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.

Syringe and vial on blue background

Image source: Getty Images

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

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

If I’d invested £1,000 in Lloyds shares at the start of the year, here’s what I’d have now

The stock market is unmoved, but Stephen Wright thinks last year’s record profits might give Lloyds shares a long-term boost.

Read more »

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

I’ll snap up shares in this growth stock in March if others don’t get there first

This Fool says shares in this growth stock are stable, full of profit, and might be undervalued. But there are…

Read more »

Rainbow foil balloon of the number two on pink background
Investing Articles

My 2 top energy investment trust picks for a passive income

I'm aiming to buy more of these investment trusts for a passive income and the reasonably stable energy sector returns…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

5.5% dividend yield! Shares like these could be great for my retirement

Oliver Rodzianko thinks this company with a stellar dividend yield could be very useful when looking for income from his…

Read more »

Investing Articles

Should I buy this FTSE 250 stock as it soars back to the FTSE 100?

This FTSE 250 stock has rallied following its pandemic woes. This Fool thinks now could be a good time to…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

How I’d aim to transform an empty Stocks & Shares ISA into £1m of wealth!

There's never a better time to start investing in a Stocks and Shares ISA than today. Here's how I'd aim…

Read more »

Close up of manual worker's equipment at construction site without people.
Investing Articles

Investing £14,708 in this FTSE 100 stock could earn me £1,000 per year in passive income

Is a CMA investigation into anticompetitive practices the cloud cover Stephen Wright needs to start buying shares in a FTSE…

Read more »

Investing Articles

Despite rising 152% in a year, is Rolls-Royce’s share price still a bargain?

While Rolls-Royce’s share price has shot up recently, it still looks very undervalued against its peers, and the business looks…

Read more »