Investment case

Oxford BioDynamics (OBD) is focused on developing and commercialising three-dimensional (3D) genomic biomarkers. Its proprietary technology platform, EpiSwitch, is designed to employ chromosome conformation signatures (CCS) to identify and validate diagnostic and prognostic tests for various applications including cancer, neurodegenerative disorders, and autoimmune diseases. EpiSwitch CiRT (Checkpoint Inhibitor Response Test), its first test, is used to predict patient responses to immunotherapy. More recently, the EpiSwitch PSE prostate diagnostic has been launched. A pipeline of tests targeting a variety of additional indications is under development. OBD was founded in 2007 as a spin-out from the University of Oxford. The focus was initially on biomarker discovery but in late-2020 this shifted to creating commercially relevant diagnostics. OBD listed on AIM in December 2016 and has raised a total of c £46m since IPO.

Valuation

We use a three-stage DCF model to value OBD (based on the current corporate structure). This includes comprehensive cash flow forecasts to 2031, followed by a five-year trending period, and a 1.5% terminal growth rate. We separately forecast revenues for PSE and CiRT, based on peak annual testing volumes of 250k for PSE and 25k for CiRT, which we assume can be achieved within the next 10 years. These are offset against costs, discounted back, and then netted against current net cash. This generates a valuation of £162/$203m, or 52p/share.

Financials

Oxford BioDynamics generates revenues from the two commercial tests: PSE and CiRT. Translating testing volumes into revenues is not straightforward given a number of variables, largely arising from the complex reimbursement system in the US. Whilst forecasting revenues is challenging, we anticipate that these will increase as volumes rise. Our underlying OpEx forecasts (excluding PROWES costs) reflect some initial cost-cutting. Cash at end-March 2024 was £1.2m and OBD subsequently completed a fundraise in March 2024, raising gross proceeds of £9.9m. We estimate cash at end-September 2024 of c £2.6m, which should provide a runway into early 2025; given the cash need, in addition to cost saving measures, management is also reviewing potential strategic options.

Sensitivities

Having successfully developed its lead products, OBD’s main sensitivities now switch to successful execution of commercialisation plans, and ensuring it has the financial resources required to accomplish these. OBD operates in a complex, crowded, and highly competitive marketplace. Having the better product does not guarantee commercial success as competitors with more resources may crowd out a smaller player. Widespread clinical acceptance requires validation from robust study data, appropriate reimbursement, and, importantly, traction with key opinion leaders (KOLs). However, these factors are well known and even a minor penetration into such large markets would merit investor attention.

Oxford BioDynamics: Innovative diagnostics

Oxford BioDynamics (OBD) employs 3D genomics to develop cutting-edge diagnostic tools that improve patient outcomes, facilitate personalised medicine, and enhance the precision of therapeutic interventions. At the core of OBD’s innovation is the EpiSwitch platform, which enables the identification of epigenetic biomarkers based on CCSs (Chromosome Conformation Signatures). These signatures provide insights into the three-dimensional structure of the genome and its regulatory mechanisms, offering a novel and powerful basis for developing diagnostic and prognostic tests. The first test, EpiSwitch CiRT, helps identify patients who are likely to benefit from checkpoint inhibitor therapies. The EpiSwitch PSE prostate test has recently started commercialisation, with two further tests, EpiSwitch NST (for colorectal cancer) and EpiSwitch SCB (for canine cancers) ready for partnering. Even modest penetration into these large markets, notably with EpiSwitch PSE, could be transformative for OBD, albeit further funds will be needed to deliver on the potential of these tests. We value OBD using a three-phase DCF at £162m/$203m or 52p/share.

Oxford BioDynamics (OBD) is at the forefront of 3D genomic biomarker discovery and application, using its proprietary EpiSwitch technology to develop innovative diagnostic tools. EpiSwitch elegantly captures genomic and epigenetic variations. Epigenetics reflects the heritable changes in gene expression that occur without changes to the DNA sequence. These influence how cells read genes and can be affected by environmental factors, lifestyle, and disease states. In turn they form the basis for regulating processes such as cell differentiation and development, and abnormalities in these processes can lead to disease. The EpiSwitch platform exploits chromosome conformation signatures (CCS), the three-dimensional (3D) arrangement of the genome within the nucleus, that accurately reflect changes due to disease mechanisms and serve as valuable biomarkers for many illnesses.

