Oxford Biomedica plc (OXB) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Oxford Biomedica Interim Results 2022 Conference Call and Webcast. [Operator Instructions] As a reminder, today's conference call is being recorded.

Good afternoon, and good morning, and welcome to Oxford Biomedica Half Year Results. I'm Roch Doliveux, I'm the Chairman of the Board and Interim CEO. And I'm joined today by Stuart and Kyri to share the update on Oxford Biomedica and then also with Sophia, who will help with the Q&A later on and all the questions you will have after this call. So if I start with the first slide, I'm really pleased and excited about the momentum with Oxford Biomedica. Can I have Slide 3, please? And that momentum is really -- if I had to pick one KPI for you to remember, and we'll come back to this is our increase in customers by 70% over a year ago, and that's probably one of the best predictor of future revenues. The more fundamentals is you know that we had set up a new strategy, much more focused of becoming a leading, innovating global viral vectors across all viral vectors for cell and gene therapy companies. And we have delivered on the first half on this strategy. And the reason why I'm excited about the potential of this strategy is that, we all agree that cell and gene therapy will bring the next wave of breakthroughs and medicines. Almost several hundred of companies in biotech and Big Pharma are active in the space. Viral vectors, we all know will play a critical role for cell and gene therapy. We all know the strong double-digit planned forecast for both the AV and the lentiviral vector [ outsource ] supply market. And there are still many more gains to be gained through innovation, and Kyri will come back to that. Oxford is indeed uniquely positioned to solve our customers and the industry problem in this manufacturing challenge around viral vectors. And we're doing that through proprietary technology, continuous innovation in viral vectors, once again, Kyri will share some of the updates on this leading position that Oxford Biomedica has. And not only are we leading in the innovative space, but we also have a track record of delivering on the manufacturing as we demonstrated through the Oxford Biomedica unique ability to deliver the adenovirus-based COVID vaccine from AstraZeneca and also by the long-term relationship which we have with Novartis as the sole global supplier of lentiviral vector from Kymriah. And last but not least, I think we've taken really the windfall of this positive impact on the company of the vaccine business to invest into the largest viral vector of the market, the AAV platform, the AAV market, and we acquired and completed the acquisition of Oxford Biomedica solution for our AAV platform based in Boston. Can I have the next slide, please, Slide 4. Beyond the ability to integrate our Boston business and our AAV business. We've also started to completely transform that business to make it a truly innovative CDMO. And the testimony of that is the new customers that we have announced yesterday in addition to our Homology and more to come on that front. As I mentioned in my intro and my excitement about the momentum of Oxford Biomedica is the impressive customer base that is expanding by over 70% in the last 12 months. You know that it takes a long time to finalize the deal in this space. It's a very important decision for any biotech or any Big Pharma company when they hand over the key of their viral vector to a third party. It takes a long time. The good news is that we retained them also for a long time. And it will take some time before the 70% generates revenues, but the important thing is indeed that metric. And the dynamics in our customer base. We also expanded existing agreement and [ import 1 ] with BMS or a subsidiary of BMS, Juno Therapeutics. They are large viral cell engine therapy company. We signed 4 new U.S.-based agreements from 4 U.S. customers including a new AAV customer since the beginning of the year. And we provided clarity on the future of our relationship with AstraZeneca through an expanded supply and development agreement. If I go to the next slide, Slide 5. The acquisition of our AAV business in Boston is running very well just to remind you of why we did that. As I mentioned, the AAV business is even larger than the lentiviral vector business. It's growing even faster at very strong double-digit rate. We were not present in this market. And now since the beginning of the year, we are present with a unique platform and proprietary IP, a unique program play platform that has convinced already 1 customer, as I mentioned, in addition to Homology and is in the process of convincing many more. And just to remind you, we have manufacturing capabilities there with proven capability all the way to 2,000 liter for commercial supply. And we expect our profitability to be reached in the first half of 2025. If I go to the next slide. This just summarize, again, the innovative service updates that we have since the beginning of the year. And once again, I'm thrilled with the momentum that is provided by an impressive team at Oxford Biomedica, and I'm handing over now to our CFO, Stuart Paynter, to put a few numbers behind this momentum. Stuart?

