Good afternoon, ladies and gentlemen, and welcome to the Oxford Biomedica Interim Results 2022 conference call and webcast. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. We will only be taking questions from the phone line today, and any questions submitted through the webcast will be answered after the call. 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. If I start with the first slide, I'm really pleased and excited about the momentum with Oxford Biomedica. Can I have slide three, please? 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 main fundamentals are you know that we had set up a new strategy, much more focused on becoming a leading, innovative global viral vectors across all viral vectors for cell and gene therapy companies. We have delivered on the first half on this strategy. 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. You know, almost several hundred 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 AAV and the lentiviral vector outsource supply market.
There is 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. 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. Not only are we leading in the innovating space, but we also have a track record of delivering on the manufacturing, as we demonstrated through Oxford Biomedica's 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 for Kymriah.
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 Solutions for our AAV platform based in Boston. Can I have the next slide, please? Slide four. 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. A testimony of that is the new customers that we have announced yesterday in addition to 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 a 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 you know, we retain them also for a long time. It will take some time before the 70% generates revenues, but the important thing is indeed that metric and the dynamism in our customer base. We also expanded existing agreement, an important one with BMS, or a subsidiary of BMS, Juno Therapeutics.
They are a large viral cell and gene therapy company. We signed four new US-based agreements from four U.S. customers, including a new AAV customer since the beginning of the year. 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 five. 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 plug and play platform that has convinced already one customer, as I mentioned, in addition to Emergent, and is in the process of convincing many more. Just to remind you, we have manufacturing capabilities there with proven scalability all the way to 2,000 liters for commercial supply. We expect profitability to be reached in the first half of 2025. If I go to the next slide. This just summarizes, again, the innovative service updates that we had since the beginning of the year. Once again, I'm thrilled with the momentum that is provided by an impressive team at Oxford Biomedica. 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 eight. 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 eight, which is around the core business growth. You know, the opportunistic work through the COVID vaccine, which was, you know, 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 at more than 20% CAGR.
Now, as that revenue goes away, and you can see the reduction in revenues overall, you know, we're pleased to report the core revenue growth in cell and gene therapy is growing very nicely at double digits. That is the momentum on which we build our core business as the vaccine work is essentially winding down. The operating losses you see there, it's GBP 5.8 million for the first half of the year compared to a profit previously. Again, you know, we've taken that profit made previously and made a very smart investment for the future, as Roch has said. The loss we're carrying, of course, is representative of the new business in Boston, and it's gonna be loss-making, as Roch said, profitable in the first half of 2025.
At the moment, you know, we're utilizing the latent capacity to add new customers as quickly as we can in order to build towards that profitability, but we'll be carrying an element of loss for that business for a number of years. Now, you can see that, you know, incorporating that loss, the underlying core business again is around that break-even mark. You know, we are intent on making the core business, you know, sustainably profitable going forward, and that's a key goal of the organization as we currently stand. As you can see, the operating expenses have increased to reflect, you know, the skills, capabilities, and costs of doing business in the AAV field in Boston.
You know, 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 been released. The first customer through the door, 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. 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. Of course, there are some other strategic goals we have in terms of building out the fallow area of Oxbox going forward, but that really is in the planning stage.
The next slide, please. Slide nine. We've included a slide on cash, which we've not done before, but we think this is a representative of, you know, the marketplace and the macroeconomic and geopolitical situations in which we find ourselves. 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. 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 one-year loan facility that was taken out as a bridging facility to get the deal done back in January. We have made really good progress on that. There'll be more news to come in this calendar year. Then we have an ongoing process that's the sale and leaseback of Windrush Court, which is our GMP and analytical 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.
We think this is a good time to make sure that all the assets are working for us in terms of, you know, solid liquidity into the business. At the same time, the review of gene therapeutics, which Kyri will go through a bit more detail on a few more slides, is progressing nicely. You know, 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. Really good progress is being made. Kyri will take you through a bit more of those later. Cost control initiatives.
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 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 it of us for the next 12-18 months, while maintaining very, very strong, robust liquidity. Next slide, please. Here's the very familiar slide. You can still see strong growth in the underlying revenues on the top table in the darker color. You know, every half year as well, there are some of the lumpy licenses, incentives, royalties and grants that come through, which is good for liquidity.