OBD has established a sizeable pipeline of diagnostic tests in various stages of development; all of these are based on simple blood samples, offering a non-invasive and patient-friendly alternative to traditional tissue biopsies. The first product, EpiSwitch CiRT (Checkpoint Inhibitor Response Test), is designed to predict patient response to immunotherapy, addressing a critical need in cancer treatment. The focus is on growing volumes through the PROWES registry study and eventual incorporation into NCCN guidelines. EpiSwitch PSE is a prostate cancer diagnostic that, when used with the PSA (prostate specific antigen) test, can provide class leading performance (for instance, 94% accuracy). Resources have been reallocated to drive PSE volumes, particularly in the concierge medicine sector, and potential distribution deal opportunities are being evaluated. Even limited penetration into this large market could result in meaningful revenues.

While understandably EpiSwitch CiRT and, in particular, EpiSwitch PSE attract the greatest attention, the development portfolio includes a number of additional tests. Two of these, EpiSwitch NST (colorectal and bowel cancers) and EpiSwitch SCB (canine cancers), are ready for partnering or out-licensing with appropriately specialised players. In our view it is the prospects for these, coupled with continuing news flow on progress with commercialising EpiSwitch PSE and EpiSwitch CiRT’s inclusion in NCCN guidelines, that will drive share price performance over the medium term.

3D genomic analysis: creating attractive diagnostics

Oxford BioDynamics is at the forefront of exploiting 3D genomics to build a portfolio of clinically relevant diagnostics that address clear needs, are accurate, robust, reproducible, and, importantly, are minimally invasive and easy to perform. 3D genomics is the mapping of the architecture and configuration of the genome in the context of different cells in the body. The way the c 2m strand of DNA is folded, shaped, and condensed into a nucleus with a diameter of c 8µm is as significant as the DNA sequence itself. This 3D structure (chromatin interactions) plays an essential role in gene expression, with the arrangement of chromosomal loops able to bring differing regulatory elements into play and so resulting in altered function. These patterns are known as Chromosome Conformation Signatures (CCS) and they provide invaluable insights into numerous disease states, hence providing attractive biomarkers for diagnosis and treatment selection.

The role of epigenetics in disease and diagnosis

Genomic information alone is of limited clinical value, it has to be placed into the appropriate context. One of the key elements is how genetic function is affected by spatial relationships, with, for instance, DNA folding being able to bring otherwise distant regions into close proximity. Epigenetics is the study of such reversible heritable changes in gene expression that occur without alterations to the DNA sequence itself (in other words a change in phenotype without a change in genotype), linking the genome and the environment. Epigenetics lies at the intersection of genetics (nature) and environmental influences (nurture). It provides insights into how our genetic code is expressed differently based on internal and external factors. This overlay has profound implications for understanding disease mechanisms and for developing better diagnostic tools.

Our genetic code, inherited from our parents, forms the foundation of our biological makeup. This code remains largely unchanged throughout our lives. Genetic variations and mutations can predispose us to (or in inherited diseases cause) certain diseases. However, these genetic changes alone cannot fully explain the complexity of many diseases. Environmental factors (such as diet, stress, life choices, and toxin exposure) also influence gene expression through epigenetic modifications. These influences do not change the DNA sequence but modify how genes are turned on or off, so affecting cellular function and health. Accumulation of epigenetic alterations over time contributes to multiple disorders.

Epigenetic change is a regular and natural occurrence but is also heavily influenced by multiple external factors including age, environment, lifestyle, and disease state. The best characterised changes to chromatin structure (Exhibit 1) include chemical modifications (eg methylation) to DNA or RNA, chemical modifications to DNA associated proteins (eg histones), incorporation of histone variants which alter the chromatin conformation. and mRNA degradation by microRNAs (~22 nucleotide-long RNA sequences). The resulting chromosome conformation remodelling, where changes to the three-dimensional arrangement of the genome within the nucleus occurs, can provide valuable information for diagnosing diseases, predicting disease risk, and monitoring treatment responses.

Exhibit 1: Three main mechanisms of epigenetic activity

Source: Nature Reviews Genetics

The last decade has seen a far greater understanding of epigenetics and its role in disease pathogenesis. Epigenetics can be thought of as the second layer of information encoded on the genome that governs genomic function and activity. It is these epigenetic modifications that play a significant role in the development and progression of many diseases. Epigenetic dysregulation is a feature of nearly all cancers and specific epigenetic alterations offer excellent potential as cancer biomarkers as they can be used to analyse well-documented changes in disease-relevant genes and monitor important events in carcinogenesis. Diagnostics able to capture these features are not only valuable for the early diagnosis of cancer but also provide important prognostic information, predicting how aggressive the disease process would be and differentiating a tumour’s outcome.

