Oxford Biomedica slumps as AstraZeneca vaccine trial halted

Oxford Biomedica shares slid on Wednesday on news that AstraZeneca and Oxford University's Covid-19 vaccine trial has been put on hold, as investors fretted over how this might affect the gene and cell therapy company’s supply deal with the UK pharmaceuticals giant.

At 0900 BST, the shares were down 11.3% at 763p as it emerged that the Oxford trial has been halted after a participant in the UK had a suspected adverse reaction.

The medical regulator, MHRA, will make a final decision on restarting the trial but until then, all international vaccination sites are on hold.

Earlier this month, Oxford Biomedica announced that it had signed an 18-month supply agreement with AstraZeneca for large-scale commercial manufacture of its Covid-19 vaccine candidate.

Under the terms of the agreement, AstraZeneca will pay Oxford Biomedica £15m upfront as a capacity reservation fee. The company also expects to receive additional revenue in excess of £35m plus certain materials costs for the manufacture of multiple large-scale batches of the vaccine until the end of 2021, subject to the satisfactory scale-up of manufacturing capacity and continuation of the vaccine programme.

Analysts did not seem too concerned about the news, however.

Broker Liberum said there is clearly a risk the vaccine fails at this hurdle. "From an Oxford Biomedica perspective they recently signed a deal with Astra to supply batches of this vaccine for trials and potential commercial sale. Importantly the deal has a £15m upfront payment that is guaranteed irrespective of the trial outcome.

"Clearly it would be better for OXB if this vaccine is successful and becomes a mainstream commercial product, but the nature of the deal with Astra provides a level of income even if this trial fails."

Liberum expected the shares to fall at the open but said its own positive thesis has nothing to do with this vaccine. "We have nothing in the model for it," it said, adding that its thesis is based on "the excellent progress being made in cell and gene therapy collaborations (eg with Novartis and Bristol-Myers Squibb)."

Peel Hunt said: "We see limited read-across from this to our valuation or fundamental thesis on OXB. The viral vector and transgene on which the vaccine is based is not OXB technology (OXB’s platform is lentiviral vector based, the vaccine is an adenovirus platform).

"We have not yet had the opportunity to discuss this with OXB, but our understanding is that the £15m capacity reservation fee announced as part of last week’s AZN deal is non-contingent. As such, this news only increases the risk adjustment on the additional circa £35m revenues that could be generated under the deal, which we estimate would fall through at a c.20% gross margin, i.e. a maximum £7m profit benefit before risk adjustment. We have not yet reflected last week’s supply deal in our forecasts and as such this news does not affect our model today. The implications for OXB’s valuation are limited in our view, and so we would be buyers of the shares on any sentiment weakness today."