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Edited Transcript of OXB.L earnings conference call or presentation 13-Sep-18 11:00am GMT

Half Year 2018 Oxford BioMedica PLC Earnings Call

Oxford Jul 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Oxford BioMedica PLC earnings conference call or presentation Thursday, September 13, 2018 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* John Dawson

Oxford BioMedica plc - CEO & Executive Director

* Stuart Paynter

Oxford BioMedica plc - CFO, Company Secretary & Director

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Conference Call Participants

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* Amy Lucinda Walker

Peel Hunt LLP, Research Division - Analyst

* Joseph Pantginis

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Martin David Hall

Hardman & Co. - Head of Research

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to today's Oxford BioMedica interim result conference call.

I would now like to hand the conference over to your first speaker today, John Dawson. Thank you. Please go ahead.

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [2]

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Thanks very much. It's a pleasure to have you all here today to hear about our 6 months at June 2018. It's a period of time for the company that went extremely well. I'm going to take you through some of the detail as we go through the presentation.

Today, myself and Stuart will be presenting going forward, then we'll take questions in the room, and then after, questions in the phone lines.

During the presentation, we'll be making forward-looking statements, which cannot be relied upon.

First, the operational highlights for first 6 months of the year. We start there first with Novartis and talk about the commercialization of Kymriah in the various territories. I have to say Novartis had been an excellent collaborator with us this year. It's gone extremely well. And we've seen DLBCL approved in the U.S to treat adults; and in EU, very recently, we've seen the approval of pediatric ALL and DLBCL in Europe.

It's been a very good time for us in collaborations effectively, working with Bioverativ, the new deal we made back in February. $105 million [buyout] there with deals to come around that. Of course, they are part of Sanofi, and so effectively, with Sanofi, that was a deal that happened while we were talking to Bioverativ. You'll learn this, when big pharma deals can go through, these things can fall apart very quickly. I (inaudible) that happened, I must admit. And I think it's pretty much that day -- I spent the day on the phone just looking at what's going on. Bioverativ were excellent. They had precleared this with Sanofi, and the deal went through expeditiously after that. I want to thank that team at Bioverativ very much for their efforts.

On to -- now we're going to the deal with the UK Cystic Fibrosis Gene Therapy Consortium and Boehringer Ingelheim to develop inhaled gene therapy treatment for cystic fibrosis. This is really exciting. It's a step forward in technology, and we're very proud to be involved with this.

I think the most recent deal on that [departed] product development, the one we were very excited about as we did it, was with Axovant Sciences in New York around, as we called it, OXB-102, now renamed AXO-Lenti-PD. This still had a viable value of $842.5 million within Parkinson's disease. We were planning to move forward with the Phase I/II trial ourselves as we are still working on that by the end of '18. That will still happen, and we'll see that going to the clinic in the coming months. Very exciting to see [AXO] going into the clinic and to patients.

Continuing now to allocate appropriate finances to doing this early pre-clin work and various targets because we can see the value in this in our strategy. Very exciting to do this, and we will continue to invest in proprietary programs and bring those forward. Current strategy there is, of course, has been announced at the end of the pre-clin, ready for Phase I/II trials.

For the rest of the portfolio in our proprietary products, we actually have discussions ongoing with various parties. There's actually further deals in the coming 12 months there as well, in [Berkshire], virtual spin-outs, or proprietary products being licensed out. So exciting times in that particular area.

On to the financial highlights, and again, that was a very good result for the company. Gross income for the half year was GBP 36 million, up from GBP 15.7 million in the first half of 2017. That's 118% growth, and we are very pleased with that.

License income (inaudible) of GBP 18.3 million, of course, from Axovant and Bioverativ. And this was segmented by Products at GBP 10.2 million and Platform at GBP 8.1 million.

It's nice to talk about profits as well. Profits is not something sort of often in the bag in a biotech company, but here we are now with profits of GBP 9.4 million operating profit compared to a loss in 2017 in the first half of GBP 2.2 million. That's quite a change.

More good news in cash flow as well. Cash inflow before financing activities was GBP 12.2 million compared to an outflow in the first half of '17 of GBP 2.2 million.