Cancer applications provide a near-term opportunity

Cancer (or more precisely cancers) has been the subject of unprecedented academic and clinical research. Cancer is known to be a multifactorial disease caused by genetic variation, epigenetic dysregulation, and environmental factors. Targeted therapies, such as immune checkpoint inhibitors (ICIs), have already transformed the treatment landscape and offer the hope of greater efficacy with fewer toxicities and side-effects. However, to truly realise their clinical value such selective drug regimens require a more thorough understanding of the nature of the tumour (and its metastatic offspring). It is now evident that no two cancers are precisely the same and, as a cancer can change over time, its susceptibility to treatment differs across patients (heterogeneity) and over time (longitudinally). This means a detailed initial appraisal and regular follow-up testing is a prerequisite for the effective deployment of precision medicines, both clinically and in terms of cost-benefit.

EpiSwitch: a unique and potent platform

EpiSwitch is based on the three-dimensional (3D) arrangement of the genome, identifying Chromosome Conformation Signatures (CCSs). The packaging of chromosomal DNA plays a critical role in the epigenetic regulation of the genome; not simply to ensure effective storage, but also to guide access to the genetic information and its control of gene expression. CCSs are distinctive patterns in the 3D organisation of chromatin that are influenced by long-range interactions, for instance formed by looping and folding, and spatial genome compartmentalisation. These signatures capture the dynamic regulatory landscape of the genome, including enhancer-promoter interactions and higher-order chromatin structures. These structures are fundamental upstream gatekeepers that control how and when genes are activated or inactivated, providing critical regulatory inputs, and are arguably as important as the genetic code itself.

The systemic early-stage 3D genomic regulatory changes can be seen long before they manifest as observable symptoms of disease, which means they can be valuable prognostic and predictive biomarkers. The epigenetic profiling is based on the interrogation of around one million data points (examining loci or nodes) per sample within a highly complex architecture, with comprehensive “maps” created for over 30 major disease groups. Interaction maps, employing powerful bespoke algorithms, are constructed to identify chromatin loops and long-range connections and interfaces. The biomarkers are selected, and validated, to ensure robustness, specificity, stability, and clinical utility for that particular indication. Importantly, this 3D genomic information is present in peripheral blood and so the diagnostic test can be performed via a “patient-friendly” simple blood draw rather than an invasive tissue biopsy.

Exhibit 2: EpiSwitch and its place as a diagnostic within the 3D epigenetic and genomic overlay

Source: Oxford BioDynamics.

The EpiSwitch tests that have been developed to date showcase the broad potential of such 3D analysis of CCSs as cancer diagnostics. Once the relevant CCSs have been selected, EpiSwitch tests are binary in nature – either a chromosomal loop is present, or it is not. The number of potential combinations (>10¹⁰ combinations are possible with ~50,000 loops screened) means creating highly accurate signatures that closely represent well defined clinical disease states is possible. For instance, this could be differentiating between low-risk and high-risk disease, or identifying early stage but aggressive tumours, or determining the most effective treatment options for a particular cancer.

Importantly, as mentioned, such 3D genomic changes are known to be visible from the earlier stages of malignant evolution (tumourigenesis), hence CCSs are potentially useful across many diagnostic and prognostic applications, including complex or difficult to access cancers. We view the initial portfolio of EpiSwitch tests as effective demonstrators of the power and flexibility of the platform and so should help accelerate awareness of EpiSwitch more widely across the clinical, academic, and broader industry settings.

Currently there are two diagnostic tests being commercialised: EpiSwitch CiRT for assessing which patients will respond to immunotherapy and EpiSwitch PSE for detecting high prostate cancer risk with 94% accuracy. Additionally, two more tests are ready for partnering/out-licensing, EpiSwitch NST (a no stool test) for the early detection and staging of colorectal cancer (CRC) and EpiSwitch SCB for detecting an array of cancers in dogs. Beyond these cancer applications the development pipeline (see later) has programmes addressing broader indications. A further test for amyotrophic lateral sclerosis (ALS) has completed product development and is near-ready for commercialisation. Additionally, assays have been successfully developed for several further tests, including rheumatoid arthritis; metabolic dysfunction-associated steatohepatitis (MASH, formerly known as NASH); and breast cancer. Further development of these will likely be subject to partnering and/or adequate funding, with the priority on CiRT and PSE.

