REG - Oxford Biomedica PLC - Interim Results
15/09/2022 07:00
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RNS Number : 5705Z Oxford Biomedica PLC 15 September 2022
OXFORD BIOMEDICA PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2022
SIGNIFICANT STRATEGIC AND OPERATIONAL PROGRESS TOWARDS BECOMING A GLOBAL VIRAL
VECTOR LEADER
Oxford, UK - 15 September 2022: Oxford Biomedica plc ("Oxford Biomedica" or
"the Group") (LSE: OXB), a leading gene and cell therapy group, today
announces interim results for the six months ended 30 June 2022.
Roch Doliveux, Oxford Biomedica's Chair and Interim Chief Executive Officer,
said:
"We have made significant strategic and operational progress towards our goal
of becoming a global viral vector leader. In the first half of 2022 we
achieved double digit revenue growth in our core business and since the start
of the year have signed numerous new or expanded partnership deals, including
a new AAV deal, resulting in an over 70% increase in the number of customers
with whom we work. In addition, we executed the transformational launch of
Oxford Biomedica Solutions which brings innovative AAV capabilities, further
capacity and a significant platform in the US, delivering on our strategic
objective to become vector agnostic and provide world-leading innovative
process development and manufacturing services to our clients. With a strong
cash position, a robust and growing business and entry into the fast-growing
AAV market, Oxford Biomedica is in an excellent position to achieve long-term
future profitable growth as a leading partner of choice to deliver life-saving
cell and gene therapies to patients."
H1 2022 FINANCIAL HIGHLIGHTS
- Double digit revenue growth in the core business (excluding COVID-19
vaccine manufacturing) compared to H1 2021 offset by the decrease in COVID-19
vaccine manufacturing; total revenue decreased by 21% to £64.0 million (H1
2021: £81.3 million)
- Bioprocessing and commercial development revenues decreased by 24% to
£57.3 million (H1 2021: £75.6 million) largely driven by a reduction in
COVID-19 vaccine manufacturing revenues but partly offset by an increase in
revenues from lentiviral vector and AAV commercial development and
manufacturing activities
- Licences, milestones & royalties were £6.7 million (H1 2021:
£5.7 million), the increase of 18% resulting from licence fees from new
partner programmes
- The launch of Oxford Biomedica Solutions, enabling entry into the
fast-growing AAV market whilst also establishing a key strategic presence in
the US, including one-off acquisition-related costs, drove an increase in
operating expenses to £56.2 million (H1 2021: £23.6 million). Active cost
control initiatives were initiated to reduce the Group's operating cost base
as the COVID-19 pandemic continues to ease
- Operating EBITDA(1) loss and operating loss of £5.8 million and £19.2
million respectively (H1 2021 EBITDA(1) profit and operating profit of £27.1
million and £19.7 million respectively); this included one-off
acquisition-related due diligence costs of £5.1 million relating to the
transaction with Homology Medicines to establish Oxford Biomedica Solutions
- Cash used in operations was £24.5 million compared to £22.2 million
generated in H1 2021
- The Group's capital expenditure of £6.0 million (H1 2021: £3.5 million)
consisted mainly of purchases of equipment required for manufacturing and
laboratory facilities
- Cash at 30 June 2022 was £118.5 million and £115.8 million at 31 August
2022; net cash at 30 June 2022 was £50.1 million and £42.1 million at 31
August 2022
OTHER RECENT DEVELOPMENTS AND OUTLOOK
- The Group is in the process of part-repaying and refinancing the $85
million Oaktree loan facility taken out in March 2022 and a process is
underway for the sale and leaseback of the Group's Windrush Court facility in
Oxford
- The Group expects similar levels of revenues in the second half of 2022
as those achieved in the first half of 2022 and is expecting to deliver
broadly break-even Operating EBITDA for the second half of the year
(1)Operating EBITDA (Earnings Before Net Finance Costs, Tax, Depreciation,
Amortisation, fair value adjustments of assets at fair value through profit
and loss, and Share Based Payments) is a non-GAAP measure often used as a
surrogate for operational cash flow as it excludes from operating profit or
loss all non-cash items, including the charge for share options. A
reconciliation to GAAP measures is provided on page 12.
OPERATIONAL HIGHLIGHTS (including post-period events)
- Entered into fast-growing AAV market through a transformational deal with
Homology Medicines, completed in March 2022, to establish Oxford Biomedica
Solutions LLC ("Oxford Biomedica Solutions"), a high-performing full-scope
scope AAV manufacturing and innovation business near Boston, US; new AAV
partnership announced in September
- Expanded customer base by more than 70%, currently working on more
than 20 programmes, with a robust new business pipeline across all key vector
types
- Amended and expanded existing License and Clinical Supply Agreement with
Juno Therapeutics ("Juno"), a wholly-owned subsidiary of Bristol Myers Squibb
Company, to include two new viral vector programmes
- Continued strong relationship with Novartis with Kymriah(®)
available in more than 400 qualified treatment centres in 30 countries having
coverage for at least one indication, and expansion into a third indication
- Signed a new three-year Master Services and Development Agreement with
AstraZeneca to facilitate potential future manufacturing opportunities for the
AstraZeneca COVID-19 vaccine
- Signed four new US-based customer agreements with Cabaletta Bio
("Cabaletta"), with an undisclosed private biotechnology company advancing a
new generation of adoptive cell therapies, with an undisclosed late-stage cell
and gene therapy company, and with an undisclosed new partner for Oxford
Biomedica Solutions' AAV platform
- Continued to strengthen the Board with the appointment of Namrata Patel
as an Independent Non-Executive Director. John Dawson stepped down as CEO,
with Chair Roch Doliveux assuming the role of Interim CEO in January 2022. The
formal process to appoint a successor is progressing well
Analyst briefing
Management will be hosting a virtual briefing and Q&A session for analysts
at 13:00 BST / 8:00 EST today, 15 September. The presentation will be
available on the Group's website at www.oxb.com (http://www.oxb.com)
A live webcast of the presentation will be available via this link
(https://stream.brrmedia.co.uk/broadcast/62f38d292c785a4107c393e2) .
If you would like to dial-in to the call and ask a question during the live
Q&A, please email Oxfordbiomedica@consilium-comms.com
(mailto:Oxfordbiomedica@consilium-comms.com)
Notes
Unless otherwise defined, terms used in this announcement shall have the same
meaning as those used in the Annual report and accounts.
Enquiries:
Oxford Biomedica plc
T: +44 (0)1865 783 000/ E: ir@oxb.com
Stuart Paynter, Chief Financial Officer
Sophia Bolhassan, VP, Corporate Affairs and IR
Consilium Strategic Communications
T: +44 (0)20 3709 5700
Mary-Jane Elliott
Matthew Cole
Peel Hunt (Joint Corporate
Brokers):
T: +44 (0)20 7418 8900
James Steel
Dr. Christopher Golden
JP Morgan (Joint Corporate
Brokers):
T: +44 (0)207 1347329
James Mitford
Gautham Baliga
About Oxford Biomedica
Oxford Biomedica (LSE:OXB) is an innovative leading viral vector specialist
focused on delivering life changing therapies to patients.
Oxford Biomedica plc and its subsidiaries (the Group) work across key viral
vector delivery systems including those based on lentivirus, adeno-associated
virus (AAV) and adenovirus, providing innovative solutions to cell and gene
therapy biotechnology and biopharma companies for their process development,
analytical development and manufacturing needs. Oxford Biomedica has built a
sector leading lentiviral vector delivery system, LentiVector® platform, and
is working on programmes from pre-clinical to commercial stage across a range
of therapeutic areas with global partners.
Oxford Biomedica employs more than 900 people, is based across several
locations and headquartered in Oxfordshire, UK. In 2022, the Group established
Oxford Biomedica Solutions, a US based subsidiary AAV manufacturing and
innovation business, based near Boston, US.
Further information is available at www.oxb.com.
OVERVIEW
Oxford Biomedica is a leading viral vector specialist focussed on delivering
life-changing therapies to patients. The Group applies its innovative process
development and manufacturing capabilities, world leading expertise and
platform technology to develop and manufacture commercially scalable products.
The Group is working on partner programmes for severe diseases ranging from
pre-clinical to commercial across a range of therapeutic areas, including
oncology, haematology, immunology, respiratory and ophthalmology.
During the first half of the year, the Group delivered on its strategy of
becoming an innovative global viral vector leader, advancing into AAV, whilst
diversifying and growing its global customer base. The Group's
transformational deal with Homology Medicines in January to establish Oxford
Biomedica Solutions has further broadened the Group's offering into the large
and fast-growing AAV segment, whilst delivering on its strategy to become
vector agnostic with a presence in the key US market. Under the terms of the
deal, Homology Medicines became Oxford Biomedica Solutions' first customer,
and will contribute minimum revenues of c.$25 million (£21 million) in the
period to March 2023. Additionally, in September, the Group announced an AAV
deal with an undisclosed partner.
The initiation of new customer relationships and expansion of existing
customer agreements has increased in momentum in recent months, with six new
or expanded partnerships announced since the start of the year. The Group is
currently working with 14 customers on more than 20 programmes (in addition to
Homology Medicines' programmes through Oxford Biomedica Solutions)
representing a more than 70% increase in the number of customers compared to
the same time last year.
In July, the Group announced an expansion to the original License and Clinical
Supply Agreement signed with Juno (a wholly owned subsidiary of Bristol Myers
Squibb Company) to include two new viral vector programmes as well as
announcing a new three-year Master Services and Development Agreement with
AstraZeneca in relation to potential future manufacturing opportunities for
the AstraZeneca COVID-19 vaccine. Oxford Biomedica continues to expect to
recognise aggregate revenues of approximately £30 million from AstraZeneca in
the current financial year, of which the bulk of revenues were recognised in
the first half of 2022.
In January, John Dawson stepped down as CEO after 13 years, and simultaneously
Roch Doliveux assumed the role of Interim CEO. The formal process to appoint a
successor to lead the Group through its next phase of growth is progressing
well and Oxford Biomedica will update the market once the recruitment has been
completed.
The Group heads into the second half of the year with a strong cash position
of £118.5 million and a net cash position of £50.1 million (as at 30 June
2022). The Group is in the process of part-repaying and refinancing the
12-month $85 million Oaktree loan facility taken out in March 2022. In order
to provide additional liquidity and financial flexibility, the Group recently
initiated a process for the sale and leaseback of the Group's cutting-edge
36,000 sq. ft. Windrush Court facility in Oxford and is currently seeking
offers exceeding £55 million. The Group is also reviewing its gene
therapeutics pipeline, including strategic options to externally fund an
appropriate future pipeline of products and other novel opportunities.
Oxford Biomedica expects a highly active remainder of 2022 and the Group has a
high level of visibility over revenues for the remainder of the year with more
than 90% of forecasted revenues for the second half of the year covered by
existing binding purchase orders and rolling customer forecasts. The Group is
confident of delivering similar levels of revenues in the second half of 2022
as those achieved in the first half. As a result of ongoing cost control
initiatives, including right-sizing of headcount as the pandemic eases, and a
non-recurrence of one-off costs incurred in the first half of 2022 the Group
expects to deliver a broadly break-even operating EBITDA in the second half of
2022.
The Group continues to focus on building its number of customers and partner
programmes, and delivering on its mission of enabling the biotech and
biopharma industry to deliver life-saving therapies to patients.
OPERATIONAL REVIEW
Innovative CDMO Services
Oxford Biomedica Solutions: US-based AAV manufacturing and innovation business
In January 2022, Oxford Biomedica announced that it had entered into an
agreement with Homology Medicines to establish Oxford Biomedica Solutions, a
high-performing, full-scope 25,000 sq. ft. AAV manufacturing and innovation
business in Boston, US. The transaction completed on 10 March 2022 and was
immediately accretive to the Group's revenues.
