Oxford Biomedica plc (OXB) Earnings Call Transcript

Good morning, and welcome to the Oxford Biomedica plc Investor Presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. I'd now like to hand over to the Oxford Biomedica plc team. Good morning.

Good morning, everyone. I'm Frank Mathias, CEO of the company. So thank you all of you for joining us today in this investor presentation, which is, I have to say, the first on this platform. So I'm joined by our Chief Financial Officer, Dr. Lucy Crabtree; and we have also with us our Chief Business Officer, Dr. Sebastien Ribault. I'm really delighted to present to you today, and we will be discussing our interim results for the first half of 2026. So I'm aware that probably at least some of you have seen our full briefing earlier this week, it was on Tuesday. So we will just provide you with a more short presentation, but this gives us more opportunity to be able to answer all your questions. So if you want to look for the full briefing, you can watch out on our website. If I can go to the next slide. This is -- yes, please consider the disclaimer as always, this is my next slide. We didn't show that on Tuesday. That's for those of you that might be less familiar, I wanted to start to show you a slide to make it clear what our company, OXB is doing and the crucial role we play in delivering life-changing therapies to patients. So this slide explain quickly what cell and gene therapy is and where OXB comes into the picture. So at the core, these therapies are about fixing diseases at their biological source. Instead of just treating symptoms, they aim to correct, they aim to replace, they aim to add what's not working inside the body cells. And here, OXB plays a central role by providing viral vectors, and you see this in the middle of the slide, which you can think as something like a delivery vehicle that safely brings new genetic instruction into the cells, be it for cell or be it for gene therapies. So if we move to the next slide. Thank you. This is before we start to go into more details about our performance, just to remember you that all the OXB fundamentals didn't change over the last months despite a lot of discussions that have taking place. What you see here that the strong -- we continue to have a very strong cell and gene therapy market opportunity. We see our pipeline to continue to mature and to diversify, and that's why we were able to reiterate our guidance we have given in the summer, meaning GBP 180 million to GBP 200 million for the full year 2026, and we expect a year-to-year growth of something between 25% and 30% for 2027. So this was mentioned in the summer, and this remains unchanged. We expect also at least double-digit EBITDA margin for the full year 2027. And we continue to have a strong ambition of achieving something around GBP 500 million by 2030, which is something at the current exchange level, something around $650 million. And all this is backed by our numbers that you can see on the right-hand side. We have more than 30 years of experience. We have currently 50 current clients and running something about 60 programs, having done more than 1,000 batches over the last years. So if we go to the next one, I would like to really highlight the strong commercial momentum we have been seeing during the first half of 2026, which continues to underpin indeed our confidence in our long-term growth ambitions. So we have continued, as you can see here, to expand our client base, signing 17 new clients during the first half year. This is more than 30% more over the full year 2025. You see on the bracket here that we are already at 21 on this slide. Indeed, we signed another client this week. So we are currently at 22 new clients. If we look at our pipeline value, which stands at $713 million at the half year, a 30% year-over-year increase towards last year. And under brackets, you see that we have now $660 million in the pipeline. This movement from the end of June to end of August is a very positive indicator indeed, and it reflects the successful conversion of our opportunities into signed client orders. And you see it in the next year, contracted orders by the end of June at GBP 97 million and at the end of August at already GBP 127 million. Since then, it has continued to increase also. Revenue backlog, GBP 193 million at the end of June, end of August, we were around GBP 200 million. So we continue to see maturation across our portfolio with now 9 programs having reached late-stage development or commercial stage by the half year. So as client program continue to progress to high-value stages, that provides further opportunities to deepen our relationship and support sustainable revenue growth. That's why we are so confident about our ambition of GBP 500 million in 2030. If we go to the next slide. Here, I would like to conclude my section with indeed this slide. OXB for me is in the right market. OXB offers the right services at the right time. And you see that our global footprint positions us to capture growth across the world's leading cell and gene therapy markets while giving access to our clients to an integrated network spanning the U.K., the U.S. and France. Today, that network includes 5 facilities in Oxford, 2 in the United States and 2 in France. Over the recent years, we have strengthened this footprint through our targeted investment in our existing sites as selective acquisitions that expand our capabilities and capacities in line with client demand. So in the U.S., the acquisition of Durham last year in North Carolina has, for sure, certainly strengthened our position in the world's largest cell and gene market, where we see strong demand now for commercial manufacturing. This was an acquisition of fully FDA-approved commercial site. Together with the site near Boston in Bedford, it gives us now a full end-to-end offering in the U.S. from process, from analytical development through to GMP manufacturing and commercial supply. We are also in Europe, as you know, with our sites in Oxford, Lyon and Strasbourg. This place us in the heart of one of the world's leading center for cell and gene therapy research and innovation, supported by a centralized approval process, as we all know, across European countries. Additionally, I have to mention that in August, we welcomed our new Chief Operating Officer, Eric Schmidhauser. Eric brings a wealth of CDMO experience to OXB and will lead our global operation as we continue our focus on operational excellence and delivery of a world-class service to our clients. And finally, on the right-hand side, you can see that the market -- the outsourced cell and gene therapy market outsourced to CDMOs is supposed to continue to grow, and that's why we are also so confident in our future. If we go to the next slide, which will be the final slide on my side, it's just to show you that we continue to consider the environment in which we are operating has been very positive. We have seen a lot of good news in the last months. This is just a snapshot, but it shows that we have seen new approvals coming through. We have seen positive clinical data readouts. We have seen fresh capital flowing back into our industry. So these 3 things stand out for me. Firstly, regulators continue to approve cell and gene therapies and the process is now well established, I would say. Secondly, clinical data continues to validate the science across an ever wider range of indication as Sebastien will show you later. And thirdly, funding has obviously returned after a couple of difficult years, investors are backing cell and gene therapies developers again. Now having said that, I pass it to my colleague, Sebastien, for a few data on our commercial performance. Sebastien?