EpiSwitch CiRT addresses a clear clinical need

EpiSwitch CiRT (Checkpoint inhibitor Response Test) is the company’s first diagnostic. Immune checkpoint inhibitors (ICIs), alone or in combination with other therapies, have transformed outcomes for many cancer patients. In contrast to traditional treatment strategies, ICIs work by reinvigorating the host immune system to fight tumour cells. Their clinical benefit has been remarkable, with potent and durable anti-tumour activities achieved in many difficult-to-treat cancers. However, their high efficacy is seen only in a subset of patients, with the majority not benefitting from treatment (primary resistance) or relapsing after a period of response (acquired resistance). As only 20-40% of patients respond effectively to ICIs there is high clinical need to identify who will be a non-responder, thereby saving sizeable treatment costs and sparing patients from avoidable side-effects.

The pressing need to accurately identify likely treatment responders has been hampered by uncertainties over the mechanisms that underly such heterogeneous responses between patients. Given these issues, the search for explicit predictive biomarkers has been broad, with both tumour-related and non-tumour-related explored. Tumour-related examples include PD-L1 expression, tumour mutation burden (TMB), microsatellite instability and mismatch repair deficiency, and gene expression profiling (GEP). Non-tumour-related examples include TME (tumour microenvironment) related factors such as T-cell infiltration, immune cell counts and lymphocyte phenotype, serum protein signatures, circulating tumour DNA (ctDNA), and even exploring correlations with the gut microbiome. Despite substantial efforts investigating such varied potential biomarkers, none has been found to be wholly appropriate for effectively stratifying patients who would benefit from immunotherapy.

EpiSwitch CiRT was developed through whole genome profiling of patients prior to ICI treatment with the EpiSwitch Explorer array platform. After treatment these patients had their clinical responses classified based on standard response rate criteria/RECIST 1.1 (the standard in clinical practice and trials settings). Over 1.1m data points across the whole genome for each screened patient were analysed, with c 35.2m data points in total, and significant and reproducible differences in marker profiles of responders and non-responders were identified as potential marker leads. The top leads representing alternative 3D genomic conformations were then translated into a qPCR format (real-time quantitative polymerase-chain-reaction, a method to amplify and quantify DNA), evaluated, and reduced to a molecular classifier. The classifier was then validated on samples from the observational trial and from independent validation cohorts.

The resulting 3D genomic panel, based on eight biomarkers, was assessed across prospective observational clinical trials, representing 280 treatments with a variety of ICI agents (pembrolizumab, atezolizumab, durvalumab, nivolumab, and avelumab) in a broad range of oncology indications including melanoma, lung, hepatocellular, renal, breast, bladder, colon, head and neck, bone, lymphoma, brain, prostate, vulvar, and cervical cancers. The test achieved a high accuracy of 85%, sensitivity of 93%, and specificity of 82%: this link gives a useful summary of these terms and their meaning. These data support the view that EpiSwitch CiRT has a high predictive value for response/non-response outcomes across a variety of cancer indications and ICI treatment regimens.

Exhibit 3: EpiSwitch CiRT response prediction (RHS) at baseline versus clinical outcome (LHS)

Source: Development and validation of baseline predictive biomarkers for response to avelumab in 2L NSCLC using EpiSwitch epigenetic profiling. Parantu Shah et al J Immunother Cancer (2019)

Another study (Exhibit 3), presented as two posters at SITC 2019, examined firstly EpiSwitch epigenetic profiling as predictive biomarkers for response to avelumab (an anti–PD-L1 immunotherapy) in second-line (2L) non-small cell lung cancer (NSCLC). Seventy-five patients were treated, evaluated, and stratified into treatment responders or treatment non-responders at baseline using EpiSwitch epigenetic profiling and then assessed through clinical observation (RECIST 1.1). The data show that EpiSwitch was able to stratify patients with 84% accuracy, 79% sensitivity, 92% specificity, 75% positive predictive value (PPV) and 95% negative predictive value (NPV). The associations of EpiSwitch response with overall survival (OS) and progressive free survival (PFS) in the independent cohort were significant (p<0.001). The strong binary markers highlighted EpiSwitch’s potential as a diagnostic to identify responders and non-responders to immunotherapies.

