Oxford Biomedica plc (OXB) Earnings Call Transcript & Summary

So hello, everyone, and thank you for joining our meeting today, our analyst report meeting -- on the results of 2022. I'm Frank Mathias. I'm the newly appointed Chief Executive Officer of the company. And believe me, it's a great pleasure to meet you today together with our Chief Financial Officer, Stuart Paynter. I believe you are known here. So just for those who do not know me by now, I'm French, as you can hear from my accent, I'm sure about that. I was born in Paris, and I went to school there and to the university. So I'm pharmacist by education with a PhD in immunology and more than 30 years now of experience in the biopharmaceutical environment in senior positions at different companies throughout the biopharmaceutical industry. As you might know, I come from another renowned CDMO, namely Rentschler Biopharma, where I was CEO for about 7 years. So also, I have only started 3 weeks ago. To be very precise, 3 weeks, 1.5 days ago. I can already say the following, and this is in line with what I have expected from the beginning. So being a scientist myself, I'm really impressed by the science at Oxford Biomedica, the science behind the team behind you, Kyri, because we are happy also to have in the room today, our Chief Scientific Officer. Our company is already recognized as a true leader in the innovative development and production of viral vectors. And this applies mainly for lentiviral vectors, as you know, but I believe that we are also making big progress in the AAV field. Our client base is constantly -- and Stuart will report on that expanding and now includes more than 30 partners around the world, 30 partner programs to be precise around the world. And with a few feedbacks I've got already from clients who work with us, I can guarantee you that they're extremely satisfied with us and with our service. On the other side, as a leader, I'm equally impressed by the high level of commitment, professionalism and quality of the Oxford Biomedica team. And I have met by now both teams on both sides of the ocean, here in Oxford, but also in Bedford near Boston. We have a clear vision to become a leading global innovative partner for cell and gene therapies, not to say the leader. I firmly, therefore, believe that we are at the heart of the next generation of medical breakthroughs, and I'm delighted to be part of the next sector together with the team of this story. There are so many opportunities in the market. There are a great demand for our know-how and our service. And on the top as a quality and innovation-led CDMO and the [ DLCO ] stands for innovation and development. We will continue to combine research and development activities with market needs to deliver the highest possible quality in a timely and cost-effective manner. I'm now going to hand over to you, Stuart, to start the presentation and talk about the year in review. But after the presentation, there will be enough time to take your questions, and then we'll be around, if you want to speak more to anyone who has time to stay. We also have a live webcast running currently. And for those joining us remotely, please ask plenty of questions when we turn to you. We are also accepting written questions. That's nice. If you prepare that route and our Investor Relations team, Taylor Boyd and Sophia Bolhassan will come back to you in this case. So as I said, our Chief Scientific Officer, Kyriacos Mitrophanous, is also with us today. You all know him. I'm sure you appreciate him as I do. So please go ahead.

