OXFORD BIOMEDICA PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2018
OXFORD BIOMEDICA PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2018
Oxford, UK – 13 September 2018: 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 2018.
FINANCIAL HIGHLIGHTS
- Gross income growth of 118% to £36.0 million (H1 2017: £15.7 million)
- Operating EBITDA of £11.9 million compared to a loss of £2.1 million in H1 2017
- Licence income of £18.3 million recognised (due to Axovant and Bioverativ deals), segmented by Product (£10.2 million) and Platform (£8.1 million)
- Cash inflow, before financing activities, of £12.2 million compared to an outflow of £2.2 million in H1 2017
- Cash at 30 June 2018 was £44.0 million (31 December 2017: £14.3 million), reflecting significantly improved trading performance and placing to raise £20.5 million (gross)
- £3.0 million capital expenditure grant received from Innovate UK to support the UK’s efforts to produce viral vectors and ensure adequate supply to service expected demand
- Gross proceeds of £20.5 million raised from new and existing investors through a placing to fund the proposed expansion and fit-out of the additional bioprocessing facilities at a new facility in Oxford
- Share consolidation completed to reduce the number of issued ordinary shares in the Oxford BioMedica by a factor of 50 whilst increasing the trading price of each Existing Ordinary Share proportionally
OPERATIONAL HIGHLIGHTS (including post period-end events)
Novartis’ commercialised product Kymriah™
- The collaboration with Novartis continues to progress well with Kymriah’s approval by the Federal and Drug Administration (FDA) to treat adult patients with relapsed and refractory (r/r) B-cell diffuse large B-cell lymphoma (DLBCL), the second indication for this transformative and innovative therapy in the US
- The European Commission (EC) and Health Canada also approved Novartis’ Kymriah for the treatment of children and young adults with r/r B-cell acute lymphoblastic leukaemia (ALL) and adult patients with r/r/ DLBCL
- NHS England announced that Novartis’ Kymriah will be made available to children and young adults in England
Leading LentiVector® delivery platform for gene and cell therapy partnerships
- $105.0 million collaboration and licence agreement completed with Bioverativ (now part of Sanofi) to access Oxford BioMedica’s LentiVector® platform and manufacturing technologies in the field of haemophilia gene therapy
- Partnership formed with the UK Cystic Fibrosis Gene Therapy Consortium, Boehringer Ingelheim and Imperial Innovations to develop a novel inhaled gene therapy treatment for cystic fibrosis
Progress with proprietary product development
- $842.5 million exclusive worldwide agreement signed with Axovant Sciences for OXB-102 (now known as AXO-Lenti-PD) for the treatment of Parkinson’s disease
- Phase I/II clinical study for OXB-102 (now known as AXO-Lenti-PD) will start before the end of 2018
- The Group is continuing to allocate appropriate value enhancing investment in its proprietary programmes. Discussions are ongoing for further out-licencing or spin-out of its proprietary products
Commenting on the Group’s interim results, John Dawson, Oxford BioMedica’s Chief Executive Officer, said: “Oxford BioMedica has had a transformative year so far. The company’s significant progress is highlighted by the ongoing success of our collaboration with Novartis for Kymriah, as well as a number of new partnership agreements. Specifically, the exclusive worldwide licence agreement signed with Axovant for OXB-102, worth up to $842.5 million, successfully executes on our pre-stated strategy to externalise product development beyond the end of the pre-clinical phase. Following these developments, we are greatly encouraged by the outlook for the full year and with the finances now in place, we are able to accelerate our capacity expansion plans to meet future demand.”
Conference call for analysts:
A briefing for analysts will be held at 12:00pm BST on 13 September 2018 at 85 Gresham Street, London, EC2R 7HE. There will be a simultaneous live conference call with Q&A and the presentation will be available on the Group’s website at www.oxfordbiomedica.co.uk.
