FTSE 250 cell and gene therapy trailblazer Oxford Biomedica (LSE: OXB) may ring a few bells with investors without their remembering why.
During the height of the Covid crisis, it was this firm that manufactured over 100m doses of AstraZeneca’s adenovirus-based vaccine. It did so at a record pace for such a vaccine and without a hitch in the process.
Aside from providing such manufacturing services to top-flight pharmaceutical firms, it also works on its own therapies. These include experimental treatments for Parkinson’s, cancer, central nervous system disorders, and eye diseases.
Since the firm’s one-year traded low of £2.32 on 9 April, the share price has gone up 163%.
So, I took a deep dive into the business to find out why. I also ran the key numbers to see if there is any value left in the stock.
Why’s the share price soared?
The the firm’s full-year 2024 results were released on 9 April.
These showed revenue jumping 44% year on year to £128.8m, while gross profit rose 34% to £53m. The previous year’s operating loss of £184.2m shrank to a deficit of £39.4m.
The contracted value of client orders signed in the year was around £186m – a 35% increase over 2023.
At that point, the firm forecast fiscal year 2025 revenue of £160m-£170m, which would be a 24%-32% rise over 2024.
Over the medium-term, it expects to be the global leader in the viral vector supply market. This centres on engineered viruses that are manufactured to deliver therapeutic genes into human cells. According to industry data, this market is forecast to increase in size from $6.3bn (£4.7bn) now to $18.8bn by 2030.
A risk to the firm is a failure in any of its key products. This could damage its reputation and be extremely costly to fix.
That said, consensus analysts’ estimates are that its earnings will grow by a whopping 68% a year to the end of 2027. And it is these that ultimately drive any firm’s share price over the long term.
How were the latest numbers?
Its H1 2025 results released on 23 September also looked very positive to me. These showed revenue jump 44% year on year to £73.2m.
Over the same time, there was a 166% increase in the contracted value of client orders signed over the period – to £149m.
Oxford Biomedica also provided a revenue forecast for full-year 2026 – of £220m-£240m. It added that it expects revenue growth of 25%-30% in both 2027 and 2028.
Is the stock undervalued?
The best way I have found of ascertaining a share’s ‘fair value’ is to use the discounted cash flow (DCF) method. This identifies the price at which a stock should trade, based on cash flow forecasts for the underlying business.
In Oxford Biomedica’s case, the DCF shows its shares are a stunning 63% undervalued at their current £6.09 price.
Therefore, their fair value is £16.46.
As I’m over 50, I focus on high-dividend-paying shares as I want to use the income to reduce my working commitments. As this firm pays no dividend at present, it is not for me.
However, if I were even 10 years I would buy it today. I think its strong earnings growth prospects should push its share price up, and it has a long way to go to meet its fair value.