So at the end of period, 30th of June '18, we had GBP 44 million in the bank versus GBP 14.3 million in the 31st of December 2017. This reflected a really significantly improved trading performance and also a placing of GBP 25.5 million (sic) [GBP 20.5 million]. I'll come to that in a few minutes.

Innovate UK, backed by our government, again, continued to show investment in gene cell therapy manufacturing. We're very grateful for that. It will allow us to further invest in our production of vectors. We've got GBP 3 million there for CapEx, which we're spending anyway, so it's a great deal for us at that point in time.

Another big thing for the company, we announced this morning there's a new site. We just signed a lease on that. We announced that this morning, first thing. It will be valued at GBP 20.5 million, that grows back in March, moving forward with that, we plan to invest that in further GMP suites and some fill and finish suites as well, QC, warehouses and offices. But again, a big step for the company, and this is because of our confidence in new deals coming around our manufacturing activities back at base.

Another big thing about the year, in May, there was a share consolidation of 50:1, which was completed in May '18.

With the platform, and I'll start with Novartis relationship there. You're well aware we did a deal with them back in the middle of '17 around the manufacturing. That will be receiving about $100 million over 3 years, $10 million of that was an upfront. We (inaudible) with them, actively currently giving them clinical and commercial supplies. We're working with them on Kymriah but also working on a second drug, which should go into the clinic in 2019. And again, that would become clear what that is as time moves by.

[Multiple sales] are growing. Looking forward there, as I said, also various territories come online, various approvals. Just a few weeks back, in fact, last week I think it was, NHS England approved Kymriah for pediatric ALL in the U.K. We've seen Health Canada approve pediatric ALL and DLBCL there. And we've seen sales estimates for Kymriah in 2023 of $1.4 billion, and growing very nicely. The business is growing well there, and they are excellent collaborators.

I just want to (inaudible) back to platform and some explanation behind our views about expansion of bioprocessing activities. The new building we just leased is 84,000 square feet. The first build of that is starting immediately. The plans are done already. There will be about 45,000 square feet for 4 GMP suites, 2 fill and finish suites, offices, warehousing and QC laboratories. And this is allowing us to meet the demand we see in the LentiVector market. We're taking up 45,000 feet now. We won't have to balance to (inaudible) ourselves later, and we might well start building again in '19 or '20 for the second CAR-T. We'll see how that goes. But again, the market you see, it's immediate, it's now. And we know that when we make deals, we have to have more capacity than we have today, This is why we're doing this.

Again, I have to stress U.K. collaboration of Innovate UK with us has been excellent. It gives us some CapEx monies, and allow us to use our viral vectors more efficiently going forward.

Partnerships, I have to say, have been a delight for us to do at Oxford BioMedica this year, showing some belief in our partners and in our platform. Bioverativ, $105 million there back in February; and of course, the U.K. Cystic Fibrosis Gene Therapy Consortium with Boehringer working on this inhaled LentiVector for cystic fibrosis.

Moving on to a slide about the platform pipeline there. This does look quite different to outlooks in the past. Novartis now, we have 2 indications on various territories there with Kymriah, pediatric ALL and DLBCL. And of course, the second one is moving towards the clinic, the second CAR-T we can't disclose what it is currently. And we have the Factor VIII and Factor IX with Bioverativ in haemophilia A and B. Again, we plan to have clinical trials there ready by the end of '18.

Orchard Therapeutics is a company is very exciting. Originally, we were able to [cut] a share of capital there in the company by equity because they didn't want to give us cash at that point in time. That would prove to be an excellent decision for the company going forward. They've now taken on the old GSK assets, taking mostly the [MLP] fund with BLA, we believe, very soon for ADA-SCID.

And design is now moving towards a Phase III trial, again, that collaboration continues and grows. At the bottom there, you'll see how we work with Bohringer and the Cystic Fibrosis Gene Therapy Consortium. Very exciting area, I'd like to announce the growth in the future. And the [amount] and effect that, that will take the patient would be quite large, so that would be a massive (inaudible) expansion for us going forward.