Under the agreement, Oxford Biomedica US, Inc. acquired an 80% ownership
interest in the newly formed AAV-focused manufacturing and innovation business
for a $130 million (£97 million) cash consideration, and a $50 million
(£38.2 million) capital injection into Oxford Biomedica Solutions to fund
growth.
Oxford Biomedica Solutions offers a scalable, high-quality manufacturing
platform to global customers, including Homology Medicines, through a 3-year
Manufacturing and Supply agreement as a preferred customer with minimum
contracted revenue of c.$25 million (£21 million) from Homology Medicines for
the first twelve months post completion.
Integration of the business is progressing smoothly with the transfer of 124
technical operation employees from Homology Medicines now completed. Oxford
Biomedica Solutions is led by Tim Kelly, Chief Executive Officer and Chair of
its Board of Directors.
The Group has a robust business development pipeline and is targeting one
further new AAV customer partnership by the year-end, with one already
announced. In September, the Group announced that it had signed an agreement
with an undisclosed, US based private biotechnology company, granting the new
customer access to Oxford Biomedica Solutions' AAV platform for their
pre-clinical gene therapy programmes.
The Group estimates the AAV outsourced supply market to grow to c.$2.2 billion
by 2026, and to c.$3.7 billion by 2030. To accommodate the expected increase
in customer demand, an additional c.23,000 sq ft of fallow area at the Oxford
Biomedica Solutions Boston site is being developed for analytical, office,
warehouse, & GMP space. This is to be funded by existing funds from the
$50 million (£38.2 million) capital injection into the business in March
2022. As previously guided, Oxford Biomedica Solutions is expected to
break-even on an Operating EBITDA basis by the third year after the closing of
the transaction (the first half of 2025).
Juno Therapeutics, Inc. (a wholly owned subsidiary of Bristol Myers Squibb
Company)
Oxford Biomedica has continued to build on its partnership with Juno, (a
wholly owned subsidiary of Bristol Myers Squibb Company), which started in
2020. In July 2022, the Group announced it had amended and expanded the
original License and Clinical Supply Agreement signed with Juno to include two
new viral vector programmes.
Under the terms of the agreement, Oxford Biomedica received an undisclosed
target nomination fee, and is eligible to receive potential payments upon the
achievements of certain milestones. This latest agreement demonstrates the
Group's ability to expand work with existing partners and takes the total
number of programmes that it is working on with Bristol Myers Squibb to six.
COVID-19 vaccine and Agreement with AstraZeneca
Oxford Biomedica continued to manufacture the Oxford AstraZeneca COVID-19
vaccine at the Group's Oxbox facility at the beginning of 2022. Post-period
end, in July, the Group announced the signing of a new three-year Master
Services and Development Agreement with AstraZeneca. The new agreement will
facilitate potential future manufacturing opportunities for the Oxford
AstraZeneca COVID-19 vaccine, expanding the original three-year master supply
and development agreement announced between the two companies in September
2020.
Under the new agreement, manufacturing of vaccines at Oxford Biomedica's world
class 84,000 sq. ft. manufacturing facility, Oxbox, will be available to
AstraZeneca on an as needed basis beyond the last quarter of 2022, when the
manufacture of COVID-19 vaccines is expected to complete as part of the
original commitment.
In accordance with the terms of the original agreement and inclusive of
revenues for batches already manufactured in the first half of 2022, Oxford
Biomedica expects to recognise aggregate revenues of approximately £30
million from AstraZeneca in the current financial year.
Novartis
The Group continues its strong and long-term relationship with Novartis as its
sole global supplier of lentiviral vector for Kymriah(®) (tisagenlecleucel,
formerly CTL019).
Kymriah(®), which is designed to be a one-time treatment, was the first-ever
FDA-approved CAR-T cell therapy and recently expanded into a third indication
in May 2022, after the accelerated approval from the FDA and approval by the
European Commission for Kymriah(®) for the treatment of adult patients with
relapsed or refractory follicular lymphoma (FL), after two or more lines of
systemic therapy. This the third B-cell malignancy indication for Kymriah(®),
joining approvals in indications in children and young adults with r/r
paediatric and young adult acute lymphoblastic leukaemia (ALL), and r/r adult
diffuse large B-cell lymphoma (DLBCL). In June 2022, Novartis announced
five-year Kymriah(®) data showing durable remission and long-term survival
maintained in children and young adults with advanced B-cell ALL.
Kymriah(®) is available in more than 400 qualified treatment centres in 30
countries having coverage for at least one indication.
The Group is currently working with Novartis on four partner programmes, in
addition to Kymriah(®).
Cabaletta Bio
In January 2022, Oxford Biomedica announced a License and Supply Agreement
with Philadelphia, US-based Cabaletta for their lead product candidate,
DSG3-CAART. DSG3-CAART is being evaluated in the DesCAARTes™ Phase I
clinical trial as a potential treatment for patients with Mucosal Pemphigus
Vulgaris and is designed to selectively target and kill the B cells that
produce DSG3 antibodies while preserving the healthy B cells critical to
immune function.
In May 2022, Cabaletta presented data showing that DSG3-CAART has a favourable
safety profile with no DLTs or cytokine release syndrome of any grade.
Cabaletta recently announced 6 month clinical and translational data from
cohort A4 and 28-day safety and persistence data from cohort A5 at the
European Dermatology and Venereology Congress in September 2022.
Further partner updates
In July 2022, Oxford Biomedica announced a new Licence and Supply Agreement
with an undisclosed US-based private biotechnology company advancing a new
generation of adoptive cell therapies. The Licence and Supply Agreement grants
the new partner a non-exclusive licence to utilise Oxford Biomedica's
LentiVector(®) platform for its application in their lead CAR-T programme and
puts in place a three-year Clinical Supply Agreement.
In September 2022, Oxford Biomedica announced a further Licence and Supply
Agreement with an undisclosed US-based late-stage cell and gene therapy
company. The Licence and Supply Agreement grants the new partner a
non-exclusive licence to utilise Oxford Biomedica's LentiVector(®) platform
for its application in their lead programme, a cell-based therapy targeting a
rare indication, putting into place a five-year clinical supply arrangement.
The Group continues to actively progress its collaborations with Boehringer
Ingelheim, Immatics, Arcellx and Beam Therapeutics with the combined revenues
from these partnerships contributing meaningfully towards the total
bioprocessing and commercial development revenues expected in the current
financial year.
The MPS-IIIA (OTL-201) partner programme with Orchard Therapeutics ("Orchard")
is currently being evaluated in an ongoing proof-of-concept clinical trial,
with interim data from this study expected to be released by the year end
2022.
Innovation and Platform Development
Innovation and the development of the platform are core to the Group's goal of
industrialising viral vector manufacturing not just with lentiviral vectors
but across all viral vector classes. By industrialising viral vector
production, reducing costs and improving quality through innovation, the Group
will broaden the therapeutic indications that are amenable to treatment with
cell and gene therapy. It is expected that the reduction in cost will help
drive more projects through clinical development and ultimately adoption by
payors into indications where there are a far greater number of patients, by
bringing down the overall cost per patient treated.
Multiple elements of IP and innovation are relevant across all viral vector
classes. Development of the Group's technologies such as TRiPSystem™,
SecNuc™, LentiStable™ and U1 and U2, along with the corresponding IP,
continue to move ahead. In addition, the Group is utilising automation and the
use of robotics, artificial intelligence and machine learning to further drive
productivity and capacity improvements.
Process C, which utilises perfusion-mode production, as opposed to the more
typical batch-mode production, coupled with improvements in downstream
processing into the manufacturing process has been proven and rolled out at
200L scale in GMP. Process C works together with production enhancers (such as
U1, U2) which are adopted to realise even greater gains in productivity and
quality. The Group has begun to offer Process C commercially, with several
customers adopting the technology due to the evident gains in vector quantity
and quality it affords.
Post-period, in July 2022, Oxford Biomedica announced that it had initiated a
new project with Orchard utilising the Company's proprietary LentiStable™
technology. As part of the project, Oxford Biomedica's LentiStable™
technology platform will be used to develop a producer cell line capable of
stably expressing lentiviral vectors. Orchard is exploring the technology to
increase the manufacturing efficiency and scalability of their investigational
haemopoietic stem cell (HSC) gene therapy in development for the potential
treatment of mucopolysaccharidosis type I Hurler syndrome (MPS-IH).
The Group continues development work in the area of in vivo CAR-T, which the
Group believes would offer great patient access and superior efficacy to
existing treatment options.
Gene Therapeutics Pipeline
Dr Ravi Rao joined Oxford Biomedica as Chief Medical Officer in April 2022,
with responsibility for assessing and developing the Group's therapeutic
product strategy, which is expected to be completed by the end of calendar
year 2022.
The Group is reviewing strategic options to externally fund an appropriate
future pipeline of products and other novel opportunities with the intention
for this to be executed in 2023. It is anticipated that this will allow the
Group to maintain a long term economic interest in a number of therapeutic
products with a potential material reduction in annual operating expenditure.
In the first half of 2022 the Group's Product segment generated an operating
EBITDA loss of £5.0 million.
The Group's work on targeting the liver is progressing well with the initial
indications identified, and pre-clinical studies ongoing. The liver is an
attractive target for lentiviral vectors due to the possibility of a one-off
treatment giving life-long benefit to patients with high unmet need or heavy
medical burden.
In addition, the Group is evaluating opportunities for cell-based therapy,
using its proprietary platform technology to generate specific CAR-T
constructs for haematologic and solid tumours, including 5T4 (an oncofoetal
antigen specifically expressed of the cell surface of many cancers) as a
potential target.
In January, Oxford Biomedica was informed by Sio Gene Therapies ("Sio") of
their intention to return the rights for AXO-Lenti-PD following Sio's
deprioritising of the programme due to resourcing constraints. The rights to
AXO-Lenti-PD were returned to the Group in March 2022, and the Group is now
seeking a suitable partner for out-licensing. To date, six patients have been
dosed in the Phase II SUNRISE-PD trial with AXO-Lenti-PD.
Facilities and capacity expansion
Oxbox, the Group's largest manufacturing facility spanning 84,000 sq. ft
received MHRA approval for the fill finish suite post-period in August 2022,
bringing this previously outsourced function in-house.
The manufacture of COVID-19 vaccines at Oxbox took place in three suites at
the start of the year, with the remaining suites being used for 200L viral
vector manufacturing. As part of the expanded agreement with AstraZeneca
announced in June 2022, further manufacturing of AstraZeneca COVID-19 vaccines
is planned for the last quarter of 2022, with the suites being available for
AstraZeneca on an as needed basis beyond 2022.
The second phase of Oxbox development is expected to provide additional
flexible manufacturing capacity for a variety of viral vector-based products,
including cell and gene therapy products, vaccines, and other advanced
therapeutics up to 2,000L scale. Design work for this next phase of Oxbox
development, is progressing, with the proceeds from the £50 million
investment from Serum Life Sciences Ltd (a subsidiary of Serum Institute of
India) funding the development.
Oxford Biomedica has a Memorandum of Understanding with Serum Life Sciences
Ltd, granting them the right of first refusal to the exclusive use of one of
two 2,000L bioreactor facilities that Oxford Biomedica is building in the
expansion of its Oxbox manufacturing facility. Exclusive use will require
Serum Life Sciences to commit to a minimum contract value per year for up to
ten years.
With regard to the planned redevelopment of the Windrush Innovation Centre
into next generation laboratory facilities, the Group is currently conducting
a review of required capacity and alternative laboratory options, in parallel
with the strategic review of the gene therapeutics pipeline and ongoing
development of lab space at Oxford Biomedica Solutions.
A process is underway for the sale and leaseback of the Group's Windrush Court
facility in Oxford, which will potentially provide additional liquidity and
financial flexibility. Windrush has 36,000 sq. ft. of GMP grade facilities and
office space, and is currently on the market seeking offers exceeding £55
million.
