Kymriah approved - royalties to OXB assured

Oxford BioMedica 9 January 2017 Update
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Oxford BioMedica

Kymriah approved - royalties to OXB assured

CTL019 update

Pharma & biotech

1 September 2017

Price

9.86p

Market cap

£306m

Net debt (£m) at end December 2016

19.1

Shares in issue

3,095.2m

Free float

83%

Code

OXB

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

14.7

97.2

134.8

Rel (local)

13.9

99.3

113.1

52-week high/low

10.75p

3p

Business description

Oxford BioMedica’s (OXB) lentiviral vector technology is wide-ranging and underpins the company’s strategy, most notably in relation to revenue received from Novartis for the supply of lentiviral vector. OXB’s internal focus remains on pipeline assets OXB-102, OXB-202 and OXB-302.

Next events

CTL019 approved in B-ALL in EU

Q417/Q118

CTL019 approved in DLBCL

Q417

Further partnership deals

2017/18

Licensing deals/spin-outs

2017/18

Analysts

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Dr Susie Jana

+44 (0)20 3077 5700

Oxford BioMedica is a research client of Edison Investment Research Limited

Kymriah (tisagenlecleucel/CTL019), for which Oxford BioMedica (OXB) provides the key lentiviral vector component, has been approved by the FDA for the treatment of patients up to 25 years of age with refractory/relapsed (second or later relapse) B-cell acute lymphoblastic leukaemia (ALL). Novartis has announced that the price for the one-off treatment will be $475k (c £370k), an increase over our previous assumption of £300k. We have updated our model to reflect the higher price, which materially increases the associated royalties we expect OXB to receive. Our updated valuation is £284m (9.2p/share).

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/15

15.9

(16.6)

(0.49)

0.0

N/A

N/A

12/16

27.8

(20.0)

(0.59)

0.0

N/A

N/A

12/17e

40.4

(5.4)

(0.04)

0.0

N/A

N/A

12/18e

47.2

2.9

0.22

0.0

44.8

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

History is made as the first CAR-T is approved

Kymriah is the first therapy approved that utilises gene transfer and represents a major step forward in personalised therapies for cancer. Novartis has agreed an outcome-based arrangement with the US Centres for Medicare & Medicaid Services, where Novartis will not charge for patients who do not respond in the first month following treatment. We expect zero competition in the near term for Kymriah in this exact patient population as the closest competitor, Kite Pharma’s (Gilead acquisition ongoing) KTE-C19 (axicabtagene ciloleucel), is 12-24 months behind Novartis in paediatric ALL. OXB is guaranteed to receive $90m in revenue from Novartis (agreement signed in June) over the next three years in addition to milestones (from the original 2014 agreement) and royalties (we assume 2%).

Long-term efficacy and safety to be monitored

An impressive 83% (n=52/63, 95% CI: 71-91%) of patients were in remission at three months (all patients had no minimal residual disease), which meant approval was likely. However, data are still in their infancy and long-term remission rates and safety remain unclear. The FDA has approved a Risk Evaluation and Mitigation Strategy (REMS) for Kymriah, which aims to inform clinicians about the risks associated with the product. Novartis will follow patients for 15 years to monitor a range of factors, notably efficacy, adverse events and secondary malignancies. To coincide with Kymriah approval, the FDA approved Roche’s Actemra (tocilizumab) for the treatment of CAR-T-induced cytokine release syndrome.

Valuation: CTL019 driving near-term value

Our increased valuation of OXB is £284m (9.2p/share) vs £252m (8.15p/share) previously. The source of uplift relates to the higher pricing of Kymriah versus our previous assumption. Notably, this has increased our expected royalty-related revenues in 2017/18 and 2019. We note that the royalty rate (assumed at 2%) that OXB receives from Novartis is unknown and has a material effect on our valuation. We keep other valuation assumptions unchanged.

Exhibit 1: Financial summary

£'000s

2015

2016

2017e

2018e

2019e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

15,909

27,776

40,400

47,242

52,477

Cost of Sales

(5,839)

(11,835)

(15,426)

(16,593)

(18,268)

Gross Profit

10,070

15,941

24,975

30,649

34,209

R&D

(20,274)

(24,299)

(21,500)

(18,500)

(17,000)

Other operating income

2,862

3,002

1,000

1,000

1,000

EBITDA

 

 

(12,456)

(7,638)

2,445

10,470

15,179

Depreciation

(1,264)

(3,340)

(3,719)

(3,365)

(3,056)

Operating profit (before amort. and except).