The second part of the study examined whether the changes in chromosome conformation signatures were suitable prognostic classifiers across treatment lines, indications, and drug combinations. The results from the various groups studied demonstrated that the signatures worked as expected and could stratify patients at baseline. In contrast, immunohistochemistry (IHC), which is often used in assessing expected treatment response, as expected, could not (Exhibit 4).

Exhibit 4: EpiSwitch CiRT response prediction (RHS) versus immunohistochemistry (LHS) at baseline

Source: Development and validation of baseline predictive biomarkers for response to immuno-checkpoint treatments in the context of multi-line and multi-therapy cohorts using EpiSwitch epigenetic profiling Parantu Shah et al J Immunother Cancer (2019)

EpiSwitch CiRT requires a small draw of peripheral blood (around 2ml), rather than an invasive biopsy of the tumour, that is placed in a standard collection tube with no special handling requirements across the supply chain (ambient storage and transport). The test is performed in a CLIA-certified laboratory, using a standard qPCR process, with the results typically returned electronically or by fax (a surprising number of institutions still rely on fax) within three to five days. The report is a straightforward binary status of predicted response to ICI treatment: a low probability indicates the patient is unlikely to benefit from therapy, while a high probability suggests immunotherapy would be beneficial for that patient. Over 1,200 tests (as of the end of September 2024) have been performed since EpiSwitch CiRT US commercial launch in February 2022, with a pleasing number identifying patients who did respond to ICI treatment when other parameters were indicating treatment should not be given.

The commercial opportunity and our view of the expected market positioning for EpiSwitch CiRT is addressed later in this note.

EpiSwitch PSE accuracy eliminates unnecessary biopsies

EpiSwitch PSE (Prostate Screening EpiSwitch) is the company’s second diagnostic. This is a rapid multi-variate test that combines five chromosome conformation signatures (DAPK1, HSD3B2, SRD5A3, MMP1, and miRNA98), that are assessed using a typical qPCR process, together with the results from a standard PSA (continuous readout rather than binary). The results (Exhibit 5) show diagnostic improvements across most parameters, with an accuracy of 94%, a PPV (positive predictive value) of 93%, a NPV (negative predictive value) of 95%, a specificity of 97%, and a sensitivity of 93%. This compares with PSA values of: accuracy of 55%, a PPV of 25%, a NPV of 86%, a specificity of 53%, and a sensitivity of 64%.

Exhibit 5: EpiSwitch PSE improves many diagnostic parameters

Source: Oxford BioDynamics  Notes: * refers to best metric within groups, ^ transrectal and transperineal, ^^ MRI patient group suspected of severe disease, which increases sensitivity

Prostate cancer is considered a disease of older men and is infrequently reported in patients aged 55 years or younger. It is the most common cancer in males in the developed world, with the American Cancer Society estimating c 299k new cases of prostate cancer in the US in 2024. It is the second leading cause of cancer death (behind lung cancer), with around 35k deaths annually in the US. Around one in eight men will be diagnosed with prostate cancer during their lifetime, and while 60% of cases are in men older than 65, the pathological characteristics of the cases in younger men tend to be significantly different.

In most diagnosed cases, prostate cancer may not manifest clinically and is a slow-growing disease (indolent) that often does not require immediate treatment. On average, prostate cancer has a five-year relative survival rate of 96.8%. However, some cases may be aggressive tumours or progress to metastatic disease. The difference in five-year survival rates between local (or regional) prostate cancer (confined to the prostate and nearby organs), and metastatic prostate cancer (which has spread to other organs), is vast, with nearly 100% for local/regional vs only 31% for metastatic cancer.

Given this disparity, while it is important to establish whether a patient has prostate cancer, it is also important to stage and grade the cancer in order to determine appropriate treatment options, which could include watchful waiting for indolent cancers. Current common diagnostic tests are not even definitive in establishing if a patient has prostate cancer, and therefore suspected cases require additional invasive procedures to confirm the presence of cancer and to stage and grade the cancer. The two most common tests for prostate cancer are:

• PSA blood test: Prostate specific antigen (PSA) is a protein made by the prostate. A high PSA level can be indicative of prostate cancer but can also be associated with other conditions including inflammation of the prostate. Equally, a low or normal PSA level does not necessarily exclude prostate cancer.
• Digital Rectal Exam (DRE): A physician will try to feel for abnormalities (eg bumps or hard areas), which may indicate the presence of prostate cancer.