To ensure the Group has sufficient warehouse capacity to meet expected
near-term commercial development from both current and future potential
partners, the Group has acquired the leasehold of a new 45,000 sq ft warehouse
in Wallingford, Oxfordshire to store ambient raw materials. The first phase of
fit-out is expected to be complete shortly with the site being ready for
occupation in the last quarter of 2022.
Short-term loan facility
In March, the Group entered into an $85m short-term loan facility with Oaktree
Capital Management, L.P. The proceeds were used by the Company, together with
the Company's existing cash, to finance a portion of the transaction with
Homology Medicines to establish Oxford Biomedica Solutions. The loan carries
an interest rate of 8.5% with the principal amount due at the facility's
maturity date in March 2023.
The Group is in the process of part-repaying and refinancing this loan
facility. The Group heads into the second half of the year with a strong cash
position of £118.5 million and a net cash position of £50.1 million as at 30
June 2022.
Corporate and organisational development
During the period, new appointments were made across the Board and the Senior
Executive Team, further diversifying its areas of expertise and strengthening
Oxford Biomedica's position as a leading gene and cell therapy company.
In January, John Dawson stepped down as CEO after 13 years and simultaneously
Roch Doliveux assumed the role of Interim CEO, in addition to his existing
role as Chair. John Dawson stepped down from the Board at the AGM in May 2022
and remains an adviser to the Company. The recruitment process to appoint a
successor to lead Oxford Biomedica through its next phase of growth is
progressing well and Oxford Biomedica will update the market once the
recruitment process has been completed.
In April, Namrata Patel was appointed to the Board as an Independent
Non-Executive Director. Ms. Patel has extensive international experience in
manufacturing and end-to-end supply chain with experience in the
commercialised regulated industry and has held senior positions across several
major global markets. Her experience in sustainability includes playing a key
role in delivering on Procter & Gamble's 2040 Sustainability Ambition
Goals for its Beauty Business portfolio.
In April, Ravi Rao, Chief Medical Officer joined the Senior Executive team,
dividing his time between his role at Oxford Biomedica with roles at SV Health
Investors and Sitryx. Dr. Rao brings long-standing biopharmaceutical and
translation experience across multiple therapeutic areas with different
treatment modalities.
Environmental, Social and Governance
The Group remains committed to its role as a responsible business and
implementing its Environmental, Social and Governance (ESG) strategy, which is
focused on five pillars: People; Community; Environment; Innovation and Supply
Chain.
The People pillar continued to be an area of particular focus. As part of the
Equality, Diversity and Inclusion (EDI) three-year plan, a working group was
formed, applying equality and diversity principles across the whole of Oxford
Biomedica's UK business. Sixteen new representatives from across the business
have been elected to our Workforce Engagement Panel (WEP). Following feedback
from our first annual all employee engagement survey 'Your Voice', the Senior
Executive Team (SET) established a fortnightly Q&A briefing, providing SET
with a platform to share business updates, and employees with an open forum to
ask questions. The Group has introduced further wellbeing initiatives,
including webinars focussed on stress, debt and budget management.
On the Community pillar, a community volunteering activity scheme was
introduced, allowing employees to request up to seven hours of paid time off
for volunteering each year, whilst fundraising efforts for Oxfordshire Mind
and Homeless Oxfordshire continued during the year.
The Group has been focussing on waste reduction initiatives and ways to
improve energy efficiency as part of the Group's commitment to reducing its
environmental footprint under the Environment pillar. The Group has engaged
with waste operators to increase levels of recycling and participated in an
external programme to improve energy efficiency in laboratory cold storage.
The Group has engaged with waste operators to increase levels of recycling and
in June, welcomed a specialist waste management company onsite to perform a
waste awareness day. The Group participated in an external programme to
improve energy efficiency in laboratory cold storage, and tree planting
schemes have been investigated to offset paper use.
On the Innovation pillar, the Group continues to work to promote science and
build strong academic collaborations. The Group continued to support PhD
studentships through ABViP, a multidisciplinary training programme for
next-generation bioscience leaders, where the first cohort of students is due
to start at Oxford Biomedica in October 2022. The Group has 35 apprentices
enrolled across different programmes in the business and was recently
recognised as "Apprenticeship Employer of the Year 2022" in the Oxfordshire
Apprenticeship Awards.
The Group is fully committed to responsible supply chain management, and work
continues to progress in achieving the Group's 2022 ESG supply chain
objectives. A supplier code of conduct has been rolled out and published on
the Group's website, detailing the standards it expects the Group's suppliers
to adopt, focussing on the core principles of quality; ethics; people; health,
safety and environment and related management systems.
The Group's commitment to responsible business practices were recognised with
inclusion in the FTSE4Good index in June 2022. Created by the global index
provider FTSE Russell, the FTSE4Good Index Series is designed to measure the
performance of companies demonstrating strong Environmental, Social and
Governance (ESG) practices. The FTSE4Good indices are used by a wide variety
of market participants to create and assess responsible investment funds and
other products.
Full details on our ESG pillars, including the supplier code of conduct, can
be found on our ESG webpage at www.oxb.com.
Financial Review
The initiation of new customer relationships and expansion of existing
customer agreements has increased in momentum in recent months with the Group
currently working with 14 customers compared to 8 customers at the same time
last year. Lentiviral vector manufacturing volumes have continued their post
pandemic upward trajectory, with revenues from the core (excluding COVID-19
vaccine manufacturing) business achieving double digit revenue growth compared
to the first half of 2021. COVID-19 vaccine bioprocessing volumes were much
lower with the variance from the prior year reflecting the exceptional results
achieved in 2021 when vaccine manufacturing was at full pace.
The Group announced license and supply agreements with Cabaletta, Juno, (a
wholly owned subsidiary of Bristol Myers Squibb Company) and three undisclosed
US-based private biotechnology companies, including one new AAV partner. These
agreements are expected to bolster the Group's development and manufacturing
pipeline over the coming years.
In June, the Group also expanded its original supply and development
agreement with AstraZeneca, allowing the Group to be able to recognise
aggregate revenues of approximately £30.0 million from AstraZeneca in the
current financial year, of which the bulk of revenues have been recognised in
the first half of the year.
The Group achieved total revenues of £64.0 million and incurred an Operating
EBITDA loss of £5.8 million in the first half of 2022 compared to revenues of
£81.3 million and an Operating EBITDA profit of £27.1 million in the prior
year. The variance in revenues from the prior year reflects the exceptional
results achieved in 2021, predominantly driven by much higher COVID-19 vaccine
bioprocessing volumes with manufacturing at full pace. At a cost level, there
was an increase in operating expenditure in the first half of 2022 as a result
of increased personnel and other operational expenditure incurred due to the
consolidation of the results of Oxford Biomedica Solutions,
acquisition-related due diligence costs of £5.1 million and, throughout the
wider Group, inflationary operational cost increases including employee salary
increases to help ensure the Group continues to attract and retain high
quality employees. Oxford Biomedica Solutions' operating expenditure continues
to be fully funded from the $50.0 million (£38.2 million) capital injection
into the new business.
During the period, whilst the Group has continued to invest selectively in the
future growth of the business, we have also taken appropriate measures to
reduce the Group's operating cost base particularly as the COVID-19 pandemic
continues to ease, which has included a degree of right-sizing its staff base
and initiating a headcount freeze (except for critical hires). Whilst the
Group continues to experience inflationary pressures, it is expected that
active cost management can more than offset the impact of inflation.
In March 2022, the Group acquired an 80% ownership interest in Oxford
Biomedica Solutions, an AAV-focused manufacturing and innovation business for
$180 million (£137.4 million), with Homology Medicines Inc. retaining a 20%
ownership stake. As part of the financing arrangements, the Group raised gross
proceeds of £80.0 million through a placing of shares and secured a
short-term loan facility of $85.0 million (£64.9 million) which is repayable
12 months after the closing date.
Concurrently with the Oxford Biomedica Solutions transaction, the Group
entered into a manufacturing and supply agreement with Homology Medicines
which has made a promising contribution to revenues since the completion of
the transaction, with Oxford Biomedica Solutions generating revenues of £7.3
million in the period. Homology Medicines is Oxford Biomedica Solutions' first
customer, and under the terms of the agreement will contribute minimum
revenues of circa £21.0 million ($25.0 million) in the period to March 2023.
The Group's balance sheet expanded with the establishment of Oxford Biomedica
Solutions through the recognition of identifiable net assets of £133.2
million. The transaction was funded through a combination of £77 million of
net equity raised in 2 tranches, the Oaktree loan of $85.0 million (£64.9
million) and the recognition of a put option liability to acquire the
remaining 20% of Oxford Biomedica Solutions from Homology Medicines of $51.1
million (£42.0 million).
The key financial indicators used by the Board are set out in the table below
and the highlights are:
- Revenue (£64.0 million) decreased by 21% over H1 2021 (£81.3
million) as a result of the decrease in vaccine batches manufactured for
AstraZeneca, partly offset by an increase in revenues from lentiviral vector
and AAV commercial development and manufacturing activities.
- Operational results (Operating EBITDA(1) loss and Operating loss) of
£5.8 million and £19.2 million respectively, were lower than the prior year
due to much lower vaccine bioprocessing volumes, as well as increased
operating expenditure from Oxford Biomedica Solutions operating spend,
inflationary increases, and acquisition related due diligence costs of £5.1
million.
- Operational activities consumed cash of £24.5 million compared to
generating cash of £22.2 million in H1 2021 due to much higher vaccine
manufacturing revenues in H1 2021 and consolidation of the new business,
Oxford Biomedica Solutions in H1 2022.
- Capital expenditure increased from £3.5 million in H1 2021 to £6.0
million with H1 2022 capital expenditure consisting mainly of the purchase of
bioprocessing and laboratory equipment, as well as various other equipment and
leasehold improvements required for commercial activities and production.
- Cash burn(2) was £32.2 million in H1 2022 (H1 2021 inflow of
£18.7 million) due mainly to decreased cash inflows from vaccine production,
increased operational cash flows and due diligence fees paid.
- Cash at 30 June 2022 was £118.5 million compared to £61.3 million
at 30 June 2021. The net cash position was £50.1 million as at 30 June 2022
-
KEY FINANCIAL INDICATORS (£m) H1 2022 H1 2021
Revenues
Bioprocessing/commercial development 57.3 75.6
Licence fees, milestones & royalties 6.7 5.7
Total 64.0 81.3
Operating (loss)/profit (19.2) 19.7
Operating EBITDA(1 2) (5.8) 27.1
Cash (consumed by)/generated from operating activities (24.5) 22.2
Capital expenditure (6.0) (3.5)
Cash (burn)/inflow(3) (32.2) 18.7
Period end cash 118.5 61.3
Net cash(4) 50.1 61.3
Headcount
Period end 959 744
Average 920 716
1 Operating EBITDA (Earnings Before Net Finance Costs, Tax,
Depreciation, Amortisation, fair value adjustments of assets at fair value
through profit and loss, and Share Based Payments) is a non-GAAP measure often
used as a surrogate for operational cash flow as it excludes from operating
profit or loss all non-cash items, including the charge for share options. A
reconciliation to GAAP measures is provided on page 12.
2 Included £5.1 million in one-off acquisition-related due
diligence costs relating to the transaction to acquire Oxford Biomedica
Solutions. Includes operational expenditure for Oxford Biomedica Solutions
from March 2022.
3 Cash (burn)/inflow is net cash generated from operating
activities less net finance costs paid and capital expenditure. A
reconciliation to GAAP measures is provided on page 15.
4 Net cash is cash less external loans.
The Group evaluates its performance inter alia by making use of two
alternative performance measures as part of its Key Financial Performance
Indicators (see table above). The Group believes that these Non-GAAP measures,
together with the relevant GAAP measures, provide an accurate reflection of
the Group's performance over time. The Board has taken the decision that the
Key Financial Performance Indicators against which the business will be
assessed, are Revenue, Operating EBITDA and Operating profit/(loss).