Thank you very much, Frank. So I'm going to take you through the presentation. I'm going to attempt to do that in about 25 minutes to leave some sufficient time for Q&A at the end, as Frank mentioned. Actually, as we look up at the first slide, which the covering slide, it actually tells a bit of a story because part of the impact that Frank's had in Oxford Biomedica in the 3 weeks, 1.5 days he's been here, is he's added a single word in the front page, and that's to increase our focus on quality. So for those of you with good memories, we were saying that we were an innovation-led CDMO. And now we are saying that innovation and quality will hold sort of equal rights on the sort of title page for this company. So we'll go through a bit about why that is and what that means in the presentation. Forward-looking statements, you all know this. So FY '22, this is just a snapshot of some of the achievements in the year, and we'll go into a bit more on the strategy in a minute. So obviously, the single biggest achievement of the year was the transformative acquisition that we made at the beginning of 2022, which closed in March 2022 of Oxford Biomedica Solutions, which I'll remind you is the carve-out of the technical capabilities of Homology Medicines, a Nasdaq-listed company into essentially a start-up CDMO. And we acquired the assets, the equipment, a nice facility, 130 individuals with really, really good experience in the AAV field. The IP, which has gone on actually in the year with the published data we've put out to really prove itself and then the contract with Homology for, I think, exclusive rights to produce and work on their portfolio of medicines, which is ongoing. So that was our first move into the adjacency of AAV, which will take you through the reasons why a bit later. We've increased the client base within Oxford Biomedica. So 13 new client relationships in the year in both lenti and AAV, another 3 postperiod end, it's really good momentum. We will take you through a bit of the thinking around how we're morphing into more of a commercial entity with strong commercial capabilities, which we're continuing to invest in. The robust financial position in this environment, we know that cash is super important, and we'll take you through some of the reasons why we think we're in a really, really good spot to exercise that cash position to make the best use of any opportunities that come our way. And of course, as Frank has told you, all important that we get the right leadership in place to drive the new story. So we'll talk a bit about how we're bifurcating the business into this quality and innovation-led to CDMO in one sense, the internal products in the other and how we're going forward with that. And I am curious here potentially to answer any questions you have on that. But what remains with Oxford Biomedica from -- beyond 2023 is going to be this quality and innovation at CDMO, and we're very happy to welcome Frank to lead the organization. So why do we think we can win? This is the sort of value proposition. What do clients value? They value our ability to solve their problems. Biologics, especially cell and gene therapy is still a tricky business to be in, high barriers to entry. And if you can provide really, really top quality products and top quality service and you can provide the right level of innovation and innovative solutions to your partners, you're going to be in a very, very nice position. We firmly believe our vectors continue -- are playing and will continue to play a key role in this next wave of breakthroughs in medicines. These are curative therapies. We're seeing some really nice momentum in the marketplace. Now more and more approvals, which, of course, is going to increase the market size, and we expect to be able to rise significantly with that tide. We've got this proven track record. We were the first on the market with the cell therapy, the first cell therapy approved in the U.S., Kymriah with Novartis back in 2017, and we have none broken record of market supply since, and that cannot be said for every cell or gene therapy that's been launched since that time. And we've learned an awful lot from that relationship, and we've been able to transfer that learning into the other clients' relationships and really leverage that know-how and build that know-how state. And then these capabilities, we were -- a year ago, we were a lenti company, and that's a great place to be. We were -- and we are the leading lenti company. Now we've made that leap into that sensible adjacency, bigger market, faster growing market, and we'll tell you some of the reasons why we've done that. So here is the market. This is the addressable market for viral vectors, so when we talk in addressable markets, we're talking about the outsourced bioprocessing revenues available in these markets. AAV is the biggest market and it's the fastest-growing market. So the move into AAV was a very sensible, a very pragmatic one, and we're very excited by it. The reason it's so much bigger is the quantity of vector required for a dose is just higher. You're going systemically into the patient rather than typically the way that lentis have been used. And what's reflected in these market sizes is ex-vivo therapy, therapy that cars outside the body where you need less vector. We do see in-vivo applications for lentiviral vectors as we move forward with the future generations of lenti. And again, we're just about to launch fourth generation lenti and Kyri you can ask some questions about that if there are any. But that's super important because that enables more modalities to be tapped. And then at the bottom, not such a fast-growing market, in fact, declining as you can see there, because the growth or the size of that market is very dependent on the adeno vaccine that was the AstraZeneca COVID vaccine, not strategic for us, but we do have capabilities. And if the right client comes along with the right proposition, we're happy to work on that area for them. So more opportunistic. But of course, in the world of a CDMO, you need to be both strategic and opportunistic to make sure you build the right mix of clients in the right stage of development. And just a quick view of the time line of 2022 and the achievements. Cabaletta Bio signed in January, innovative CAR-T company in the U.S. March, I've taken you through the closing of Oxford Biomedica Solutions. We've got this plug-and-play platform. And maybe this is the time just to go through a bit on that. I mean we are quoting titers of 1E15. Full-to-empty capsid ratio is 90%-ish plus. These are market-leading sort of KPIs for these platforms. And this is published data now. So we're really excited to bring that to market. And they've done a great job so far. So as well as supporting Homology, the new client. And they've signed multiple new clients onto the platform early stage, but they're really transforming themselves into this top-level AAV CDMO. July was extension of a contract with Juno/BMS. We're hoping to be able to talk more about that very soon. And another undisclosed and master agreement with AstraZeneca, which although it's therefore as a safety net for AstraZeneca for us to produce whatever they need, I think it's an endorsement of our capabilities because of the 11 or 12 people that had in their supply chain for the vaccine. We are the ones with the enduring relationship with AstraZeneca, which is a good indicator of the level of service we gave AstraZeneca during the vaccine production. In August, we finished the fill finish suite in Oxbox Phase 1, vitally important because we want to be able to offer a genuine end-to-end solution for our clients. So right from cell line development and process development all the way through to fill finish, now we can do that all in-house. We were using outsourced fill finish, which comes with its own issues. But now we are a full-service CDMO, which is fantastic progress. And a new