomedica’s shift to become a “pure play” contract development and manufacturing organisation in the cell and gene therapy market, it has streamlined its board (Alex Ralph writes).

The appointment of Peter Soelkner, the managing director of Vetter Pharma, as a non-executive director (he will join from the end of the week) and the departures of Catherine Moukheibir and Michael Hayden, who will stand down at June’s annual general meeting, are designed to bolster Oxford Biomedica’s boardroom expertise.

The strategy, which includes ending the company’s hybrid business model and therefore leaving its residual product development business, is being led by Frank Mathias, who became chief executive last March. At the company’s half-year results in September, Mathias, 61, moved to reset the business. He rebased the finances, cut forecasts for 2023, outlined medium-term growth predictions, renewed a cost-cutting drive and announced plans to expand the business in the European Union through the acquisition of ABL Europe from Institut Mérieux in France for €15 million. All of which is designed to revive a company, spun out of the University of Oxford, whose balance sheet and share price were temporarily lifted during the Covid-19 pandemic by its success manufacturing the AstraZeneca-Oxford vaccine.

Mathias is seeking to rebuild investors’ confidence after downgrades to forecasts and amid scepticism from some in the City about excess capacity in the market and limited commercial traction for most gene therapies. Underlining the challenge, shares in Oxford Biomedica have halved since Mathias took charge.

An encouraging full-year trading update last Tuesday, including for this year and its medium-term outlook, provided some relief, paring losses in the stock. The value of client orders signed during the year rose by 50 per cent to £131 million year-on-year, excluding Covid vaccine manufacturing, and the company said it expected operating profit margins of more than 20 per cent by the end of 2026 and to be profitable in 2025.

Advice? Hold

Why? In early stages of a long-term shift towards becoming a specialist CDMO

[dominiccummings] 11/3/2024 21:11

Don't work too hard on it Mr President Sir. It behoves that good fortune for OXB is clearly in store when the Redwings and the like migrate to this thread!

[harry s truman] 11/3/2024 21:03

We've done the cash position a lot Brucie. £103.7m cash - c£40m loan - c£20m put option + c£17m from IM for new shares + whatever else comes our way this year. Nett cash is brilliant assuming that OXB hit their guidance of rough breakeven (or better).

Redwing,

I type what I think as an OXB watcher and usually caveat that somewhere. It's an opinion from a non-expert non-city type.

Maybe you know story well, apologies for the quick repeat if you do, but OXB were doing well before covid. CAR-T and a lot of other good stuff had lined up for them. Then came covid and clinical trials stopped (apart from covid related) and stuffed many of OXB's customers. We got vaccine work but when that ended early for political reasons a lot of our pre-pandemic work hadn't come back and we had 2 years where but for the huge cash balance we would have been stuffed too.

Read the recent releases and OXB's current situation is that not only is the work back now, but Seb's sales team is winning such an amount of work that we are already surpassing all pre-covid years and of course we wouldn't be sending excess work to America if Oxford wasn't at capacity.

Even on RBC's current assessment of OXB's public targets, so basically RBC being conservative about OXB's "achievable" guidance (i.e. effectively 2 cautious discounts applied there), their future is very bright (740p target this year).

Listen to Stuart in the webcasts last year about the guidance where he says 3 year revenue CAGR better than 30%, EBITDA margin better than 20%. But he stresses that these are very achievable targets which they expect to better.

What did he say in the update last week? Three-year revenue CAGR increased to more than 35%, up from prior guidance of more than 30%.

Expect to better 30% becomes more than 35% in six months?

Just my opinion here but based upon the above I honestly believe that OXB are in a position now where they are looking at the amount of work Seb's team is winning and thinking "this is brilliant, but after the last 2 years if we give projected guidance for the full story straight away then they'll never believe us".

So they are dripping it out in incremental stages (as shown above) and people like yourself are still thinking that it's too good to be true - which is fair enough.

Stuart says roughly breakeven for OXB this year, but there are of course many things lurking which could make that guidance redundant too.