Thank you very much, Roch. If I can proceed to Slide 8. As Roch said, and I'll reiterate, and good morning to everyone, and good afternoon. We really do have good momentum, and that's borne out in the first point on Slide 8, which is around the core business growth. So the opportunistic work through the COVID vaccine, which was vitally important to saving tens of thousands of lives has really given us the firepower financially to execute on the AAV strategy, which Roch has outlined and got us strategically into a market growing more than 20% CAGR. Now as that revenue goes away, you can see the reduction in revenues overall, we're pleased to report the core revenue growth of the cell and gene therapy is growing very nicely at double digits. So that is the momentum on which we build our core business as the vaccine work is essentially winding down. The operating loss, as you see there, it's GBP 5.8 million in the first half of the year compared to a profit previously. Again, we've taken that profit made previously and made a very smart investments for the future, as Roch has said, and the loss we're carrying, of course, is representative of the new business in Boston, and it's going to be loss-making as Roch said, profitable in the first half of 2025. So at the moment, we're utilizing the latent capacity to add new customers as quickly as we can in order to build towards that profitability, but we would be carrying an element of loss for that business for a number of years. Now you can see that incorporating that loss, the underlying core business again is around that breakeven mark. So we are intent on making the core business sustainably profitable going forward. And that's a key goal of the organization as we currently stand. As you can see, look, the operating expenses have increased to reflect the skills, capabilities and cost of doing business in the AAV field in Boston. And we are super committed to continuing to build that exciting business with a platform that is already starting to prove itself in some of the data that's being released and the first customer through [indiscernible] as Roch said. Cash used in operations, of course, that reflects the transformational deal, which was done in the first half of the year with an equity raise, a debt raise and the acquisition of the asset. And then capital expenditures, you can see there that the ongoing amount includes Oxford Biomedica solutions, and it's pretty much down to sort of rates of maintenance. And of course, there are some other strategic goals we have in terms of building out the [ fall ] area of Oxford going forward. But that really is in the planning stage. The next slide, please, Slide 9. So we've included a slide on cash, which we've not done before, but we think this is a representative of the marketplace, the macroeconomic and geopolitical situations in which we find ourselves. And we want to highlight the robustness of the business model we're running and the relative strength of our balance sheet in terms of its liquidity. So cash at the half year was GBP 118 million, just short of GBP 116 million at the 31st of August, you can see that, again, we reiterate, we're not a traditional cash burn type business, very sustainable. We are in the process of refinancing and part repaying the Oaktree 1-year loan facility that was taken out as a bridging facility to get the deal done back in January. And we have made really, really good progress on that, and there'll be more news to come in this calendar year. And then we have an ongoing process that's the sale and leaseback of Windrush Court, which is our GMP and analytics core laboratory suite here in Oxford. That is being marketed in the high GBP 50 million, and we expect to achieve in excess of GBP 55 million in terms of the cash generation from that asset. So we think this is a good time to make sure that all the assets are working for us in terms of solid liquidity into the business. At the same time, the review of Gene Therapeutics, which Kyri will go through a bit more detail on in a few more slides, is progressing nicely. And I'll remind you that the goal of the organization is to take these exciting assets, retain a long-term interest in them but not carry the burden of the burn on these internal products on our own P&L and really good progress are being made, Kyri will take you through a bit more of those later. And cost control initiatives. So currently, we have a headcount freeze within the organization where we are strategically making sure that we are appropriately sizing the business for a world in which the vaccine revenue is going to wind down and to make sure that this is a sustainable, robust and strong business in terms of its underlying skills and capabilities and the opportunities it sees in front of us for the next 12, 18 months. whilst maintaining very, very strong robust liquidity. Next slide, please. So here's the very familiar slide. You can still see strong growth in the underlying revenues at the top table, in the darker color. Every half year as well, there are some of the lumpy licenses, incentives, royalties and grants that come through, which is good for liquidity, and we really like that sort of revenue but it's less predictable. And you can see that there's been a significant uptick through the vaccine in the last 3 halves. And as we've been [ pain ] to say, we've utilized that momentum, to build a strong, robust pipeline in the underlying business and to make the play in the bigger market of AAV. And as you can see on the bottom chart, this is operating EBITDA you'll see there are one-off acquisition fees in this half, just over GBP 5 million to do the transaction. And of course, we've added in significant costs in the Oxford Biomedica Solutions business. So I think you can see there that as we progress, we're looking to do this very sustainably. We're looking to continue to fund the innovation story, which Kyri will take through, which is key to our offering to the marketplace, both in AAV and lenti, and we're in a really, really strong position to continue to fund the innovation and the investment in the right areas in order to make the best opportunistic use of the market opportunities in front of us. Not just in terms of the core business, but obviously, as we progress, our talks are ongoing about collaboration opportunities with other vaccine providers as well, including the Serum Institute of India, we made the investment of GBP 50 million into the business this time of last year. Next slide, please. So here's the P&L for you, for those of us who love a bit P&L, this is the output of all the things I've been talking about. There a couple of things to highlight on here are, obviously, the revenue we've talked about, vaccines coming off, core business growing very nicely. The bioprocessing processing costs are going up. That's the utilization issue, heavy utilization this time last year around 24/7. Obviously, the core business is a slightly different profile of cadence. And then on the R&D and admin expenses, we've added some in Boston, but as I've alluded to, these are being reviewed in terms of making sure that we are the right size and suitably -- have a suitable and correct capabilities and investment in the right areas going forward is key to the success of the business. The 1 other thing to mention is the finance costs, there are interest on the loan. That's not the whole piece of it, of course, there's some increased leases that have gone through from our acquisition of Oxford Biomedica Solutions, and there's some FX loss in there as well. So at this point, and I'll proceed to 1 more slide, please. I'm going to hand it to Kyri to take us through some of the innovation we're making and then I'll -- he'll hand back to me to finish off the presentation.

