Oxford BioMedica: Manufacturing Agreement Signed With Novartis

Oxford BioMedica (OXB.LSE) has signed a production agreement with Novartis. Oxford BioMedica’s lentivirus vector expertise will be used to produce clinical trial material for the high-profile CTL019 leukaemia programme. The deal is worth between £2.5m to £4.0m in the first 12 months and should extend the company’s forecast cash runway from Q114 to Q214. Our valuation, based on rNPVm, rises from £58.5m to £60.1m.

Novartis signs manufacturing agreement
Novartis has signed a deal with Oxford BioMedica to help produce clinical trial material for the CTL019 clinical development programme. CTL019 is the lead project in a high-profile collaboration between Novartis and the University of Pennsylvania targeting various forms of late-stage and refractive leukaemia. Promising proof-of-concept study results in December 2012 have placed the CTL019 trials programme in the clinical spotlight.

Useful external validation of gene therapy expertise
CTL019 uses a lentiviral vector to genetically modify a patient’s own T cells such that they express an antibody-like protein that targets the CD19 antigen on B cells. Such ex vivo techniques are typically difficult to scale-up easily and the deal helps validate Oxford BioMedica’s viral vector production expertise. Additionally, it also highlights that gene therapy has the potential to dramatically alter life-threatening and severely debilitating disease outcomes.

Cash runway extended through to Q214
Net cash at end-2012 was £14.1m, and with a forecast cash burn of around £1m per month, suggested the cash runway extended through to early-2014. The financial details are limited (Novartis will pay between £2.5m to £4.0m over the next 12 months), but assuming around 60% will fall through the P&L, it suggests the runway has been extended through to Q214. This is important, since Sanofi is expected to make the key RetinoStat opt-in decision before Q114.

Valuation: rNPV increases from £58.5m to £60.1m
The effect of the additional cash from the deal is to increase our valuation from £58.5m to £60.1m. Our valuation is based on an rNPV model of the late-stage pipeline alone. We have conservatively chosen not to include the value of other less-visible, but arguably just as important, assets such as the manufacturing facility and intellectual property estate.

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