Please visit the website approximately 10 minutes before the conference call to download the presentation slides. Conference call details:
Participant UK dial-in: 08003767922
Participant US dial-in: 18669661396
International dial-in: +44 (0) 2071 928000
Participant code: 5970816
An audio replay file will be made available shortly afterwards via the Group's website: www.oxfordbiomedica.co.uk
For further information, please contact:
Oxford BioMedica plc: Tel: +44 (0)1865 783 000
John Dawson, Chief Executive Officer
Stuart Paynter, Chief Financial Officer
Financial PR Enquiries: Tel: +44 (0)20 3709 5700
Consilium Strategic Communications
Mary-Jane Elliott/Matthew Neal/Olivia Manser/Laura Thornton
Peel Hunt (Joint Corporate Brokers): Tel: +44 (0)20 7418 8900
James Steel
Dr. Christopher Golden
WG Partners (Joint Corporate Brokers): Tel: +44 (0)20 3705 9321
David Wilson
Claes Spång
OVERVIEW
Oxford BioMedica has made significant progress during 2018. In particular, the Group’s collaboration with Novartis has performed strongly with the launch of Kymriah in the United States for the paediatric and young adult patients with relapsed and refractory (r/r) B-cell acute lymphoblastic leukaemia (ALL) and the supplemental Biologics Licence Application (BLA) approval by the US FDA to treat adult patients with (r/r) B-cell diffuse large B-cell lymphoma (DLBCL).
In February 2018, Oxford BioMedica entered into an agreement worth up to $105.0 million with Bioverativ (now part of Sanofi group) to access Oxford BioMedica’s LentiVector® platform and manufacturing technologies in the field of haemophilia gene therapy. In June 2018, Oxford BioMedica entered into an exclusive licence agreement for OXB-102 (renamed AXO-Lenti-PD) for the treatment of Parkinson’s disease with Axovant, worth up to $842.5 million. In August 2018, the Group also established a partnership with the UK Cystic Fibrosis Gene Therapy Consortium, Boehringer Ingelheim and Imperial Innovations to develop a novel gene therapy treatment for cystic fibrosis.
These agreements underline the value of the Group’s LentiVector® technology whilst the ongoing production revenues and future sales-based royalties underpin the Group’s strategy. In addition, the equity fundraise in March 2018 has provided the Group with the financial resources to increase its capacity with a new leasehold facility near the Windrush headquarters, which is expected to meet long-term demand for lentiviral vectors. As a result, Oxford BioMedica is well positioned to deliver against its strategic objectives as outlined in the 2017 Annual Report.
OPERATIONAL REVIEW
Novartis collaboration progress
Through 2017 and during 2018, Oxford BioMedica’s collaboration with Novartis has progressed well Kymriah (tisagenlecleucel, formerly CTL019) has successfully continued through the stages required for approval, and launch of the chimeric antigen receptor T cell therapy in the US, for the treatment of children and young adults with r/r ALL.
Additional indication and regulatory filings
The supplemental BLA for Novartis’ potential blockbuster product Kymriah was approved by the US FDA in May 2018 to treat adult patients with r/r DLBCL. The r/r DLBCL target patient population is considerably larger than Kymriah’s initial indication in r/r ALL.
Novartis also made a filing to the European Medicines Agency (EMA) in November 2017 for Kymriah to treat children and young adults with r/r ALL and adult patients with r/r/ DLBCL. The EMA granted accelerated assessment to the Marketing Authorisation Application (MAA) in January 2018. The European Commission (EC) and Health Canada approved Novartis’ Kymriah for the treatment of children and young adults with r/r ALL and adult patients with r/r/ DLBCL in August and September 2018 respectively.
In September 2018, NHS England announced that children and young adults in England will be able to receive Novartis’ Kymriah treatment for r/r ALL.
Novartis has also made, or is in the process of making submissions in 2018 to other countries including Australia and Japan.