Thank you, Stuart. Good morning, everyone, and good afternoon. First, I will share with you some of our recent innovations around the platform. These are focused on realizing the potential of our vectors to revolutionize medicine by enabling life-saving cells and gene therapies. Then I will describe the exciting product areas we're working on and our plans there. Now let's first take a look at the platform innovation. So Slide 13, please. Our goal is clear. What we're seeking to do is to industrialize the production of viral vectors. Our expertise, IP and investments make us world leading producers of viral vectors, particularly of lentiviral vectors. And through our Boston expansion experts in AAV production as well. By increasing the amount of [ vectors ] that we can produce, we can improve vector quality and thereby enable new therapeutic possibilities. Let me show you an overview of the platform on this slide. So first, we have capability on the top right of the slide. We develop vectors that allow optimal expression of the gene of interest to fine-tune the therapeutic effect. And we're developing targeted vectors to genetically modify specific cell types. Both of these are key to the future of lentiviral vectors as they allow their use in new ways and to enable new therapeutic indications. Second, we have scale, and that's on the bottom right. We have a number of innovations, which we're implementing in our bioreactor processes to improve yield and quality. For lentiviral vectors, we have now implemented process C which includes perfusion that increases tighter immunities before they enter downstream purification. We have U1 and U2. These are additives that increase the tighter but also improve the number of active particles. And we have an optimized downstream process to further improve vector quality. For AAV, our Boston colleagues have developed a novel Dual plasmid AAV system that leads to superior productivity and quality. We're continuing to evaluate other types of enhancers and additives and process improvements, and we will discuss these in due course. We are seeing an increasing interest in process D. That's the one on the bottom here. that's making vectors using producer cell lines. We announced 1 new project in July this year. Producer cell lines have better scalability and productivity, and we're looking at ways of improving the speed of their generation for lenti and extending this technology to AAV production. Finally, we have analytics, automation and AI on the left-hand side. The secret to innovation, as we have said before, is understanding what happens inside cells and vector particles during production. Technologies such as transcriptomics, proteomics, give us a window into the bioreactor as well as the cell. We're using automation to analyze more samples and to enable faster batch release, and we use AI and machine learning to take full advantage of the huge data sets that are generated from these kind of analysis. By understanding vector production better, we can increase components that boost yield and quality and reduce those that they don't. And now let me give you some more details about some of our recent innovations. Next slide, please. So process C for lenti has been successfully implemented to GMP as planned and we have seen the expected gains in productivity and quality. We have a number of customers evaluating process C and have already made process C materials to add GMP for a customer. Our colleagues in Boston have now exemplified the novel Dual plasmid AAV system at 2,000-liter scale and seen the expected gains in productivity and quality attributes. We have made great progress with our fourth generation lentiviral vectors, which we expect to launch in 2023. These factors enable higher expression have additional safety features and there larger capacity that can deliver greater amount of DNA. This last point is critical as we are seeing increasing demand for Vectus to deliver multiple genes or more complex expression cassettes. Improvements in analytics have also been realized with the successful transfer to GMP of automated cell-based assays. These allow for much greater productivity and reproducibility. Let's move now on to products. Next slide, please. Our current focus for product development is the application of systemically administered lentiviral vectors to treat disease. Our focus initially will be in 2 main areas: in vivo CAR-T generation and lenti-targeted liver therapies. In vivo CAR-T bypasses the need for costly and limited GMP cell engineering facilities by directly administering the vector into the body to generate the CAR-T cells and is necessary if we are to realize the full potential of CAR-T therapy for both liquid and solid cancers. We expect to be able to treat many more patients, treat them as first or second-line therapy rather than third or fourth, and this should give better clinical outcomes. Our work on developing therapies by genetically modifying liver cells is progressing well. The liveries are continually dividing organ. And because lenti viral vector is integrating target cells, a one-off treatment is all that may be needed to give lifelong benefit. A lot of high-quality vector is required for both in vivo CAR-T and liver gene therapy, which we are particularly good at making. Dr. Ravi Rao joined OXB in April this year, and he is leading a review of the therapeutic product strategy and how we best ensure that the great promise of these products is realized. This work will complete by the end of the year and will be executed on in 2023. Our aim here is to maintain long-term economic interest in a number of therapeutic products with a potential material reduction in annual operating expenditure, which was GBP 5 million operating EBITDA loss in the first half of this year. I'll stop here and hand back to Stuart. Thank you.