Next slide, we'll talk about the extensive LentiVector activities and pre-clin and clin trials. Again, lots of companies there are named. This is literally a cross-section from the pool of the companies working in these areas. The guys with the red circles, they're the ones we're already working with. The graph to the right shows you, near the x-axis, the commercial revenues available to various companies any commercial capabilities and quality systems.

Now looking at this, quality is something we stand out on, now with the FDA approval of -- the viral vector for Kymriah. And you can see the various types of activities there, the academics making non-GMP in vector; some companies coming into the area and investing heavily. With guys out there, taking some revenues from it would be Molmed and Lonza. But again I think we're ahead of the game here. Our revenues are quite large and growing. And we have a turnkey operation here, of taking process development with bioprocessing to deliver a complete service.

Now today, we see the market for LentiVector manufacturing to be around $200 million worldwide, and that's just the manufacturing. We deliver about 15% of that or so. By 2026, our expansion plans are based upon that being $800 million, and we plan to have about 25% to 30% of that market by that time. And that's just the manufacturing revenues, no royalties included or milestones.

And at that point, I'll pass to Stuart to talk about our products and financial review.

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Stuart Paynter, Oxford BioMedica plc - CFO, Company Secretary & Director [3]

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Thanks, John. So just a little bit about the products. Of course, the one thing we can say we were most excited about this year is the fact that with our dual strategy, which is Platform and Product, we managed to sort of reawaken the slightly latent Product part of our strategy.

So in doing this deal, we have shown the investment we've made in the past and the investment we could make in the future in our own products can really pay off in a big way. So it enables us to create platform customers with fast, superior economics, essentially, because we own the IP around the internal gene as well as the vector.

So the AXO-Lenti-PD deal was completed in June. It was an interesting process and a very interesting, innovative sort of gene therapy company from America. And we're very happy that we've started the relationship in the right way. Then they're heading towards the clinic this year with Phase I/II trials. And it's all looking rather good. The economics are pretty spectacular for us. So we received the $30 million upfront, of which $5 million was the deferred manufacturing. And then we have development milestones staying for over the next few years of about $50 million and the balance being in sales and regulatory milestones. And we firmly believe this has got an accelerated route to market.

As we look out into the gene therapy world, it seems the regulatory pathways for these sorts of paradigm-shifting therapies are becoming fairly easy to navigate. And of course, we're [following] on behalf of world-class companies who've done that navigation. And it further sort of gives us confidence that we can keep investing in our early-stage discovery team, and we are going to keep on bringing these products through into what we consider to be a rather hot market at the moment. So great deal going to clinic this year. And what we saw that nicely reflected in the share price.

Going on Slide 13 and the product pipeline itself. You can see that now we have now 3 products that are available to be spun out or out-licensed. And actually in, I think, June, the Board made a decision around the ocular assets, to start thinking about a spin-off vehicle for those. So that's a potential route to market with the occular assets.

It's worth mentioning that the Sanofi assets that we licensed out in 2009 are progressing. So we expect to see Stargardt into a clinical trial next year, and we know that it's coming along, too. So we're very happy with those, and we're very happy with the products that we now have with Sanofi, which is (inaudible) and we have haemophilia A and B from Sanofi, so (inaudible) [drugs] of Sanofi back in the platform.

And in terms of reinvigorating that pipeline, this is the next thing we've got to concentrate on. In the next few months, we'll be -- start talking about a couple of early-stage assets, which we've been working on hard back at base. And we'll promote those to the pipeline and start talking about those as those goes through the early-stage clinical trials and top studies and other things.

So now we have a suite for the [areas] we work in. In terms of therapeutic areas, they tend to match what our partners are doing on the platform. So whilst we make some innovations for our partners on the platform, (inaudible), we can transfer that back into the products. And we had a nice sort of internal group of potential customers as well as the wider world of other therapeutic -- of other geographic -- and we're trying to get more assets, or indeed, big pharma trying to get into gene therapy. So we think it's a cogent working strategy, and we look forward to speaking more openly about some of those innovations we're making very soon.

So moving on to the financial review. This graph looks a bit different. The interesting thing to note on Slide 15 is that when we look at the gross income there, and we've always made sure we guided that the business can be lumpy on these bigger licensing deals, and indeed, that's the way it looks. The blue side or the blue bar there is the more predictable, ongoing recurring revenues. And they grew about 16% or 17% from the previous year -- from the same half in the previous year, H1 2017. The business is slightly back-end loaded due to the way that we manufacture in terms of various shutdowns we have to do. And we expect those numbers to grow -- the recurring revenues to grow pretty strongly in the second half.

