Oxford Biomedica plc (OXB) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen and welcome to the Oxford Biomedica Preliminary Results 2021 Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded.

Welcome, everybody, and thank you for joining us for our preliminary results 2021 conference call. I'm Sophia Bolhassan, Head of Investor Relations, and I'm joined here today by Roch Doliveux, Chairman and Interim Chief Executive Officer; Stuart Paynter, Chief Financial Officer; and Kyri Mitrophanous, Chief Scientific Officer. I'll now hand over to Roch to begin the presentation.

Thank you very much, Sophia. And welcome everybody to the 2021 financial results for Oxford Biomedica. I will share with you a couple of slides on where is the company and then let Stuart highlight the financial results and Kyri and Stuart talk about the future. First of all, I'm clearly delighted about the 2021 performance which was clearly exceptional due to several factors. The most important one being the large scale manufacturing of the adenovirus based COVID vaccine from Oxford University/AstraZeneca. And I'm proud that we have successfully manufactured over 100 million doses of the AstraZeneca vaccine. And just for the sake of -- I know several of you had questions or comments -- just to highlight that we do expect to continue activity with the -- with AstraZeneca this year. We are in advanced stages of discussion, and the discussion around how much and when and not if, so just want to be very clear on that. The underlying business, if I could have the first slide please? The underlying business is growing very nicely. Brought in new customers, and the -- can I have the first slide please? We are, you know, building on this -- I'm not seeing the first slide. So I don't know if the first slide is appearing.

I can confirm the first slide is on the webcast for you, Roch.

Okay. We don't see it. So that's okay. Thank you for doing that. I apologize. So we are indeed delivering on our strategy to become a global viral vector. I think we're in a very unique position in the biotech space of being an innovative CDMO and an innovative service providers to cell and gene therapy companies, whether biotech or large pharma. And what makes us unique is our proprietary platform, our IP, our knowhow, for which customers are willing to pay royalties. The strength of our quality system audited by large pharma and regulatory bodies all around the world and our expertise, and the same recipe of success applied to our AAV business with the plug and play platform that we acquired in Boston earlier in 2022. If I could have the next slide, please? The 3 reasons to really invest in Oxford Biomedica is the fact that we are a leader in viral vectors. Today, we are a leader in lentiviral vectors, and we aim to become a leader in the largest of the viral vector and the fastest growing, which is the AAV business, by the acquisition of our new platform which has record-setting quality and yields performance. The second is the fact that we have a diversified business of both process development. Again, a lot of the innovative and the IP is coming through this activity, but also manufacturing revenues and then the ability to have a long-term upside from our proprietary pipeline, which will require external funding and we'll come back to that in the Q&A, I'm sure. And last but not least, the fact that we have an amazing management team with an operational infrastructure that has delivered. I think the delivery on the lentiviral vectors on the adenoviral vector, and the -- and now on the AAV is truly unique. And the fact that we have commercial supply capabilities for both small biotech and big pharma is a huge strength to build in. I just want to highlight, before I hand over to Stuart for the financial results, that we really believe that this unique platform-based innovative business is coming at the right time of a challenging biotech market for companies not to reinvent the wheel, and consider go to Oxford Biomedica as the place to go for any of their process development and manufacturing topic around viral vectors. And as you know, viral vectors is the key to unleash the potential of the vast majority of cell and gene therapy products. So as you can hear, maybe from my energy, I'm even more bullish than I was when I joined as Chair 2 years ago. And great progress have been made to maximize the potential of this company to become global viral vector leader now across the world. Now to Stuart for the financial results of 2021.