Thank you, Kyri. If we just progress to the next slide for the financial outlook. So we're expecting similar levels of revenues in the second half as the first half and more than 90% of those are booked in. So it's a pretty solid forecast. Obviously, continued growth in the underlying core business, the vaccines revenue is going to reduce, the aggregate revenues of around GBP 30 million from AstraZeneca in this full year for the bulk of the revenues being recognized in H1 2022. So broadly speaking, the EBITDA numbers are going to be around breakeven in half 2, 2022, with a very similar amount of CapEx. And all of our spend profile and everything you've actually heard is in service of the target, which is obviously, to enhance our position as the leading viral vector outsourcing player in this marketplace across these 2 vibrant markets, with a long-term goal to grow our revenues at a faster rate than the market is growing. The market is growing very, very quickly. Last slide, please. Just on some of the catalysts. Obviously, Oxford Biomedica continues to be a deal-generating company. We expect new deals through the end of 2022 and into 2023 for both OXB Solutions in Boston and the core business in Oxford, the lenti viral vector business. We've made a -- having a statement that we expect new customers in the AAV field this calendar year, we're bullish on that. The therapeutic strategy, as Kerry said, we're looking to have that finalized by the end of this calendar year and executed in 2023. So we would expect to see some news on that, and achieving that goal of keeping that long term economic interest by and minimizing the internal spend on the [ loan ] programs. And then the part payment and refinancing and the sale and leaseback, we expect to be complete this calendar year and put us in a very, very strong and robust cash position with a well thought out sort of capital structure for the business, including element of debt moving forward for the next period of time. So I'm going to leave you with our initial strategy slide. And I'll hand over to Sophia who's going kickoff Q&A process.

Thank you, Stuart. We have a number of -- for you queued up on the phone line. Operator, can you please open up for the first question.

[Operator Instructions] We will take the first question from Joe Pantginis from H.C. Wainwright.

A couple of quick questions, if you don't mind. So first, Stuart, with regard to the debt refinancing and repaying, any guidance with regard to the amount of what will be refinanced?

Joe. So we're currently working through that hopefully, we won't have too long before we can fully share the details on the marketplace. But at the moment, we're still talking to various providers about the profile of how that looks. So no specific guidance for now, but you're not going to have to wait too long to see that.

No, I understand. And then, look, I mean it's great to see the business grow, especially out of Boston. And I guess, look, as you make these announcements, you say that the terms are undisclosed and I can understand that because there's a lot of -- the competitive environment is quite wide, so I can understand that. So can you give us some level of baseline expectations with regard to the types of deals you terms, the deals you signed with regard to maybe some minimum terms that could be expected from these types of deals?

So it's an interesting question, Joe. I mean the reason that we have done a few undisclosed deals recently, both on the lenti vector side and the AAV side, is because some of these smaller biotechs are in the process of raising funds through Series A Series B. And obviously, we're respectful of that process. So not talking about anything in particular, but the way that we sort of view early-stage agreements is that we can take someone from a very early stage effect construct, and work on through PRD both in Boston and Oxford to get them something very viable. And then you're talking about potentially talks phase and other things. So each deal is slightly different, but it will evolve producing the material for sort of viability, maybe animal studies, [indiscernible], those sorts of things. But they are all different. So it's difficult to give guidance. But they are -- what they are is essentially a gateway with the customer to take them on to a journey and help them solve the issues that they're undoubtedly going to face that we've seen before, which enables them to progress through the early stage development and then through clinical stage development and ultimately our goal is to support the customer all the way through to commercial, where we have, obviously, our Oxbox facility, which is already approved for commercial manufacture. So it's at a fill finish now. So it's a real suit in that offering. And this is one point we can capture the customer and hopefully provide them with access to the technologies and the solutions which will make them happy customer and stay. We've got a great track record of keeping customers for a very, very long time. And Novartis has been with us for a decade now with us helping them all the way along from first stage production for Kymriah all the way through to launching in 30 countries.

Sure. No, I appreciate that answer, and it certainly talks to the variability of the types of clients that you bring in and the maturity levels and what have you and almost providing an end-to-end process. So thanks for that answer. I appreciate it. And then, of course, I'd be remiss if I didn't ask about the gene therapeutics pipeline because look at Kyri described your different initiatives with regard to tech improvements and what have you, how a lot of that could potentially translate to your gene therapeutics pipeline and what we could potentially look towards with regard to any potential news flow?