Developing the LentiVector® platform
The Group is a pioneer and world leader in the field of gene and cell therapy, providing the lentiviral vector delivery system, the LentiVector® platform. The technology is established at commercial scale with three state-of-the-art, custom-built GMP clean rooms and laboratory facilities offering current and next generation LentiVector® platform bioprocessing capabilities, with capacity for in-house platform development work and current partners’ requirements. However, due to future demand and the growth of the bioprocessing market the Group is expanding its capacity. The successful equity fundraise in March 2018 has provided Oxford BioMedica with the funds for this to proceed.
Expansion of capacity
The Group has announced today that it has signed a lease on a new facility in Oxford that is near to its Windrush laboratories in Oxford, UK. The new facility is 84,000 sq. ft (7,800 sqm). The Group’s planned Phase I and Phase 2 expansion will fit out around 45,000 sq. ft (4,200 sqm) for four GMP clean room suites and two fill and finish suites as well as offices, warehousing and QC laboratories, with space available for future expansion. Once open the Group will have seven GMP suites in total. The new full-service site will allow the Group to exploit the immediate market opportunity, meet the expected long-term demand and secure Oxford BioMedica’s leading position.
Innovate UK collaboration
In January 2018, Oxford BioMedica was awarded a £3.0 million grant by the UK’s innovation agency, Innovate UK, to support the UK’s efforts to produce viral vectors to ensure adequate supply to meet future supply.
Product development
The LentiVector® gene delivery platform underpins the Group’s partnering business and is the starting point for its proprietary products.
During the period, the Group continued to prepare the priority programmes for clinical studies, and to pursue potential financial partnership arrangements. In June 2018, the Group entered into an exclusive worldwide licensing agreement with Axovant Sciences to develop and commercialise OXB-102 (now known as AXO-Lenti-PD) for Parkinson’s disease, worth up to $842.5 million. This agreement with Axovant successfully executes on Oxford BioMedica’s pre-stated strategy to externalise product development beyond the end of the pre-clinical phase.
During the second half of 2018, the Group completed the regulatory filings for the planned Phase I/II study. This included the manufacture of a second batch of the vector to ensure sufficient supplies for the study and to prepare the clinical study centres in Cambridge and London, UK, for the initiation of the study. The Phase I/II study for AXO-Lenti-PD will start before the end of 2018.
A variety of potential partnership arrangements have been explored for the Group’s proprietary programmes, including out-licencing or spin out opportunities. The Board is determined to ensure that the Group, and therefore shareholders, retains an appropriate share in the upside potential of these programmes. As such, the Group will continue to invest strategically in these programmes to maintain their momentum and to continue to enhance their value.
Partnering progress
The strategic partnerships with Orchard Therapeutics, Immune Design and GC LabCell are making good progress During the first half of 2018 the Group continued its activities to further grow its portfolio of strategic collaborations with the addition of Bioverativ (now part of Sanofi group) and post period-end the UK Cystic Fibrosis Gene Therapy Consortium, Boehringer Ingelheim and Imperial Innovations partnership. The Group’s involvement with Novartis’ Kymriah has attracted additional interest from a range of potential partners and, as a result, the Group is conducting feasibility studies and discussions with a number of companies.
Corporate and organisational development
During the first half of 2018, Oxford BioMedica successfully completed an equity fundraise for capacity expansion and fit out. In addition, the Group successfully completed a share capital consolidation in May 2018 to make the shares more attractive to a broader range of institutional investors and other members of the investing public both overseas and in the UK.
To support the increased activities of the Group, the Senior Management Team was augmented during the first half of 2018, with the appointment of a Chief Operations Officer, a Chief People Officer and a Chief Project & Performance Officer. In addition, a new apprentice joined in January 2018 on an apprenticeship programme that is part of the Group’s collaboration with the Government and other life science organisations to help develop the sector’s next generation of workers. Peter Nolan retired from his role as Chief Business Officer and stepped down from the Board on 2 July 2018.