Again, the purple is something that is more opportunistic, but we have really good opportunities to keep on generating big licensing upfronts, either in signing deals on the Platform, as John mentioned, or looking at deals we can do on our end products. So we have really good growth potential therefore on revenue lines, and we'll be looking to exploit that to the fullest.

If you look down, off to the [EBIDA] -- EBIDA and EBITDA actually this half year is the same, there's no tax. As we start making money, we lose the benefit of having the tax credit, which is great.

It's an interesting number. Obviously, that's a big spike due to some of the licensing revenues. It is worth mentioning that the investment profile we're currently going through is representative of a very fast-growing company. And we gave some guidance in the documents themselves to say that we're going to be at roughly 425 employees by the end of the year. When you look at the first half of 2017, I think the average is about 270. We took about 150 extra people over that 18-month period. This is -- it's a pretty substantial growth we're going through. And these are highly trained for the most part, because I assuming [it's] highly trained scientists we're trying to recruit. So we are going through a growth phase to enable us to generate the new products and be able to sign new deals in the platform. And the operating leverage will come soon after we're in proper growth cycle. We're focused on growing the top line. And the business is doing impressive results in terms of profit generation and cash generation.

We're going to Slide 16. We'll have a little segmental analysis, which is no surprise, right? The Platform is growing nicely as you see. Platform is profitable, which is the recurring piece essentially. And then the Product segment is where we can make those onetime big additions to the value of the company. And we've done that once this year, and we are looking to -- like John said, looking to do a deal over the next 12 months. But still, the frequency is good. The pipeline is good. We can say that. So both Platform and Product look very positive. And the key for us now is to provide enough interest and enough new products to supplement the Products segment so we can keep on generating that sort of return to shareholders.

Just moving on to news flow. Novartis, John's already talked about, but they had various regulatory approvals over the last weeks and months, and of course, they're looking for further approvals in Japan and Australia. They're moving apace, and we look forward to supporting them in all their efforts across the world. They have to do that. And as John mentioned, second CAR-T into the clinic, and we know that they are looking very carefully at the rest of their portfolio to see what they want to advance, and we hope to be a partner in that.

And Orchard Therapeutics. BLA for ADA-SCID by the end of the year, the launch sometime in 2019. Again, great partner to work with. We've been very successful in collaborating with them and meeting the time lines and milestones which they've set for us.

And Bioverativ. In terms of the haemophilia A and B approach, we think it has a real, at least, theoretical advantage over the A and B approaches we're seeing. And we're keen to help them get that into the clinic as soon as possible to see if that plays out in real life.

And LentiVector delivery platform. It's worth mentioning that we innovate at a pace there, too, and we are investing in platform innovations. So automation's a big thing. You want many assays on the -- downstream on the product. And we need to be more efficient doing that, and this is one way we've looked in at that. Automation is going to be a big key over the next 10 to 12 months.

And we're looking to further partner contracts. And our -- we can sit here and say that our pipeline has never looked healthier in terms of feasibility space and new customers we're speaking to.

We've already gone through the in-house products.

The outlook for the group, on Slide 18. We don't see demand diminishing for LentiVector. We'd probably see it increasing. We did the expansion based on the numbers that they're are going to see. So high-teen CAGR growth of the LentiVector -- just the LentiVector production market out to 2026. And we think that it's definitely staying there. I mean, it's -- the amount of interest in people working in the lenti space is growing.

It's interesting to see that our last 2 deals on the platform are both in vivo, whereas, lenti was previously seen as an ex-vivo therapy. Now companies are really seriously looking in vivo. So we did cystic fibrosis, which is the direct application into the body, same with CAR-T therapy in hemophilia, and of course, Parkinson's, which is injection straight into the brain.

So that really widens the possibilities for use of lenti, and we're looking to exploit that. Of course, we've been cash-generative this year, and we look to continue that going forward. And we look to keep investing. We see enormous growth opportunities. We're very bullish about it. But we need to put our money where our mouth is and really gear the company up in order to really fully exploit future opportunities.