We really like that sort of revenue, but it's less predictable. You can see that, you know, there's been a significant uptick through the vaccine in the last three halves. You know, as we've been at pains to say, we've utilized that momentum to build strong, robust pipeline in the underlying business and to make the play in the bigger market of AAV. As you can see on the bottom chart, this is operating EBITDA. Yeah, you'll see there are one-off acquisition fees in this half, just over GBP 5 million to do with the transaction. Of course, you know, we've added in significant costs in the Oxford Biomedica Solutions business. I hope you can see there that, you know, 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. We're in a 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, who made the investment GBP 50 million into the business this time last year. Next slide, please. Here's the P&L for you.
For those of us who love a good P&L, you know, this is the output of all the things I've been talking about. The 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 costs are going up. That's a utilization issue. Heavy utilization this time last year, running 24/7. Obviously the core business is a slightly different profile of cadence. On the R&D and admin expenses, we've added some in Boston.
As I've alluded to, you know, these are being reviewed in terms of making sure that we are the right size, and suitably have the suitable and correct capabilities, and invest in the right areas going forward is key to the success of the business. The one other thing to mention is the finance costs. Finance costs there are interest on the loan. That's not the whole piece of it, of course. There are some increased leases that have gone through from our acquisition of Oxford Biomedica Solutions, and there's an FX loss in there as well. At this point, I'll proceed to one more slide, please. I'm gonna hand over to Kyri to take us through some of the innovation we're making.
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 viral vectors to revolutionize medicine by enabling life-saving cell and gene therapies. I will describe the exciting product areas we're working on and our plans there. Let's first take a look at the platform innovation. 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's 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 vector we can produce, we can improve vector quality and thereby enabling new therapeutic possibilities.
Let me show you an overview of the platform on this slide. 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 titer and removes impurities before they enter downstream purification. We have U1 and U2. These are additives that increase the titer but also improve the number of active particles.
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 one 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 datasets that are generated from these kind of analyses. By understanding vector production better, we can increase components that boost yield and quality and reduce those that don't. Now let me give you some more details about some of our recent innovations. Next slide, please. 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 at 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 pro-productivity and quality attributes. We have made great progress with our fourth generation lentiviral vectors, which we expect to launch in 2023. These vectors enable higher expression, have additional safety features and a larger capacity, so can deliver greater amounts of DNA. This last point is critical as we are seeing increasing demand for vectors 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 two 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 liver is a continually dividing organ, and because lentiviral vectors integrate in 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's 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. We're expecting similar levels of revenues in the second half as the first half, and more than 90% of those are booked in. 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 £30 million from AstraZeneca in this full year, but the bulk of the revenue is being recognized in H1 2022. Broadly speaking, the EBITDA numbers are gonna be around breakeven in H2 2022, with a very similar amount of CapEx.
You know, 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 two vibrant markets, with a long-term goal to grow our revenues at faster rates than the market's growing. The market's growing very, very quickly. Last slide, please. Just on some of the catalysts. Obviously, Oxford Biomedica continues to be a deal-generating company, and we expect new deals through the end of 2022 and into 2023 for both OxP Solutions i n Boston and the core business in Oxford, lentiviral vector business. We've made a public statement that we expect 2 new customers in the AAV field this calendar year, and we're bullish on that.
The therapeutic strategy, as Kyri said, you know, we're looking to have that finalized by the end of this calendar year and executed in 2023. You know, 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 programs. Then the part payment refinancing and the sale and lease back, we expect to be complete this calendar year and put us in a very strong and robust cash position with a well thought out sort of capital structure for the business, including an element of debt moving forward for the next period of time.
I'm going to leave you with our initial strategy slide, and I'll hand over to Sophia, who's gonna kick off the Q&A process.
Thank you, Stuart. We have a number of you queued up on the phone lines. Operator, can you please open up for the first question?
To ask a question over the phone, please press star one. Please ensure the mute function on your phone is switched off to allow your signal to reach our equipment. Star one to ask a question. We will take the first question from Joe Pantginis from H.C. Wainwright & Co. Please go ahead.
Hi, good morning, everybody. Thanks for taking the question. Good morning or good afternoon. Couple quick questions, if you don't mind. First, Stuart, with regard to the debt refinancing and repaying, any guidance with regard to the amount of what will be refinanced?
Hey, Joe. Great to see you. We're currently working through that. Hopefully, we won't have you know too long before we can fully share the details with the marketplace. At the moment, you know, we're still talking to various providers about the profile of how that looks. No specific guidance right now, but you're not gonna have to wait too long to see that.