Thank you very much, Roch. So I'll ask the presenter just to forward on the slide to Page 6. So this is just a bit of a highlight as to where we've been in 2021. So we really wanted to present the business with a state of play, the strategy which Roch has just given, just a little bit of a backward look at 2021 financially and from an operational perspective. And then something about the transformative acquisition that we just made in Oxford Biomedica Solutions and the impact that's going to have on the future and some of the other opportunities that are in front of us. So on Slide 6, this is the start of our -- well, a look back at the year of 2021, which is a year of substantial growth for us. So revenues grew 60-plus percent to GBP 143 million from about GBP 87 million the year before. Of course, that was largely driven by the large -- as Roch said, the large scale manufacturer of the Oxford AstraZeneca vaccine, which we've done at a high throughput, high cadence and also with some very nice success in terms of completed batches and yields, which AstraZeneca have been very kind to us to say that we were towards or at the top of their league tables in terms of those key performance indicators. And interestingly, you'll see the disproportionate impact of the increased revenue throughput as we get to the P&L a bit later and the EBITDA generated. It really does illustrate the fact that commercial manufacture -- high-throughput commercial manufacture really is something to be learned from and aimed for in the world of innovative services, which we find ourselves in. The more commercial products, the more high throughput products you can get, the more efficient you're going to be utilizing your footprint and your fixed costs, essentially, which is what we found. And we signed 2 new partnerships. In fact, 3 new names appeared on that sheet since this time last year, Arcellx, Cabaletta being the top 2, Immatics being another really interesting small biotechs in the lenti field, who, as Roch mentioned, have gone down the CDMO route looking to utilize our expertise to help them achieve their clinical goals, which is exactly where we want to be. We want to be helping companies, both big and small -- we do have the big pharma endorsement -- achieving their goals and ultimately providing with solution from very early-stage process development, all the way through to commercial manufacturing, which, of course, is the goal to help our partners get right the way through their program, at which point the royalties, which Roch mentioned again, start kicking in. We've also, post balance sheet, completed as well as moving from pure lenti into adeno, which was done in 2020. We've now completed the full suite of viral vector types in terms of our investment into AAV in North America, and just outside Boston. We think that's a really smart use of the pandemic efforts that we put in, the success we've had in that area and really crystallizing that into something that's going to be really, really interesting and transformative to us in the medium to long-term, which is our entrance into the AAV business and leveraging our technologies and our brand across lenti through adenovirus with AstraZeneca and into AAV. And Kyri will take you through some of the technology points a bit later on. So if we just move on to -- point 4, not to be underestimated on this slide is about the strengthening of the Board. And Roch's been in a -- since his 2 years as chair has been slowly transforming the Board into real world-class gene therapy expertise on the Board, both clinical, technical, manufacturing, financial. And so we think we're in a really good governance place now to drive the future growth of the business in the right way -- in the right way for a FTSE250 company to do it. So next slide. I'm not going to take you through all the points here, but I'll let you read through them. The 3 key points for us are always revenues, and we've been through the revenue growth that we've achieved in 2021. EBITDA, and that number was about GBP 35 million for the year of 2021. Like I say, driven by that efficiency where we were generating through the high-throughput campaigned lenti -- adenoviral vaccine. And then how we are transforming that EBITDA into cash generation. So you'll see that we have GBP 35 million of operating cash generated from the business -- GBP 25 million of operating cash generated from the business, which was substantially more than the previous year. And that enables us to make interesting choices both in terms of how we fund the business and how we then reinvest into the business, whether it be into R&D for future innovations or where it's necessary into lab expansion, capital expansion to further forward our infrastructure footprint. Worth mentioning that we did the deal back in September with Serum Institute to fully fund the Phase II of Oxbox. So many of you will know, many of you have visited the Oxbox facility in Oxford. And know that there's 25,000 to 30,000 square feet of fallow area there, which was deliberately designed for a future-proof expansion plan. We believe the time is right to be looking at delivering Oxbox Phase II. So we will have a multi -- an offering to our partners, which is multi-scale, all the way from 50 to 1,000 liter and beyond in terms of the GMP capacity we can offer. And that provides a commercial solution, not just for our existing partners for lenti, but it provides a solution for AAV as well and then potentially other vaccine, which we can do. We've recently signed a memorandum of understanding with Serum on how a future collaboration will look. We're very excited by that in terms of us helping them with their strategy of building up their capacity and capabilities in the U.K. for vaccine manufacture. The other area, of course, more importantly is cash. Cash at the end of the year was north of GBP 100 million. Cash at the end of the first quarter was GBP 144 million. Of course, that was after some quite big inflows and outflows, having transacted the deal and a capital raise in order to fund the deal as well as some loan financing. So you can see we're still in a strong net cash position at this juncture. This was a sort of bridging loan to get us through the way the capital raise was put together in the required circular. But we've come out of the sort of pandemic period with an acquisition which we're really excited about and a strong financial position. So if we just scroll to Slide 8, please. The top chart being down underlying business and the purple being the more lumpy milestones and license fees. And you can see that we get something very regularly, in fact every 6 months. Though, we'll see some of that purple stuff coming through, very difficult to predict. The underlying business slightly easier to predict. And you'll see that they're looking back to the first half of 2015 when we pivoted to be an innovative service provider initially just for Novartis. There's some substantial growth capped off in a year of 2021 with north of GBP 140 million. The seasonal split there is a lot to do with the throughput of vaccines in the first half, and the arrangement with AstraZeneca on pricing, et cetera. So we are, again, very proud of that underlying growth, and we expect that too post pandemic and with the acquisition we've made in the medium to long-term to continue very, very aggressively. The bottom chart, operating EBITDA. We've communicated this for a while now, that now is -- we don't say that now is the time to generate, to be -- aim to generate EBITDA. EBITDA has come from the good delivery that we've made this year. And it gives us those flexible reinvestment opportunities, whether that's to strengthen the balance sheet or whether that's to invest back in R&D. But we are absolutely committed as an innovative service provider to generating the next tranche of innovations, which is going to enable this industry to make a really big impact in health care and bring gene therapies, not just to very rare diseases, but beyond that to more prevalent diseases in a cost-effective way. And we believe we've got a really big part to play in both making it more robust as a process, cheaper and safer. And we're excited to be able to do that in both lenti and AAV now. And Slide 9 is our P&L we show. You'll see our revenue, we've already talked about. Costs will go up, of course -- cost of goods with the increase in revenue. There's been a shift. As you can see there is some bioprocessing costs into cost of sales, given the extra efficiency we managed to create and the absorption of those overheads into cost of sales. R&D expenses have gone up as we continue to invest. This is absolutely the right thing to do and what we're committed to do for the next few years. And administrative expenses have increased too, as we have built the governance around our company which is going to a springboard now from the lower ends of the FTSE250 with really significant growth ambitions that the Board has set us for the next 3 to 5 years. We're set further in terms of building that back office, the control environment, the governance structures to be able to make the next leap forward. Yes, obviously, there's various headwinds in the marketplace as well in terms of supply chain and inflation running. But we are in a financially very robust position to be able to not just cope with those changes, but actively push those -- push the agenda forward with a multi-geography approach now that we're taking. So on to Slide 11. This is more of a future look now. So Kyri will take you through some of the science in one or 2 slides' time. But I just wanted to reiterate, we've gone through this a couple of times now, why we wanted the Board and the executive team here wanted to make the leap into AAV. Having seen the performance levels in adeno, which was brand new to us, we were convinced that the technologies, the knowhow that we have in having worked in lenti, which is a very tricky place to be for the last 20 years, really does lend itself well to that transfer of knowhow across that modality through adeno and into AAV. So here, I think, we've made a smart acquisition in a very smart way of a fledgling innovative service provider who is currently just providing services to a single client, which we have received the contract for, with the latent capacity we can build out very quickly. If we'd done this organically, it would have taken us a few years. We believe this is a really smart way to make an impact in the AAV field with a best-in-class plug and play platform. But the reason we were doing this is because you'll see in that top graph that the lentiviral gamma retro area is growing at 17% CAGR, which is not too shabby, and we're already very, very constant in that market. But you'll see the levels of activity going on in AAV. And furthermore, AAV really does have a problem with some of the CMC the FDA has identified, which we truly believe we can form part of the solution for. So we believe the time is right for us to bring our knowhow, capabilities, technologies and ultimately, our brand and big pharma endorsement into this area. When you see the market size, it makes a lot of sense. So we will continue to deliver on the alignment and integration and ultimately delivering new customers into that part of the business. And it's going to form part of the growth strategy for Oxford Biomedica Group over the next 2, 3, 4 years. And everyone is aligned, both the management at Oxford Biomedica Solutions, we, Oxford Biomedica Group and Homology are all aligned that in the next 3 years the job of Oxford Biomedica Solutions is to bring clients on, generate revenue and essentially grab the biggest portion of this market share we can as the market matures. So I'll hand you over to Kyri, who will take you through some of the science and the technology that we're excited about in the next 2 slides.

