The Oxford Biomedica share price is up 80% in a year. Here’s what I’d do

The Oxford Biomedica (LON: OXB) share price has soared more than 600% in five years. Could there be be a lot more to come?

| 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.

At the time of writing, the Oxford Biomedica (LSE: OXB) share price has stormed ahead 82% over the past 12 months, and 170% over two years. And over the past five years, we’ve seen a massive 630% gain.

The latest bullish sentiment appears to stem from record first-half results released in September, which showed a surge in earnings. A 139% rise in revenue, to £81.3m, led to an operating profit of £19.7m, from £5.8m a year previously.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

On an EBITDA basis, it’s even more impressive. The half brought in a figure of £27.1m, from an EBITDA loss of £0.4m in H1 2020. My Motley Fool colleague Zaven Boyrazian has dug more deeply into the results, so I won’t repeat them here. I just want to look at the bigger investment picture.

Oxford Biomedica specialises in gene-based biotechnology. And its key technological development is its LentiVector drug development platform. That’s used by pharmaceuticals companies for R&D, including big names like Novartis and AstraZeneca.

Oxford Biomedica strikes me as something of a picks and shovels investment. You know, when there’s a gold rush, those selling the digging tools make their money whoever finds the shiny stuff. It’s perhaps not quite like that here, but I do see something similar.

Biotechnology platform

The LentiVector financial model renders things a little differently from straight picks and shovels sales. Customers pay an initial licence fee. And then further cash comes from royalties should the drugs being developed turn into commercial successes. That makes for a nice potential long-term income stream. But much of it will come from the successful users of the technology.

So where are the current big profits coming from? Oxford Biomedica has also been doing some manufacturing, of AstraZenenca’s Covid-19 vaccine, and that contributed strongly to those first-half profits.

It does create some concern for me over the Oxford Biomedica share price strength. Those H1 results show revenue from licences, milestones and royalties of just £5.7m, down from £10.6m. That’s only a small fraction of total revenue. The Covid vaccine deal will probably keep the cash coming for some time yet. But it’s going to wind down eventually, surely.

Oxford Biomedica share price valuation

If the current valuation is driven by those vaccine profits, I can see a risk of price falls when that happens. So what does the valuation look like? Well, simply doubling up first-half EPS, and going on the current Oxford Biomedica share price, I get a forward P/E of around 35.

The company says it expects EBITDA in the second half to be below the H1 figure, due to “an increase in research and development, administrative and bioprocessing costs“. So the real forward P/E should be higher than my guess. I even see some forecasts suggesting around twice that valuation, with a P/E of close to 70.

A company in transition

Right now, Oxford Biomedica is in something of a transitional phase. It currently has its manufacturing capacity to bring in the shorter-term cash. And I can see further opportunities there. But long term, it’s surely all about the LentiVector technology and its licensing progress and royalty income.

On balance, I see attractive potential here, but with a fair helping of risk. I’ll keep watching, in the hope of better buying opportunities in the future.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Alan Oscroft has no position in any of the shares mentioned. 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

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Investing Articles

A passive income stock I’ve bought to supercharge my wealth!

I think this UK dividend stock is one of the best to buy for healthy long-term passive income. Here's why…

Read more »

British Pennies on a Pound Note
Investing Articles

3 hot penny stocks I’m buying in June!

With their exciting growth potential, penny stocks can be great investments. I've found three to buy next month based on…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

2 green dividend shares I’d buy with £500

Jon Smith explains two dividend shares with a focus on renewable energy that have caught his eye at the moment.

Read more »

Young black woman walking in Central London for shopping
Investing Articles

Should I buy these cheap FTSE 100 shares before June?

Paul Summers considers whether he should add these cheap FTSE 100 stocks to his portfolio before their next updates.

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

3 growth shares I’m avoiding in June

Knowing which growth shares to avoid is as important as recognising those worth buying. Paul Summers picks out three of…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

This cheap share fell 30% last week. I’d buy now

This huge US corporation saw its shares crash by 30% last week. But I'd buy this surprisingly cheap share now…

Read more »

Various denominations of notes in a pile
Investing Articles

These 7 shares produce passive income of 7% to 11% a year!

Passive income is extra money I make without working. By buying these seven shares, I could earn 8.9% a year…

Read more »

A person holding onto a fan of twenty pound notes
Investing Articles

6.6%+ dividend yields! 2 FTSE 100 dividend stocks to buy

Finding the best dividend stocks to buy requires extra care today as soaring inflation takes a bite out of shareholder…

Read more »