client for Oxford Biomedica Solutions in September as well as an undisclosed client in Oxford and another 3 clients in December. So whilst you see all these are undisclosed, let me just take you through a bit of the reasoning why. We're seeing some undisclosed clients at the moment because, firstly, if they're early stage and they're in funding rounds, they're in stealth mode. Secondly, if they're coming from another CDMO, it's a difficult thing to manage, moving CDMO, so of course, we're very willing to respect the process of our clients. We're not in this for the short-term gain of throwing up a name in a press release, we're in this for the long term of helping these clients get their products to patients. Just a bit on the financial performance. So double-digit growth in the underlying revenue. So you'll see that the revenues were broadly flat. We have taken off GBP 40 million worth of -- or within those numbers is GBP 40 million of vaccines revenue. That has now come to an end, as we know. So we're expecting next year's number to be slightly lower, but that's with double-digit growth in the underlying business. A modest EBITDA profit. Of course, that's driven by some other -- some clever use of assets that we made for the sale and leaseback and was an important aspect of generating cash and a robust cash position as well as earnings. And we have, as we said, the sale and leaseback there, profit of GBP 21.4 million. And then the Oxford Biomedica Solutions' acquisition, we saw the expenses go up as we're supporting a nascent CDMO. So it's an investment we know we were making. We said we're going to break even on that asset by 2025, that's still the plan, but it requires some investment in that area. So we're in a position where we can support that investment through a robust cash position, which I'll take you through. So highest cash position we've ever had at the end of the year, GBP 140 million is supported by, like I said, the sale and leaseback, GBP 60 million coming from the sale and leaseback of the Windrush facility with Kadans, a great science partner to have on the sale and leaseback. They're really active in the Oxford area and looking to increase the scope of lab space all around the Oxford area, very good. We took a loan to complete Oxford Biomedica Solutions deal. We repaid GBP 35 million of that GBP 85 million loan in September, refinanced with a competitive refinancing process. And now we've GBP 50 million in a 4-year term loan, which is up for renewal, comes to maturity in 2026. Importantly, for the external products that which we're working on, we've said that we are bifurcating those 2 parts of the business, very important for us. Become apparent to us through the year that -- and in fact, in prior years, it's very difficult to support those 2 competing demands for resources in a sensible way under 1 roof from 1 set of investors. But there is some fantastic technology there we're looking to give life to. So the plan there is to by the end of the year, have the no P&L movement through on the products. They're going to be out with the life of their own with external funding, which we're going to retain the long-term economic interest in. And of course, importantly, they're going to be a potential customer -- or a customer of Oxford Biomedica as we start them off with process development and all the rest of the activities, which we would give any other client at arm's length. So that's a really important thing that we're going to do in 2023. And that allows us to re-segment the business in 2023 at the interims and guide further. And we have gone through a rightsizing project towards the end of the year, which we've made sure that we have retained the cost infrastructure and the capability infrastructure to make sure that we're well placed to exploit the growth in the end of '23 and '24 and beyond, where the real takeoff of cell and gene therapy is going to occur. We're going to make sure we guide in that way. But post the vaccine coming to end, we made judicious but sensible adjustments to the cost base to make sure that's reflected lack of revenue from the vaccine, but a cost base in place to make sure that we're in a good place to exploit the growth opportunities we find in front of us. A little graphical view of that. As you can see, this is a 6-month segment. what we told people is while we're waiting for cell and gene therapy to mature, we'll roughly be breakeven, and that's what we've achieved in this year. And in prior years, you'll see that profitability spike coming from the vaccine. That taught us a very valuable lesson, which Frank already knew, which is that if you can produce at scale and you can campaign assets on a large enough scale, you're going to make some very, very meaningful efficiency gains and you're going to generate some good EBITDA. And that's where we will focus our efforts on getting a balanced customer portfolio going forward, not just early stage but some later-stage assets as well in order that we can start building those efficiencies through the capacity that we're running. And the revenue growth, there's some significant vaccines revenue in there, of course, but the underlying growth is strong, double digit. And like I say, the interims will be guiding further over the medium to long term on how we see revenues going. Okay. For the accountants in the room, here's a P&L. Not much to comment on this. I'm sure that there will be questions. The most interesting number on there that I think is probably the bioprocessing cost line. The bioprocessing costs line is significantly increased because -- and you can see how much bioprocessing costs you can absorb through overhead absorption when you're running 24/7, 3 suites on the vaccine. Now that vaccine was done point in time for the good of the nation and with the efforts of AstraZeneca and Oxford University, but that's the promise of what you can achieve when there are more launched products and commercial products to go for on the higher throughput volumes. That's what we're aiming for. So the commitment to quality and focused on innovation, how are we going to make our money going forward and how we're going to serve our clients going forward and how we're going to try and pick up clients going forward? Frank was making the point earlier that we need to find the clients that are right for us, the clients that value both quality and innovation and are prepared to share that economic benefit with you. And this is the way that we're going to engage with those clients. So we start at the early stage cell line and process development, where we've got those commercial development. Development revenues are starting. And this is vitally important they take a license to the platform, they come on to the platform. They're able to utilize our analytics. All the rest of those things that give people a bit of a leg up and a bit of a boost forward in terms of their time to IND. And then we go through pilot scale, early stage clinical, late stage and then commercial and fill finish. And you can see there how we see the revenues changing. And of course, as you get closer to commercial and into commercial, the bioprocessing revenues, the revenues you produce for the materials go up and up and up. And then, of course, well, someone has taken a license to that platform, the royalties start flowing as well. We're also looking, like I said, where we can add clients in every stage on this particular chart because if someone wants to come in and again, they're the sort of customer we value, tech transfers would be available, and that's something we're actively pursuing with our new commercial team. Just a word on the commercial team. So we've had our Chief Commercial Officer, Sébastien Ribault, in place for since October. And that's a significant investment we're making at Oxford Biomedica. So we're moving from 5 or 6 people in that team to mid-teens people in that team this calendar year. And we're