No, I understand. Look, I mean, it's great to see the business grow, especially out of Boston. I guess, look, as you make these announcements, you know, you say that the terms are undisclosed, and I can understand that because there's a lot of, you know, the competitive environment is quite wide, so I can understand that. Can you give us some level of baseline expectations with regard to the types of deals you term, the deals you sign with regard to maybe some minimum terms that could be expected from these types of deals?
It's an interesting question, Joe. I mean, the reason that we have done a few undisclosed deals with you both on the LentiVector side and the AAV side, is because, you know, 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. Not talking about anything in particular, but you know, the way that we sort of view early-stage agreements is that, you know, we can take someone from a very early stage of vector construct and work on through our process R&D people both in Boston and Oxford, to get them something very viable. Then you're talking about potentially tox studies and other things.
Each deal is slightly different, but you know, it will involve producing the material for sort of viability, maybe animal studies, tox studies, those sorts of things. But they are all different. It's difficult to give guidance, but you know, they are what they are is essentially a gateway with the customer to take them onto 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 that early stage development and then through clinical stage development. 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. It's a and fill finish now. It's a real soup to nuts offering.
You know, 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 a happy customer and stay. We've got a great track record of keeping customers for a very, very long time. Novartis has been with us for a decade now, with us helping them all the way along from, you know, 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, you know, providing an end-to-end process. Thanks for that answer. I appreciate it. And then, of course, you know, I'd be remiss if I didn't ask about the gene therapeutics pipeline, because look, how, you know, as Kyri described your different initiatives with regard to tech improvements and what have you know, how a lot of that could potentially translate to your gene therapeutics pipeline and what, you know, we could potentially look to or look towards with regard to any potential news flow. Thanks.
Yeah. 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, you know, puts us in that unfair advantage position as a producer of high quality, high volume, high titer lentis. You know, we're looking to essentially push forward the agenda with the latest technologies. Kyri mentioned process C, fourth generation lenti, all these other things which, you know, could form part of the offering here, and looking to attract external sources of funding there. You know, we're super excited by the value that can be created. We're just aware that, you know, there's a different risk profile to that area of business than the underlying innovative CDMO business.
We're looking for, you know, that external funding in order to make sure that they're well-funded, pushed forward as fast as possible because patients need these treatments. The call on capital between an innovative CDMO and a product business is very different. Yeah, I mean, the timing remains that we should be in a position to execute that strategy in 2023, but progress is being made very rapidly now coming up towards the end of this year.
Got it. Thank you very much for the color, Stuart.
The next question comes from Miles Dixon from Peel Hunt. Please go ahead.
Great. Thank you. Afternoon, all. If I could just maybe ask Joe's question a little bit differently. 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? 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 new partners? Thanks.
Would you like me to take that, Roch?
Yeah, that would be great. Yeah, I think it's
Okay.
Targeted to you.
Yeah. Hi, Miles. I think it's a great question and we see, you know, milestones, licenses come from, you know, various customers at various times, depending on the maturity of the relationships. Sometimes they're licensees when they sign on, and sometimes they're milestones in some element of commercial development, where we've particularly tied to milestones. 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, you know, we are seeing and we are targeting, in fact, early-stage biotechs as well as big pharma. You know, what we try and do is be as customer-centric as we can.
There'll be various economic pressures on our partners, and they'll be very different if they're big pharma to small biotech. We try to really apply our increased robust balance sheet to help them get on board and start solving their problems 'cause the long-term economic value of these deals is very similar, whether, you know, there's a big license fee and, you know, a less milestones or whether there's smaller license fee, big milestones, and we just need to get them through the door. 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.
We see that as an opportunity because what we do know is that there are very few small biotechs now springing into existence who are gonna create their own manufacturing solution. So we see the market growing for 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, as Roch took us through earlier. So, you know, in that sense, the market is 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.
May I add, as to the second part especially of your question, to what Stuart said, there is another in addition to the early-stage biotech 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. It's late-stage biotech who are getting poor service from their CDMO who cannot deliver and are turning to us in panic. 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. Thank you. I think you've answered my second question there about the pipeline of opportunity. If I could go on from one USP to another and perhaps for Kyri. I mean, obviously there's the yield and quality of a virus manufacturing you talked about, and your reputation in Lenti and Adeno speaks for itself over the, well, the last kind of 15 and 2 years respectively. I mean, you mentioned dual plasmid AAV. How do your Boston AAV capabilities compare to the competitors out there? Thanks.