That being said, it needs to be on a prudent and managed basis, which is the challenge which John and I face at the moment. We are growing very fast and it's all about control in that environment. But the revenue growth opportunity is huge for us, and we're looking to exploit them fully.

And so the last slide is just a summary of where we are. And it's worth highlighting, I mean, in terms of the investment proposition we give to people, we are definitely in a growing market. I mean, gene therapy in itself is growing. 3 products on the market now, more to come. Certainly, lots and lots of interest in going into the clinic and the paradigm shifting sort of therapies can be achieved with gene therapy. Certainly a profitable platform. We proved that now that it's a profitable platform with ongoing revenues. We're expecting to see more royalties, as John mentioned, as the Novartis product grows. And we'll have a royalty stream online when ADA-SCID gets the market as well.

And then developing products, that's the third arm. This arm is -- the concept is improving Axovant, and we're looking to further prove that concept down the line.

We really do believe there is really improved value in the improved economics we get from developing our own products and then being able to out-license them and have a new platform customers and being able to prep them for Phase I/II studies ourselves.

So with that, we'll wrap up. We'll take some questions from the room, and as John mentioned, then we'll take some questions from -- in the phone.

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Questions and Answers

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Stuart Paynter, Oxford BioMedica plc - CFO, Company Secretary & Director [1]

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Amy?

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Amy Lucinda Walker, Peel Hunt LLP, Research Division - Analyst [2]

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Amy Walker from Peel Hunt. I'll start with 3, and I'll get back to the queue. So I'm thinking to have a couple to start with. I might not have got this right, but it seems (inaudible) overall your production cost is pretty attached to your bioprocessing and commercial (inaudible) income. Is it like a cost ratio, and then in the first half of this year and you're at 20% compared to 9% last year? I was just wondering if you can help us understand what the reason for that step-up was?

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [3]

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Yes. I mean, it's something we are learning as we go along. I mean this is still a -- it's a manufacturing process, and it's characterized, but it still comes with its issues. And we're making improvements all the time in terms of automation of those processes. So with automation, is going to come margin improvement, with more batches coming through process B from process A, will come margin improvement. But frankly, it's a bit of a mix. So we do have a process A and process B running at the same time at the moment. There is going to be some variability there, but we -- it's worth mentioning that some of the -- one of the senior manager appointments we made was a chief operations officer, who is looking to drive the efficiency through the manufacturing process now. And we are going to be further drilling down those margin numbers to make sure we know -- we can understand why and how to make those efficiencies both upstream and downstream and in the production process itself. So bit of a wooly answers, understandably, but it is a bit mix, and it's a bit the processes maturing as we go along.

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Amy Lucinda Walker, Peel Hunt LLP, Research Division - Analyst [4]

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And your intent is that, that it would (inaudible)? Just if we were going to anything from a modeling perspective or...

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [5]

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Yes. I mean, we've always said -- so the margins we expect to make on the bioprocessing are second quartile, so they're between 25 and 50 depending on the product. And so they're decent margins, they're very good margins. And -- but it is still a process that's being worked upon and honed and as it were.

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Amy Lucinda Walker, Peel Hunt LLP, Research Division - Analyst [6]

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Okay. The second thing was you've got quite good (inaudible) in the batch (inaudible) that you're expecting out of the second half because of the [refunds] released in the past. I wondered if you would be able to do this -- but within that GBP 16.5 million of bioprocessing in commercial [indiscernible], can you say anything about the batch between (inaudible) -- I just wondered how to think about how that can (inaudible) offtake for the batch revenue is tracking what we can see going on from the launch. And just -- if you could contextualize that, I mean, I -- (inaudible) come forward that kind of even out the argument, so whether they undulate onto that is something I would (inaudible) from a ramp-up perspective.