doing that because we see a massive opportunity in terms of brand recognition and the commercial model we're trying to roll out here with this newly bifurcated, focused business to really make a big difference in terms of the pipeline and pipeline conversion into new customers. This is just a snapshot over that 5-year period, you can see how much progress we've made. So 5 years ago, GBP 40 million -- just under GBP 40 million in revenue. This year, GBP 140 million in revenue. Look at the clients and how we've expanded that, there are some great names there. And you'll note actually, it's an interesting -- we were asked the question early how many clients do you lose? You'll see that Orchard and Novartis remain. Bioverativ were acquired by Sanofi, who deprioritized the product. The Immune Design got acquired. But we have a fairly unblemished record at the moment of no one's left us for other CDMOs. The quality of the customer service we bring is really strong, and we're aiming to continue that with our net promoter score, which we measure and which is very, very impressive. A bit -- a few bits on Kymriah and where we are in terms of developing our own products. Of course, now we've bifurcated this business with our focused quality and innovation-led CDMO. And probably the biggest achievement is the facilities development in that time period, where we've gone from essentially Windrush Court for those of who have visited us and a couple of small sort of GMP suites in various locations in single-use GMP suites and warehouses to a world-class facility in Oxbox, where we've got 4 suites up and running, fully funded second half of development there for suites up to 2,000 liters. And of course, 90,000 square feet in Boston, just outside -- well, embedded just outside Boston in terms of AAV development and production. Here's a little bit on what partners want and where we're innovating. So typically, why would a partner come to us? Those partners that value innovation and quality. They're looking to leverage the expertise we have, the platform technologies we have, the fact that we can be flexible, so we talk a lot about competition, and we pride ourselves on being very agile as a size of business we are -- and that's very important because we're competing against some really, really big players. We can just be more agile. We can give a more personalized approach, and we can help solve problems in a more active way. And that's a really, really key part of the offering to our partners. And those technical capabilities we've talked about, we talked about the [indiscernible] ratios titer in the U.S. In the U.K., we've got a very, very long history, looking at Kyri now, 25 years in our business as the Chief Scientific Officer. And this is -- we've been at Lenti, making quality product, definitely the longest. And it's now time to make sure that's leveraged in terms of how we can bring clients on, and you can see that -- the progress we've made. Novartis, Juno -- 2 of the 3 originators of the CAR-T technologies are with us. And we're always speaking to some of the big players. Where are we focusing innovation? We focus innovation on anything that will make the process more robust, safer, higher titers and yields, better quality, they will get people through feasibility studies much quicker and obviously, safety. And that's what the focus is around the new process, Process C, which uses perfusion technology. There's an efficiency gain there and mechanical efficiency gain plus some of the add-ons that we're putting in there, the biological add-ons E1, E2, which will increase titer yield. And then fourth generation lenti, which is encompassing quite a lot of this stuff, which is going to form the backbone of the platform for people as an offering now and should make -- should give them the best chance of success when they're developing their product with Oxford Biomedica. This is the super important slide, and we'll continue this. So this replaces the old slide I used to name, the customers and the products. We're sort of clumping them together a little bit because the important thing here is these are these 4 development stages in which we're looking to add clients, and you can really gauge how we're progressing through the number of new client programs or projects we're working on with clients. Obviously, it's great to catch them early because they come on to our platform, and they'll be there for the long term. But it's also good to catch them as they're approaching BLA, and they're looking for commercial solutions or potentially as the industry matures, even second source supply contracts. We need to be super flexible as CDMO should be, and we need to add all the way along this list, and we need to progress from the top to the bottom as well as adding just share numbers, volume numbers to this chart. So this is going to be a key performance indicator for us going forward, how we're adding here. And the pipeline that we've got that Sébastien and his team are generating now is looking extremely healthy. And we're hoping to sign new meaningful contracts this year, which are going to bolster these numbers. The financial outlook, and we're coming towards the end, is strong double-digit growth in the underlying business. We expect the total revenues to be marginally lower than 2022, in 2023 because GBP 40 million of the vaccine revenue is coming off. That's still really, really good underlying growth. We've rightsized that cost base. We're making some interesting investments in the first half of this calendar year in terms of scalability and digitization, which is being led by our Chief Information Officer. And we're expecting an EBITDA loss as we are carrying that cost base, which is going to see us through this growth in 2024. This is a choice, and this is a strategic choice we've made. So we're prepared to carry this cost until we see the pipeline come through and the ramp-up in '24 and beyond because this is a choice we made after a lot of discussion. We don't want to cut too deep into the cost base and then have to re-put back that cost base and retrain people. This is the right cost base at the right time. And we'll go through why we think we're in the right place at the right time in a moment. CapEx level is very similar. And of course, that does encompass the first bits of building of Oxbox Phase 2 and looking to diversify that pipeline, exit you on that pipeline and give the commercial team all the support they need to make sure they're closing great customers, great clients who are aligned to our offerings of innovation and quality and willing to share those economic benefits with us. So this is the last slide before we just put it onto the holding slide. Opportunity for us, I just used that phrase right place, right time. We genuinely are hearing some really encouraging noises coming out of the industry, the number of approvals coming forward, how biotechs and companies are going to engage with CDMOs going forward to give them the best benefit. We think we're in a fantastic place to do that being a platform technology company. We've got this track record. We've got this vector agnostic, multi sort of stranded offering. And we genuinely -- with our increased focus, now we are focused quality-driven, innovation-driven CDMO, we're in a great position to make sure we're actualizing that potential of the market. And of course, the market is going to rise. We'll rise with that market, but we also want to be the competition and make sure we increase share, keep on increasing the number of new clients and make sure those clients are with us, got a great quality experience all the way through and give their products the best chance of winning and eventually getting to patients. And that's where we are. So I'll leave you with the holding slide and I'm happy to open it up for Q&A. And I think we're going to start with any questions on the conference call, and then we'll move to the room.