Thank you, Stuart. So Slide 12, please. So today I'm going to share with you some of our plans for future innovation around our platform technologies, as Stuart was saying. These are focused on realizing the potential of AAV and lentiviral vectors to revolutionize medicine. Then I will describe how we are strengthening our product pipeline. First, with the continued development of OXB-302 for acute myeloid leukemia; second, with the application of lentiviral vectors to modify the liver for therapeutic benefit, and finally, the development in vivo CAR-T therapy, a very exciting area. So first, on platform technologies. Our expertise, IP and investments make us well leading producers of lentiviral vectors. In the last few years, we have leveraged this expertise into other vector platforms, as we heard, with our very successful manufacturer of the Oxford AstraZeneca COVID-19 vaccine. Our long-term goal is to become vector agnostic. And to that end, together with Homology medicines, we've established Oxford Biomedica Solutions, a high-performing full-scope AAV manufacturing and innovation business near Boston. We see clear areas of synergy between our current capabilities and our new AAV expertise in Oxford Biomedica Solutions. And I'm really looking forward to the exciting developments we will make by combining our strengths. By improving the amount of and quality of active we can generate, we are opening up new therapeutic indications for both AAV and lentiviral vector products, right. Now so we are focusing co-development activities initially in 4 areas: first, transfection. Both AAV and lentiviral vector production currently rely on transient transfection for lenti production. We have learned to make stable transfection mixes that are particularly useful at large scale in GMP. By optimizing the transfection conditions and also switching from 3 to 2 plasmids, Oxford Biomedica solutions have increased the potency of the AAV particles produced. These are the ones that have the vector genome inside them. They are the ones containing the therapeutic genes. Combining these technologies of stable transfection mix, superior transfection conditions should allow further improvements in titer and quality of vector produced both for AAV and lenti, thereby obtaining superior cost of goods. In terms of upstream and downstream production, we will look to combine 2 industry-leading technologies, 2,000-liter transient transfection and perfusion technology for improved quantity and quality of vector. In addition, the TRiPSystem allows for the production of high titer AAV and lenti vectors irrespective of the transgene. In terms of analytical testing, through Oxford Biomedica Solutions, we have a full suite of analytical methods for our AAV characterization and product released. By combining this with our state-of-the-art automation and vector characterization, we expect faster and more efficient testing, characterization and also batch release. Now we recognize that having the right production cells is key to a successful product, and OXB has developed screening technologies for obtaining high-titer production cells -- sort of production cell lines for lenti, and also developed methodologies for making a stable lentiviral vector producer cell lines. We can apply these learnings to AAV production to meet the expected and current high demand for AAV and lenti. I'm looking forward to sharing with you the exciting technologies and innovations that will arise by combining the strengths that we have brought together in AAV and lentiviral vector, ultimately leading to the development of life-saving products for our patients. Now please, can we move on to Slide 13? So first it's with great pleasure that we welcome Dr. Ravi Rao to OXB, as our new Chief Medical Officer. Ravi brings with him a wealth of experience gained through senior roles at Sobi, GSK and Roche. Ravi is responsible for developing the OXB therapeutic product strategy, both by building on our existing product pipeline and further evaluating novel areas of opportunity. We have undertaken an internal review of our preclinical programs. This is ongoing, but I will share some of our latest thinking. Our lead clinical product candidate, OXB-302 for the treatment of acute myeloid leukemia is in late preclinical and progressing well. We're developing a new set of products to target the liver that play to the strengths of lentiviral vectors. The liver is a continually dividing organ. And because lentivectors integrate into target cells, a one-off treatment is all that may be required to give a lifelong benefit. Now large quantities of high-quality lentiviral vector is required for liver gene therapy, which OXB is particularly good at making. And finally, we're developing an exciting new innovation, the generation of CAR-T cells in vivo. The aim with in vivo CAR-T therapy is to remove the need for all ex-vivo cell processing by directly administering the lentiviral vector into the body. We expect to be able to treat many more patients and treat them as a first or second line therapy rather than third or fourth. This should give better clinical outcomes. To ensure that we adequately resourced this new pipeline, we are deprioritizing OXB-203, 204 and 103. Finally, on the 31st of January, 2022, Oxford Biomedica was informed by Sio Gene Therapies of their intention to return the rights for AXO-Lenti-PD. We plan to out-license the program to a suitable partner. And thank you, and I'll hand over back to Stuart.