Revenue
Revenues were £64.0 million in H1 2022, 21% below the £81.3 million achieved
in H1 2021.
£m H1 2022 H1 2021
Bioprocessing/commercial development 57.3 75.6
Licence fees, milestones & royalties 6.7 5.7
Revenue 64.0 81.3
Revenues from bioprocessing/commercial development were 24% lower in H1 2022
as compared to H1 2021, due largely to the decrease in the volume of vaccine
batches manufactured for AstraZeneca, offset to an extent by an increase in
revenues from lentiviral vector and AAV commercial development and
manufacturing activities. Bioprocessing and commercial development activities
performed on behalf of the Group's other customers have increased due to the
new development and manufacturing agreements entered into with customers over
the last 12 months including Boehringer Ingelheim, Arcellx and Homology
Medicines.
Revenues from licence fees, milestones and royalties have remained largely
stable when compared to the prior year.
Operating EBITDA
£m H1 2022 H1 2021
Revenue 64.0 81.3
Other operating income 0.9 0.4
Total expenses(1) (70.7) (54.6)
Operating EBITDA (5.8) 27.1
Depreciation, amortisation, share option charge and fair value adjustments of (13.4) (7.4)
available-for-sale assets
Operating (loss)/profit (19.2) 19.7
(1) Cost of goods plus research, development, bioprocessing and administrative
expenses excluding depreciation, amortisation and share option charge. A
reconciliation to GAAP measures is provided on page 12.
Total expenses in H1 2022 were £70.7 million, compared with £54.6 million in
H1 2021, a 29% increase over H1 2021. The increase was driven by an increase
in operational spend from consolidation of the results of Oxford Biomedica
Solutions, inflationary increases and acquisition-related due diligence costs
of £5.1 million.
As a result of the lower revenues and increased operational spend, the
Operating EBITDA loss in H1 2022 was £5.8 million, £32.9 million lower than
the prior period (H1 2021 Operating EBITDA profit of £27.1 million).
Total expenses
In order to provide the users of the accounts with a more detailed explanation
of the reasons for the year-on-year movements of the Group's operational
expenses included within Operating EBITDA, the Group has added together cost
of goods, research and development, bioprocessing and administrative costs and
has removed depreciation, amortisation and the share option charge as these
are non-cash items which do not form part of the Operating EBITDA alternative
performance measure. As Operating profit/(loss) is assessed separately as a
key financial performance measure, the year-on-year movement in these non-cash
items is then individually analysed and explained specifically in the
Operating and Net profit/(loss) section. Expense items included within Total
Expenses are then categorised according to their relevant nature with the
year-on-year movement explained in the second table below:
£m H1 2022 H1 2021
Research and development costs(1) 27.3 14.7
Bioprocessing costs(1) (2) 12.4 2.9
Administrative expenses(1 3) 16.5 6.0
Operating expenses 56.2 23.6
Depreciation, amortisation & share option charge (13.4) (7.4)
Adjusted operating expenses 42.8 16.2
Cost of Sales 27.9 38.4
Total expenses(1) 70.7 54.6
(1) Includes operational expenditure for Oxford Biomedica Solutions from March
2022 onwards.
(2) Bioprocessing costs have increased from the prior period due to the lower
recovery of batch manufacturing costs which is also reflected in decreased
cost of goods in H1 2022.
(3) Included £5.1 million in one-off acquisition-related due diligence costs
relating to the transaction to acquire Oxford Biomedica Solutions.
The table below shows total expenses by type of expenditure (excluding
depreciation, amortisation and other non-cash items):
£m H1 2022 H1 2021
Raw materials, consumables and other external bioprocessing costs 15.8 18.8
Personnel-related 40.4 27.2
External R&D expenditure 1.9 2.0
Due diligence costs 5.1 1.2
Other costs 7.5 5.4
Total expenses 70.7 54.6
Raw materials, consumables and other external bioprocessing costs have
decreased as a result of lower number of vaccine batches manufactured in H1
2022 as compared to H1 2021. Personnel related costs are higher due to average
employee numbers increasing from 716 in H1 2021 to 920 in H1 2022, mostly as a
result of 124 employees acquired as part of the transaction to establish
Oxford Biomedica Solutions but also reflecting employee salary increases.
External R&D expenditure was in line with the prior year. Due diligence
costs relate to the establishment of Oxford Biomedica Solutions. Other costs
have increased compared to prior year due to the administrative expenditure of
Oxford Biomedica Solutions, and inflationary increases.
Operating profit/(loss) and net profit/(loss)
£m H1 2022 H1 2021
Operating EBITDA(1) (5.8) 27.1
Depreciation, amortisation and share option charge (13.4) (7.4)
Operating (loss)/profit (19.2) 19.7
Interest (8.2) (0.5)
Taxation (0.2) (1.1)
Net (loss)/profit (27.6) 18.1
(1) Operating EBITDA (Earnings Before Net Finance Costs, Tax, Depreciation,
Amortisation, fair value adjustments of assets at fair value through profit
and loss, and Share Based Payments) is a non-GAAP measure often used as a
surrogate for operational cash flow as it excludes from operating profit or
loss all non-cash items, including the charge for share options. A
reconciliation to GAAP measures is provided on page 12.
In arriving at the Operating loss, the Operating EBITDA loss of £5.8 million
was further impacted by depreciation and the share option charge.
Depreciation and amortisation increased by £5.0 million mainly due to Oxford
Biomedica Solutions fixed assets and intangible asset depreciation and
amortisation for the period from when they were acquired. The share option
charge increased by £0.9 million due to the increased employee headcount of
the Group.
The impact of these charges resulted in an operating loss of £19.2 million in
the first half of 2022 compared to a profit of £19.7 million in the prior
year corresponding period.
The interest charge increased by £7.7 million largely due to interest and
foreign exchange on the Oaktree loan, as well as IFRS 16 interest on the lease
liability related to the Oxford Biomedica Solutions Boston facility.
The corporation tax expense in H1 2022 decreased as the corporation tax charge
in 2022 is limited to the notional tax charge on the RDEC tax credit included
within research and development costs and the release of the deferred tax on
the acquired intangibles assets.
Other Comprehensive Income
The Group recognised other comprehensive income in H1 2022 of £10.8 million
(2021: nil) in relation to movements on the foreign currency translation
reserve.
The translation reserve comprises all foreign currency differences arising
from the translation of the financial statements of foreign operations,
including gains arising from monetary items that in substance form part of the
net investment in foreign operations.
Segmental analysis
The Group reports its results within two segments, namely the "Platform"
segment which includes the revenue generating bioprocessing and process
development activities for third parties, and internal technology projects to
develop new potentially saleable technology, improve the Group's current
processes and bring development and manufacturing costs down. The other
segment, "Product", includes the costs of researching and developing new
product candidates.
H1 2022
£m Platform Product Total
Revenues 64.0 0.0 64.0
Operating EBITDA(1) (0.8) (5.0) (5.8)
Operating loss (13.2) (6.0) (19.2)
H1 2021
£m Platform Product Total
Revenues 81.2 0.1 81.3
Operating EBITDA(1) 31.2 (4.1) 27.1
Operating profit/(loss) 24.5 (4.8) 19.7
1 Operating EBITDA (Earnings Before Net Finance Costs, Tax, Depreciation,
Amortisation, fair value adjustments of assets at fair value through profit
and loss, and Share Based Payments) is a non-GAAP measure often used as a
surrogate for operational cash flow as it excludes from operating profit or
loss all non-cash items, including the charge for share options. A
reconciliation to GAAP measures is provided on page 12.
Revenues from the platform segment decreased when compared to H1 2021 due to
the lower volumes of vaccine batches manufactured for AstraZeneca. Operating
results were negatively impacted by the lower revenues as well as Oxford
Biomedica Solutions' operational expenditure in the period since they were
acquired.
Revenues from the product segment were higher due to an increased level of
clinical development activities for customers. Product operating expenses were
higher due to increased research, development and pre-clinical product
expenditure, but also increased manpower costs.
Cash flow
£m H1 2022 H1 2021
Operating (loss)/profit (19.2) 19.7
Depreciation, amortisation and share option charge 13.4 7.4
Operating EBITDA(1) (5.8) 27.1
Working capital (19.3) (5.9)
R&D tax credit received 0.6 1.0
Cash (consumed in)/generated from operations (24.5) 22.2
Interest paid less received (1.7) -
Capital expenditure (6.0) (3.5)
Cash (burn) (32.2) 18.7
1 Operating EBITDA (Earnings Before Net Finance Costs, Tax, Depreciation,
Amortisation, fair value adjustments of assets at fair value through profit
and loss, and Share Based Payments) is a non-GAAP measure often used as a
surrogate for operational cash flow as it excludes from operating profit or
loss all non-cash items, including the charge for share options. A
reconciliation to GAAP measures is provided on page 12.
Operating losses for the first six months of 2022 were £38.9 million lower
than the £19.7 million profit achieved in H1 2021. The negative outflow from
working capital was mainly as a result of the increase in contract assets due
to amounts receivable as part of the AstraZeneca contract agreed in June 2022.
Capital expenditure increased by £2.5 million in H1 2022 due mainly to the
purchase of bioprocessing and laboratory equipment, but also various other
equipment and leasehold improvements required for commercial activities and
production.
Statement of financial position
The most notable items on the Statement of financial position, including
changes from 31 December 2021, are as follows:
Non-current assets - Intangible assets and goodwill increased from £0.1
million to £123.9 million due to £102.9 million of technology assets and
£14.4 million of goodwill acquired as part of the acquisition of Oxford
Biomedica Solutions. Property, plant and equipment increased from £69.7
million to £136.3 million due to £58.9 million of property plant and
equipment acquired as part of the transaction to establish Oxford Biomedica
Solutions, £9.6 million of capital expenditure incurred, positive foreign
exchange movements of £4.5 million offset by depreciation of £8.8 million.
Current assets - Inventories increased to £13.9 million from £9.5 million at
31 December 2021 mainly as a result of the acquisition of the inventories of
Oxford Biomedica Solutions, but also stock purchased in preparation of the
expected increased bioprocessing activities in the second half of 2022. Trade
and other receivables and Contract assets have increased by £26.0 million
mainly as a result of the recognition of a receivable for the contracted
vaccines batches ordered by AstraZeneca.
Current liabilities - Trade and other payables have increased from £19.1
million at the start of the year to £26.3 million due to the inclusion of the
trade and other payables of Oxford Biomedica Solutions. Contract liabilities
have increased by £0.4 million to £12.9 million due to the invoicing of
orders received in advance of the goods and services being provided by the
Group. A £64.9 million ($85 million) loan facility was entered into with
Oaktree Capital Management in March, with a balance of £68.4 million at the
period end due to the devaluation of sterling versus the dollar. Deferred
income decreased due to the recognition of grant income related to production
capacity expansion.
Non-current liabilities - Provisions increased by £2.6 million as a result of
the recognition of an increased liability for the costs of restoring existing
properties to their original state, as well as the recognition of a liability
for the costs of restoring the newly leased Wallingford warehouse property to
its original state at the end of the lease term. Lease liabilities increased
by £28.6 million to £37.0 million due to the inclusion of the lease
liabilities for the Wallingford and Bedford, Massachusetts property lease as
part of the acquisition of Oxford Biomedica Solutions. The Group has
recognised a liability of £41.3 million for the put option to acquire the
remaining 20% of Oxford Biomedica Solutions that it doesn't already own.
The Group's cash resources at 1 January 2022 were £108.9 million. Cash used
in operations was £24.5 million. Other significant cash flows were £77.0
million received from equity fundraises, £64.9 million received from drawing
down the Oaktree loan, £99.2 million paid to Homology Medicines upon
completion of the transaction to establish Oxford Biomedica Solutions, £6.0
million of capex and £1.5 million of lease liability payments. The cash
balance at 30 June 2022 was £118.5 million with a net cash position of £50.1
million.
