OXFORD BIOMEDICA PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2022
*OXFORD BIOMEDICA PLC*
*INTERIM RESULTS FOR T**HE SIX MONTHS ENDED 30 JUNE 202**2*
*SIGNIFICANT STRATEGIC AND OPERATIONAL PROGRESS **TOWARD**S* *BECOMING A GLOBAL VIRAL VECTOR LEADER*
*Oxford, UK – **15* *September 2**02**2**: *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
^1Operating 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
A live webcast of the presentation will be available via this link.
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
*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 **v**accine 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**.*** *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 available-for-sale assets (13.4) (7.4)
*Operating (loss)/profit* *(**1**9**.**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* *5**6**.**2* *23.6*
Depreciation, amortisation & share option charge (13.4) (7.4)
*Adjusted operating expenses* *4**2**.**8* *16.2*Cost of Sales
27.9
38.4
*Total expenses*^*1* *7****.**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* *7****.**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* *(**1**9**.**2**)* *19.7*
Interest (8.2) (0.5)
Taxation (0.2) (1.1)
*Net (loss)/profit* *(**2**7**.**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* *(2**4**.**5**)* *22.2*
Interest paid less received (1.7) -
Capital expenditure (6.0) (3.5)
*Cash (burn)* *(3**2**.**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 pur