Thanks Kyri. If we just go on to Slide 15. We are just going to cover a bit of outlook and news flow for the year 2022. So the outlook is that we expect that the revenues will be slightly lower than 2021. As we work with AstraZeneca, as Roch said, to sort of reassess their supply needs going forward, we fully expect -- and there will be vaccine revenues in the year 2022, but not at the same throughput levels as 2021 -- we do expect the number to be significantly more than the year 2020. We are going to see the impact of the integration and alignment of Oxford Biomedica Solutions into our numbers which will -- as we've highlighted during the deal stage, this is an innovative service provider in-waiting as it were, and we need to bring them up to use the latent capacity in order to get them to a profitable state. And that will take a few years. We fully funded that by injecting $50 million into the business at the time of acquisition. So we tried to be entirely transparent about that. But as we are building up their customer base, there will be some losses, which we will consolidate into the group accounts, which will lead to a slight negative EBITDA number for 2022. We expect that alignment, transition, sort of integration period to be over in 12 months. We are making sure that the business has the latitude to run itself absolutely according to the demands of the business. And we're making sure that we take the best of both cultures, share technologies and do those things which will make us strong. This was not a cost synergy play, of course. This is a new business into a fast-growing area. So we need it to be agile, well-funded and have the resources it needs to make an impact in that marketplace. What I lead on to is our approach for CapEx in the year of 2022 is going to be relatively cautious, as most -- as you all know, we did the deal back in September with Serum Institute of India to fully fund the GBP 50 million expansion of Oxbox Phase II. That's in the planning stage. Now the main pieces -- the main cost on that is not going to be on until 2023 and beyond. But we are making sure that we are integrating the solutions business priority #1, making sure that we are aligned to our existing customers and future customer needs on the lenti side as well. And making sure we're fit the purpose for the future in terms of full-scale manufacturing up to and beyond the 1,000 liters. So we'll make those calls as we see fit at the Board level and make sure that we are spending our net cash judiciously in that sense. Again, we expect 2 customers to come on the AAV side in Boston. And on the lenti side, we expect to continue and build on the momentum of 2021 in terms of new customer signatures. Both new deals in terms of expansion of existing customer at work and completely new customers. So we believe the outlook is very strong for the year. And we find ourselves in a position where, of course, the capital markets are relatively soft than they have been since in mid-November last year. But in that time frame, we've had the financial robustness to manage -- to do a transformative acquisition. And we're still in a strong net cash position coming out of that 6 month period. So really, really strong performance. We are excited about where we're going in the future. And we've put the building blocks in place, we believe, to be able to make a really big splash across the cell and gene therapy industry and becoming, as Kyri said, vector agnostic in that sense. So if I ask to go on to the last slide, which is a repeat of the first slide that Roch went through. Again, not to be underestimated, the big pharma endorsement, very important. The risk-mitigated approach to cell and gene, we're not taking those big clinical risks that you see some companies have. And ultimately, the scale we have now achieved of close to a 1,000 people across 2 continents, audited by the FDA and many other regulatory authorities, Japanese FDA, MHRA, this is a real barrier to entry. So we really believe we're in a strong position now to serve our customers, keep on innovating and ultimately to aggressively grow the business in the medium to long-term. And with that, I'll hand back over to Roch for closing comments and to open the Q&A.