Yes. So I mean I think Kyri took us through what we're focusing on, which is liver-based lenti treatments and in vivo CAR-T, both systemic treatments with lenti, which require higher volumes, which puts us in that unfair advantage position as a producer of high-quality, high-volume, high titer lentis. And we're looking to essentially push forward the agenda with the latest technologies [indiscernible] process C, fourth generation lenti all these other things, which could form part of the offering here and looking to attract external sources of funding there. So we're super excited by the value that can be created. We're just aware that there's a different risk profile to that area of business from the underlying innovative CDMO business. So we're looking for that external funding in order to make sure that they're well funded, pushed forward as fast as possible because patients need these treatments. And the call on capital between innovative CDMO and the product business is very different. So yes, I mean, the timing remains that we should be in a position to exclude that strategy in 2023. But progress is being made very, very rapidly now coming up towards the end of this year.

The next question comes from Miles Dixon from Peel Hunt.

If I could just maybe ask Joe's question a little bit differently. So the license milestones and royalties in first half grew by 18%. Can you comment how much of that was from existing or legacy work versus new partners? And are you seeing a change in the profile of the economics that you can now ask from what looks like a quite significantly increased cadence of the new partners?

Would you like me to take that, Roch?

Yes, that would be great. Yes. I think it's targeted to you.

Hi, Miles, so I think it's a great question. We see milestones, licenses come from various customers at various times, depending on the maturity of the relationship. So sometimes the licensees when they sign on sometimes the milestone is some element of commercial development but we've particular tied to milestone [indiscernible]. So there's a very good spread, and it forms part of the core of those licensing deals we do. In terms of the economics going forward on platform deals, actually, we are seeing -- and we are targeting, in fact, early-stage biotechs as well as Big Pharma. And what we try and do is be as customer-centric as we can. So there will be various economic pressures on our partners, and that will be very different if the Big Pharma to small biotech. And we try to really apply our increased robust balance sheet to help them get on board and start solving their problems because the long-term economic value of these deals is very similar, whether there's a big license fee and less milestones or what this smaller license for big milestones, and we just need to get them through the door. So we essentially are not seeing any difference from the market except for the fact that the small biotechs are under some pressure from the funding, of course. And we see that as an opportunity because what we do know is that there are very few small biotechs now springing to existence who are going to create their own manufacturing solution. So we see the market growing, small biotechs coming to proven CDMOs, which we are. We've proven that we can take someone from early stage all the way through to commercial, which is one of our USPs that Roch took us through earlier. So in that sense, the market is very, very vibrant for us. We have a very strong pipeline in both Boston and Oxford. And that gives us the confidence to be pretty bullish about new deals and the economics are remaining strong.

I -- may I might adds to the second part, especially of your question to what Stuart said, there is another in addition to the early-stage biotech and the and the Big Pharma, there is another trend that we're seeing more and more. And I guess in the months and years to come, we'll reveal more as we can. But it's late-stage biotech who are getting poor service from their CDMO who cannot deliver and are turning to us in panic. And so we're seeing clearly a momentum there of large companies who can't really deliver given the sophistication and the complexity of what needs to be delivered in our space.

Great. You answered my second question there about the pipeline of opportunity. But if I could go on from 1 USP to another and perhaps for Kyri, you -- I mean, obviously, the yield and quality of virus manufacturing you talked about and your reputation in lenti and adeno speaks for itself over well the last kind of 15 and [ 16 ] years, respectively. I mean you mentioned Dual plasmid-AAV. How do your Boston AAV capabilities compared to the competitors out there?

Thanks for the question, Miles. So when we looked to bring in AAV expertise, we looked at a number of different companies, a number of different opportunities. And what we found in our Boston colleagues as they are now, was an expertise in a large-scale AAV manufacturing using HK 293 cells at very large scale. And they had to use these materials in a number of clinical trials with a particularly good safety record and had a considerable experience in terms of making many batches without any failure. So I think they compare very well to what's out there for AAV. And as we get to know more about their capability, we are more assured that they are industry-leading in their knowledge ecosystem processes and also IP.

Kyri, would you like to comment on the posters from ASGCT that we -- that Oxford Biomedica Solutions produced on their titer and then maybe something on the full fledge capsid ratio, please?

