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Set aside Rolls-Royce and Fresnillo – this small-cap biotech stock is soaring, outperforming some of the UK's leading growth stocks. Up to 100% this year, OXB (LSE:OXB) is taking no prisoners as it battles to recoup its losses from 2022.
Between November 2021 and October 2022, the share price plummeted by 78%, going from a high of £16.78 to almost £3 per share. The price continued to fall through 2023, but has now recovered to £4.18, the highest level in over a year.
So what's next for stocks?
Cutting-edge biotechnology
Formerly known as Oxford Biomedica, OXB is a relatively small £442m publicly traded stock. FTSE All-Share index. The Oxford-based biopharmaceutical company focuses on cell and gene therapy, specializing in the manufacturing of viral vectors. He has over 25 years of experience working with some of the world's leading pharmaceutical and biotechnology companies.
Recently, it became a contract development and manufacturing organization (CDMO), with the goal of positioning itself as a leader in viral vector services, helping other companies develop and commercialize gene therapies.
Over the past year, its portfolio has grown to include 37 clients and 48 programs, focusing on types of viral vectors such as lentiviruses and adeno-associated viruses (AAV). The value of these contracts is approximately £94 million as at 31 August.
Unstable finances
Last year was not good for OXB, as the share price fell by 50%. In the first half of 2023, it reported a 33% drop in revenue compared to the same period in 2022. The drop was mainly due to the non-recurrence of AstraZeneca Manufacturing of Covid vaccines. It also posted an operating EBITDA loss of £33.7m, up from a £5.8m loss a year earlier. This was attributed to inflation combined with higher expenses related to its new Oxford Biomedica Solutions division.
Things appear to be improving in 2024, although first half results were still somewhat disappointing. Both revenue and earnings per share (EPS) missed analyst expectations, by 4.7% and 110%, respectively. Although it posted a net loss of £32.5m, this was a 32% improvement on the first half of 2023.
The balance sheet seems fine for now, with a debt-to-equity ratio of 55.8%. However, it is burning cash and racking up debt, possibly due to rising operating expenses and rising bioprocessing costs.
Cash and liquidity are key areas to watch as the company expects to break even on EBITDA by the end of 2024. In an announcement made in September during the rebrand to OXB, new CEO Dr Frank Mathias said his goal is to improve his financial situation by focusing on his role as CDMO.
It is unclear to what extent the switch to CDMO will pay off, but the price is already reacting positively. However, the loss of a large client like Novartis could easily change things. It already faces tough competition in the CDMO market: any drop in performance could result in lost contracts.
If things go well, the transition should provide more stable, long-term revenue, as opposed to volatile revenue from internal R&D. I hope it continues to perform well, so if I weren't already a shareholder, I would gladly buy the shares today.