Thank you, Frank. Yes, we can move into the commercial update and go directly to the first slide in the section. Just wanted to highlight here the evolution of the portfolio of active programs that we have at OXB. We're today at -- well, Frank said it, we signed a new program this week. So it's actually not anymore 59, but 60 clients programs on which we work with a split 50 of these 60 programs -- well, 51 of these 60 programs at early stage, 6 in late stage and 3 at the commercial stage at the very bottom left of the slide. It's a nice evolution in comparison to what we could see in April 2024 or even April 2025, an increase in the programs at early stage, but even a more significant increase of programs between late stage and commercial. If I compare April '24 to September '26, 5 total programs between late stage and commercial to be compared to 9 programs today between late-stage and commercial. And it's not just that we have late-stage program. We have a very good visibility on when these programs are likely to be commercial products that we routinely manufacture. You see here the submission dates communicated by our clients to us, BLA submission date. In the next 12 months, at least 5 of these 6 programs will have a BLA submitted, first one in Q4 2026, last one in Q3 2027. One of them is a rolling submission. So that's why it's difficult to put a date on it, although we believe that sometimes in 2027, the BLA submission will move to BLA approval based on the recent clinical data, and it should be a new commercial product in 2028 at the latest. We cover with all these programs at BLA submission stage, multiple indications, oncology, multiple programs, but also dermatology, neurology and ophthalmology. It's important for Oxford Biomedica to be positioned with multiple vectors on multiple indications because we all know that the failure rate in clinical studies is extremely high. So we want to make sure that we don't have all our eggs in the same basket, and we're not exposed to one single indication. As you can see here, that's not the case. Moving to the next slide and talking about making sure that the pipeline is diversified enough. You will see here pictures of the pipeline. In terms of number of opportunities by vector, starting on the left. And you see that for the first time in the Oxford Biomedica history, we have as many opportunities in the AAV space that in the lenti space, 42% for each vector. The rest of the 18% of the pipeline are being allocated to different type of vectors, adenoviruses, MVA, other type of vaccines, but also [indiscernible] and a few other vectors. If we move to the graph in the middle now, not only we have roughly the same amount of AAV and lenti opportunities. But again, for the very first time in the company history, we have a volume with AAV that is above the lenti volume of opportunities, $289 million of AAV opportunities as of now versus $265 million for the lenti opportunities. It shows that OXB is finally very well positioned as an AAV player. That was the rationale of the acquisition of our site in Bedford, Massachusetts. And we today deliver AAV not only from Bedford, but from Durham as well, where we've finished successfully the first GMP batch recently. But we've also tech transferred the AAV platform to our sites in France, and we have started the first AAV programs in France with the first GMP batch in the next coming -- not even weeks, but days now. So that was a key objective in the [ AAV ] strategy to reposition the company as a multisite, multi-vector company. And we see from the data in the pipeline, but also the volume of orders and number of new programs in the AAV space that has been successful. The last data point here that I want to discuss with you in the graph that we have on the right, where you see the evolution of the pipeline by geography. In Q3 2025, the volume of opportunities allocated for execution on the U.S. sites was 24%. 19% of the opportunities for Bedford, 5% of the opportunity for Bedford and Durham. If we move now 1 year after Q3 2026, about 40% of the pipeline is for execution in the U.S. with Durham only being 23% of the 40% volume. We knew that Durham was going to be a game changer. We see it here in the pipeline. We see it every day through execution. I was there with Frank last week, seeing the volume of activity that we've already onboarded and the projections for the next years, indeed having commercial scale manufacturing in the U.S. able to deliver AAV and lenti was key for the company, and we see that the effects are already visible in the pipeline. More or less the same situation in France that moved from 13% in Q3 '25 to 24% in Q3 '26, reflecting the effective tech transfer of the lenti platform from U.K. to France and the transfer of the AAV platform from U.S. to France as well. This being said, we still have a lot of volume for the U.K. site where, as a reminder, we deliver only lentiviruses, which explains why the other sites grow today faster because we have more vectors that we can deliver in this geography. On the next slide, we'll see the conversion rate for the company. It's just an element of comparison versus what we had already disclosed back in June during our Capital Markets Day event. We see only per category 1% maximum variation of our conversion rates from proposal to contract from contract [ drafting ] to contract [indiscernible] or last but not least, from end of negotiation to the final contract. It's obvious for everyone that if it's an existing client, the conversion rate is expected to be above. But I think important to emphasize here that 85% from the very initial proposal to the final contract or 96% from the final contract draft to the conclusion is an excellent result in the CDMO space and shows that the customer satisfaction at OXB is extremely high. So very good result on this conversion rate and overall on the client relationship and the attractiveness of the company [indiscernible]. If we now move to the next slide, which will be my last slide, I wanted to recap why companies work with OXB. Two different client profiles here, a relationship that has been there for a few years already with Cabaletta Bio, a 5 years history developing and manufacturing for Cabaletta, a CAR-T program in the autoimmune space, extremely successful. Cabaletta disclosed results in Q2 showing that this program is advancing extremely well. What they needed was viral vector and specifically lentivector manufacturing expertise, execution on time, in full at clinical and commercial scale, which we could provide for the site in Oxford. That's why they selected OXB. We have a track record of delivery. We have the ability to support the commercial programs. Versus one of our new names here in this presentation, BrainChild Bio, we started the execution on one of our European sites, showing that the tech transfer of the platform was very effective and could be used by clients. Clinical stage biotech, they recently raised more than $100 million for pivotal Phase II, progressing very quickly into the clinical stage. They also needed lentiviral vector expertise and proven track record, which we have provided. Same rationale of why they selected OXB, different stages. With Cabaletta, we're discussing commercial introduction. With BrainChild Bio, we have been discussing so far the early stages. But when I look at the comments and when I look at the fact that they accepted to be mentioned on the slides, same experience for the 2 customers. So whether it's a long-standing relationship or a new one, the client centricity at OXB really means something. And I think that's the reason why we are well differentiated from competition. I'm going to stop here for today and hand over to my colleague, Lucy Crabtree for the financial update.