Yes. So one of the key aspects with regard to AAV is the particle to infectivity ratio. So how many of your particles have got genome in them? And how many particles don't. And the more of those -- more empties you have then the higher the dose you have to administer and that means more empty particles going into the body that may elicit unsatisfactory outcomes information and so on. And although AAV P/E Ratios are not shared by everyone from the knowledge that we had from talking to KLs -- the KOLs, the P/E Ratio that the homology medicines process generated was at the cutting edge. And in addition, the overall productivity of the 500-liter the 2000-liter process that they had developed was again at the higher end, if not the highest we had seen. The another aspect that is critical is how do you purify your AAV. Do you use methodologies that are industrialized, or are you using things such as centrification and so on that are okay for small scale are for one-off batches, but are not really going to solve the industrialization of AAV manufacturer. Ideally, you'd want to use more robust systems, and that's what the Oxford Biomedica Solutions team now has. So the downstream process that is being utilized is scalable, robust and again, a fit for purpose for commercial and beyond.

The next question comes from Natalia Webster from RBC Capital Markets.

Can you hear me, okay?

Yes. Perfect.

I ask 2, please. So firstly, we're hearing that the impact of more limited biotech funding is leading to prioritization of pipeline assets. I realize that you discussed having a mixture of pharma and smaller biotech customers, but are you seeing this impacting any of Oxford Biomedica customers, particularly on the early-stage side?

You want to take that, Stuart?

Yes, I mean, it's a very good question. We're still seeing very robust funding in the venture stage. I think the real pressures on the publicly listed companies in terms of their abilities to raise funds. But we have a nice mix of both venture-funded biotechs, small publicly listed biotechs like Homology as a customer, for example, and then Big Pharma. We know that Big Pharma doesn't stop. We know that the small companies are well funded. The interesting piece is that middle group. And actually, what we are seeing because we are working with customers who -- it's -- their existence depends on progressing their products. And the sort of stage of the element they're in, they need to produce data, whether that's clinical data or preclinical data in order to get to their next value inflection point. So we, as a service provider are on the critical path, so if they have a dollar to spend somewhere, they're going to spend it on their ability to produce data, which is going to be something they can do to move their share price. Specifically, those companies are pre-revenue. So we benefit from a very close relationship with our partners and solving very tricky issues for them and, frankly, being on their critical path to producing the data they require to push forward.

That's great. That makes sense. Just my second question is more specifically on the deals that you've announced, just wondering if you can provide any further color on the 2 new BMS programs, and how important these are for your near-term growth expectations?

Yes, I don't think we can reveal much there, Natalia, because we're providing the service to our customers. We want our customers to be happy. But when we can, we're sure will release more. I think what the great news is that you see a BMS who made a significant acquisition and really has a significant stake in the cell therapy space and leading now is expanding their partnership with Oxford Biomedica and significantly. So I think that's the take home for you at this stage. And we'd like you to provide more color but we have to respect our partners and customers' wishes.

The next question comes from Julie Simmonds from Panmure Gordon.

Just a couple of questions on the cost side. I know you've talked about sort of getting your levels of personnel down to a sustainable level, I think, was how you described it. And just sort of looking at the increase in number of people you have sort of versus last year, it's 700 and something to -- I think 716 to 920. Firstly, I was just wondering what level is sustainable. And then secondly, along the same sorts of lines, the sort of cost presumably of the additional U.S. personnel was more expensive than the U.K. And just sort of are we going to continue to see sort of that balance?

Julie, yes, I did use the word sustainable. I think sustainable stroke appropriate is the right messaging. So when you quote to those 2 [indiscernible], of course, 120-plus people came into the organization in the time frame from Oxford Biomedica Solutions. And you're correct to say that there is a premium we paid for the scientific expertise that you get in Boston, but that premium is well worth it because some of the best operators in cell or gene therapy are in that hub, which is why the premium is there. And of course, you're very close to a whole bunch of biotechs, which are being spawned all the time from academic institutions and [indiscernible]. And it really is the center, especially the AAV world. So it's the right place to be to attract the best talent and to be close to customer. We -- our commitment is to move forward in a sustainable way in both parts of the business. The Boston business, of course, has its own plan, which we've outlined and the Oxford business, the business that remains at core, we are committed to making sure that, that is sustainable and has appropriate staffing levels, in order to meet the demand both from our customers and to continue to innovate in a way which keeps our lead. And because we're an innovation that CDMO and this is the lifeblood of the business. So we are working hard on internal measures to make sure that we are fit for purpose to face into the market with the revenue opportunities we see in front of us in 2023 and beyond.

We will now take the next question from James Orsborne from Stifel.

3, if I may. Firstly, now you're 4 months into the OXB Solutions venture. I understand you have GBP 25 million guaranteed in the first 12 months from Homology, I just wondered kind of looking forward into next year, what are your expectations from Homology going forward? And is there any commitment from Homology on the revenue side at this stage?

