Insider: two FTSE 250 stocks tipped to recover
25th April 2022 07:33
by Graeme Evans from interactive investor
Its share price has plunged by two-thirds, but the boss of this mid-cap has put his money where his mouth is with a big purchase. Another down-in-the-dumps FTSE 250 firm has also received serious backing from its chairman.
The boss of Oxford BioMedica (LSE:OXB) has spent £500,000 on shares after the gene therapy company’s valuation slumped to where it was before the award of a lucrative Covid vaccine contract.
Dr Roch Doliveux, who is chairman and interim chief executive, bought in two tranches at 536p and 589p, which compares with a peak of more than 1,500p in October after investor interest was fuelled by the three-year Covid manufacturing deal with AstraZeneca (LSE:AZN).
On Wednesday, the FTSE 250-listed company reported “exceptional” annual results, having produced more than 100 million doses of the vaccine from three of the four manufacturing suites at its new Oxbox facility. However, shares fell 15% as Oxford Biomedica said that production had been paused ahead of an expected extension to the supply agreement.
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Away from these ongoing talks, Dr Doliveux said he expected another year of underlying growth, as the rest of the business builds a global footprint as a viral vector specialist focused on delivering life changing therapies to patients.
A particular focus will be the strategically important US market after January’s transformational deal with Massachusetts-based Homology Medicines Inc (NASDAQ:FIXX) that created a new business focused on adeno-associated viruses (AAV).
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Oxford Biomedica, which has a 80% stake in the new venture, expects the AAV market to see compound annual growth of 25% over the next five years. It part-funded the transaction by raising £80 million through a placing of shares at 810p.
Analysts at Liberum said in a note published on Friday that the AAV landscape looked to be an attractive one after it identified 86 active gene therapies in the early stages of development.
It said: “Three quarters of the projects are in the hands of small biotech or academia, where in-house manufacturing capability is lacking, creating a broad potential customer base for Oxford Biomedica.”
Encouraged by the opportunities, Liberum raised its price target by 10p to 1,390p. House broker Peel Hunt is even more optimistic at 1,780p after reflecting on a “transformative” year in which Oxford Biomedica’s capabilities were put in the international shop window.
As well as more than £100 million of revenues from the AstraZeneca partnership, Peel Hunt said the company’s achievements included an extended relationship with Novartis AG (SIX:NOVN) and new three-year development and supply agreement with Boehringer Ingelheim. Indian vaccine manufacturer Serum Life Sciences also made an investment in the business worth £50 million.
Peel Hunt described the recent US expansion, which includes the addition of a state-of-the-art 25,000 sq ft facility, as “compelling” and pointed out that City consensus figures were currently very wide due to the transformational nature of the deal.
As a result of one-costs from the venture and higher R&D overheads, Oxford Biomeidca said last week that it expects to be loss-making at an operating level in 2022.
However, Dr Doliveux also sees a significant opportunity to build on last year’s successes. The chairman, who is running the business after the departure of long-time boss John Dawson, backed up his optimism with the purchase of £155,000 of shares in the hours after the annual results and then again the next day in a transaction worth £343,000.
Chief financial officer Stuart Paynter also spent £20,000 on shares at a price of 508p, while on Thursday deputy chairman Stuart Henderson bought at 589p in a move worth £6,000.
The stock closed the week at 575p for a market capitalisation of just over £530 million, which makes Oxford Biomedica the smallest company in the FTSE 250 index.
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Another chairman leading by example last week was Andy Harrison after he spent £300,000 on Dunelm Group (LSE:DNLM) shares.
The former Whitbread and easyJet chief executive made his move with the FTSE 250-listed stock trading at close to its lowest level since May 2000.
The shares have fallen by a quarter this year as investors shun the retail sector due to fears over cost of living pressures. However, this month’s third quarter update from Dunelm revealed that sales were up 37% on two years ago amid strong online trade.
The retailer added that its broad product range and low average item and basket values meant it was well placed. Peel Hunt described Dunelm shares as a “clear buy” and said the tighter consumer conditions were likely to drive an acceleration in its market share.
The broker has a target price of 1,750p, which compares with Friday’s close of 1,020p. Harrison, who has been on the Dunelm board since 2014, bought his shares on Tuesday at 1,055p.
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