Financial outlook
Oxford Biomedica anticipates continued growth in lentiviral vector and AAV
manufacturing volumes, lower vaccine volumes, and for process development
activities for customers to continue at higher levels in 2022 than those seen
in 2021. Oxford Biomedica continues to expect to recognise aggregate revenues
of approximately £30 million from AstraZeneca for vaccine manufacturing in
the current financial year.
Overall, the Group has a high level of visibility over revenues for the
remainder of 2022 with more than 90% of forecasted revenues for the second
half of the year covered by existing binding purchase orders and rolling
customer forecasts. Accordingly, the Group is confident of delivering
similar levels of revenues in the second half of 2022 as those achieved in the
first half.
As a result of ongoing cost control initiatives, including right-sizing of
headcount as the pandemic eases, and a non-recurrence of one-off costs
incurred in the first half of 2022, the Group expects to deliver a broadly
break-even Operating EBITDA position for the second half of 2022. Capex
levels are expected to be similar in the second half of 2022 to the first half
of 2022 with the Group taking a cautious approach to planning significant new
projects.
One further new AAV customer partnership is expected before the end of
calendar year 2022, with one new customer already announced. Oxford Biomedica
Solutions has generated revenues of £7.3 million in the first half of 2022,
with a ramp up in revenues expected as the new business builds its customer
base. The integration of Oxford Biomedica Solutions is on target for
completion by H1 2023. As previously guided, Oxford Biomedica Solutions is
expected to break-even on an Operating EBITDA basis by the third year after
the closing of the transaction (the first half of 2025).
Cost of goods, which includes material costs and the transfer of bioprocessing
manpower and overheads, is expected to be similar to the first half, with an
increase in bioprocessing costs from Oxford Biomedica Solutions. Research and
development costs are expected to remain at consistent levels as the Group
continues to invest in new technologies in order to maintain its competitive
edge in lentiviral vectors, and to also build a leading position in AAV.
Administrative expenditure is expected to decrease due to one-off costs
related to the Oxford Biomedica Solutions transaction and ongoing cost control
initiatives.
With a cash position of £115.8 million and a net cash position of £42.1
million as at 31 August 2022, the Group is well financed. A process is
underway for the sale and leaseback of the Group's Windrush Court facility in
Oxford, and, simultaneously, the Group is in the process of part re-paying and
refinancing the $85 million Oaktree loan facility taken out in March 2022.
In the medium term, the Group expects to continue to grow lentiviral vector
and AAV manufacturing and development revenues through the successful
development of existing customer relationships and the continued targeting of
new customer relationships. Consistent with years prior to 2021 (when revenues
were significantly boosted by COVID-19 vaccine manufacturing business) the
Group expects future years' revenues to be second half weighted.
Building on its leading position in lentiviral vectors, the Group aims to
ultimately have a market leading position in the viral vector outsourced
supply market across all key vector types, with long term revenue growth rates
exceeding the broader market.
Principal risks and uncertainties
Except as noted below, the principal risks and uncertainties facing the Group
are unchanged from those set out in pages 24 to 38 of the 2021 Annual report
& accounts which is available on the Group's website at www.oxb.com.
The following additional elements have been identified in respect of existing
risks identified in the 2021 Annual report post published in April 2022:
War in Ukraine and COVID-19
Inflationary cost pressures have accelerated in the wake of the COVID-19
pandemic and the war in Ukraine and are expected to impact the Group's
operational expenditures, giving rise to an increased risk that the Group may
not be able to pass on resulting price rises to customers. Further, there is a
risk that such cost pressures will negatively impact the Group's customers and
could result in a reduction in revenues from customers, including expected
revenues from customers under long term contracts.
In addition, the risk to the security of the Group's supply of energy has
increased considering the impact of the war in Ukraine and the resulting
Russian sanctions.
Foreign currency exposure and Loan facility
Sterling has devalued significantly versus the dollar over the period since
the 2021 Annual report and accounts were released leading to increased levels
of expenditure required to service dollar denominated supplier spend, interest
and loan refinancing costs. This risk is partially offset by dollar balances
held by the Group.
Going concern
The financial position of the Group, its cash flows and liquidity position are
described in the primary statements and notes to these interim financial
statements.
The Group made a loss for the period ended 30 June 2022 of £27.6 million, and
consumed net cash flows from operating activities for the year of £24.5
million. The Group also raised £77.0 million in cash from an equity fundraise
in January and March 2022. The Group ended the period with cash and cash
equivalents of £118.5 million. In considering the basis of preparation of the
Interim financial statements, the Directors have prepared cash flow forecasts
for a period of at least 12 months from the date of approval of these
financial statements, based in the first instance on the Group's 2022 latest
view and forecasts for 2023. The Directors have undertaken a rigorous
assessment of the forecasts in a base case scenario and assessed identified
downside risks and mitigating actions.
These cash flow forecasts also take into consideration severe but plausible
downside scenarios including:
· A substantial manufacturing and development revenue downside
affecting the core LentiVector(®) platform business,
· Vaccine manufacturing revenues only included to the extent
contracted,
· No revenues from new customers,
· Significant decreases in forecasted existing customer milestone
and royalty revenues, and
· The potential impacts of the current ongoing war in Ukraine on
the Group and its customers including expected revenues from existing
customers under long term contracts.
The Group entered into an $85 million (£63 million) loan facility with
Oaktree Capital Management as part of the Group's acquisition of an 80% stake
in Oxford Biomedica Solutions in March 2022. The facility has been drawn down
in full and the Group is required to repay this one-year facility in March
2023. The Group is in the process of considering its options for the above
loan. The Group is considering potential part repayment from cash balances
held and part refinancing the loan facility through a combination of proceeds
from a sale and leaseback of its owned premises and rolling the remainder, or
securing replacement loan finance. There are a number of potential lenders
and the sale and leaseback transaction is expected to be completed by the end
of December 2022. Given the amount of cash available to the group the
refinancing is not critical to the going concern assumption. On this basis
in both the Group's cash flow forecast and the mitigated downside scenario,
the Group is able to refinance this loan before the repayment term.
However, despite the above requirement, the Board has confidence in the
Group's ability to continue as a going concern for the following reasons:
· As noted above the Group has cash balances of £118.5 million at
the end of June 2022 and £115.8 million at the end of August 2022;
· More than 90% of 2022 forecasted revenues are covered by binding
purchase orders and rolling customer forecasts which give confidence in the
level of revenues forecast over the next 12 months; and
· The Group's history of being able to access capital markets
including raising £80 million of equity during the last six months;
· The Group's history of being able to obtain loan financing when
required for purposes of both capital expenditure and operational purposes, as
recently evidenced by the $85 million one-year facility obtained with Oaktree
Capital Management;
· The Group is also reviewing its gene therapeutics pipeline,
including strategic options to externally fund an appropriate future pipeline
of products and other novel opportunities.
· The Group's ability to continue to be successful in winning new
customers and building its brand as demonstrated by successfully entering into
new customer agreements with Astra Zeneca, Juno (a wholly owned subsidiary of
Bristol Myers Squibb Company), Homology Medicines and two unnamed new partners
over the last 6 months;
· The Group has the ability to control capital expenditure costs
and lower other operational spend, as necessary.
Taking account of the matters described above, the Directors remain confident
that the Group will have sufficient funds to continue to meet its liabilities
as they fall due for at least 12 months from the date of approval of the
financial statements and therefore have prepared the financial statements on a
going concern basis.
Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2022
Six months ended Six months ended
30 June 2022 30 June 2021
Unaudited Unaudited
Notes £'000 £'000
Revenue 64,027 81,252
Cost of sales (27,899) (38,372)
Gross profit 36,128 42,880
(12,383)
Bioprocessing costs (2,947)
Research and development costs (27,310) (14,708)
Administrative expenses (16,479) (6,009)
Other operating income 925 441
Change in fair value of available-for-sale asset 9 (38) 1
Operating (loss)/profit (19,157) 19,658
Finance income 50 31
Finance costs 6 (8,277) (472)
(Loss)/profit before tax (27,384) 19,217
Taxation (250) (1,148)
(Loss)/profit for the period (27,634) 18,069
Other comprehensive income
Foreign currency translation differences 10,825 -
Other comprehensive income for the period 10,825
Total comprehensive (expense)/income (16,809) 18,069
(Loss)/profit attributable to:
Owners of the Company (25,483) 18,069
Non-controlling interests (2,151) -
(27,634) 18,069
Total comprehensive (expense)/income attributable to:
Owners of the Company (17,419) 18,069
Non-controlling interests 610 -
(16,809) 18,069
5 (27.29p) 21.92p
Basic (loss)/profit per share
Diluted (loss)/profit per share 5 - 21.36p
The notes on pages 24 to 38 form part of this financial information.
Consolidated statement of financial position
as at 30 June 2022
Notes 30 June 31 December
2022 2021
Unaudited Audited
£'000 £'000
Assets
Non-current assets
Intangible assets & Goodwill 7 123,919 52
Property, plant and equipment 8 136,266 69,728
Trade and other receivables 11 3,605 3,605
263,790 73,385
Current assets
Inventory 10 13,853 9,521
Assets held for sale 9 36 74
Trade and other receivables 11 32,587 31,200
Contract assets 37,923 13,547
Current tax assets - 558
Cash and cash equivalents 12 118,510 108,944
202,909 163,844
Current liabilities
Trade and other payables 13 26,283 19,058
Contract liabilities 12,660 12,502
Deferred income 894 894
Lease liabilities 14 2,046 853
Loans 16 68,405 -
Deferred tax liabilities 525 -
110,813 33,307
Net current assets 92,096 130,537
Non-current liabilities
Lease liabilities 14 37,046 8,488
Provisions 15 8,869 6,244
Contract liabilities 84 92
Deferred income 1,404 1,760
Put option liability 17 41,286 -
Deferred tax liabilities 7,183 -
95,872 16,584
Net assets 260,014 187,338
Shareholders' equity
Share capital 18 48,038 43,088
Share premium 18 379,950 307,765
Other reserves (27,900) 2,291
Accumulated losses (178,056) (165,806)
Equity attributable to owner of the Company 222,032 187,338
Non-controlling interests 21 37,982 -
Total equity 260,014 187,338
The notes on pages 24 to 38 form part of this financial information.
Consolidated Statement of Cash Flows
for the six months ended 30 June 2022
Notes Six months ended Six months ended
30 June 2022 30 June 2021
Unaudited Unaudited
£'000 £'000
Cash flows from operating activities
Cash (consumed in)/generated from operations 19 (25,069) 21,205
Tax credit received 558 994
Net cash (used in)/generated from operating activities (24,511) 22,199
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (99,206) -
Purchases of property, plant and equipment 8 (6,009) (3,548)
Proceeds on disposal of property, plant and equipment 35 9
Interest received 50 -
Net cash used in investing activities (105,130) (3,539)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 80,082 483
Costs of share issues (2,952) -
Interest paid (1,732) -
Loan arrangement fees (2,205) -
Payment of lease liabilities (1,484) (4,611)
Loans received 64,866 -
Net cash generated from /(used in) financing activities 136,575 (4,128)
6,934 14,532
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January 2022 108,944 46,743
Movement in foreign currency balances 2,632 -
Cash and cash equivalents at 30 June 2022 12 118,510 61,275
The notes on pages 24 to 38 form part of this financial information.