Stuart, the first question comes from Joe Pantginis from H.C. Wainwright. Can you please discuss the guidance for modestly lower revenue in 2023? Is this a function of timing of payments as well as business mix, stage and profitability of that particular stage of process?

Thanks for the question, Joe. So as I think I just alluded to, marginally lower revenues in '23. When you look at the base business and you strip out the AstraZeneca vaccines business, yes, doing the math, you're about GBP 100 million in base revenues in '22 with GBP 40 million in the vaccine. We're looking to be just marginally lower in 2023. So that's still pretty strong double-digit growth. And that's the underlying business, so that's business from both existing clients moving their assets forward and some new clients that we signed last year and indeed some new clients we're signing at the moment. So it's a good example of diversifying the mix of clients, but actually living with the downturn in the vaccines revenue whilst not losing too much revenue.

Stuart, the next question on the line comes from Martin Diggle at Vulpes. I note that Nigeria and Ghana have recently approved the Oxford Serum Institute of India vaccine for malaria. CEO of Serum is on record as stating that some of the vaccine will be manufactured by OXB. Do you care to comment on the progress of this development?

Well, I mean, we certainly saw the malaria vaccine being approved, which is great news for people suffering from that horrendous disease in those areas. We have got an MSDA signed with Serum, but we're not disclosing any further details about that at the moment.

We'll now take questions from the room.

Perfect. So we'll now move to the room, and I think Sophia is going to run around with a microphone. Charles has got hand halfheartedly up there.

Charles Weston from RBC. Two, if I can just start with, please. First of all, just on OpEx leverage. So you talked about having a -- rightsized the business to support future growth. So as the revenues grow, which you've sort of indicated there are going to be quite substantial, how should we be thinking about modeling those operating costs, both in terms of the COGS and the bioprocessing and your actual OpEx and R&D and sort of more -- some of the more discretionary costs?

Well, first thing is -- we can say that if you look at the segmentation, there's GBP 10 million of product-related OpEx that's going to come out in 2024 and beyond. Not wanting to entirely avoid the question, but what we're looking to do actually as Frank's 3.5 weeks into the role, we're looking to, in the next few months, really plan ahead and look what the long-range plan is telling us on that bit of the business which we're segmenting. So let me just take you through some of the segmentation because I think that helps here. We look at the segment the business into the operating business and then the lumpy license fees, milestones, royalties piece. And we're going to guide on that underlying predictable revenue stream coming from the underlying CDMO. So that CDMO should be very comparable to other CDMOs who are working in cell and gene therapy. And we will make sure that we are looking at the margins, which we expect to increase over that time period. So we'll be guiding for multiple years, and we'll be expecting at the end of that guidance period to be making sort of industry standard margins. But we're starting from a base of breakeven. And we're expecting the -- so as you can imagine, Charles, the revenue we're expecting to grow significantly, the costs will grow, but not so much. And they will be leveraged because we're making these digitalization investments now, which should enable us to make sure that the software and the technology carries as much of the load as it can. But of course, as we look to expand and get more suites up and running, we're going to need highly trained colleagues to work on those. So there is that fixed sort of stepped-up cost base every time you open a new suite or you're basically carrying those costs.

Maybe just a sort of second question to Frank. You've seen lots of different CDMOs. Industry standards obviously means something quite different in small molecule versus biologics. And no one, I guess, really knows quite yet where cell and gene therapy mature margin might be. What do you think industry standard actually could end up being in 5, 10 years at sort of a more mature market?