If a PSA test and/or DRE are abnormal, then further tests are needed to confirm if a patient has prostate cancer. The main clinical problem of the currently available blood tests for prostate cancer remains their low positive predictive value which results in unnecessary referrals to secondary care and expensive and invasive testing like biopsies and MRI (magnetic resonance imaging).

A biopsy is still viewed as the gold standard diagnosis and the only current way to confirm the presence of cancer, although it cannot reliably distinguish between aggressive and indolent tumours. For patients, this leads to high rate of referral for biopsies which often yield no cancer or indolent disease. For payors, this means many unnecessary biopsy and MRI referrals resulting in significant costs and overdiagnosis of clinically insignificant disease. Other limitations are a high c 35% incidence of false negatives (missing the cancer), which occur if the needles miss the tumour. In addition, biopsies are invasive procedures that can have complications (up to 40%), ranging from pain, discomfort, bleeding, and erectile dysfunction, through to serious infections, which can require hospitalisation.

There are more than one million prostate cancer biopsies in the US each year to confirm a suspected case of prostate cancer. Of these, only 20-25% diagnose a prostate cancer, highlighting ‘overuse’. Hence there is a large pool of patients undergoing invasive biopsies that are not necessary and could be avoided if a blood test could accurately confirm the presence of cancer and assess severity. Such a clear clinical need has led to numerous approaches being developed to improve the initial diagnosis; however, to date, no single test has achieved the required standards and established itself as the new standard of care.

Combining EpiSwitch PSE with a PSA test results in a marked superiority across all scores when compared to PSA alone. A clinical study examining 109 blood samples reported a PPV of 92% and a NPV of 94%. It concluded that due to its high scores that significantly exceed current screening modalities, EpiSwitch PSE can be utilised for both diagnostic and screening applications, minimising unnecessary referrals for expensive and invasive MRI and/or biopsy testing. Additionally, EpiSwitch PSE was viewed as accurate, rapid, minimally invasive, and inexpensive. Placing this into context, with EpiSwitch PSE 19 men in 20 tested would get the correct diagnosis, compared to ten in 20 with PSA alone, and only one in 20 with a positive EpiSwitch PSE test would be found to be negative at biopsy (false positive rate), compared to 15 in 20 with a high PSA (>4ng/ml) who are negative for cancer at biopsy.

Again, the commercial opportunity and our view of the expected market positioning for EpiSwitch PSE is addressed later in this note.

Development pipeline: two near-term prospects

There are six test programmes within the development pipeline (Exhibit 6). Two of these, EpiSwitch NST, for colorectal cancers, and EpiSwitch SCB, for the most common canine cancers, are ready for partnering or out-licensing with appropriate specialised players. Earlier programmes include both a diagnostic and a prognostic test for Amyotrophic Lateral Sclerosis (ALS), also known more generally as Motor Neurone Disease (MND), that was evaluated alongside Mitsubishi Tanabe Pharma America’s Radicava (edaravone) study programmes.

Earlier still are three programmes: rheumatoid arthritis, looking at predicting likely methotrexate responders and flaring/residual disease monitoring; metabolic dysfunction-associated steatohepatitis (MASH, formerly known as NASH), looking at early detection using a simple blood test screen; and breast cancer, a screening test for earlier detection of disease across multiple groups. Broader potential applications of the EpiSwitch platform include the incorporation of existing (eg EpiSwith CiRT) or future diagnostic tests by drug developers as part of their clinical development programmes with the aim of developing companion diagnostic tests, or leveraging OBD’s proprietary biomarker data with artificial intelligence/machine learning (AI/ML) approaches to identify actionable insights. OBD is already active in the former area and will shortly start running CiRT tests on blood samples from endometrial cancer patients enrolled in a clinical trial of an undisclosed immune checkpoint inhibitor as part of an agreement with a top ten pharma company.

Exhibit 6: The two lead development programmes are ready for partnering

Source: Oxford BioDynamics

EpiSwitch NST (No Stool Test) has demonstrated strong results in detecting the presence of polyps and the presence or absence of Stage I/II colorectal cancer (CRC). Early detection of cancer and pre-cancerous polyps can materially improve clinical outcomes, where five-year survival of 91% drops to 14% if diagnosed at the metastatic stage, with active screening programmes in place in most countries.