In light of the Group’s significant growth opportunities, expenditure has been increasing throughout 2018 in platform research, commercial development and strengthening of the management team and quality and compliance infrastructure. As a result, the Group expects to have a headcount of approximately 425 by the end of 2018, an increase of 32% on the prior year.
OUTLOOK
Oxford BioMedica has made considerable progress during the first half of 2018 and the Group intends to capitalise on this positive momentum in the coming months.
With the ongoing success of its Novartis collaboration validating its LentiVector® platform and partnering credentials, the Group expects its technology leadership to boost its business development activities. The Group intends to expand its portfolio of collaborations, and to attract third-party investment to accelerate the clinical development of its wholly-owned proprietary products.
Oxford BioMedica’s progress during 2018 demonstrates its leading industry position. With the Group’s collaborations supporting its continued growth, Oxford BioMedica is ideally positioned to deliver value to shareholders as a world-leading gene and cell therapy business.
Financial Review
The first half of 2018 has seen significant commercial achievements by the Group with the signing of the Bioverativ and Axovant agreements announced in February and June 2018 respectively, alongside operational achievements including growth in bioprocessing and commercial development income. The key financial indicators used by the Board are set out in the table below and the highlights are:
- Gross income (£36.0 million) increased by 118% over H1 2017 (£16.5 million), driven by £20.6 million worth of licence income & grants. This was made up almost entirely of upfront receipts recognised on the signing of the Bioverativ and Axovant agreements. Bioprocessing and commercial development income was up by 12% on the prior year,
- Operational losses (Operating EBITDA, EBIDA and the operating loss) incurred in H1 2017 turned into significant profits of £11.9 million, £11.9 million and £9.4million respectively,
- Cash generated from operations of £18.3 million far exceeded the £1.3 million deployed in H1 2017 as a result of the Bioverativ and Axovant licence upfronts received,
- Capital expenditure increased from £1.0 million in H1 2017 to £6.0 million in H1 2018 as planned as a result of assets purchased as part of the proposed capacity expansion project, the cost of which was partly offset by a £3.0 million Innovate grant for 50% of the cost,
- Cash inflow before interest and the R&D tax credit increased from an outflow of £2.2 million in H1 2017 to an inflow of £12.2 million,
- Cash at 30 June 2018 was £44.0 million compared to £10.2 million at 30 June 2017.
KEY FINANCIAL INDICATORS (£ m) | H1 2018 | H1 2017 | |||
Gross income1 | Bioprocessing/commercial development | 15.4 | 13.7 | ||
Licence fees, incentives, grants | 20.6 | 2.8 | |||
Total | 36.0 | 16.5 | |||
Operating EBITDA2 | 11.9 | (2.1 | ) | ||
EBIDA3 | 11.9 | 0.4 | |||
Operating profit/(loss) | 9.4 | (2.2 | ) | ||
Cash generated from/(used in) operations4 | 18.3 | (1.3 | ) | ||
Capital expenditure | (6.0 | ) | (1.0 | ) | |
Cash inflow/(outflow) before interest and R&D tax credit | 12.2 | (2.2 | ) | ||
Period end cash | Cash | 44.0 | 10.2 | ||
Loan | (38.8 | ) | (33.6 | ) | |
Net cash/(debt) | 5.2 | (23.4 | ) | ||
Headcount | Period end | 364 | 288 | ||
Average | 352 | 280 |
- Gross income is the aggregate of revenue and other operating income.
- Operating EBITDA (Earnings Before Interest, Tax, Depreciation, Amortisation, revaluation of investments 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.
- EBIDA is an internal measure used by the Group, defined as Operating EBITDA with the R&D tax credit included. The Board refers to EBIDA periodically as the R&D tax credit is, in essence, a subsidy or grant which offsets the Group's R&D expenditure.
- Net cash generated from operating activities after deducting capital expenditure.
Gross income
Gross income – the aggregate of Revenue and Other Operating Income - was £36.0 million in H1 2018, 118% above the £16.5 million in H1 2017.