Just another bit about the new house broker. RBC in their note last week have that revised target of 740p for this year, and of course you perhaps already know their 3 year fair value of £18, with both actually being discounted figures to reflect RBCs caution that OXB can achieve what they have guided for this year. RBC say that they will revise upwards as we progress through the year if and when OXB demonstrate that they are hitting their targets.

Their upside scenario for this year is significantly more than 740p and the upside target simply represents OXB delivering on everything the guidance in their public plan targets. OXB have said this is very achievable and they expect to better it.

I'm actually much more optimistic about the future than I might come across (yes, really). I also believe that OXB after the last interim results that, without the optimistic future plan + ABL deal, would have been simply been seen as missed previous guidance, are now giving guidance which is definitely not going to become another missed target - i.e. it's expectation over hope.

But what if some of the big hopes come in? I guess that's a different topic.

At the moment RBC are showing professional conservatism and I like that. I like it even more that their idea of conservatism is a target price of 740p this year.

In the absence of any other news, the presentation on the 29th April should show another 2 months of progress.

[brucie5] 11/3/2024 20:43

Redwing111 Mar '24 - 18:41 - 7222 of 7225
I knew there was a reason I shouldn't have piled in.
;)
Redwing, important to have peeps like you on board, so ticked you up.
Would be good to clarify the cash situation and thereafter the rate of likely burn through 25 to 26.
My remedial Maths teacher at school used to hold up his fingers and begin with: "how many do you count?"

Any chance, Mr. President?

[redwing1] 11/3/2024 20:03

Hi philh75 - are you sure? Look at their interim results statement and you will see that 'cash' was £121 in August but 'net cash' only £83m. The statement on 5th March only mentioned 'cash' of £103.7m.

[steeplejack] 11/3/2024 19:25

Price to sales ratios strike me as a pretty safe guide to valuation.Take for example the CDMO Catalent Inc which is currently subject to a bid from Novo Holdings.The company recently announced a loss itemised below but that hasn't put off Novo who incidentally stated last week that they would look to do further deals with contract manufacturers if the Catalent purchase didn't complete.It would be difficult indeed to make CDMO comparatives on earnings so i go with the simple price to sales methodology albeit i see your point Redwing."Q2'24 net loss of $(204) million compared to $81 million of net income in Q2'23 due primarily to a decline in COVID-related demand."Catalent Inc

[philh75] 11/3/2024 18:50

The cash position at 31 December 2023 was £103.7 million.

Liquidity update post ABL Europe acquisition

The cash position at 31 December 2023 was £103.7 million. This excludes the €10 million cash funding in ABL Europe provided by Institut Mérieux upon completion of the Transaction on 29 January 2024. Post completion of the Transaction, Institut Mérieux SA became a 6.2% shareholder. Institut Mérieux will increase their shareholding upon the issuance of new shares pursuant to the subscription agreed as part of the Transaction, which was cash neutral for OXB.

[redwing1] 11/3/2024 18:41

Hang on just a minute, Harry. We are talking about a business that is going to make an EBITDA loss of £23m in the 2nd half for a whopping £56m over the full year. Yes, they are taking out £30m of costs but there will still be losses in 2024 and only a small EBITDA profit in 2025. So trying to put them on a similar multiple to other CDMOs before they are making anywhere near the normal industry margins is premature.

Net cash was only £83m in August and presumably quite a lot less now, so the cash cushion looks like being pretty tight by the time they are generating meaningful cashlow from operations. Overall an interesting growth story but definitely not a low risk one.

[steeplejack] 11/3/2024 14:23

This is not a normal market and we are in some kind of recession / depression following the shutdown of our economy for covidHere in the UK perhaps but not in the USA where the S&P 500 has been hitting new highs of late.IM have been afforded an opportunity in good part due to disaffection with UK equites which has emphasised the relative undervaluation of OXB to peers listed on overseas exchanges.Unless the anomaly narrows then OXB will more than likely be taken over or go private.Spirent is currently subject to a bid from the US,Dechra has recently gone private,pointers of sorts.