Thanks for the question, Miles. When we looked to bring in AAV expertise, we looked at a number of different companies, a number of different opportunities. What we found in our Boston colleagues, as they are now, was an expertise in large scale AAV manufacturing using HEK293 cells at very large scale. They had used 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 failures. I think they compare very well to what's out there for AAV.
As we get to know more about their capability, we are more reassured that they are industry-leading in their knowledge, vector system processes and also IP.
Kyri, would you like to comment on the posters from ASGCT that Oxford Biomedica Solutions produced on their titer? Then maybe something on the full-to-empty capsid ratio, please.
One of the key aspects. Thanks, Stuart. One of the key aspects with regards to AAV is the particle to infectivity ratio. How many of your particles have got genome in them and how many particles don't? The 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, inflammation and so on. Although AAV P to I ratios are not shared by everyone, from the knowledge that we had from talking to KOLs, the P to I ratio that the Homology Medicines process generated was at the cutting edge.
In addition, the overall productivity of the 500-liter, the 2,000-liter process that they had developed was again at the higher end, if not the highest we had seen. Another aspect that is critical is how do you purify your AAV? Do you use methodologies that are industrialized or are using things such as centrifugation and so on that are okay for small scale, are okay for one-off batches, but are not really going to solve the industrialization of AAV manufacture. Ideally you would want to use more robust systems, and that's what the Oxford Biomedica Solutions team now has. The downstream process that is being utilized is scalable, robust and again, fit for purpose for commercial and beyond.
Great stuff. Thank you, Kyri.
The next question comes from Natalia Webster from RBC Capital Markets.
Hi there. Can you hear me okay?
Yeah. Perfect.
Perfect. Thank you very much for taking my questions. I have two, please. 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's customers, particularly on the early stage side?
Do you want to take that, Stuart?
Yeah, I mean, it's a very good question. We're still seeing very robust funding in the venture stage. I think the real pressure's on the publicly listed companies in terms of their abilities to raise funds. You know, 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.
Actually, you know, what we are seeing, because we are working with customers who it's their very existence depends on progressing their products and the sort of stage, the element they're in, they need to produce data, whether that's clinical data or pre-clinical data, in order to get to their next value inflection point. You know, we as a service provider are on their critical path. If they have a dollar to spend somewhere, they're gonna spend it on their ability to produce data, which is gonna, you know, be something they can do to move their share price 'cause typically those companies are pre-revenue.
You know, we benefit from a very close relationship with our partners and, you know, solving very tricky issues for them and frankly, being on their critical path to producing the data they require to push forward.
Yeah, that's great. Thank you very much. That makes sense. Just my second question is more specifically on the deals that you've announced. Just wondering if you could provide any further color on the two new BMS programs and how important these are for your near-term growth expectations.
Yeah. I don't think we can reveal much there, Natalia. You know, because we're providing a service to our customers, we want our customers to be happy. But when we can, we sure will release more. I think what, you know, 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. I think that's the take home for you at this stage. We'd like you to provide more color, but we have to respect our partners' and customers' wishes.
Of course. Thank you very much.
The next question comes from Julie Simmonds from Panmure Gordon.
Thank you very much for taking the question. 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. Just sort of looking at the increase in number of people you had sort of versus last year, it's 700-something. So I think 716 to 920. Firstly, I was just wondering what level is sustainable. Then secondly, along the same sorts of lines, the sort of cost presumably of the additional US personnel was more expensive than the U.K. Just sort of, are we gonna continue to see sort of that balance?
Hi. Hi, Julie. Yeah, no, I did use the word sustainable. I think sustainable stroke appropriate is the right messaging. When you quoted those headcount numbers, of course, you know, 120+ people came into the organization in that timeframe from Oxford Biomedica Solutions. You're correct to say that, you know, there is a premium to be paid for the scientific expertise that you get in Boston. That premium is well worth it because, you know, some of the best operators in cell and gene therapy are in that hub, which is why the premium is there. Of course, you're very close to a whole bunch of biotechs which are being spawned all the time from academic institutions and venture capitalists.
It really is the center, especially of the AAV world. It's the right place to be to attract the best talent and to be close to customer. You know, 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. The Oxford business, the business that remains the core, you know, we are committed to making sure that that is sustainable and has appropriate staffing levels in order to meet the demands both from our customers and, you know, to continue to innovate in a way which keeps our lead, because, you know, we're an innovation-led CDMO and, you know, this is the lifeblood of the business.
You know, we are working hard on internal measures to make sure that we are, you know, fit for purpose to face into the market with the revenue opportunities we see in front of us in 2023 and beyond.