Yes. So you're correct to say that those [ written ] contracted for the first 12 months post acquisition. And that was the commitment that was made at the time of the acquisition. I mean when we look forward to our partners at Homology, what we can say is that the team of Oxford Biomedica Solutions are uniquely placed to serve that customer, having worked for them and with them for the previous 5 or 6 years. So in terms of the ability to serve that particular customer, there is no one in the world like it. So we're very confident that Homology is an organization moving forward to fund in new leadership now. And it's -- we can expect it to be a considerable customer for the foreseeable future.

That's great. And just following on from that. I just wondered if you could give any more color on the initial demand you've had with the AAV platform coming online. I know you've mentioned about having 2 deals. But end of the year, your remaining confident in that or even perhaps exceeding your expectations?

Yes. So James, I remain -- we all together remain very confident in the ability to achieve that goal and that commitment than -- we're always welcome if we can do more. But at least what we want is to be able to deliver on what we have committed, and that's why we have committed to new customers by the end of the year, and we have already won as you mentioned, 4 months through this transformation from just a manufacturing operation for a company into state-of-the-art innovative CDMO in the AV space.

Great. And then just finally on CapEx. With the expansion of the Oxbox facility. How it's best to kind of look at that going forward? And you mentioned around or having maintenance CapEx for this year? What will have you ramping up significantly in the years to come?

Yes. I mean it's obviously a fully funded project through the investment with Serum Institute. And we are continuing to collaborate with Serum on a number of different topics, including taking best practice on design a flexible, large volumetric advanced therapies manufacturing space. But of course, the board need to be in control of that as an investment and the board will fully trigger when the market demands it should do that. So I think we're in a great position. We have a world-class facility completely up and running with full finish. We have the ability to extend that facility as we see the market extend out in front of us. We are funded to do so. It's a pretty enviable position to be -- but for the rest of this calendar year, we don't expect last chances of CapEx on that program.

Will take the next question from Joe Pantginis from HC Wainright.

So earlier, Roch, you made a what I think is a very compelling statement with regard to CDMO scheduling, not only in the U.S., but abroad as well. And that is the issues with CDMO scheduling and clients turning to you in panic, so how I want to ask the question is the following. So first, obviously, that's a very compelling way of customer acquisition. And I was hoping you can comment with regard to the back end with regard to customer retention because it's not like they can just turn away from you because a slot opens up at their current CDMO. So I think that's actually pretty promising. I'm hopeful that you can confirm my thoughts.

I think your thoughts are broadly -- I mean, our customers are free, but I think it's a good KPI of the robustness of our ability to deliver and satisfy our customers' need is in the customer attention. And I'm pleased to look at the -- almost 10 years with Novartis is not too [indiscernible]. So -- and they are clearly large and demanding customers this year. So I think once we -- and the key job behind that is, again, the fact that we innovate all the time. So in free and it's both in the LV and the AAV space. As Stuart mentioned in the -- and Kyri commented the fact that you continue to perform better than your competitors and the posters from our colleagues in Boston on AAV at the American Society of Cell engine therapy. I mentioned that there was the poster from a competitor that was bragging about a titer and our titers were higher. So if you continue to innovate and beat the competition from a performance standpoint in terms of the innovation, customer retention follows. And of course, if we deliver for that customer. So I completely agree that the customer acquisition is probably the best predictor, and that's why I'm so thrilled and excited about the 70% increase over a year ago because that's the key, it takes a while, takes a long time, but once you add them, you have them.

Roch, perhaps I can just add....

Kyri, go ahead.

Yes. So I was just going to add. So one of the issues that we have found is customers with other companies when they hit a wall when there is an issue, maybe they're not getting the looks good on small scale, then they go to larger scale, and they don't get the titers or the quality that they're after. We are -- unlike others, we are able to dig deep use the technologies we have developed to try and understand what the issues are and how to fix that these various problems. So we often find it's not just a sort of lack of slots or availability of analytics and so on. It's also having that ability to solve the problem that clients are encountering. These are complicated therapies. I think we're at the beginning of turning cell and gene therapy into a routine manufacturing process as a few years away. So we're still at the stage where each new product has its own [indiscernible] that we have to deal with and Oxford Biomedica because of its expertise in other areas is able to provide a lot of that analysis and solutions. And that -- and then when we do get a customer in because of that. And hopefully, they're pleased with the outcome. They -- as you say often, they don't move on.

We will take the next question from Alistair Campbell from RBC.

Can you hear me okay?

Yes.

Got 3 questions, if that's okay. First of all, just on Novartis, obviously, still a very important partner. I'm very encouraged to see -- you talked about a continued strong relationship. But just obviously, that's a company where you see significant changes in the research and development organization over the last 6 months. So just kind of a confirmation that you still have a very good strong relationship post those changes and perhaps post some reprioritization in the parts of R&D unit. Secondly, in terms of your strategic options, for externalizing funding. Just to get a sense of what you're hoping to achieve. Is this simply getting some expenditure off your P&L? Or you actually hoping to get partners or a partner, you're willing to invest much more than you're currently investing [ tolerate ] and maximize the value of that portfolio. And then finally, not narrate expertise for me at all. But in your early discussions on sale and leaseback, if you had any kind of initial indications of what we should be thinking about in terms of rental yield?