Thank you, Sebastien. I'm very pleased to take you through our H1 2026 financial performance. This has been a half year of continued momentum across the business with our manufacturing, in particular, driving an increase in revenue, our pipeline growing and converting into new revenue and the impact of continued cost discipline supporting improved operating EBITDA on the same period last year. If we start with revenue, our growth through H1 2026 reflects the ongoing demand we are seeing for our services with half year revenue increasing by 10% versus last year on a constant currency basis to GBP 80.2 million. Looking at this in a little more detail, Manufacturing revenues increased by 20% with more clinical and commercial launch batches. Development revenues were marginally up 1% with increases in process characterization and validation activity. Procurement services revenues were broadly flat at GBP 8.4 million and licenses and royalties were lower at GBP 1.2 million as Kymriah matures. Looking forward, our full year 2026 revenue guidance is GBP 180 million to GBP 200 million with GBP 168 million of forecasted revenue already covered by contracted orders. Turning to profitability. We delivered an improvement on 2025 with the stronger revenues and disciplined cost control. Our OpEx has remained fairly stable as our revenues have grown. This resulted in operating EBITDA improving by GBP 0.5 million to a loss of GBP 7.8 million compared with a loss of GBP 8.3 million last year. Adjusted EBITDA, which excludes one-off costs and foreign exchange gains, improved by GBP 1.4 million to a loss of GBP 2.5 million from a comparative loss of GBP 3.9 million for the same period last year. On our balance sheet, we ended the half with a cash position of GBP 75.3 million, which takes into account a number of negative working capital movements in the cash flow totaling GBP 16 million for example, inventory builds and lower accruals. However, for H2, we expect to benefit from a release of some of this working capital in our period of higher output. Turning to the next slide. The market fundamentals, as shared earlier by Frank and Sebastien are robust. We see a market CAGR of 18% and the AAV opportunities in the pipeline are gathering pace. As we look at how OXB is primed to take advantage of this, we estimate we are currently at approximately 6% market share. And with our world-class service offering, we firmly believe we are very well positioned to grow this. Our modest market growth assumptions place us at a low double-digit percentage market share for 2030. As Sebastien has already covered in our interim financial results, we reported 50 preclinical and early-stage client programs, up from 37 a year ago. As assets progress through the clinic, we expect this will be fueled and will fuel our late-stage and commercial programs. Moving down the funnel of our current later-stage programs, we have expected BLA submission dates over the next 12 months or so, and we expect these to progress into commercial stage manufacturing. In addition, our excellent service offering has also seen further late-stage programs being added to the pipeline, representing another growth opportunity beyond the maturation funnel you see before you. The growth is very much underpinned by the traction seen in the market as described by Sebastien earlier. These are the factors that are driving our continued confidence in our strategy and our ambition to reach circa GBP 500 million of revenue by 2030. Turning to the next slide and moving on to costs and how we are improving operating leverage across the business. We have defined 6 levers across the cost base. Firstly, our increase in utilization is converting fixed manufacturing costs into operating leverage as the business scales. From a procurement standpoint, we have an associated team and strategy now in place that are focused on creating efficiencies in sourcing. For corporate activities, as revenue scale, we are already seeing administration costs lower with the progress seen in H1 2026 expected to continue. From a network optimization perspective, we are ensuring each site is aligned to a core strength to ensure our capabilities and network are optimized appropriately. On commercial mix, a shift to late-stage and commercial programs, improving volumes, price and unit economics will also create operating leverage within the business. And finally, we are focused on improving our platform productivity, lowering cost per batch and improving margin. We believe these measures will drive our 2027 margin to at least double digits with an ambition of circa 30% by 2030-'31, which I will go into in more detail on the next slide. As shared at the Capital Markets Day in June and during our results earlier this week, we are still very much focused and on the same trajectory towards an EBITDA margin approaching 30% by 2030-'31. End of 2026, we expect to be at mid-single digit, as I've mentioned. And next year, we'll see us jump to at least double-digit margin with further profitability measures under consideration to support this. The bridge from 1.4% in 2025 to around 30% is about 28 points and in the most part, sits below gross profit. Cost of sales contributes up to 1,000 basis points as late-stage and commercial programs grow, now 9 from 7 a year ago and as yield and batch release initiatives come through. Operating costs contribute up to 1,000 basis points as utilization rises with the network build complete. Administration contributes up to around 700 basis points and is already at 18% of revenue from 18.6% a year ago. Commercial and innovation contribute up to 50 basis points each. So the path to around 30% is driven by the whole cost base with signs of continued proven evident in H1. To finish, I wanted to emphasize how excited we are about the future of the business as we continue to grow. We will continue to focus on disciplined execution and cost control as we progress achieving our revenue and profitability ambitions. I will now hand over to Frank as we come to the end of our presentation.