Thank you.
We will now take the next question from James Orsborne from Stifel. Please go ahead.
Hi. Good afternoon, and thank you for taking my questions. I've got three, if I may. Firstly, now you're four months into the OXB Solutions venture, I understand you have GBP 25 million guaranteed in the first 12 months from Homology Medicines. I just wondered, kind of looking forward into next year, you know, what are your expectations from Homology Medicines going forward, and is there any commitment from Homology Medicines on the revenue side at this stage?
Hi there. Yeah. I mean, you're correct to say that those figures contracted for the first 12 months post acquisition. That was the commitment that was made at the time of the acquisition. I mean, when we look forward to our partners at Homology, you know, what we can say is that the team at Oxford Biomedica Solutions are uniquely placed to serve that customer, having worked for them and with them for the previous five or six years. In terms of the ability to serve that particular customer, there is no one in the world like it. We're very confident that Homology as an organization are moving forward under new leadership now.
It's, you know, we expect it to be a considerable customer for the foreseeable future.
That's great. Just following on from that, I just wondered if you could give any more color, you know, on the initial demand you've had with the AAV platform coming online. I know you've mentioned about having two deals, but end of the year, you know, you remaining confident in that or even perhaps exceeding your own expectations.
Yeah. You know, James, we all remain very confident in the ability to achieve that goal and that commitment. You know, 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 what we have committed to new customers by the end of the year. We're now, as you mentioned, four months through this transformation from just a manufacturing operation for a company into a state-of-the-art innovative CDMO in the AAV space.
Great. Thank you. Just finally on CapEx, with the expansion of the Oxford facility, how's best to kind of look at that going forward? You mentioned around sort of having maintenance CapEx for this year. Will it be ramping up significantly in the years to come?
Yeah, I mean, it's obviously a fully funded project through the investment with Serum Institute. We are continuing to collaborate with Serum on a number of different topics, including, you know, taking best practice on design of flexible, large volumetric advanced therapies manufacturing space. But of course, you know, the board need to be in control of that as an investment. The board will pull the trigger when the market demands that it should do that. You know, I think we're in a great position. We have a world-class facility completely up and running with fill 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. You know, it's a pretty enviable position to be in.
You know, for the rest of this calendar year, we don't expect large chunks of CapEx on that program.
Great. Thank you very much for answering my questions.
We will take the next question from Joe Pantginis from H.C. Wainwright & Co. Please go ahead.
Hey guys, thanks a lot for taking the follow-up. Earlier, Roch, you made what I think is a very compelling statement with regard to CDMO scheduling, not only in the U.S., but, you know, abroad as well, and that is the issues with CDMO scheduling and clients turning to you in panic. How I wanna ask the question is the following. 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. I think that's actually pretty promising. I'm hopeful that you can confirm my thoughts.
I think your thoughts are broadly, you know. 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' needs is in the customer retention. You know, I'm pleased to look at the, you know, almost 10 years with Novartis is not too shabby. They're clearly, you know, a large and demanding customer as they should be. I think once we've. The key driver behind that is again, the fact that we innovate all the time. You know, if we. It's both in the LV and the AAV space.
You know, Stuart mentioned in the and Kyri commented that 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 Gene Therapy mentioned that. There was a poster from a competitor that was bragging about the titer and our titers were higher. You know, if you continue to innovate and beat the competition from a performance standpoint in terms of the innovation, you know, customer retention follows and if, of course, we deliver for that customer. I completely agree that, you know, the customer acquisition is probably the best predictor, and that's why I'm so thrilled and excited about this 70% increase, you know, over a year ago.
Because that's the key.
No, I agree.
Takes a while. Takes a long time, but once you have them, you have them.
Roch, perhaps I can just add-
Of course. I appreciate that color. Please do it.
Kyri, go ahead.
I was just going to add. 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, you know, it 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. 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. We often find it's not, you know, 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. That's a few years away. We're still at the stage where each new product has its own idiosyncrasies that we have to deal with. Oxford Biomedica, because of its expertise in other areas, is able to provide a lot of that analysis and solutions. That's 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.
Thanks, Kyri, for clarifying.
Much appreciative of the added color. Thank you.
We'll take the next question from Alistair Campbell, from RBC. Please go ahead.
Morning. Can you hear me okay?
Perfect.