£m | H1 2018 | H1 2017 |
Revenue | 35.3 | 15.7 |
Other Operating Income | 0.7 | 0.8 |
Gross income | 36.0 | 16.5 |
Note - Other Operating Income in 2017 includes process development income arising from the October 2014 Novartis collaboration, as well as grant income during both years.
The main contributor to growth has been the upfront income from licence fees received under the Bioverativ and Axovant licence and development agreements signed in February and June 2018.
Revenues generated from bioprocessing clinical and commercial batches for Novartis and Orchard Therapeutics were slightly up, whilst commercial development revenues were significantly higher in H1 2018 than H1 2017, with the increase driven by development activity for Novartis and Orchard Therapeutics.
Operating EBITDA/EBIDA
£m | H1 2018 | H1 2017 | ||
Gross income | 36.0 | 16.5 | ||
Cost of sales and related production costs(1) | (10.8 | ) | (8.1 | ) |
R&D and other costs(1) | (13.3 | ) | (10.5 | ) |
Operating EBITDA(2) | 11.9 | (2.1 | ) | |
R&D tax credit | - | 2.5 | ||
EBIDA(3) | 11.9 | 0.4 |
(1) excluding depreciation, amortisation and share option charge
(2) Operating EBITDA is defined as Earnings Before Interest, Tax, Depreciation, Amortisation, Revaluation of investments and share based payments
(3) Operating EBITDA plus R&D tax credit
The aggregate of costs excluding depreciation, amortisation and other non-cash items in H1 2018 was £24.1 million, compared with £18.6 million in H1 2017. The growth in cost of sales and related production costs in H1 2018 which, at £10.8 million, was 33% higher than the £8.1 million in H1 2017, was driven by the growth in bioprocessing gross income, as well as the growth in production headcount as the Group geared up for the commercial launch of Kymriah in August 2017. R&D and other costs were 27% higher reflecting both increased headcount and increased commercial and technical project-related R&D costs. Product related R&D spend remained broadly in line with the prior year. Increased administrative costs due to additional headcount and increased spend was offset by a forex gain in H1 2018 (forex loss in H1 2017).
As a result of the higher gross income due to the Axovant and Bioverativ licences, the operating EBITDA profit in H1 2018 of £11.9 million was £14.0 million better than the £2.1 million loss in H1 2017.
The table below shows the costs by type of expenditure (excluding depreciation, amortisation and other non-cash items):
£m | H1 2018 | H1 2017 |
Raw materials, consumables and other external bioprocessing costs | 5.4 | 3.7 |
Manpower-related | 11.6 | 8.4 |
External R&D expenditure | 3.4 | 2.0 |
Other costs | 3.7 | 4.5 |
24.1 | 18.6 |
Raw materials, consumables and other external bioprocessing costs were higher due to an increase in the number of batches bioprocessed, as well as higher material and subcontracted bioprocessing spend. Manpower related costs are higher due to average employee numbers increasing from 280 to 352. External R&D expenditure was higher due to increased commercial customer and technical project related spend. Other costs are lower due to a forex loss of £0.4 million suffered in the first half of 2017 as compared to a forex gain of £0.4 million in H1 2018, both due to movements of sterling against the dollar.
Operating loss and net loss
£m | H1 2018 | H1 2017 | ||
Operating EBITDA | 11.9 | (2.1 | ) | |
Depreciation, amortisation and share option charge | (2.5 | ) | (2.4 | ) |
Revaluation of equity investments | - | 2.3 | ||
Operating profit/(loss) | 9.4 | (2.2 | ) | |
Interest and currency revaluation of loan | (4.2 | ) | (3.6 | ) |
R&D tax credit | - | 2.5 | ||
Net profit/(loss) | 5.2 | (3.3 | ) |
The significant improvement of £14.0 million seen in the operating EBITDA in H1 2018 compared to H1 2017 was reduced by a non-recurring gain in H1 2017 arising from the revaluation of the equity investment in Orchard Therapeutics. Depreciation, amortisation and the share option charge is comparable in both periods. This led to an operating profit of £9.4 million in H1 2018 compared with a loss of £2.2 million in H1 2017.