Statement of Changes in Equity Attributable to Owners of the Parent
for the six months ended 30 June 2022 (Unaudited)
Share Share premium Merger reserve Other Translation reserve Accumulated Losses Total Non- Total NCI
capital £'000 £'000 Equity £'000 £'000 £'000 Controlling Interest Equity
£'000 £'000 £'000 £'000
At 1 January 2021 41,161 258,017 2,291 - - (188,723) 112,746 - 112,746
Six months ended 30 June 2021:
Profit for the period - - - - - 18,069 18,069 - 18,069
Total comprehensive income for the period - - - - - 18,069 18,069 - 18,069
Transactions with owners:
Share options
Proceeds from shares issued 146 457 - - - (120) 483 - 483
Value of employee services - - - - - 1,306 1,306 - 1,306
At 30 June 2021 41,307 258,474 2,291 - - (169,468) 132,604 - 132,604
Six months ended 31 December 2021:
Profit for the period - - - - - 942 942 - 942
Total comprehensive income for the period - - - - - 942 942 - 942
Transactions with owners:
Share options
Proceeds from shares issued 90 982 - - - 45 1,117 - 1,117
Value of employee services - - - - - 2,217 2,217 - 2,217
Deferred tax on share options - - - - - 458 458 - 458
Issue of shares excluding options 1,691 48,309 50,000 50,000
At 31 December 2021 43,088 307,765 2,291 - - (165,806) 187,338 - 187,338
At 1 January 2022
Six months ended 30 June 2022:
Loss for the period - - - - - (25,483) (25,483) (2,151) (27,634)
Other comprehensive income - - - - 8,064 - 8,064 2,761 10,825
Total comprehensive income for the period - - - - 8,064 (25,483) (17,419) 610 (16,809)
Transactions with owners:
Share options
Proceeds from shares issued 12 75 - - - (4) 83 - 83
Value of employee services - - - - - 1,959 1,959 233 2,192
Issue of shares excluding options 4,938 75,062 - - - - 80,000 - 80,000
Costs of share issues - (2,952) - - - - (2,952) - (2,952)
Total contributions 4,950 72,185 - - - 1,955 79,090 233 79,323
Changes in ownership interests:
Acquisition of subsidiary with NCI (Note 19) - - - - - - - 48,418 48,418
Acquisition of NCI without change in control - - - - - 11,279 11,279 (11,279) - -
Recognition of put option - - - (38,996) - - (38,997) - (38,996)
Revaluation of put option - - - 740 - - 740 - 7 740
At 30 June 2022 48,038 379,950 2,291 (38,256) 8,064 (178,055) 222,032 37,982 260,014
The notes on pages 24 to 38 form part of this financial information.
Notes to the Financial Information
1. General information and basis of preparation
This condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the UK.
The annual financial statements of the Group are prepared in accordance with
UK-adopted international accounting standards. As required by the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority, the
condensed set of financial statements has been prepared applying the
accounting policies and presentation that were applied in the preparation of
the Group's published consolidated financial statements for the year ended 31
December 2021. However, selected explanatory notes are included to explain
events and transactions that are significant to an understanding of the
changes in the Group's financial position and performance since the last
annual financial statements.
The financial information set out above does not constitute the Company's
Statutory Accounts. Statutory accounts for the year ended 31 December 2021
were approved by the Board of Directors and have been delivered to the
Registrar of Companies. The report of the auditor (i) was unqualified, (ii)
included no references to any matters to which the auditor drew attention by
way of emphasis without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006
These interim financial statements have been prepared applying consistent
accounting policies to those applied by the Group in the 2021 Annual Report.
These condensed consolidated interim financial statements were approved by the
Board of Directors on 15 September 2022. They have not been audited.
Oxford Biomedica plc, the parent company in the Group, is a public limited
company incorporated and domiciled in the UK and is listed on the London Stock
Exchange.
There have been no material related party transactions in the first six months
of 2022 and no material change in related parties from those described in the
last annual report other than Homology Medicines which became a new related
party post the Group's acquisition of 80% of the voting interests of Oxford
Biomedica Solutions, with Homology Medicines retaining the remaining 20%.
Concurrently with the Oxford Biomedica Solutions transaction, Oxford Biomedica
Solutions entered into a manufacturing and supply agreement with Homology
Medicines which generated revenues of £7 million in the period. Homology
Medicines is Oxford Biomedica Solutions' first customer, and under the terms
of the agreement will contribute minimum revenues of circa £21 million ($25
million) in the period to March 2023.
2. Going concern
The financial position of the Group, its cash flows and liquidity position are
described in the primary statements and notes to these interim financial
statements.
The Group made a loss for the period ended 30 June 2022 of £27.6 million, and
consumed net cash flows from operating activities for the year of £24.5
million. The Group also raised £77.0 million in cash from an equity fundraise
in January and March 2022. The Group ended the period with cash and cash
equivalents of £118.5 million. In considering the basis of preparation of the
Interim financial statements, the Directors have prepared cash flow forecasts
for a period of at least 12 months from the date of approval of these
financial statements, based in the first instance on the Group's 2022 latest
view and forecasts for 2023. The Directors have undertaken a rigorous
assessment of the forecasts in a base case scenario and assessed identified
downside risks and mitigating actions.
These cash flow forecasts also take into consideration severe but plausible
downside scenarios including:
· A substantial manufacturing and development revenue downside affecting
the core LentiVector® platform business,
· Vaccine manufacturing revenues only included to the extent
contracted,
· No revenues from new customers,
· Significant decreases in forecasted existing customer milestone
and royalty revenues, and
· The potential impacts of the current ongoing war in Ukraine on the Group
and its customers including expected revenues from existing customers under
long term contracts.
The Group entered into an $85 million (£63 million) loan facility with
Oaktree Capital Management as part of the Group's acquisition of an 80% stake
in Oxford Biomedica Solutions in March 2022. The facility has been drawn down
in full and the Group is required to repay this one-year facility in March
2023. The Group is in the process of considering its options for the above
loan. The Group is considering potential part repayment from cash balances
held and part refinancing the loan facility through a combination of proceeds
from a sale and leaseback of its owned premises and rolling the remainder, or
securing replacement loan finance. There are a number of potential lenders
and the sale and leaseback transaction is expected to be completed by the end
of December 2022. Given the amount of cash available to the group the
refinancing is not critical to the going concern assumption. On this basis
in both the Group's cash flow forecast and the mitigated downside scenario,
the Group is able to refinance this loan before the repayment term.
However, despite the above requirement, the Board has confidence in the
Group's ability to continue as a going concern for the following reasons:
· As noted above the Group has cash balances of £118.5 million at the
end of June 2022 and £115.8 million at the end of August 2022;
· More than 90% of 2022 forecasted revenues are covered by binding
purchase orders and rolling customer forecasts which give confidence in the
level of revenues forecast over the next 12 months; and
· The Group's history of being able to access capital markets
including raising £80 million of equity during the last six months;
· The Group's history of being able to obtain loan financing when
required for purposes of both capital expenditure and operational purposes, as
recently evidenced by the $85 million one-year facility obtained with Oaktree
Capital Management;
· The Group is also reviewing its gene therapeutics pipeline,
including strategic options to externally fund an appropriate future pipeline
of products and other novel opportunities.
· The Group's ability to continue to be successful in winning new
customers and building its brand as demonstrated by successfully entering into
new customer agreements with Astra Zeneca, Juno (a wholly owned subsidiary of
Bristol Myers Squibb Company), Homology Medicines and two unnamed new partners
over the last 6 months;
· The Group has the ability to control capital expenditure costs and lower
other operational spend, as necessary.
Taking account of the matters described above, the Directors remain confident
that the Group will have sufficient funds to continue to meet its liabilities
as they fall due for at least 12 months from the date of approval of the
financial statements and therefore have prepared the financial statements on a
going concern basis.
3. Accounting policies
The accounting policies, including the classification of financial
instruments, applied in these interim financial statements are consistent with
those of the annual financial statements for the year ended 31 December 2021,
as described in those financial statements, except for the new policies
detailed below:
Business combinations
The Group accounts for business combinations using the acquisition method when
the acquired set of activities and assets meets the definition of a business
and control is transferred to the Group. In determining whether a particular
set of activities and assets is a business, the Group assesses whether the set
of assets and activities acquired includes, at a minimum, an input and
substantive process and whether the acquired set has the ability to produce
outputs. The Group has an option to apply a 'concentration test' that permits
a simplified assessment of whether an acquired set of activities and assets is
not a business. The optional concentration test is met if substantially all of
the fair value of the gross assets acquired is concentrated in a single
identifiable asset or group of similar identifiable assets. The consideration
transferred in the acquisition is generally measured at fair value, as are the
identifiable net assets acquired. Any goodwill that arises is tested annually
for impairment. Any gain on a bargain purchase is recognised in profit or loss
immediately. Transaction costs are expensed as incurred, except if related to
the issue of debt or equity securities.
The consideration transferred does not include amounts related to the
settlement of pre-existing relationships. Such amounts are generally
recognised in profit or loss.
Non-controlling interests (NCI)
NCI are measured initially at fair value at the date of acquisition.
NCI are measured subsequently at their proportionate share of the subsidiary's
net assets at the reporting date. Changes in the Group's interest in a
subsidiary that do not result in a loss of control are accounted for as equity
transactions.
Goodwill & Intangible assets
i. Recognition and measurement
Goodwill Goodwill arising on the acquisition of subsidiaries is measured at cost less
accumulated impairment losses.
Developed technology The developed technology was acquired by the Group (see note 20) and has a
finite useful life. It measured at cost less accumulated amortisation and any
accumulated impairment losses.
Patents Patents have finite useful lives and are measured at cost less accumulated
amortisation and any accumulated impairment losses.
ii. Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All
other expenditure, including expenditure on internally generated goodwill and
brands, is recognised in profit or loss as incurred.
iii. Cash generating unit (CGU)
A cash generating unit is the smallest group of assets that independently
generates cash flow and whose cash flow is largely independent of the cash
flows generated by other assets
iv. Amortisation
Amortisation is calculated to write off the cost of intangible assets less
their estimated residual values using the straight-line method over their
estimated useful lives, and is generally recognised in profit or loss.
Goodwill is not amortised.
The estimated useful lives for current and comparative periods are as follows:
- patents: 3-20 years
- developed technology: 15 years
Amortisation methods, useful lives and residual values are reviewed at each
reporting date and adjusted if appropriate.
Financial liability: loans
On initial recognition, external loans are measured at fair value plus
directly attributable transaction costs. On subsequent measurement, external
loans are measured at amortised cost under the effective interest rate method.
The effective interest rate method is a method of calculating the amortised
cost of a financial liability and allocating the interest expense over the
relevant period. The calculation of the effective interest rate takes into
account the estimated cash flows which consider all the contractual terms of
the financial instrument, including any embedded derivatives which are not
subject to separation.
Financial liability: Put Options
Where a Put Option with non-controlling shareholders exists on their equity
interests, a liability for the fair value of the exercise price of the option
is recognised. The corresponding entry under the present access method is
recognised in Other Equity. As required by IFRS, Oxford Biomedica has chosen
to apply an accounting policy, to be applied consistently for all put
liabilities that, subsequent to initial recognition, changes in fair value of
the put liability will be recognised in equity.
The value of the put liability is determined using a Monte Carlo simulation
which calculates the expected future exercise value of the put option, taking
into consideration Oxford Biomedica Solutions' forecasted cash flows over the
period up until the expected exercise date along with the expected volatility
of those cash flows over that same period. The expected future exercise value
is then discounted to the present using a discount rate in order to capture
the counter party risk of the expected payment. The discount rate may be
impacted by economic and market factors as well as changes to the risk free
rate of return which impacts debt borrowing rates.
Judgements
Estimations
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are discussed below. The nature of estimation means
that actual outcomes could differ from those estimates.
Percentage of completion of bioprocessing batch revenues
Bioprocessing of clinical/commercial product for partners is recognised on a
percentage of completion basis over time as the processes are carried out.
Progress is determined based on the achievement of verifiable stages of the
bioprocessing process. Revenues are recognised on a percentage of completion
basis and as such require judgement in terms of the assessment of the correct
stage of completion including the expected costs of completion for that
specific bioprocessing batch. The value of the revenue recognised and the
related contract asset raised with regards to the bioprocessing batches which
remain in progress at period end is £9,207,000. If the assessed percentage of
completion was 10 percentage points higher or lower, revenue recognised in the
period would have been £920,700 higher or lower.