Can we go to the next slide, please, which should be the last one. Yes, that's my last one. By the way, that's a slide I have shown at our Capital Markets event in June. And I wanted to show it again because it summarizes very well the reasons why I personally, but indeed, we all at OXB are so confident about the future of OXB. Everything starts with a high medical need that in the markets that we serve, cell and gene therapies have, as you might know, the potential to transform treatment and offer potentially curative options. So it's not only a treatment of very severe diseases, it's potentially a cure. And that for patients that are suffering from very severe diseases. As a second part, which is also important, I have to mention that we have strong skilled and experienced people on board, and this is confirmed by a lot of our clients always mentioning to me that you have very good people on board, Frank, not to say the best people in the world for cell and gene therapy viral vector development and production. We have invested a lot over the last years in our platforms and technology, helping us now to have the next generation already of platforms and technology. We can offer multi-vector experience with full end-to-end offering. Sebastien mentioned about clients. I have to say that we see a very high client satisfaction and Sebastien has shown clearly the strong commercial momentum that we have seen. We have now a global footprint that allows us to operate in an integrated network, allowing us also to serve our clients in a very flexible way and to respond to their needs wherever they are and at whatever stage of development there might be. And importantly enough, and this was shown by Lucy in her presentation, all this will translate to a clear path to profitability. In 2025, we delivered already strong revenues growth and operating EBITDA profitability for the first time since we made our strategic refocus, and we have now a clear plan in place to build on that with further growth and margin expansion. So this concludes our presentation for today, and I hope it gives us enough time for answering your questions. So let's open our Q&A session, please.

