The Oxford BioMedica share price surges on earnings

The Oxford BioMedica share price is on fire this month but can the upward momentum continue? Zaven Boyrazian explores its latest earnings report.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Oxford BioMedica (LSE:OXB) share price jumped by double-digits last week following its latest results. This recent momentum has pushed the stock’s 12-month performance to just over 90%. And as a long-time shareholder, I’ve been thoroughly enjoying the returns. But can it continue to climb from here? Let’s take a closer look.

The rising Oxford Biomedica share price

I’ve previously explored this business. But as a quick reminder, Oxford BioMedica is a young biotech firm that created a drug development platform called LentiVector. This has proven to be an essential solution for the more prominent drug developers like Novartis and AstraZeneca. The latter of which also struck a deal to hand its Covid-19 vaccine manufacturing responsibilities to this company.

This manufacturing deal is largely responsible for the rapid rise in Oxford BioMedica’s share price – something I predicted back in November last year. And looking at the latest results, it’s clear to see why. Total revenue is up 139%, reaching £81.3m versus £34m over the same period in 2020.

£75.6m of the total revenue stream originated from its bioprocessing and commercial development division. This includes all the income generated through its partnerships with larger pharmaceutical companies, including AstraZeneca. The rest came from royalties and license fees. However, cash flow in this segment remains fairly volatile. And will likely stay that way until more drugs developed using LentiVector reach the market.

Overall, this explosive revenue growth has led to the company entering the black, with operating profits coming in at £19.7m versus a £5.8m loss last year. However, as impressive as this latest performance has been, there are some brewing concerns in my mind.

The risks that lie ahead

My original and ongoing investment thesis for this business surrounds its LentiVector platform. Clients pay an initial licence fee along with additional royalties should a developed drug eventually make it to the market. This makes it a long-term source of recurring income.

So, I’m disappointed to see that Sanofi is terminating its collaboration and licence agreement with Oxford BioMedica for its haemophilia treatment. The management team expects the impact on revenues over the next 24 months to be negligible. However, it begs the question of whether LentiVector is living up to expectations.

For now, its agreements with other pharmaceutical companies, including its recent collaboration with Bristol Myers Squibb, remain in place. Still, this is something I will be watching closely. Suppose its other partnerships start to crumble? In that case, the Oxford BioMedica share price could do the same.

The Oxford BioMedica share price has its risks

The bottom line

Overall, my opinions of this business is unchanged. These latest results are quite encouraging. And if the firm can continue to maintain its growth, I wouldn’t be surprised to see the Oxford BioMedica share price climb higher over the long term.

Having said that, I must admit, the stock is starting to look quite expensive. With a price-to-earnings ratio of over 70, the slightest hint of trouble, such as another lost partnership, would likely lead to a significant amount of volatility. With that in mind, I won’t be buying more shares today as I think there are cheaper opportunities to be found elsewhere.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Zaven Boyrazian owns shares of Oxford Biomedica. His mother is an employee of Bristol Myers Squibb involved in clinical trials. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Closeup of "interest rates" text in a newspaper
Investing Articles

Interest rates fall again! Here are 3 FTSE dividend growth shares to consider buying

As interest on cash savings becomes increasingly less attractive, Paul Summers has been looking at dividend growth shares for passive…

Read more »

Investing Articles

Up 10% today, I think this FTSE 250 growth share could continue to surge!

Babcock International's flying after upgrading its full-year forecasts. I think the FTSE 250 defence share might just be getting started.

Read more »

Investing Articles

The AstraZeneca share price jumps 5% on today’s strong results – but is it too expensive?

Harvey Jones hails the brilliant long-term performance of the AstraZeneca share price, but wonders whether the FTSE 100's biggest company…

Read more »

Investing Articles

Is this my chance to buy Alphabet shares?

A big step up in AI spending at Google has investors nervous, but has it created an opportunity to buy…

Read more »

Senior woman potting plant in garden at home
Investing Articles

£10k in savings? Here’s how an investor could aim for a monthly second income of £1,200

Mark David Hartley considers how investors could build towards an early retirement plan with a second income from a portfolio…

Read more »

Investing Articles

2 cheap shares to consider buying in a £20k ISA for income of £1,000 a year

Harvey Jones loves buying cheap shares and says these two FTSE 100 stocks look tempting today, especially as they offer…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Is it worth me buying Lloyds shares for 61p after a 49% rise?

Lloyds shares have risen significantly from their one-year traded low seen last February, which could mean no value is left…

Read more »

Investing Articles

I think this FTSE 100 fashion stock could skyrocket in 2025

JD Sports has had a disastrous few months of losses but 2025 looks primed to be the year for this…

Read more »