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [7]

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Yes. I mean, it's interesting. We don't strip those numbers down. But what I will say is that -- what I mentioned earlier, we're employing a whole bunch of scientists. Most of those scientists who come in, who are working on the process development side, will be charged out. So when we start a new deal, those people are fully funded and paid for, and they're charged out a very nice charge-out rate to our platform customers in order to do work on that product. So as they come in, there is good revenue. So number of head count we get equals revenue generation. The demand is there, which it is. So I would say we did grow in the commercial development lines. As far as the batches is concerned, of course, we do know how many batches we're going to make, exact amount. And they are not constrained at the moment. We've got 3 fully working clean rooms working flat out. One, as you remember, one suspension process to adhere in, and it's mixed. But we -- and we are working flat out. So we sort of know what we're going to do, and we're very bullish about the second half and the tear in revenues and the continuing trend to seasonality, given the sort of January shutdown that I mentioned.

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Amy Lucinda Walker, Peel Hunt LLP, Research Division - Analyst [8]

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And you're not (inaudible) amount, too. On the TRiP technology, in which you're going to (inaudible). I think I've understood that you can apply that in lots of the different parts of [batch] processes, like reducing [live] reactions in the production phase. I wonder if you're planning to take this exact technology outright [towards that] of a third-party and get (inaudible) to manufacture it?

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [9]

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Exactly. That's something we're working on for that.

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Amy Lucinda Walker, Peel Hunt LLP, Research Division - Analyst [10]

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Okay. And I was going to ask, if so, what kind of time line is realistic for you to see revenues from that? Like how many (inaudible) through that (inaudible)?

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [11]

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(inaudible) mentioned what it can do, we expect to take a decent amount of revenue from it. But effectively, you can decrease your cost of goods, the (inaudible) by [a factor] of 10, that's a big number. So we'd been looking for some sort of a licensing deal where you have (inaudible) fund [threshold] (inaudible) today or (inaudible) on that as well. So if you think about someone like the Bioverativ deal, that's built in. So if we use TRiP in the Bioverativ production, we get (inaudible) royalties.

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Amy Lucinda Walker, Peel Hunt LLP, Research Division - Analyst [12]

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But you might go out and license the (inaudible). And that would (inaudible) you do not (inaudible) a viral vector expectations because that would be (inaudible).

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [13]

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That is completely set at this point in time. Yes, absolutely. And the IP goes back to middle of the decade after next year, yes.

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Unidentified Analyst, [14]

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It's (inaudible) from Jefferies. A couple of questions. Firstly, on the (inaudible) programs, I think you're talking there about appropriate value and cost reimbursement in (inaudible) previously. Is there things that haven't changed in terms of thinking about how much of an investment those programs in the near term? My second question is just related to a financial question on the deferred revenues relating to [Axovant] [GBP 8.9 million]. Do you to expect to recognize that this year or is some of that going to fall into next year's results?

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [15]

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So I'll get the first part. Our work along those lines is very important to us, obviously. It has shown to be a very good part of our strategy to actually do that with the Axovant deal and now the success we can see going with Sanofi. So we have other compounds coming through to the end of pre-clin, and part of our strategy is picking those after that point in time. We think that's a very good use of funds going forward. We'll (inaudible). And doing pre-clin work is not particularly expensive, so if we can pull these other ideas forward, get them ready, talk to partners about them and keep building, there could be some very good value creation (inaudible).

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Unidentified Analyst, [16]

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Is it more that you're not planning to spend more on the (inaudible)?

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [17]

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We have -- since we changed our strategy, we do a lot more manufacturing and do not take (inaudible) ourselves. We have kept taking things towards trials. So we're kept very busy, making sure we're getting all the work in the background to be ready to start Phase I/II trials. Hence AXO-Lenti-PD will start in the second half of '18. If we hadn't done that, it wouldn't be ready. So that's the first case. The other assets we're talking about, I mean, the portfolio now, we keep pushing those forward as well. We have interest in those, we'll see what happens. But of course, yes because of these being so successful, we're bringing forward new ideas also.

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Stuart Paynter, Oxford BioMedica plc - CFO, Company Secretary & Director [18]

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The second part of your question, on deferred revenue, the AXO-Lenti-PD, the third piece is a bit binary in that it's happening around the year-end. But if I'm going to be prudent, I would say that it probably won't happened this year.

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Unidentified Analyst, [19]

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And I just want to clarify before [indiscernible] facility, I think you're alluding to the fact it does tend to be used for new and existing clients, is that correct? Or will it mainly be a bioreactor process?