[harry s truman] 11/3/2024 13:43

With no underlying problems then a good rule of thumb for any CDMO market cap is 5.5x sales.

From the trading statement - "Projected FY2024 revenue range of £126 million to £134 million".

So £693m to £737m market cap which is as close as doesn't matter to 693p to 737p per share this year.

3 things to remember:-

1) This is not a normal market and we are in some kind of recession / depression following the shutdown of our economy for covid.

2) That is an average multiple for all CDMO, including those who make antibiotics or paracetamol. A CGT CDMO should be rated higher (potentially branching out into bulk vaccines doesn't really change that).

3) OXB have included no exceptional events in their guidance there. A partner drug approved, a huge new partner deal for us (for example) and yet another update to guidance is required.

We are still priced / thought of as a loss making / cash burning covid stock in post-covid times. OXB still haven't got the message fully across yet. If it was well known and universally accepted then we wouldn't be having this dissuasion.

[steeplejack] 11/3/2024 13:29

There are very limited clear cut opportunities in the UK equity market but this is one of them.A high of around 16 quid was too high as a price of a couple of quid is too low.Split the difference and you get a long term target of 9 pounds.In Institut Merieux i trust.

[brucie5] 11/3/2024 12:10

Well, once bitten, twice as daft. I've bought back in this morning with the result that OXB is now my largest portfolio holding, greater than which I'm not permitted to go. I can't see the flaws in Harry's argument, though I can see that he failed to cut his losses at signally higher levels, so there is certainly a huge amount of confirmation bias, as he readily admits. But I think this board is extraordinarily lucky to have him as he probably knows more than most analysts and certainly a huge amount more than this one. ;)
My optimism also now carries its own confirmation bias, of course; so NAI. But the things i like come in the following order;
1. the cash balance vs. runway to BE. Allowing me to sleep easy at night.
2. the story: as far as I can understand it. This is now, as Harry insists, a manufacturing company / CDMO for vaccines; and there's clearly lots of interest in this industry from corporate behemoths.
3. The large behemoths: when huge companies become interested in a much, much smaller company for the service/facility/technology it provides them, there is an obvious outer.
4. IM's interest: buying shares at £4 for up to 10% of the company gives me a first target for the share price
5. The chart. Having been watching for some time, including some poorly timed trades, I saw this morning's tick down as an opportunity to recommence and enlarge my involvement. If a share falls to 25% of its peak price while maintaining its original promise, and with su8ffficient cash to execute, I'm usually intrigued. This was my interest at £4, which cost me a small amount of learning on an early stop loss. Of course the chart is not a science, but I see levels as significant pointers to support/resistance. £1 is my favourite; but £2 can also be instructive in my experience. Sheer tea leaves, I know. But if my sense is correct, this will shortly confirm the new base at £2 and start rising.

My hopeful expectation thereafter is to see this now move up on good news to cross the 200sma at £3. Then it may/might/should come on more radar screens as a momentum play even before we get to IM's £4. RCB's short term target is of course, still higher; as is Harry's view of what revenue multiple (5.5) implies about a proper valuation. This I found very helpful btw - so thanks. And then who knows; if it gets back into the 250, others can start buying.

Of course and as you can readily see, I really know very little about this, though I do read what I can. Let's see what happens.
:)

[seanje] 11/3/2024 11:35

They couldnt afford his salary

[mr_mike1] 11/3/2024 11:25

I think they are reserving it for Harry. With his extraordinary insight into the company they could do a lot worse.

[harry s truman] 11/3/2024 10:04

Countering that Phil, I'd say that non-exec roles have nowhere near the same meaning as people coming or going from the exec board.

I think the guess we can make from today's story is that 2 out and 1 in is plainly (imho) making a space for someone from Institut Merieux who will be announced when the time is right.

Wearing my picky, pedantic and nit-picking hat (a tricornered hat) I think it's odd to refer to a packer or fill/finish outfit as a CDMO. That would normally be a CMO and of course OXB's management would know that. So either that company does something else upstream of F&F or OXB didn't want to confuse matters and so stuck with the same acronym as OXB's function.