Colonoscopy is the gold standard but many stool tests have been introduced to triage patients. These include faecal immunochemical test (FIT) and faecal occult blood test (FOBT) that detect blood in the stool (although not all polyps and cancers bleed) and Cologuard (Exact Sciences) that detects haemoglobin and multiple DNA methylation and mutational markers; data from the next generation Cologuard Plus test were recently presented at ESMO, and further data to support an FDA submission are expected H125. FIT and FOBT tests are generally recommended to be performed annually, whilst Cologuard is every three years. Blood-based tests include the FDA approved Shield (Guardant), ctDNA based, and Epi proColon (Epigenomics), which detects methylated Septin 9 DNA in EDTA plasma. It is worth noting Freenome has completed PREEMPT, a large 27k patient prospective trial for the blood-based early detection of CRC.

Promising early data suggest that when detecting pre-cancerous polyps EpiSwitch NST has an accuracy of 88%, a sensitivity of 91%, a specificity of 85%, a PPV of 87%, and an NPV of 90%. When detecting early-stage colorectal cancer (Stages I/II), these figures are an accuracy of 81%, a sensitivity of 84%, a specificity of 79%, a PPV of 57%, and an NPV of 94%. Such encouraging results should facilitate progress with any partnering discussions.

EpiSwitch SCB (Specific for Canine Blood) is a routine blood test that accurately detects and differentiates between six cancers that are common across most breeds of dog. These are canine diffuse large B-cell lymphoma (DLBCL), T-zone lymphoma (TZL), hemangiosarcoma (HSA), histiocytic sarcoma (HS), osteosarcoma (OSA), and canine malignant melanoma.

Cancer is the leading natural cause of premature death in dogs, with a c 30% lifetime risk. Incidence varies by breed, although size and biological age accounts for most of the variation. Malignant lymphomas are common, with an incidence of c 25 per 100,000 dogs, with DLBCL accounting for c 40%. TZL is the most frequently diagnosed indolent lymphoma, but incidence estimates vary widely (16% to 62%). HSA is a commonly occurring soft tissue sarcoma with a 2.8% to 5.0% incidence among all diagnosed cancers, with primary sites of occurrence in the spleen, heart, liver, and skin. Histiocytic sarcoma represents c 4% of all canine cancers and osteosarcoma is the most common bone cancer (over 80%).

Historically a definitive diagnosis, and hence treatment plan, was complex and costly to obtain, with a consequent, possibly premature, euthanising of dogs. The advances in liquid biopsy and molecular testing platforms seen in human disease diagnostics can equally transform veterinary applications. EpiSwitch SCB was developed with Professor Jaime Modiano at the College of Veterinary Medicine and Masonic Cancer Center, University of Minnesota. The aim was to detect the presence of common, life-threatening dog cancers with high accuracy; reduce or eliminate the need for invasive biopsy procedures; and, importantly, do so in a cost-effective and simple manner. The next step is to generate real-world data to validate the published study results and plan commercialisation through a partnership or outsourcing arrangement with an existing pet health care player.

3D genomic Dx: attractive growth opportunities

The 3D genomic diagnostic market may still be relatively young, but its potential can be viewed by using the epigenetic-based diagnostic segment as a proxy, and this is sizeable and dynamic. Reflecting the huge research effort directed towards cancer over the past decade, and the need to optimise treatments to target the tumour appropriately, the majority of testing addresses oncology indications. This segment is expected to grow both horizontally (more cancer types tested) and longitudinally (patients monitored more frequently). It is here that liquid biopsies are well suited, particularly for exploring tumour recurrence, drug resistance, and monitoring therapy response when the primary tumour has been removed.

A key change is that liquid biopsies have become better validated and their utility and benefits demonstrated. Although it will take longer than many anticipate, liquid biopsy has the potential to improve the early detection of cancer overall and, as early diagnosis is usually closely linked to better survival, to dramatically improve mortality rates. We believe liquid biopsy, as a group, has the potential to change the course of many oncology outcomes in a manner equivalent, or greater, than most novel drug therapies. From a payors’ perspective, liquid biopsies can be a highly cost-effective way to improve their patients’ health.

Exhibit 7: Epigenetics diagnostic market forecasts 2023 to 2033 ($bn)

Source: Precedence Research

Numerous market research companies have published reports examining the epigenetic diagnostic setting and forecasting likely sales for various technologies. For instance, Custom Markets Insights estimated the market at $14.3bn in 2023, with $15.7bn expected in 2024 and is forecast to reach $41.6bn by 2033, representing a 14.2% CAGR over the ten years. Precedence Research sees a similar picture, with values of $14.7bn in 2023, $16.9bn in 2024, with a ten-year CAGR of 15.1% to $60.1bn by 2033. Data Bridge Research has a lower 2023 value, $13.3bn, but a higher CAGR of 20.2% to reach $57.4bn by 2031. Several other reports forecast comparable dynamics, with a common theme being that the US is, and will remain, the largest market (2024e $4.6bn rising to 2033e $16.7bn), but with the Far East and Middle East regions growing more strongly in the latter half of the decade. Oncology accounts for c 70% currently and remains the largest application, but other areas, particularly CNS, will gain greater prominence.