Thank you, Stuart and Kyri also, exciting future started we've already. So the floor is open for question.

[Operator Instructions] We can now take our first question from Alistair Campbell of Liberum.

I've got a few actually. Can I start with just thinking about some of the R&D collaborations you've signed during the last 12 months, I mean deals with Circularis, Virica, [ ASLA ]. Obviously, it looks like those are deals intended to improve your internal productivity and yield. I'm just kind of intrigued, do they come with any significant economic pay-ways or profit shares that we should be aware of, which could influence the economics of business going forward? Second question, well, I've been trying my luck, hopefully, not have much. But just thinking about Novartis, increasingly, they seem to be pointing towards their new T-Charge technology as the key to truly building a successful CAR-T portfolio. We had data from one of these projects late last year, which is kind of Kymriah upgrade and the data looked pretty good. And we're talking about moving that into registrational trials this year. I'm thinking of it digging around, it sort of looks like that's also powered by lentiviral technology. I mean would I be foolish to assume that you're involved in that? And just to confirm any sort of future products to come from that Novartis pipeline. Would they be on similar economic relationships or arrangements that you currently have with Kymriah?

Kyri, you want to take the 2 questions and maybe Stuart can complement.

Yes. So in terms of the -- thanks for the question, Alistair. So the collaborations you outlined with regard to Virica, et cetera, are, as you say, to strengthen the platform with regard to lentiviral vectors. Can we improve the quality and quantity of vector that we manufacture? I don't want to disclose any of the financial terms. I don't think that would be appropriate to do that. With regard to your question regarding T-Charge technology, I think we'd have to defer to Novartis to confirm that they're using lentiviral vectors. But most CAR-T therapies are using lentiviral vectors, if I can say that. And in terms of the financial terms for CAR-T therapy, Stuart, I'll ask you to comment on that.

Yes. I mean I think you're right, Kyri. I mean T-Charge is something that Novartis would need to comment on. It's still in its investigational phase, as you mentioned, Alistair. We would expect -- we've got a long well-trodden path with Novartis now about how we do -- how we work with them. And we've been working with them for the best part of 7 or 8 years. And we wouldn't expect a big difference between the economics of Kymriah, et cetera, to anything new we work on them with. They're still going to utilize our platform to do that. So yes. I mean just to comment on the research pieces that you mentioned, Virica, et cetera. I mean Kyri's absolutely right. I mean, we -- Kyri and his team are extremely clever people, but we can't make every single innovation necessary to continue a cutting edge ourselves. It just can't happen. So what we do is we -- Kyri and the business development team scour the world for some of the best innovations ongoing, and we look to catch them early and build collaborations, take licenses to technologies, which will then fortify our platform and our offerings going forward. So we're trying to do this in a smart way. We're not trying to do everything ourselves. We're trying to look at the important stuff ourselves. But we're making sure that we're leveraging these really smart innovative, small companies who can help us fortify our platform, which ultimately is going to be the key to the offering, whether it be AAV or lenti. If we're going to be an innovative service provider, we need to be offering the latest technologies to our partners in order to give them a robust, safe, high-yield process, which they'll pay for.

Can I slip in one sort tricky last one, which is, I think you referenced CMC issues that the FDA seemed identified of the AAV and obviously, you're hoping to address those. Can you maybe sort of touch on sort of some of the key areas you're looking at there? Where you think you're going to have technologies that can improve the quality of AAV?

Yes. But I think the core -- and when we disclose about the acquisition of the Homology plug and play platform is the ratio of full to empty capsids, is one of the area. It's not the only one, but it's one that got a lot of airtime because the quantum are so important of difference. And the average, I think, of the industry is around 70%. So that means you have 30% of empty capsids that just do nothing except compete for the efficacy of the filled capsid and added to the toxicity. And that's one area where we feel we have a leading edge with our AAV platform and where more is to come.

We can now take our next question from Miles Dixon of Peel Hunt.

I read in the RNS this morning that you were -- I think the quote was, you are working hard to bring in additional partners in FY '22 for the U.S. AAV footprint. I think it's all wrapped up with. Can you give us an update on how the integration is going? I know it's still early. But also where you see the maturity of the BD function in the U.S. in bringing those additional partners in on top of the 25 million from Homology?

Thank you. So the interest in the platform is very strong. We have several CDA signed. We have several business propositions, so all that in a matter of less than 2 months, several business proposition already out. So I'm very confident with the guidance we've given that by the end of the year, we'd bring 2 new customers in. And the integration is not so much an integration, because we have a [ LV ] business, and we have an AAV business. So the key areas really is about innovation. I think Kyri talked about it. He has a slide where he shows -- and there is already work that has started on a few of these workstream that Kyri highlighted about enhancing each other's innovation. It's about sales and marketing, clearly. We have the sales team common to all our platforms. And I mentioned the very strong momentum we have in there. And of course, we're mindful of the cultural sensitivity. It's -- you bring 2 different cultures together and we want to keep the best of both. But at the same time, this is not a big pharma integration. This is an add-on strategic business, which is fully accountable for the -- with aligned incentives to our 3-year target. And so everybody is incentivized the same way so it makes things very easy, I should say.