That is an unfair question for Frank, isn't it?

Oh, no, I like it. No, no, let's -- also coming back to your first question, I believe it's important to understand that the company will be in 2023 in the transition year. We are learning to become a CDMO. We were a hybrid model, and now we learn to become a CDMO. And this will take a few months, yes. We have learned, for example, that we need a strong commercial team to help us to address the clients. We have now this commercial team, but it's still in the building phase, yes. Our Chief Commercial Officer started in October, so we need to give them also some time, yes. So we are in a transition period. It's the same in Oxford Biomedica Solutions because it's a spin of Homology. They also have to learn what it means to be a CDMO. And being a CDMO is different from developing your own product. It's you deal with external clients. They have different wishes, different approaches and you need to capture all this to being a good CDMO. So we are in this transition phase. And in this transition phase, it's even for us, difficult to model where we lend. So this makes your job difficult, yes, for sure. And -- but that's okay because it's a transition year, yes. We will learn to understand what the clients need. When the clients want to come back. What I can say is for no doubt, and since coming to your second question now, we are at the right place at the right time. Why? Because the need for CDMOs will increase for outsourcing. Companies will outsource by far more in the future, that's what we expect. And in cell and gene therapy, we are just at the beginning. There have been so many setbacks in the past, now it -- this is a technology which starts to be mature and now we will see a lot of new companies coming in the field. And by the way, the number of clinical trials ongoing, the fleet is growing every month, yes, so this demand will be there. Because it's complex that we'll ask for outsourcing. And because it's still complex even if you outsource, I will ask for a company like we are because we have 25 years of experience, because we are at the edge. At least in lenti, I believe we are the best. After 3 weeks, I said that. Maybe it change next week, but currently, I believe we are the best. In AAV, we have everything to become the best very quickly, yes, because we have a very good yield, very good purity, very good efficacy. So all this tells me it was a good decision to come, but it's difficult to model. And don't forget at the end -- let me just add, and at the end, our success unfortunately, depends also on the success of our clients, yes. And we cannot predict whether a product will be successful in the market or not, and this makes it difficult. Do you agree?

Yes. We'll let you know.

And just before I give it back to Sophia. For Kyri, you talked about the fourth-generation lenti. What does it mean in terms of the advantage it provides and maybe how it answers some of the questions that the market has?

Yes. So for the last 10, 15 years, we've been using the third-generation vector system and have been working on a number of components to improve the underlying capability. One of the challenges that is coming through the industry now is the need to deliver more complex genomes. So for lentiviral vectors, it's not one gene only, it's multiple genes. Some of the constructs, some of the proteins you're trying to express, impact on titer. So the fourth generation are -- have been designed to address this. So they have a bigger capacity so we can fit more genetic information in. So more genes can be delivered. There is enhanced elements -- there's elements of enhanced expression, so you can get more of the protein in the modified cells. The titer allow -- the titer of complex genome is generally lower. These vectors allow you to recover that. And all these things combined to give you additional safety feature. So when we're thinking about using lentiviral vectors in larger amounts, for example, in-vivo CAR-T and other indications, you're going to deliver more vector. So added safety features are important for the future.

Miles Dixon, Peel Hunt. So you talked about a renewed focus on innovation and quality. And Frank, I think you talked earlier about the agility that, that really affords you being a kind of mid-cap player. Who do you really see as your direct peers then in that kind of midsized, agile space?

I strongly believe that there's a need for a company like ours in the field to be a kind of alternative to the big ones, to the big CDMOs, which are in the field. And what can we offer differently? First, our size, still midsize, will permit us to continue to deliver a service which is very adapted to the client needs, to a level which I believe others will have difficulties to do so, yes. So our client will just -- not just be a number with us, it will be something special, yes. So this is one advantage. The other advantage is, currently, we have 2 locations separated, one in Bedford doing AAV, one here doing mainly lenti. This allows us to focus completely of the needs of the clients, yes. It's different for other companies. So we need to rethink everything. We need to rethink also what innovation means. Innovation in the past, meaning -- sorry, Kyri developing a product, I simplify by mate -- developing a product for our own needs, yes. And here, we need to define what is innovation for the client. It's not about us. It's what is innovation. What Kyri just mentioned about this new process Stage 4 is exactly what is needed by the clients. And that's why I believe it will be a success, yes. But we need to prove it, but I believe it will be a success. So that's what I mean by agility. We are able to react very quickly to the needs of the clients because we are a mid-sized company. We can rethink innovation differently because we have 25 years of experience. There is more or less no other company having so much experience in lenti, at least, yes? So every process change, it might be something bringing us or bringing the clients far better -- in a far better position.

Got it. And Stuart, if I could just pick up on something you mentioned about moving CDMOs, about it being really challenging. Can you give me an idea of how much that's about technical complexity of moving partners versus the brand and the contract difficulties?