[Operator Instructions] I'd like to remind you the recording of the presentation along with a copy of the slides and the published Q&A can be accessed via your dashboard. I'd now like to hand you over to Sophia. As you can see, we've had a number of questions submitted today. If I may just ask you to read them out and direct them to the team, and I'll pick up from you at the end.

Thank you, Paul. We have the first question. Please, could you expand on the delay experienced with Durham GMP coming online? Also, you've said previously that you want to acquire teams rather than facilities. Are there any learnings here?

Want to answer this, Sebastien?

Yes, of course. So we did not have delay on the GMP side. The GMP was well in place. And it's actually been confirmed by multiple client audits since we acquired the facility, multiple, many client audits. And even a regulatory inspection that we had recently that confirmed that the GMP status of the facility is exactly where it should be. The delay was linked to the tech transfer of our platform between Bedford, where we were running the process development and Durham, where we wanted to run the manufacturing activities. It's taken indeed a bit more time without impacting the clients since their main objective was to start clinical studies in September this year, and we've been able to deliver the product at the expected level of quality before the start of the clinical trial. Any tech transfer includes a certain level of risk. Are there any learnings? Yes, that we can confirm that indeed, a tech transfer is systematically at risk. And that, as always, devil is in the details. So we reinforced the presence of Bedford personnel in Durham to make sure that the team in Durham would be supported properly in this first run with the OXB platform that had a very strong impact. Our strategy, and I think it was part of the question has always been to acquire teams and not just facilities. And indeed, we see from all the clients' audits from the recent regulatory audit and from the success of the engineering run and the GMP run that the team in place is experienced, solid, has the right expertise and can deliver on multiple vectors. So that was the right acquisition. That was the right team. We visited them last week. We're obviously there regularly and had a discussion with many of them recently in an internal meeting where we extended congratulations for the work done. So tech transfer is never easy. Difficulties expected, outcome finally positive, well done to the team.

Thank you. We have another question. Do you think the current challenges seen with in vivo therapies could potentially be addressed satisfactorily by ex vivo? Or is cost of time too much of a hurdle?