And Miles, if I could just add the investment we've made in sales. So we use the term BD. We used to use it. We use it slightly more advisedly now, right. We've got sales function, the commercial function, and then we have a BD corporate development function led by -- one is led by Jason Slingsby the BD and Corporate Development; the other led by Dave Backer, who is someone based in California. He'd came from ElevateBio. Very used to the AAV field and expert in AAV. So we are trying to speed up our sales cycle by making it a more commercial process rather than a big deal every time we do a deal. And we've invested in both an East Coast and the West Coast rep under reporting to Dave. So we have moved from -- basically in the last 2 years, Jason and a couple of colleagues based in Oxford to a truly international sales team. And Jason with his BD and Corporate Development hats on led the process that got us Oxford Biomedica Solutions. So we have bifurcated that area and we've made those investments in order that we can drive quicker and more volume of sales.

I noticed earlier on, you talked as well about the increased cadence of deals. I wondered if you care to comment, not just in AAV, but more broadly across the group, how the profile of those deals and the type of companies that you're working with that changed over the last 18 months in particular.

I can say that the momentum is much stronger than pre-COVID. So pre the big focus of the company on the vector for the vaccine. So pre that focus our momentum on the lentiviral space is much stronger now. And the profile of customers is very different at this stage because in LV were established, so large companies are target in addition to innovative biotech. In the AAV space, the first 2 customers that we expect are small customers that will validate the fact that the performance that was done on the clinical batches for the Homology as a customer can be validated to other customers before big pharma or big biotech aligned with us on AAV. But I'm very confident because I'm impressed to see that even large customers are interested at this stage in the AAV. But to set up your expectations, I would expect really the first 2 deals to be smaller deals to validate, and that's our assumption before large customers coming. Whereas on the lentiviral space, you should expect more big customers also.

We now take our next question from Charles Weston of RBC.

Perhaps I can just start by following up on Miles' on new business development. You mentioned that the first couple of deals in the U.S. might be smaller ones. Beyond that, would you be targeting late-stage clinical or potentially even commercial products that could have quite an immediate impact on revenues? Or clearly, you'll be targeting them. But how likely do you think it is that there will be a material mix of those larger projects rather than the earlier stage ones that, of course, take longer to come to fruition.

Yes, it's a great question. The one that take longer -- the earlier stage are the one that lasts longer also, because you don't compete them on -- compete with the CDMOs. You basically set the process, help people solve their issues and then they stay and as you've seen in our customer retention on the lentiviral space. So I expect the same dynamic there. And that being said, I think so it will take a while before we get large manufacturing scales. When I say a while, not this year and maybe not next year, so it will take probably a couple of years before we get large scale AAV in the activities.

Charles, just to follow up on Roch's answer there. In terms of the investment we're making in Oxford in Oxbox Phase II, that space is going to be genuinely flexible advanced therapies manufacturing space. So we will credibly be able to offer a solution from early-stage commercial development -- process development in the U.S. for AAV and in Oxford lenti and adeno, all the way through clinical supply, all the way to a genuinely FDA-approved commercial facility. So that really is a differentiating factor for us. So we are making sure that any future builds have that sort of strategy in mind, long-term in terms of multi-scale, all the way up to 2,000 liters potentially, but commercial manufacturing that's been FDA approved.

My second question is on the R&D -- your product R&D. Has your strategy sort of evolved further in terms of your thinking on how -- at what stage you're likely to want to take assets before out-licensing them? And if you can just provide a split between the product and the platform R&D expense in the P&L that would be helpful.

So I'll answer the first one and let Stuart comment on the second. So we have not yet an answer to your question and that Ravi who will join as Chief Medical Officer, -- that's his first jobs, is to provide an answer to your question. That being said, one thing that is pretty clear is that we plan to expand the product side through different type of funding and innovative approaches rather than self-financing. And the fact that Ravi works part-time for -- 50% of his time Oxford Biomedica and 50% of his time for SV venture, I think, is a good indicator of the type of thinking we have on the financing, how do we move ahead the product. It's not just a question of financing. It's a question of management focus. Our focus in the next 2 to 3 years is entirely on delivering on the lentiviral vector platform and the innovation around it. And so the challenge is how do we keep on moving our assets without distracting management attention, no financial resources, and that's something that, again, we're working on. Stuart, do you want to add or correct?

