As the leading Covid-19 vaccine manufacturer for AstraZeneca, Oxford Biomedica was able to persuade the prime minister to open its newest facility in January. At the ceremony Boris Johnson decreed that it should be running 24/7 as soon as possible and was said to have sought reassurance afterwards that it was squeezing out every available drop. No factory owner could ask for more.
The two companies signed an eighteen-month supply deal in September under a three-year master supply and development agreement for the large-scale manufacture of the Oxford-AstraZeneca vaccine. Oxford Biomedica was paid £15 million as a capacity reservation fee and another £35 million is expected by the end of the year.
So far, so good, but shareholders must bear in mind that Oxford Biomedica is a complex proposition with several risk factors in a fast-moving market. Although its long-term aim is to become an integrated, self-financing gene and cell therapy business, for the time being, at least, it is dependent on partnerships.
Oxford Biomedica admitted that the AstraZeneca contract was the main contributor to its revenue growth last year and it is clearly on track to be the star performer again in 2021, despite concerns in some countries about rare blood clots.
An urgent task for the company’s management is to find other sources of business. Encouragingly, revenue generated from bioprocessing and commercial development increased by 45 per cent last year to £68.5 million and there were new deals with customers including Juno Therapeutics/Bristol Myers Squibb and Beam Therapeutics. However, the fragility of such connections was brought home last month when Sanofi ended a pre-existing haemophilia licence deal that it had signed only three years ago.
Oxford Biomedica had led the City to expect it to return to profit for 2020, but earnings before interest, tax and other charges is the only category of profit in the black. Losses still prevail at the operating and net levels. That should improve, though, as the bulk of last year’s other numbers were moving in the right direction.
Total 2020 expenses rose by £11 million to £81.2 million, mainly because of higher research and development and sales costs. The cash burn from capital expenditure and interest payments fell from £26.3 million to £7.8 million.
While admitting that 2020 had been a year of “operational resilience and adaptability”, John Dawson, 61, chief executive, said: “Discussions and feasibility studies are continuing with various potential cell and gene therapy partners and the group aims to increase not only the number of partners but also the number of programmes worked on by existing partners during 2021. The future has never looked more exciting.”
The stinger in the AstraZeneca vaccine from Oxford Biomedica’s point of view is the politically driven price pressure. Britain is paying $3 (£2.17) per jab, while the European Union is paying $2.15 and the United States is stumping up $4. Those numbers are certain to align and not necessarily upwards. Oxford University and AstraZeneca have pledged to make their vaccine available at cost price “in perpetuity” to low and middle-income nations.
However, having a facility operating full-time at least covers overheads and generates cash that can be used elsewhere in the group. It is also a useful advertisement to help to sell other products and, now that we all have had a crash course in pandemic medicine, Oxford Biomedica will be operating in a friendly climate that should generate a flow of opportunities. But can the company make the most of them?
Advice Hold
Why Enticing long-term prospects, but more evidence is required of financial controls and dealmaking flair
Entain
Gambling companies face a dilemma. They want to please investors with blossoming profits from online operations, but do not want to show such huge increases that they attract the attention of regulaotr concerned about betting addictions.
Entain, previously GVC Holdings, neatly sidesteps this dilemma with a “good news, bad news” tale. Thanks to the lockdown, online trade rose by a third in the first three months of this year, though even that was a decline from the previous quarter. Despite that growth, overall January-to-March revenue fell by 13 per cent because the group’s 3,000 Ladbrokes and Coral bookmakers’ shops and other brands were closed, suggesting that regular punters are not all up to speed with the digital age. Ironically, the shops’ reopening this week will increase costs.
Since the period covered by yesterday’s trading update, one of the most exciting Grand Nationals in years was run last Saturday. It was Britain’s biggest online sports betting event, with more than 150,000 customer visits per minute during the race. This augurs well, not only for the growth of mobile apps but also for the popularity of bets struck during an event, when gamblers are not, shall we say, at their most rational.
Next week investors will be given an update by BetMGM, Entain’s American online joint venture with MGM Resorts, which has the potential to outshine all Entain’s other operations put together. The venture has 19 per cent of the market in the United States. While it is the nation’s No 3 and faces strong competition, online gambling is legal in only ten states, a number that is bound to rise.
A sign of the mouthwatering possibilities was the recent £8 billion bid for the joint venture by MGM, loftily rejected by Entain. The Americans walked away, but some analysts think that they could return with a higher offer in July. Although this would generate cash or shares equal to nearly half Entain’s market capitalisation, it is hard to see where it could reinvest those proceeds anywhere near so profitably. However, joint ventures often end in tears, so they may have to bow to the inevitable. A nice problem.
Advice Buy
Why Shares look as if they have further to go