Percentage of completion of fixed price process development revenues
As it satisfies its performance obligations the Group recognises revenue and
the related contract asset with regards to fixed price process development
work packages. Revenues are recognised on a percentage of completion basis and
as such require judgement in terms of the assessment of the correct percentage
of completion for that specific process development work package. The value of
the revenue recognised and the related contract asset raised with regards to
the work packages which remain in progress at period end is £3,972,000. If
the assessed percentage of completion was 10 percentage points higher or
lower, revenue recognised in the period would have been £397,000 higher or
lower.
Provision for out of specification bioprocessing batches
Bioprocessing of clinical/commercial product for partners is recognised on a
percentage of completion basis over time as the processes are carried out.
Progress is determined based on the achievement of verifiable stages of the
process.
As the Group has now been bioprocessing product across a number of years, and
also in a commercial capacity, the Group has assessed the need to include an
estimate of bioprocessed product for which revenue has previously been
recognised and which may be reversed should the product go out of
specification during the remaining period over which the product is
bioprocessed. In calculating this estimate the Group has looked at historical
rates of out of specification batches across the last five years and has
applied the percentage of out of specification batches to total batches
produced across the assessed period to the revenue recognised on batches which
have not yet completed the bioprocessing process at period end. The Group
makes specific provisions for product batches where it is considered that the
average overall historical failure rate does not adequately cover the
perceived risk of revenue recognised on those specific batches having to be
subsequently reversed.
This estimate, based on the historical average percentage as well as certain
specific provisions, may be significantly higher or lower depending on the
number of bioprocessing batches actually going out of specification in future.
If the historical average percentage had been 10% higher or lower, the
estimate would be £100,000 higher or lower. The estimate will increase or
decrease based on the number of bioprocessing batches undertaken, the
percentage of completion of those bioprocessing batches, and the number of
batches which go out of specification over the assessment period.
Consequently, bioprocessing revenue of £1.0 million (31 December 2021: £0.7
million) has not been recognised during the six months ended 30 June 2022 with
the corresponding credit to contract liabilities. This revenue will be
recognised as the batches complete bioprocessing.
Amortisation of intangibles assets (developed technology)
The estimated useful life of developed technology acquired by the Group is 15
years as the Group expects the technology to generate cash flows for a total
of 15 years. The estimate of 15 years is based on management's experience of
the time period over which the technology acquired as part of the acquisition
of Oxford Biomedica Solutions will become fully obsolete. Over time as the
platform technology is improved, parts of the technology become obsolete as
they are superseded by new technology until after 15 years the original
technology is expected to have been fully replaced by newer/improved
technology.
If the estimated useful life of the assets had been 10 years, the estimated
amortisation for the six months ended 30 June 2022 would be £1.2 million
higher (2021: £nil); whilst, if the estimated useful life of the assets had
been 20 years, the estimated amortisation for the six months ended 30 June
2022 would be £0.6 million lower (2021: £nil).
4. Segmental analysis
The chief operating decision-makers have been identified as the Senior
Executive Team (SET), comprising the Executive Directors, Chief Technical
Officer, Chief Medical Officer, Chief Scientific Officer, Chief Business and
Corporate Development Officer, Chief Operations Officer, General Counsel,
Chief People Officer and Chief Information Officer. The SET monitors the
performance of the Group in two business segments:
(i) Platform - this segment consists of the revenue generating
bioprocessing and process development activities undertaken for third parties.
It also includes internal technology developments and the costs involved in
developing platform related intellectual property;
(ii) Product - this segment consists of the clinical and
preclinical development of in vivo and ex-vivo gene and cell therapy products
which are owned by the Group.
Revenues, other operating income and operating profit/(loss) by segment
Operating EBITDA and Operating profit/(loss) represent the Group's measures of
segment profit & loss as they are a primary measure used for the purpose
of making decisions about allocating resources and assessing performance of
segments.
Platform Product Total
H1 2022 £'000 £'000 £'000
Revenue 64,024 3 64,027
Other operating income 925 - 925
Operating EBITDA¹ (780) (5,005) (5,785)
Depreciation, amortisation and share based payment (12,350) (984) (13,334)
Change in fair value of available-for-sale asset (38) - (38)
Operating loss (13,168) (5,989) (19,157)
Net finance cost (8,227)
Loss before tax (27,384)
Platform Product Total
H1 2021 £'000 £'000 £'000
Revenue 81,202 50 81,252
Other operating income 441 - 441
Operating EBITDA¹ 31,216 (4,124) 27,092
Depreciation, amortisation and share based payment (6,777) (658) (7,435)
Change in fair value of available-for-sale asset 1 - 1
Operating profit/(loss) 24,440 (4,782) 19,658
Net finance cost (441)
Profit before tax 19,217
(1) Operating EBITDA (Earnings Before Net Finance Costs, Tax, Depreciation,
Amortisation, fair value adjustments of assets at fair value through profit
and loss, and Share Based Payments) is a non-GAAP measure often used as a
surrogate for operational cash flow as it excludes from operating profit or
loss all non-cash items, including the charge for share options. A
reconciliation to GAAP measures is provided on page 12.
Other operating income of £0.9 million (2021: £0.4 million) includes grant
income of £0.4 million (2021: £0.4 million) and £0.5m (2021: £nil) of
income for the provision of support services to Homology Medicines and is
included within the Platform segment. No grant income to fund clinical and
preclinical development is included within the Product segment.
Costs are allocated to the segments on a specific basis as far as is possible.
Costs which cannot readily be allocated specifically are apportioned between
the segments using relevant metrics such as headcount or direct costs.
The acquired business of Oxford Biomedica Solutions has been included in the
Platform Segment.
Disaggregation of revenue
Revenue is disaggregated by the type of revenue which is generated by the
commercial arrangement. Revenue shown in the table below is denominated in
sterling and is generated in the UK and US.
For the six months ended 30 June
Platform Product Total
2022 £'000 £'000 £'000
Bioprocessing/Commercial development 57,301 3 57,304
Licence fees, Milestones & Royalties 6,723 - 6,723
Total 64,024 3 64,027
Platform Product Total
2021 £'000 £'000 £'000
Bioprocessing/Commercial development 75,559 50 75,609
Licence fees, Milestones & Royalties 5,643 - 5,643
Total 81,202 50 81,252
Revenue by geographical location
Revenue by customer location 30 June 30 June
2022 2021
£'000 £'000
Europe 43,160 70,252
Rest of world 20,867 11,000
Total 64,027 81,252
In the first half of 2022 AstraZeneca and Homology Medicines generated more
than 10% of the Group's revenue.
5. Basic earnings and diluted earnings per ordinary share
The basic loss per share of 27.29p (2021: 21.92p profit) has been calculated
by dividing the profit for the period attributable to the owners of the
company by the weighted average number of shares in issue during the six
months ended 30 June 2022, being 93,371,295 (2021: 82,430,408).
As the Group made a loss in the period, there were no potentially dilutive
options therefore there is no difference between the basic loss per ordinary
share and the diluted loss per ordinary share. The diluted earnings per
share in the prior period was 21.36p which was calculated by dividing the
earnings for the period by the weighted average number of shares in issue
during the period after adjusting for the dilutive effect of the share options
outstanding at 30 June 2021 (84,599,862).
6. Finance Costs
Finance costs of £8.3 million (2021: £0.5 million) consists of loan interest
(£2.3 million), foreign exchange losses relating to loans (£4.9 million) and
lease liability interest recognised in accordance with IFRS 16 (Leases)
(£1.1million).
Goodwill Developed technology Patents Total
Note £'000 £'000 £'000s £'000
Cost
At 1 January 2022 - - 5,636 5,636
Acquisitions through business combinations 20 14,386 102,869 - 117,255
Retirements - - (3,825) (3,825)
Effects of movements in exchange rates 1,118 7,995 - 9,113
At 30 June 2022 15,504 110,864 1,811 128,179
Amortisation and impairment
At 1 January 2022 - - 5,584 5,584
Charge for the period - 2,309 11 2,320
Effects of movements in exchange rates - 153 - 153
Retirements - - (3,797) (3,797)
At 30 June 2022 - 2,462 1,798 4,260
Net book amount at 30 June 2022 15,504 108,402 13 123,919
Net book amount at 31 December 2021 - - 52 52
7. Intangible assets & goodwill
The Cash-generating unit (CGU) identified is the manufacturing and process
development operation of Oxford Biomedica Solutions located at the Bedford,
Massachusetts site in the United States. The CGU was not tested for impairment
because there were no impairment indicators at 30 June 2022.
Due to a tax deduction not being available on a portion of the developed
technology intangible asset, a deferred tax liability of £7.3 million was
recognised at the acquisition date, with the liability expected to unwind in
line with the 15 year useful life of the developed technology intangible
asset.
8. Property, plant & equipment
Freehold Leasehold Office equipment Bio-processing and Right-of-use assets Total
property Improve-ments and computers Laboratory equipment
£'000 £'000 £'000 £'000 £'000s £'000
Cost
At 1 January 2022 25,409 28,145 10,663 29,505 18,411 112,133
Additions at cost 102 527 660 4,719 3,609 9,617
Acquisitions through business combinations - 22,747 788 10,436 24,974 58,945
Disposals - - (45) (127) - (172)
Change of Estimate - - - - 2,373 2,373
Effects of movements in exchange rates - 1,768 61 871 1,941 4,641
At 30 June 2022 25,511 53,187 12,127 45,404 51,308 187,537
Depreciation
At 1 January 2022 12,652 6,226 6,863 12,519 4,145 42,405
Charge for the period 1,020 2,323 1,102 2,339 2,033 8,817
Effects of movements in exchange rates - 10 13 79 63 165
Disposals - (27) (89) - (116)
At 30 June 2022 13,672 8,559 7,951 14,848 6,241 51,271
Net book amount at 11,839 44,628 4,176 30,556 45,067 136,266
30 June 2022
Net book amount at 31 December 2021 12,757 21,919 3,800 16,986 14,266 69,728
9. Assets held at fair value through profit and loss
Reconciliation of opening and closing balances:
30 June 31 December
2022 2021
£'000 £'000
At 1 January 74 239
Change in fair value of available-for-sale asset (38) (165)
At 30 June/31 December 36 74
The Asset at fair value through profit & loss under IFRS 5 is represented
by the equity held in Orchard Therapeutics Plc, a company listed on the Nasdaq
stock exchange. The financial asset is classified as level 1 in the
hierarchy.
10. Inventory
30 June 31 December
2022 2021
£'000 £'000
Raw materials 13,853 9,521
Inventory 13,853 9,521
Inventories constitute raw materials held for bioprocessing, research and
development purposes.
During 2022, the Group wrote down £304,000 (2021: £290,000) of inventory
which is not expected to be used in production or sold onwards.
11. Trade and other receivables
Current 30 June 31 December
2022 2021
£'000 £'000
Trade receivables 18,592 22,398
Other receivables 2,955 365
Other tax receivable 7,098 5,227
Prepayments 3,942 3,210
Total trade and other receivables 32,587 31,200
Non-current 30 June 31 December
2022 2021
£'000 £'000
Other receivables 3,605 3,605
12. Cash and cash equivalents
30 June 31 December
2022 2021
£'000 £'000
Cash at bank and in hand 118,510 108,944
13. Trade and other payables
30 June 31 December
2022 2021
£'000 £'000
Trade payables 9,487 5,260
Other taxation and social security 1,888 1,899
Accruals 14,908 11,899
Total trade and other payables 26,283 19,058
14. Leases
The Group leases many assets including land and buildings, equipment and IT
equipment. Information about leases for which the Group is a lessee is
presented below:
Right-of-use assets
Property Bioprocessing and Office equipment Total
£'000 Laboratory and computers £'000
equipment £'000
£'000
Balance at 1 January 2022 11,450 2,780 36 14,266
Additions 3,624 - - 3,624
Acquisitions through business combinations 24,410 - - 24,410
Depreciation charge for the period ( 1,633 ) ( 372 ) ( 27 ) ( 2,032 )
Change in Estimate 2,357 - - 2,357
Effects of movements in exchange rates 2,442 - - 2,442
Balance at 30 June 2022 42,650 2,408 9 45,067
The additions in the period related to the Wallingford lease entered into in
the first half of 2022 (2021: £37,000 manufacturing equipment assets).