Yes. To the second part of your question, Charles, in the appendix here, we've got a segmental split, which shows that the product R&D roughly mid to high single digit millions of pounds for the year. The remainder is the R&D we spend on the innovation services as part of the business. I do want to address something that we did say at the half year about segmental reporting, we're going to do something different. Actually, we decided to postpone that given the acquisition of Solutions to make sure that we don't have to do it twice. We're just going to do it once and to see how that fits in best and we can present that with transparency. But as Roch said, the key for us is that these are very different risk profiles -- these 2 areas of spend and how best to both not just present, but to preserve and enhance the value of both of these propositions, innovative services and our own products in order that it's very clear where investors' money is going and how we want to play this game. Because there are genuine synergies in doing what we do and the ability to generate new products and it's how to best give life to them, and so they're not competing on capital with those areas that Roch mentioned have undoubted folks over the next 2 years, which is the innovative services piece. So that's Ravi's job, and we look forward to him getting his feet under the table back here and his other job at SV and giving a proposal to the Board in due course where we will then look to execute the strategy.

And just a really quick last one just for you, Stuart. Could you clarify why the revenue outturn for the year was less than the number that you indicated in January, please?

Yes. Well, we knew that question was coming, Charles, because it was -- you put it in your note this morning. So shame on me I haven't got a response to it. So yes, I mean, it was -- well, let me give you a bit of background. So the control governance we have over our revenues is that -- I mean, we tend to do quite big, complicated deals. And Novartis deal at the end of the year being a good example of such. As you'll recall, we negotiated back the nonexclusive rights to CD19 and 2 other leading CAR-T targets back to Oxford Biomedica. So now we're free to operate in those areas which we consider has significant commercial value. And the proof of the pudding is going to be in the first time we signed a deal around CD19, all those other 2 assets. Those are the 2 targets, I should say. And we have to be doing that in due course. On the flip side, we released Novartis from the capacity reservation fees and minimum call-offs more to a pay-as-you-go type arrangement, which we are currently with Novartis and that gave them flexibility and that was worth something to them. We -- as a governance, we have revenue recognition advisory firm, a big 4, that works with us on putting together the accounting papers around these complicated deals. And advises us on both IFRS 15 standards and whatever the relevant guidance is around those revenue points. And we performed back control at the time. So we did the deal, looked at the contract, wrote the paper, had it advised on by the big 4. And the final part of the control is, obviously, agreeing the trade with the auditors. And we're in a situation where we did a deal which was relatively unique. And we had a different interpretation along with our advisers to the interpretation which the auditors had. Now this is getting to be a bit of an occupational hazard for a company that does complex deals. And there wasn't a good example even in the guidance of a deal anything like this. So whilst we and our advisers, our big 4 advisory firm belief that our initial belief of what the accounting would have looked like, would stand, it was a debatable new point, novel point that no one had come across before and in-depth discussions with our auditors, another number was agreed upon. So whilst I won't go into the nitty-gritty of the counters because I think that's commercially sensitive. Suffice to say that we ended up recognizing slightly less than we initially write the accounting paper and got advice that we could. But yes, it is an occupational hazard for a company which does complex deals, which is another reason why my point earlier, we're trying to bifurcate those complicated BD commercial development deals from these commercial/sales deals. We want this to become faster and more standard and more predictable rather than having to fair value 78 pages of the contract with all sorts of different bits in it, which often leads to consequences which in terms of revenue recognition, we have to get advice on to take to our auditors. It's that complicated. So for you guys and the general public, it really becomes very problematic in trying to assess where we're going to be from a revenue perspective. So short question, Charles, long answer, apologies for that. But that's the kernel, the essence of the issue we faced.

I think the important thing from us is that both from an EBITDA and cash standpoint, there was no change.

Yes, it is a good point. I mean, EBITDA we have macro consensus Charles, it was cash neutral. It was not a cash issue.

And we can now take our next question from Joe Pantginis of H.C. Wainwright.

So a couple of questions. First, with regard to the internal pipeline -- and this is going off some of your earlier comments, so I just wanted to take it a step forward -- it's always been evolving your strategy with regards to the pipeline. So if you just look at your most advanced right now, as of today, do you think you would take 302 into the clinic yourselves?

No.

Perfect answer. So I guess, next, going backwards with regard to some of your prepared comments, when you look at the AXO-Lenti-PD program, I guess the first part of the question is, how would you define the level of maturity for your discussions right now? And are there anything that potential partners might be considering? Because obviously, the program has had a very positive evolution, especially when you look at the improvements you made over ProSavin and the long-term clinical data. So are potential partners looking at anything beyond the current clinical data with regard to, say, commercial landscape or potential future vector improvements, anything that we need to consider?

Kyri, do you want to take that?

So we are in early-stage formulations about discussions for the future. With regard to any additional technology improvements, obviously, we've carried on developing the lentiviral vectors and there are new improvements that we've made, processes and so on, that longer term can be incorporated to give an improvement in the cost of goods. I don't think we can -- so those will be factored in our discussions in the future. I don't think we can say more than that. So the improvements that we are making on the underlying lentiviral vector platform would likely applying to AXO-Lenti-PD and therefore, can be incorporated to improve the cost of goods and quality, which will be of value as you get into a commercial stage product. It won't affect the current clinical plans because those are ongoing, materials being made and so on.