I mean the -- if you're with the CDMO -- I'm actually -- I don't know your comment, Kyri. But I mean we've had incoming rather than outgoing. But what we used to say is that -- I mean, if you decide to leave the CDMO in your ensconced in -- within that CDMO, it will take you a significant amount of time. And at the same time, you're exiting one, you've got to spin up another. I mean it's a massive effort for an organization. Kyri, I don't know whether you want to comment on some of the regulatory aspects.

Yes. So some of the -- this can be done. So depending on what the challenges were for the need to move, we can carry out analysis to do comparability, verify that the product we are making is as good or better than what was originally manufactured. Usually, clients want to come to us from a different CDMO because inside of them they're not happy with the quality of the vector, the amount has been generated or time delays and all those things, we can help address. And they usually don't have any regulatory implications as long as the quality is as good or better, which we do.

And typically, how long does that work take?

It depends on the projects, but it can be around a year, 6 months to a year depending on where they are. Because it's a straight process transfer and it's fine, we don't have to develop it. If we have to do innovation because the -- simply, productivity is not as good as they need and you add on extra time to add on the -- evaluate the new elements that we would incorporate. So if you're going from a process B to a process C, we would have to take that into account. If it's a straight transfer, then that's faster.

Let me add something because this is about CapEx. It means also that we need to continue to invest in capabilities because the clients will come to us in first position if we can offer everything from gene, anti-commercial, fill and finish production, yes. This is something which I will ask them, to avoid to transfer later on to a bigger CDMO. That's why we need and we have plans to continue to invest in our capabilities in a bigger scale.

Perfect. And if I could just talk about capacity as well, particularly in the U.K., given I think really lenti has been the standout success on a business development front. I think I know the answer, but you've got plenty of capacity to expand into in lenti.

Yes. So we obviously have 1, 2, 3, 4 -- 6 working GMP suites within the U.K., [ 4 ] within Oxbox. And we have a fully funded expansion program for Oxbox Phase 2, where the plans are flexible at this point but can go up to 2,000 liters. The standard scale at the moment for lenti is 200 liters, so it enables us to be flexible on the volumetrics as products and the technology matures. So -- and obviously, it gives you the opportunity to make commercial AAV as well, which goes up to 2,000 liter scale. So we've got fully funded plans in place to give the business the flexibility it needs to really go after any customer in the cell and gene therapy area.

Julie Simmonds from Panmure Gordon. A couple of questions on the new commercial team, please. Just wondering if they're going to be selling both AAV and lenti or if there's going to be a sort of split between how they balance that out? And then also, when they're looking at -- sort of, I guess, is similar to your pipeline as a whole and how they balance the research side of things and the clients at that stage to the ones that are at the later stage, which are clearly more valuable. I'm wondering if there's a -- sort of how you're, I suppose, incentivizing your balancing to ensure that you get the right clients that you want at the right time so that you get...

We start with the split?

Yes.

I don't know by now. We are looking at it. Maybe that we try to give to lenti and AAV a certain level of autonomy and align other things like HR, finance questions together. We will look at this, yes. And at the end, what will guide us is what the clients need from us, yes. And clients, currently AAV clients and lentiviral clients are different in size and level of clinical development, in size also.

I mean just to add to Frank's point, Julie, there are some big pharmas that do everything, right? So Novartis, BMS, both AAV and lenti programs, of course. And in that sense, we're exploring key account management, which I know Sébastien is looking at as a potential model. But as Frank said -- look, both Frank and -- Sébastien is in 6, 7 months, Frank is in 3 weeks, we'll -- we're making that investment, and we will, to a certain extent, sort of suck it and see with how successful we can be. And we've got the flexibility to be relatively experimental there and see what gives the best results.

Edward Thomason at Liberum Capital. I first had a question for Frank. Just in the next 6 months, where do you anticipate spending the majority of your time in the business? And what are your key focuses?

This is an easy question. Thank you. So I've decided myself to put a lot of time in acquisition of new clients. So I will support our commercial activities because this is what we need for the future and for delivering and try to find a way to model our financial revenues for the future. So we'll spend a lot of time, and I tell you why because I believe that our success will depend on the right balance of clients. Not every client can fit us, and we will not fit every client. So we need to find the clients where we can add to and you say that in this presentation to, what we need to find the clients where we can add the highest value. If we are able to do so, if we can balance between early stage, late stage, between AAV and lenti, and this is portfolio management that this is a difficult task, if you are able to do so, we'll be very successful. So I need to spend a lot of time to understand the market dynamics together with the team. And so this is the first priority. The second priority is to help the organization to become a true CDMO. And I mean also in the head in the mindset, it's a transformation, yes. It's a transformation. I think we are in a good way, but we can push a little bit more, so this will be the second priority. And then there are 250 other priorities.