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [20]

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We've [4] bioreactors in the GMP suites. We could run for the moment from what we have today with our 3 GMP suites, but taking on new deals from this point forward would give us real capacity constraints to take on further deals than we have today. So to be ready for those, we want to be expanding now because we can see -- generally, feasibility predicts what we'll do in deals in a year's time. We're working on (inaudible) our feasibility today, so we expect further deals to come in the next 12 months.

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Unidentified Analyst, [21]

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Will that (inaudible) potentially increase in financial strength? Should we expect any easing in the financial debt? (inaudible)

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Stuart Paynter, Oxford BioMedica plc - CFO, Company Secretary & Director [22]

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Yes. So the debt is $55 million in (inaudible) we have, which is going out to June 2020, so 3-year term. And yes, you're quite right. We are in a very different financial situation than we once were, when we signed the deal, especially, sort of 15 months ago. And we don't consider it to be an appropriate sort of debt profile for a company of our [risk] anymore. So we are, as a Board, thinking about -- actively thinking about what we're going to do over the next 6 months to look at how we fund ourselves. I can't say much more than that, but it is something -- and now we have the optionality. I mean, you can see it in the cash, we have the net cash, we have a net debt now. But of course, some of that is being (inaudible) for the GBP 20 million new facilities, the first part.

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Unidentified Analyst, [23]

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Are you still thinking about keeping manufacturing, and I've kind of asked this question before, but are there any plans to move manufacturing to the U.S.? Or...

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Stuart Paynter, Oxford BioMedica plc - CFO, Company Secretary & Director [24]

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Well, we always consider these things. At the moment, as John was mentioning earlier, the process is still slightly embryonic and it's quite difficult. And this is both a blessing and a curse, right? It doesn't make our life easy internally, but then it's a barrier to entry for others. And so there is a lot of benefit in having your facilities within 20 minutes of each other because there are a lot -- there's lots of ongoing, very high scientific problem-solving that goes in all of the time. And so we are -- as we characterize the process, we may have to expand geographically. But that's -- certainly for this facility and future development, John mentioned, the 45,000 square feet left over, we do see a real benefit of having our top scientists available, on-site very quickly.

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [25]

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No more questions? Okay, so we got--

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Stuart Paynter, Oxford BioMedica plc - CFO, Company Secretary & Director [26]

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Sorry, we have one more question.

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Amy Lucinda Walker, Peel Hunt LLP, Research Division - Analyst [27]

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Sorry, I have (inaudible). I have one more before you can get to the phone. I get lots of questions from people and (inaudible) for around how do you (inaudible) for anyone who switch away from (inaudible) platform at any stage of development. And I just wondered, have you ever had a (inaudible) where someone who came to you have decided at some point, for whatever reason at all, (inaudible) actually (inaudible) use some other provider?

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [28]

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I can't recall one. I seriously can't recall one.

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Amy Lucinda Walker, Peel Hunt LLP, Research Division - Analyst [29]

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Okay. And it almost immediately becomes prohibitively expensive and time consuming (inaudible)?

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [30]

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So once you start the process with us, tech transfer does take a considerable amount money and an awful lot of time. So we tend to work a bit for a long time. We have (inaudible) work with (inaudible) to move away, and it will be a long-term post marketing process.

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Stuart Paynter, Oxford BioMedica plc - CFO, Company Secretary & Director [31]

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And even if they move away, they're not moving away to another process. They have to stick with -- I mean, they're stuck with the process that's on the license. And so even with the tech transfer away, we will still generate royalties on our platform even though their batch manufacturer revenues would leave. And -- but like John said, we've never come across that.

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [32]

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And in certain situations you can find the royalties have lasted more long-term in the bioprocessing space at some point in time.

So to the phone lines.

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Unidentified Company Representative, [33]

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We ready to take questions from the people on the phone. Operator?

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Operator [34]

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(Operator Instructions) Your first question comes from the line of Joe Pantginis.