Lease liabilities
30 June 2022
£'000
Maturity analysis - contractual undiscounted cash flows
Less than one year 4,926
One to five years 17,532
More than five years 23,026
Total undiscounted cash flows at 30 June 2022 45,484
30 June 2022
£'000
Lease liabilities included in the Statement of Financial Position
Current 2,046
Non-current 37,046
Total lease liabilities at 30 June 2022 39,092
Amounts recognised in the statement of comprehensive income
30 June 2022
£'000
Interest on lease liabilities 1,043
Expense relating to short-term leases -
Amounts recognised in the statement of cash flows
30 June 2022
£'000
Total cash outflow for leases 1,484
15. Provisions
The dilapidations provisions relate to the anticipated costs of restoring the
leasehold Oxbox, Yarnton, Corporate office and Windrush Innovation Centre
properties in Oxford, UK, to their original condition at the end of the lease
terms in 2024 and 2028 respectively, discounted using the rate per the Bank of
England nominal yield curve. The equivalent rate was used in 2021. The
provisions will be utilised at the end of the leases if they are not renewed
In 2022 the Group signed a lease on a new Warehouse in Wallingford, UK that is
near its other sites. The new facility is 28,000 sq. ft. (2,601 sqm). This new
facility has estimated restoration costs of £255,000.
16. Loans
On 10 March 2022 the Group drew down an $85 million loan facility with Oaktree
Capital Management under a 1 year facility agreement maturing in 2023 with a
nominal interest rate on the loan of 8.5%.
30 June 31 December
2022 2021
£'000 £'000
Balance at 1 January - -
New loan 62,661
Interest accrued 2,286 -
Interest paid (1,732) -
Foreign exchange movement 4,925 -
Amortised fees 265 -
Closing balance 68,405 -
17. Put option liability
30 June 31 December
2022 2021
£'000 £'000
Balance at 1 January - -
Recognised at fair value 42,026 -
Revaluation (740) -
Closing balance 41,286 -
On 10(th) March 2022, the Group recognised a put option liability to acquire
the remaining 20% of Oxford Biomedica Solutions that it doesn't already own
from Homology Medicines. The fair value of the option at the date of
acquisition was assessed to be £42 million.
At 30(th) June 2022 the fair value of the Put option liability was £41.3
million (Dec 2021: £nil). The lower liability valuation was due to increases
in borrowing rates over the period to 30 June 2022 leading to a higher
discount rate applied at 30 June 2022 and a resultant lower put option
liability.
18. Share capital and Share premium
At 31 December 2021 and 30 June 2022 Oxford Biomedica had an issued share
capital of 86,175,055 and 96,074,841 ordinary 50 pence shares respectively.
23,242 shares were created as a result of the exercise of options by employees
during the period.
Between January and March 2022, the Group issued 9,876,544 new ordinary shares
at a price of £8.10 per share. Gross proceeds from the placing were £80.0
million; net proceeds were £77.0 million.
19. Cash flows from operating activities
Reconciliation of operating (loss)/profit to net cash (used in)/generated from
operations
Six months ended Six months ended
30 June 2022 30 June 2021
£'000 £'000
Continuing operations
(Loss)/profit before tax (27,384) 19,217
Adjustment for:
Depreciation 8,816 6,037
Amortisation of intangible assets 2,320 11
Loss on disposal of property, plant and equipment 27 (10)
Loss on disposal of intangible assets 23 -
Amortisation of loan fees 283 -
Net finance costs 8,227 441
Charge in relation to employee share scheme 2,202 1,343
Change in fair value of available-for-sale asset 38 (1)
Changes in working capital:
(Decrease)/increase in contract assets and trade and other receivables (26,365) 11
Increase in trade and other payables 7,282 3,581
Decrease in contract liabilities and deferred income (6) (7,871)
Increase in inventories (532) (1,554)
Net cash (used in)/generated from operations (25,069) 21,205
20. Acquisition of subsidiary
On 10 March 2022, the Group acquired 74% of the shares and voting interests in
Oxford Biomedica Solutions LLC. As a result, the Group's equity interest
granted it control of Oxford Biomedica Solutions. Immediately following the
acquisition, the Group acquired a further 6% interest in Oxford Biomedica
Solutions (refer note 21).
Included in the identifiable assets and liabilities acquired at the date of
acquisition of Oxford Biomedica Solutions
are inputs, production processes and an organised workforce. The Group has
determined that together the acquired inputs and processes significantly
contribute to the ability to create revenue. The Group has concluded that the
acquired inputs and processes constitute a business.
A. Consideration Transferred
The following table summarises the acquisition date fair value of each major
class of consideration transferred.
£'000
Cash 99,206
Total consideration transferred: 99,206
B. Acquisition related expenses:
The Group incurred acquisition related legal and due diligence expenses of
£5.1 million which is included in Administrative
expenses.
C. Identifiable assets acquired and liabilities assumed:
The following table summarises the recognised amounts of assets acquired and
liabilities assumed at the date of acquisition.
£'000
Property plant and equipment 58,945
Intangible assets 102,869
Inventory 3,476
Prepaid expenses 229
Lease liabilities (24,974)
Deferred tax liabilities (7,307)
Total identifiable net assets acquired: 133,238
The valuation techniques used for measuring the fair value of material assets
acquired were as follows.
Assets acquired Valuation technique
Property plant and equipment Market comparison technique and cost technique - The valuation model considers
market prices for similar items when they are available, and depreciated
replacement cost when appropriate.
Depreciated replacement cost reflects adjustments for physical deterioration
as well as
functional and economic obsolescence
Intangible assets Multi-period excess earnings method - The multi-period excess earnings method
considers the present value of net cash flows expected to be generated by the
customer relationships, by excluding any cash flows related to contributory
assets.
Inventory Market comparison - To determine the fair value of the inventory, the Group
obtained current prices for each of the items making up the transferred
inventory.
Fair values measured on a provisional basis
If new information obtained within one year of the date of acquisition about
facts and circumstances that existed at the date of acquisition identifies
adjustments to the above amounts, or any additional provisions that existed at
the date of acquisition, then the accounting for the acquisition will be
revised.
D. Goodwill
Goodwill arising from the acquisition has been recognised as follows:
£'000
Consideration transferred 99,206
Fair value of non-controlling interests 48,418
Fair value of identifiable assets: (133,238)
Goodwill 14,386
The goodwill is attributable mainly to the skills and technical talent of
Oxford Biomedica Solutions' workforce. None of the goodwill recognised is
expected to be deductible for tax purposes.
21. Non-controlling interest ("NCI")
The following table summarises the information relating to the Group's
subsidiary that has material NCI:
2022 2021
£'000 £'000
NCI percentage 20% 0%
Non-current assets 185,736 -
Current assets 44,040 -
Non-current liabilities (525) -
Current liabilities (39,342) -
Net assets 189,909 -
Net assets attributable to NCI 37,982 -
Revenue 7,273 -
Loss (10,753) -
Other comprehensive income 13,801 -
Total comprehensive income 3,048 -
Loss allocated to NCI (2,151) -
Other comprehensive income allocated to NCI 2,760 -
Cash flows from operating activities (3,308) -
Cash flows from investment activities 37,672 -
Cash flow from financing activities (dividends to NCI: nil) 265 -
Net increase in cash and cash equivalents 34,629 -
22. Acquisition of Non-controlling interest
On 10 March 2022, the Group acquired an additional 6% interest in Oxford
Biomedica Solutions from Homology Medicines, increasing its ownership from 74%
to 80%, with Homology Medicines holding the remaining 20%. The carrying amount
of Oxford Biomedica Solutions' net assets in the Group's consolidated
financial statements on the date of the acquisition was £133.2 million.
£'000
Carry amount of NCI acquired 11,279
Consideration paid to NCI -
Increase in equity attributable to owners of the Company 11,279
The increase in equity attributable to owners of the Company comprised solely
an increase to retained earnings.
23. Capital commitments
At 30 June 2022, the Group had commitments of £4,752,000 for capital
expenditure for leasehold improvements, plant and equipment not provided in
the financial statements (Dec 2021 £3,974,000).
24. Related party transactions
Transactions for the six months ended Balance outstanding
30 June 2022 30 June 2021 30 June 2022 31 December 2021
£ '000s £ '000s £ '000s £ '000s
Sales of goods and services
Homology Medicines, Inc. 7,273 - 7,273 -
Purchase of services
Homology Medicines, Inc. 1,661 - 1,661 -
Other
Homology Medicines, Inc. - rental income 568 - 568 -
All outstanding balances with related parties are to be settled in cash within
six months of the reporting date. None of the balances is secured.
25. Statement of Directors' responsibilities
The Directors of Oxford Biomedica plc are set out on page 41 of this report.
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted for use in the
UK.
· the interim management report includes a fair review of the
information required by:
o DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
o DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
By order of the Board
Roch Doliveux
Chair of the Board and Interim Chief Executive Officer
15 September 2022
INDEPENDENT REVIEW REPORT TO OXFORD BIOMEDICA PLC
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2022 which comprises the Consolidated Statement of Comprehensive Income,
Consolidated Statement of Financial Position, Consolidated Statement of Cash
Flows, Statement of Changes in Equity Attributable to Owners of the Parent and
the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 is not prepared, in all
material respects, in accordance with IAS 34 Interim Financial Reporting as
adopted for use in the UK and the Disclosure Guidance and Transparency Rules
("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the
UK. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other
information contained in the half-yearly financial report and consider whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the Group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK-adopted international accounting standards
The directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
William Smith
for and on behalf of KPMG LLP
Chartered Accountants
2 Forbury Place
33 Forbury Road
Reading
RG1 3AD
15 September 2022
Shareholder Information
Doliveux
Chairman & Interim Chief Executive Officer) (th) Floor
Director until 27 May 2022)
Directors Financial adviser and joint broker
Roch Doliveux Peel Hunt
(Chair & Interim Chief Executive Officer) 7(th) Floor
100 Liverpool Street
John Dawson London EC2M 2AT
(Director until 27 May 2022)
Financial adviser and joint broker
Stuart Paynter J.P. Morgan Cazenove
(Chief Financial Officer) 60 Victoria Embankment
London
Stuart Henderson EC4Y 0JP
(Deputy Chairman and Senior Independent Director)
Financial and Corporate Communications
Michael Hayden Consilium Strategic Communications
(Non-executive Director) 85 Gresham St
London EC2V 7NQ
Siyamak Rasty
(Independent Non-executive Director) Registered Auditor
KPMG LLP
Heather Preston 2 Forbury place
(Independent Non-executive Director) 33 Forbury Road
Reading
Robert Ghenchev RG1 3AD
(Non-executive Director)
Solicitor
Kay Davies Covington & Burling LLP
(Independent Non-executive Director) 265 Strand
London WC2R 1BH
Catherine Moukheibir
(Independent Non-executive Director) Registrars
Link Group
Namrata P. Patel 10th Floor
(Independent Non-executive Director from 13 April 2022) Central Square
29 Wellington Street
Leeds LS1 4DL
Company Secretary and Registered Office
Natalie Walter
Windrush Court
Transport Way
Oxford OX4 6LT
Tel: +44 (0) 1865 783 000
Fax: +44 (0) 1865 783 001
enquiries@oxb.com
www.oxb.com (http://www.oxb.com)
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