Very good to hear. And then I just had -- just asking for any commentary on the Polyplus-Sartorius deal. Is there any change in the landscape that you see as a result of it?

It's not come onto our radar in any way now. Do you have any comments, Kyri?

No.

No. Sorry. Yes. We see that as often left or right and it's not right in the middle of our runway.

We now have a question on the line from Paul Cuddon at Numis.

I just have a couple of questions actually, please. The revenue visibility into 2023, I think you've talked about 2/3 coverage already. I wonder if you could provide any more visibility on that and to what extent it may relate to any ongoing payments at all from kind of AstraZeneca and what is left from the Homology deal? And then secondly, just the accounting treatment, the gain on the property in H2 2022. I mean was that part of your expectation when you guided to EBITDA breakeven in the second half of the year? Or was that something that came sort of unexpectedly?

And so -- the second question first. We were exploring that for a good period of time because we understood we had some uncapped -- untapped capital that was available to us, and we were looking to make sure we had the most robust balance sheet we could. In terms of the revenue coverage, you're right to suggest that that's about what we are talking about, the revenue coverage. It's -- there's going to be no AstraZeneca revenue in 2023. None that we can foresee right now, which is, yes, a good thing because that AstraZeneca revenue would mean something else. So the revenue coverage that we're looking at, and I'll remind you of the revenue guidance, which was slightly lower than 2022 in 2023. But obviously, with no AstraZeneca vaccines revenue in there. So we believe we've got good coverage. We've got a great pipeline. And we've got some great customers. So we'll get there.

James Orsborne from Stifel. Just 1 from me. Just wondering, given the funding environment currently with the biotech space and you're being highly reliant on early-stage companies, how are you seeing that progress this year? And how are you seeing the size of your agreements changing with -- over time of this year?

It's a question which we get asked quite largely. And I wouldn't say we're not -- we're certainly not overly reliant on small biotech. We're very fortunate to have the spread the portfolio of customers we have, including Novartis, Boehringer Ingelheim, BMS, who aren't stopping, right? They're never going to stop. In terms of the smaller biotechs -- actually, even with the smaller biotechs, we're enormously empathetic to the environment they find themselves in. But if you're a small biotech and you want to move your share price really got to generate some data, and we're fortunate enough to be on the critical path for that. So whilst we've seen some of our partners who are in stealth mode and fundraising, they're still pushing these products forward because they -- this is their lifeblood. Now occasionally, you've seen some prioritization in pipelines where maybe they're working on 2 of the 3 or they've done something to make sure they're focused but the work still continues. And we're -- like we say, we've got to be a good partner to these guys, make sure that we get them the data and the materials they need to try and generate some data to get themselves moving again in terms of their share price. But yes, I mean, it's one of the benefits of having this balanced portfolio, both big and small.

Yes. And let me add some things to it -- if you admit this. I believe it's fair to say that Oxford Biomedica was not so much known as a CDMO so far, yes. And if they were known as a CDMO, they were thought to be a CDMO just working out of their own platform, yes. Now because we are on the road, a lot of companies start to understand, wow, we can also do a transfer to Oxford Biomedica. And if this is true, and we see first signal in the market of company coming to us because they have a certain level of disappointment with their current CDMO, this might enable us to bring in late-stage projects, Phase II, Phase III or even second source for commercial can, yes. So we need to do work on the road, yes, that's for sure. And I see -- I start to see that awareness of the company is growing, and this will be helpful, I believe, for our future.

[ Ed Blair from Intron Health Research ]. Can I just ask, Frank, in relation to the comments that you've made about the CDMO mentality, which are extremely clear comments, does that change anything as regards to the possibilities that anything you may have done with the Serum Institute may have been deprioritized?

I don't know so much about the Serum.

No, no, no.

I need to refer to you.

Yes, look, I mean, we signed the -- an MSDA with Serum last year. And as I commented on one of the questions earlier, we're not at liberty to talk too much about that. But I'll remind you of the facts. The facts are that Serum Institute invested GBP 50 million into the business in September '21 for the expansion of the fallow area in Oxbox. Those plans are progressing. And they're a very, very supportive shareholder. And when we've got more news to share on that, we'll happily share that with the market.

With that, we'll end the Q&A. If there's any closing remarks from the team?

So?

I'm looking at you for closing remarks. I've said enough.

As you close -- I thought now I -- so let's -- from the discussion, I think, we just had, we -- I hope that you can value that the company is currently in a very good starting position for addressing the needs of the cell and gene therapy market for the future. So there's a big demand for outsourcing. There's a big demand for cell and gene therapies. We are covering AAV. We are covering lenti. We are covering adeno. We are looking at additional formats for the future. So we are doing everything to grow our positioning, grow our position also in the market. And having said that, thank you so much for your interest in the company. You should continue to look at us. Thank you.

Thank you very much.