So I'll let -- I'll answer Novartis question and then let Stuart answer the 2 other questions. So yes, I'm pleased to say that the relationship with Novartis continued to be very strong at all level. And yes, there is a change. But over the last 10 years, there have been quite a bit of change in the company. And the key is to continue. I think some of the people based in Boston leaders there remain absolutely the same, and Kyri [indiscernible] want to provide also more colors. But on the -- since you're much closer than me, and I'm quite close at the top, but we are not doing the job at the top, just things go smoothly that's all.

Yes. So we've worked very well with Novartis. We carry on working with them. We're both on multiple programs, and we have an excellent relationship with them. There's a lot of synergy. There's a lot of co-development, the teams know each other very well. So yes, that relationship is going very strongly.

Great to hear.

Okay, Alistair. Great to speak to you again. So on your second and third questions. On the product side, in terms of external funding, I think we are ultimately flexible. The goal here is to significantly reduce the level of spend that we're putting through our own P&L to make it clear to the wider community, the market, what an innovation base the CDMO looks like. We've doubled down, obviously, on that part of the business with the investment Oxford Biomedica Solutions. And so that's not to say, I mean I hope we made the point clearly in the presentation. We're super excited about the potential of those products. And actually, there's some really, really strong funding going into things like in vivo CAR-T and lenti livers a really interesting systemic approach that Kyri outlined could be potentially curative where some of the AAV approaches are sort of redosing regimen. And think of it in such a way that we want to retain that long-term economic interest through maybe some sort of investment vehicle, but really not be carrying that P&L burn ourselves. We're not fine to making a commitment to that investment vehicle, both in terms of technologies, people and potentially a share, but we're looking for great partners to be able to accelerate both the funding and the time to push these forward. Because like I said in the presentation, the calls on capital between innovation-based CDMO and product just means that there's always going to be a call on capital between 2 very different risk profiles. So if you are -- if you have a special purpose vehicle, which is -- has that its core developing those programs then it gives them the best chance to succeed, we need to give them a chance to succeed for patients. On your third question on sale and leaseback, we are pretty progressed through a process we are very confident that we can exceed -- offers in excess of GBP 55 million going forward. And of course, what that will mean is an owned asset becomes a leased asset, and we've made sure that we are going to end up with a market rate, which is appropriate for paying rent to you over the -- of a leased asset essentially. But it will retain full flexibility to do what we need to do in that facility. So it should be completely visible to staff and everyone else, but it should just be a nice way of generating income on a one-off basis, of course. But in these markets, making sure we're maximizing the capital structure of the business is very important.

I think we're running out of time, but we'll take 1 last question.

We will take the last question from [ Sue Ramana ] from Edison Group.

Congratulations on the first half performance. I just have a quick one. I think we've touched on this a little bit, but I believe your close partnerships with your customers really highlights your specialized expertise and key assets. As you increase engagement and stickiness perhaps this offsets any funding concerns and maybe you can add some context around that on the engagement or differentiated sophistication.

Stuart, do you want to take that?

Yes, sure. So we are always looking at making sure that we're optimally structured for facing into the market and being able to invest in those areas which need investing in. I think in this presentation, we've made sure we push forward that innovation is key to us. Customer acquisition and making sure we've got capacity for our customers is key to us. And obviously, cash and funding is key to us. And we're in a very privileged position in that we have 4 available sources of funds. We have debt and equity, which is a day of anyone's listed, of course. And then we have customers which can form a key part of our capitalization strategy, both in terms of license fees, and ongoing revenues and income. And then we have the ability to produce income on a one-off basis on things like sale and leaseback. So I think the bottom message here is we will continue to make sure we have an optimally structured for capital and to progress the mission and the strategy, and we will keep on being customer-centric and making sure that we capture and maintain customers so that we can share the economic benefits of their programs and what we bring to the party in the most optimal way.

Thanks, Stuart, thank you, Susie. And what is mentioned is that we are probably much less capital intensive than other CDMOs, but more R&D intensive than other CDMOs, but we're -- this concludes our presentation of -- and Q&A for the half year results of Oxford Biomedica. And I thank you for your interest. And hopefully, you can share the excitement about the potential of Oxford Biomedica in making the difference in the cell and gene therapy space. And hence, for you and for shareholders to pay returns and long-term profitable, exciting growth. So with that, I'm looking forward to updating you in the second half. Thank you.