Got three questions, if that's okay. First of all, just on Novartis. Obviously still a very important partner, and I'm very encouraged to see you talk about a continued strong relationship. Just, you know, obviously, that's a company where we've seen significant changes in the research and development organization over the last six months. Just kind of a confirmation that you still have a very good, strong relationship post those changes and perhaps post some reprioritizations of Novartis R&D unit. Secondly, in terms of your strategic options, for externalizing funding, I just want to get a sense of what you're hoping to achieve.
Is this, you know, is this simply getting some expenditure off your P&L, or are you actually hoping to get partners or a partner who'd be willing to invest much more than you're currently investing to accelerate and maximize the value of that portfolio? And then finally, not an area of expertise for me at all, but as in your early discussions on sale-leaseback, if you had any kind of initial indications of what we should be thinking about in terms of rental yield?
I'll answer the Novartis question, then let Stuart answer the two other questions. Yes, I'm pleased to say that the relationships with Novartis continue to be very strong at all levels. Yes, there is change, but you know, over the last 10 years, there has been quite a bit of change in the company. The key is, you know, to continue. I think some of the people based in Boston, leaders there remained absolutely the same. Kyri, maybe you want to provide also more color, but since you're much closer than me. I'm quite close at the top, but we are not doing the job at the top. We're just making sure.
Yeah.
Things go smoothly. That's all.
Yeah. We've worked, you know, very well with Novartis. We carry on working with them. We've worked 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. Yeah, that relationship is going very strongly.
Brilliant. Great to hear. Thanks.
Okay, Alistair. Hi there. Great to speak to you again. On your second and third questions, on the product side, in terms of the external funding, you know, I think we are ultimately flexible. You know, the goal here is to significantly reduce the level of spend that as you know that we're putting through our own P&L to make it clear to you know to the wider community, the market, what you know an innovation-based CDMO looks like. We've doubled down, obviously, on that part of the business with the investment in Oxford Biomedica Solutions. You know, 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.
Actually, there's some really, really strong funding going into things like in vivo CAR-T. You know, LentiVector is a really interesting systemic approach here that Kyri outlined could be potentially curative, where some of the AAV approaches are sort of redosing regimen. You know, think of it in such a way that, you know, 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 frightened of making a commitment to that investment vehicle, you know, 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 gonna be a call on capital between two very different risk profiles. If you have a special purpose vehicle, which has that at its core, developing those programs, then it gives them the best chance to succeed, and we need to give them a chance to succeed for patients. On your third question, sale and lease back. We are pretty progressed through a process. We are very confident that we can get offers in excess of GBP 55 million going forward. Of course, what that will mean is an owned asset becomes a leased asset.
You know, we've made sure that, you know, we are gonna end up with a market rate which is appropriate for paying rent to the new owner of our leased asset, essentially. It will retain full flexibility to do what we need to do in that facility. It should be completely invisible to staff and everyone else, but it should just be a nice way of generating income on a one-off basis, of course. You know, in these markets, you know, making sure we're maximizing the capital structure of the business, you know, is very important.
I think we're running out of time, but we'll take one last question.
We will take the last question from Soo Romanoff from Edison Group. Please go ahead.
Hi, thank you for including me here. 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 is really highlights your specialized expertise and key assets. As you increase engagement and stickiness, perhaps this offsets any funding concerns and maybe can add some context around that on the engagement or differentiated sophistication. Thank you.
Stuart, you want to take that?
Yeah, sure. You know, 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 that we push forward the, you know, innovation is key to us. Customer acquisition and making sure we've got capacity for our customers is key to us. Obviously cash and funding is key to us. We're in a very privileged position in that we have, you know, four available sources of funds. We have debt and equity, which is available to anyone who's listed, of course. We have, you know, customers which can form a key part of our capitalization strategy, both in terms of license fees and ongoing revenues and income.
We have the ability to produce income on a one-off basis on things like sale and lease back. I think the bottom message here is that, you know, we will continue to make sure we're optimally structured for capital, and to progress the mission and the strategy. 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 in on what we bring to the party, in the most optimal way.
Thanks, Stuart, and thank you, Soo. You know what, again, Stuart mentioned is that we are probably much less capital-intensive than other CDMOs, but more R&D intensive than other CDMOs. This concludes our presentation of and Q&A for the half year result of Oxford Biomedica, and I thank you for your interest. Hopefully you can share the excitement about the potential of Oxford Biomedica in making the difference in the cell and gene therapy space. Hence for you and for shareholders, you know, superior returns and long-term, profitable, exciting growth. With that, I'm looking forward to updating you in the second half. Thank you.