(13,720)

(10,978)

(1,274)

7,105

12,122

Amortisation

(363)

(335)

(268)

(214)

(171)

Exceptionals

0

0

0

0

0

Operating profit

 

 

(14,083)

(11,313)

(1,542)

6,892

11,952

Net Interest

(2,899)

(8,994)

(4,081)

(4,227)

(4,379)

Other

0

0

0

0

0

Profit Before Tax (norm)

 

 

(16,619)

(19,972)

(5,355)

2,878

7,743

Profit Before Tax (reported)

 

 

(16,982)

(20,307)

(5,623)

2,664

7,573

Tax

3,963

3,666

4,000

4,000

4,000

Profit After Tax (norm)

(12,656)

(16,306)

(1,355)

6,878

11,743

Profit After Tax (reported)

(13,019)

(16,641)

(1,623)

6,664

11,573

Average Number of Shares Outstanding (m)

2,574

2,778

3,095

3,095

3,095

EPS - normalised (p)

 

 

(0.49)

(0.59)

(0.04)

0.22

0.38

EPS - reported (p)

 

 

(0.51)

(0.60)

(0.05)

0.22

0.37

Dividend per share (p)

 

 

0.00

0.00

0.00

0.00

0.00

Gross Margin (%)

63.3%

57.4%

61.8%

64.9%

65.2%

EBITDA Margin (%)

(78.3%)

(27.5%)

6.1%

22.2%

28.9%

Operating Margin (before GW and except) (%)

(86.2%)

(39.5%)

(3.2%)

15.0%

23.1%

BALANCE SHEET

Fixed Assets

 

 

26,139

29,501

26,514

23,936

21,709

Intangible Assets

0

657

657

657

657

Intangible Assets

1,743

1,330

1,062

849

678

Tangible Assets

24,396

27,514

24,795

22,430

20,374

Current Assets

 

 

25,712

27,441

34,596

44,775

59,674

Stocks

2,706

2,202

2,870

3,087

3,399

Debtors

10,930

6,904

2,169

5,772

6,137

Cash

9,355

15,335

26,223

32,582

46,805

Other

2,721

3,000

3,334

3,334

3,334

Current Liabilities

 

 

(13,169)

(9,316)

(13,879)

(13,542)

(13,323)

Creditors

(9,286)

(6,003)

(10,566)

(10,229)

(10,010)

Provisions

(838)

0

0

0

0

Deferred income

(3,045)

(3,313)

(3,313)

(3,313)

(3,313)

Long Term Liabilities

 

 

(27,788)

(35,011)

(36,240)

(37,513)

(38,831)

Long term borrowings

(27,255)

(34,389)

(35,618)

(36,891)

(38,209)

Other long term liabilities

(533)

(622)

(622)

(622)

(622)

Net Assets

 

 

10,894

12,615

10,992

17,656

29,229

CASH FLOW

Operating Cash Flow

 

 

(14,871)

(5,979)

11,074

6,313

14,284

Net Interest

(1,494)

(3,258)

(2,867)

(2,970)

(3,076)

Tax

3,247

4,131

3,666

4,000

4,000

Capex

(16,716)

(6,458)

(1,000)

(1,000)

(1,000)

Acquisitions/disposals

0

0

0

0

0

Financing

144

17,497

0

0

0

Dividends

0

0

0

0

0

Other

38

47

15

15

15

Net Cash Flow

(29,652)

5,980

10,888

6,359

14,223

Opening net debt/(cash)

 

 

(13,195)

17,900

19,054

9,395

4,309

HP finance leases initiated

0

0

0

0

0

Other

(1,443)

(7,134)

(1,229)

(1,273)

(1,318)

Closing net debt/(cash)

 

 

17,900

19,054

9,395

4,309

(8,596)

Source: Oxford BioMedica accounts, Edison Research Investment

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Oxford BioMedica and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Sydney +61 (0)2 8249 8342

Level 12, Office 1205

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Oxford BioMedica and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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