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Joseph Pantginis, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [35]

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Joe Pantginis from H.C. Wainwright. So Stuart, I know you were shaking your head over the phone before, so I won't press you on trying to break out the platform revenue segment any further. But I will ask you for a reminder, if you don't mind, before I ask the full part of the question. Is there a quarter lag with regard to the Novartis revenue when you book it?

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Stuart Paynter, Oxford BioMedica plc - CFO, Company Secretary & Director [36]

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Are you talking about the royalties, Joe? Or are you talking about...

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Joseph Pantginis, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [37]

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Yes, just the royalties.

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Stuart Paynter, Oxford BioMedica plc - CFO, Company Secretary & Director [38]

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Yes. No, well, there's a quarter lag in the actuals but we accrue a royalty, so we make an estimate. So it's sort of done in slightly inaccurate real-time. But at the moment, of course, the numbers aren't big enough to be materially wrong. Somewhere down the line we may have that issue, but this is only where we really go. We must recognize the value that we've seen and we'll be fairly prudent about. But then the royalties will be trued up sort of 3 months later when the actuals come through.

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Joseph Pantginis, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [39]

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Understood, Okay. And then with regards to your expansion announcement today, just wanted to clarify -- from an earlier question as well, and I'll ask it in this fashion. So with your current facility, I know you'd reach capacity relatively fast, I believe, you mentioned for like new types of deals. So do your current facilities have the ability to address, say, all of Novartis' needs for even the second CAR-T as well as for Orchards' planned or anticipated launch?

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [40]

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We are in a place where we can satisfy to the end of '19, which is why we're moving as we are. We have some big demands from even from current customers. We do think we'd have to have more capacity anyway. And (inaudible) sales by having an opportunity to new deals as we (inaudible). The answer is yes. At the moment, we could cope in '19. We could cope -- after that, we're going to need more capacity even with what we have today.

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Joseph Pantginis, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [41]

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Got it. And then my last question, and this might be more suited to ask Sanofi directly, but -- I know you mentioned the Stargardt program could be entering pivotal studies in 2019, but do you anticipate clinical updates this year for either of the 2 programs with Sanofi?

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [42]

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That's a question we couldn't answer because Sanofi have their own policies, which we can't comment on. And if they disclose then we can disclose, too.

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Operator [43]

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Your next question comes from the line of Martin Hall.

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Martin David Hall, Hardman & Co. - Head of Research [44]

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My questions relate to the gene and cell therapy catapult in Stevenage. I just wanted to know, is -- because it's government-backed, it does receive a tremendous amount of media attention. Do you see this as a threat or an opportunity? When media talks about it, they very rarely mention OXB in the same article. And secondly, in relation to it, when pitching or tendering for business, do you feel that you're on a level playing field with them? Or are they pitching low in order to generate a deal and generate media attention near company (inaudible)?

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [45]

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We've worked very close with them. We know them quite well. And I would say that wouldn't affect us in the slightest. I think we operate in a different sphere to them. Nowadays, we do a full turnkey operation, working with process development and manufacturing with bioreactors. As far as I'm aware, and I think my colleagues agree with me, we're the only people in the world where (inaudible) to bioreactors currently. So we are in a different space, looking for different deals, so after that, we'd stay out this point in time. So I think we can work very well together, and there hasn't been too much competition at all.

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Stuart Paynter, Oxford BioMedica plc - CFO, Company Secretary & Director [46]

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And in fact, Martin, I'll emphasize the opportunity, which is, what we're they're there for is the companies who want, in the end, to take their manufacturing potentially in-house, that go in trial rather than building a facility to try and do this thing. But it's the early-stage clinical trials that they're going for. And we're an innovation piece. At the end of that the process, when they need to scale up to the commercial process, that's not what the catapult is there for. So it does encourage innovation, and as John mentioned, we don't see them as a -- but we certainly see the output of what they do as an opportunity.

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Operator [47]

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(Operator Instructions) There are no further questions at this time. Please continue.

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John Dawson, Oxford BioMedica plc - CEO & Executive Director [48]

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Okay. Well, thank you very much, all, for coming. Happy to have a chat with you afterwards, and thanks for the question over the phone as well. Thank you.

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Unidentified Company Representative, [49]

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Thank you.

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Operator [50]

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That does conclude our conference for today. Thank you for participating. You may all disconnect.