The interest charge of £4.2 million in H1 2018 was higher than that in H1 2017 due to a currency loss of £1.2m suffered in 2018 on the revaluation of the Oaktree loan. This compares to a £1.3 million currency gain during the first half of 2017 as sterling strengthened against the US dollar. The 2018 interest paid, at £3.0 million, was significantly lower than the £4.9 million paid in 2017 due to refinancing the Group’s debt facility.
The R&D tax credit in H1 2018 reduced to zero from £2.5 million in H1 2017. As the Group is now profitable it is unable to elect to receive the benefits of its R&D tax claim in cash.
As a consequence of the above, the net profit for H1 2018 was £5.2 million, £8.5 million greater than the loss suffered in H1 2017.
Segmental analysis
As noted at the 2017 full year, we have made a change to the business segments to better reflect the way the business is being managed by the Senior Executive Team. Internal technology projects to develop new potentially saleable technology, improve our current processes and bring development and manufacturing costs down, is now included in the ‘Platform’ segment, along with the revenue generating bioprocessing and process development activities for third parties. The other segment, ‘Product’, includes the costs of researching and developing new product candidates. Prior year figures have been adjusted to reflect the change.
H1 2018
£m | Platform | Product | Total |
Gross income | 25.3 | 10.7 | 36.0 |
Operating EBITDA | 4.4 | 7.5 | 11.9 |
Operating profit | 2.3 | 7.1 | 9.4 |
H1 2017
£m | Platform | Product | Total | ||
Gross income | 16.3 | 0.2 | 16.5 | ||
Operating EBITDA | 0.8 | (2.9 | ) | (2.1 | ) |
Operating profit/(loss) | 1.1 | (3.3 | ) | (2.2 | ) |
Both segments show a marked improvement in results mainly as a result of the licence fees recognised in both the Platform (Bioverativ and Axovant platform licences) and the Product (Axovant product licence) segments.
Cash flow
£m | H1 2018 | H1 2017 | |||
Operating profit/(loss) | 9.4 | (2.2 | ) | ||
Depreciation, amortisation and share option charge | 2.5 | 2.4 | |||
Revaluation of equity investments | - | (2.3 | ) | ||
Operating EBITDA | 11.9 | (2.1 | ) | ||
Working capital | 6.4 | 0.8 | |||
Cash used in operations | 18.3 | (1.3 | ) | ||
R&D tax credit received | - | - | |||
Net cash generated from/(used in) operating activities | 18.3 | (1.3 | ) | ||
Capital expenditure | (6.0 | ) | (1.0 | ) | |
Interest paid, less received | (2.2 | ) | (7.5 | ) | |
Cash inflow/(outflow) | 10.1 | (9.8 | ) |
As discussed above, the Operating EBITDA profit for the first six months of 2018 was £11.9 million, having increased £14.0 million from a £2.1 million loss in the same period of 2017. The working capital inflow of £6.4 million was much higher than in H1 2017, helped by the receipt of the Axovant licence fee and Innovate grant income of £3.0 million covering 50% of the cost of the H1 2018 capital expenditure. Capital expenditure of £6.0 million was £5.0 million higher than in 2016 due to assets purchased as part of the capacity expansion project due to start in the second half of 2018.
Interest paid of £2.2 million in H1 2018, was significantly lower than in H1 2017 due to the payment in 2017 of the cost of termination of the Oberland loan facility as well as the accrued interest which covered the period since initial drawdown of the loan.
Balance sheet
Non-current assets – Property, plant and equipment increased from £25.4 million to £29.3 million in the first six months of 2017 due to the £6.0 million worth of asset purchases as part of the planned capacity expan
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