And maybe just to add to that -- sorry, Joe. Yes, it's Stuart. Obviously, we did a ton of work in the background in the 3 years that this program is with Axovant and Sio. And we successfully translated the adherent process to suspension, which it was vitally important for the cost of goods and was one of the key things. And we've got a nice sort of process working now. So ultimately, these discussions for the return of rights are still ongoing. As soon as they're finalized, we've got 1 or 2 people who are interested in opening discussions in terms of having a look at the data and potentially discussing with us how we can partner to get this to the market. I mean Kyri's -- obviously, Kyri's been working on ProSavin/OXB-102/AXO-Lenti-PD for a long time. We really do -- as you mentioned, Joe, we really do believe that this product needs to be put into patients to really test the thesis that this increases these dopamine levels and gives long-term relief. So a very underserved market, and we believe we can still form part of this solution, and we're pretty bullish about our opportunities to our license when it comes back.

And my last question, I guess, it's really a technical question for Kyri. And obviously, a lot of your processes that we've talked about at length in the past are quite proprietary. But I guess I wanted to focus on one part that's intriguing, especially when you look at the TRiPSystem and the comment that the efficiency and quality and et cetera, is irrespective of the size of the transgene. So obviously, that's, I think, a very important improvement there. Any sort of even high-level description of that system, why you can make that statement?

So with regard to the TRiPSystem, so the mechanism of action there is to suppress the expression of the protein during production. Usually, we find that depending on the transgene that can interfere with the vector production, both with AAV and with lenti. It's not so much a size issue. So it's not -- it doesn't benefit in terms of the size, it benefits by removing that protein in a number of ways. One is you get more vector particles, especially if that protein interferes with particle formation. The other is, it isn't present in your downstream purification, therefore, that protein, whatever it is, is it less likely to interfere. And finally, as we touched on earlier in terms of AAV and lenti, it would be best not to have the transgene present in your dose or vector to be administered. You are less likely to get an immune response and inflammatory response that could be problematic. So the TRiPSystem acts along in a number of different ways to improve the quality of the vector that is made. And that is both for AAV and lenti. And some of the data coming out of the AAV clinical trials indicate that the presence of the transgene can cause an inflammatory or immune response to the transgene, which can then curtail long-term expression. So that's where the benefit is from the TRiPSystem.

We can now take our next question from Julie Simmonds of Panmure Gordon.

Just have a couple of questions on Oxbox, if that's okay. Looking at the agreement you just signed with Serum, you're looking at putting in 2 2,000 liter scale reactors into there. What else are you looking at putting in that part of the facility?

So I mean, we're going through the planning phase at the moment. So yes, you're right to suggest that we want to see that scale to give us full flexibility around commercial solutions, for both AAV and vaccine. And ultimately for lenti in the future when the process becomes much bigger than the standard 200 liter process. We have about 25,000 square feet to play with. 2,000-liter suites are big purely because of the water systems that need to go in and, of course, the size and scale of the bioreactors themselves and the fact that you need to have many bioreactors scaling up all the way through to process 2,000 liters. So we are currently in planning and seeing what we can fit in there comfortably. As you'll recall, the first part of Oxbox was built with the future in mind. So we've already had made much of the utilities work done, which is really helpful when it comes to that process of planning. But we are doing that planning in conjunction with some of the people who have gone through this process before, particularly our partners at Serum, who have given us some really good technical advice on how to build fully flexible advanced therapies, manufacturing spaces and get the most bang for your buck out of the floor plan. So as soon as we've got a finalized plan, we're happy to share for the time being, we're looking at that flexibility. But you're right to suggest 2,000 liters are definitely involved.

And then just on the fill/finish suite, it looks like you're only getting approval for that fairly shortly this year, I guess, from the time it was in the comment. Does that help in terms of signing up new partners or partners currently reasonably comfortable with sort of going elsewhere to get that part of the process done?

Make it simpler for sure.

Yes. I mean we identified a long ago, Julie, that we essentially, Oxford Biomedica, is subcontracted the fill/finish. So we were on the hook for it, and we weren't in control of it. And actually, it has given us various elements of issues over the years. So in terms of our control, as Roch said, what we're looking to do is offer our partners complete control from plasmid -- from getting the plasmids in, doing the production all the way through to frozen vials. And that's what the fill/finish will enable us to do. And you're right to say that it's going through its validation process right now, and we expect approval surely.

That's the question-and-answer session. I would now like to hand the call back to your speakers for any additional or closing remarks.

Thank you very much for your time. We run a few minutes over, and thanks for your interest in Oxford Biomedica. That meant there was a lot of question, and hopefully, we shared with you the enthusiasm of 2022 and beyond with both our LV business and our AAV business, which is starting on a very strong footing. And also, hopefully, we clarify the misunderstandings perhaps around the activities around our vaccine business for this year, which is continuing, again, at a different level than last year, clearly. But we are continuing manufacturing the vaccine this year and we're in advanced discussion with AstraZeneca on how much and when and have great relationship with them. So thanks for your interest again. And any question, feel free to contact Sophia, who will be delighted to provide you more answers if you have questions after this call. Thanks for your interest. Have a great day.