The Uniqueness of Oxford BioMedica plc (LON:OXB)

Oxford BioMedica plc (LON:OXB) is the only company in the world with a GMP-approved facility for commercial scale production of lentivral vectors, viruses used to deliver genetic material in gene (within the body) and cell (outside the body) therapies. By infecting a patient's cells with a lentivirus it is possible to replace segments of DNA within their genome. Lentiviruses are not suitable for all gene and cell therapies and there are other delivery techniques such as (adeno-associated viruses) AAV, but lentiviruses have some unique features and are currently the most widely used approach.

OXB has a licensing arrangement with Novartis for its recently launched CAR-T therapy for leukaemia, Kymriah, where OXB generates revenue from manufacturing the drug and receives a low single digit royalty on top. Similar partnerships exist with Sanofi, Axovant Gene Therapies, Orchard Therapeutics, Boehringer Ingelheim, the UK Cystic Fibrosis Gene Therapy Consortium and Imperial Innovations, although Kymriah is the only therapy using OXB's technology that is currently approved. OXB is working on clinical stage therapies to treat diseases such as Parkinson's, wet AMD, Haemophilia A & B and Cystic Fibrosis as well as several types of cancer and other indications. As well as providing services to existing third party projects, OXB also does its own drug discovery before seeking a partner in the clinic and in these cases the company typically receives an upfront fee and development milestones in addition to royalties and manufacturing fees. It receives production revenue during the regulatory process and total revenue has grown from £5 million in 2013 to £67 million in 2018.

OXB enjoys a couple of competitive advantages. Firstly, it continually invests in lentiviral technology where it is the global leader and has unparalleled understanding of the technology. Second, it has built a strong reputation from nurturing multiple relationships with third party biotechnology companies who trust it to perform the high risk and difficult task of manufacturing their gene and cell therapies. Finally, like other types of manufacturing, the efficiency and quality of lentiviral production improves with scale. OXB has already invested ten of millions of pounds in production capacity (with more to follow) and has the only GMP-approved commercial production facility globally.

I expect the gene and cell therapy market to explode in coming years. Lentiviral vectors are currently the most popular delivery mechanism and increasing scale will drive down costs making it more difficult to replace lentiviral technology. OXB are the market leaders in lentiviral vectors with an improving competitive position. It is a picks and shovels business that should be able to ride industry growth trends and be relatively unaffected by the success or failure of any given treatment. OXB's market cap is £540 million. As you can tell I am very optimistic about the business, but it operates in a new and highly changeable industry and so I consider OXB to be a high risk investment in the UK Portfolio.

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