Arguably a better guide to the commercial potential of the market opportunity is to examine the liquid biopsy expectations. Again, many market research providers are publishing reports with recent examples including: MarketsandMarkets who estimate this segment at $5.9bn in 2023, with $6.4bn for 2024 and forecast $11.3bn by 2029, representing an 11.9% CAGR; Precedence Research has $5.4bn in 2023, $6.2bn in 2024, and rising to $20.4bn by 2033 (a ten-year CAGR of 14.2%); Market.us has a higher value of $10.3bn in 2023, with $11.6bn in 2024, and increasing with a ten year CAGR of 13.1% to $35.3bn by 2033; Roots Analysis forecasts a 15.3% CAGR from $6.1bn in 2024 to $29.8bn in 2035; and Fortune Business Insights has estimates of $8.0bn in 2023, $9.6bn in 2024, growing with a CAGR of 25.3% to $58.6bn in 2032.

Although methodologies and forecasts differ, a number of common themes emerge here too. The US is (again) expected to remain the largest market with rapid clinical adoption, (relatively) quick reimbursement clearance, and a receptive payor infrastructure as the economic benefits are readily appreciated. Lung cancer is a key target due to the difficulties with initial tissue biopsies, similarly with breast cancer, and the importance of longitudinal monitoring. Initially tests that are rapid and easy to perform will gain traction but the provision of a high amount of clinical data will become more important later in the forecast periods. The larger players will seek to claim a sizeable slice of this through “fast follower” internal development or, more opportunistically, M&A. Interestingly, many earlier market research reports were, with the benefit of hindsight, too conservative despite what were deemed aggressive forecasts at the time.

Liquid biopsy: crowded and competitive but exciting

The competitive landscape is complex, crowded, and competitive. Much like its therapeutic equivalent, the diagnostic segment is dominated by a number of global players, who have the established infrastructure, commercial footprint, and financial resources to impact clinical practice. Similarly, much of the genuine innovation happens within the smaller companies (and academia), with licensing, partnering, and outright acquisition of novel technology platforms by the larger players being among the key routes to market. The larger players include:

• Guardant Health (GH Nasdaq, market cap $2.5bn) is a leader in liquid biopsy tests for cancer detection and monitoring using circulating tumour DNA (ctDNA) analysis. Their mission is to conquer cancer with data. Its Shield test is FDA approved for first-line colorectal cancer screening, supported by the 20k patient three-year ECLIPSE Its core Guardant 360 range underpins revenues, guided to be c $690-700m for 2024.
• Grail (GRAl Nasdaq, market cap $441m) uses its Galleri test to screen populations for early signs of multiple cancers (MCED) using a blood draw to analyse methylation patterns in cfDNA (cell-free DNA). FDA submission is planned following read-out of the registration studies (c 35k patients). Over 215k tests have already been sold, generating revenues of c $100m pa. An NHS prospective trial is planned, with ambition to catch 75% of cancers early. The aim is to move into all diagnostic areas of the treatment pathway.
• Neogenomics (NEO Nasdaq, market cap $1.7bn) has a long history in tumour biopsy with a major push into liquid biopsy. Products are in diagnosis and prognosis, therapy selection, and MRD (minimal residual disease) and surveillance. FY24 revenue guidance of $655-667m.
• Foundation Medicine (acquired by Roche in 2018) offers a wide range of diagnostics for both tissue and liquid biopsies, with a number of approved companion diagnostics (CDx), through its comprehensive genome profiling (CGP). Limited financial details are available since the acquisition.
• Exact Sciences (EXAS Nasdaq, market cap $12.8bn). Focuses on cancer screening tests such as Cologuard for colorectal cancer screening and Oncotype Dx treatment guidance. FY24 revenue guidance of c $2.8bn.

Other large players worthy of note are: (1) Illumina (ILMN Nasdaq, market cap $23bn), a leader in genomic sequencing technologies used for genetic and epigenetic analysis in research and clinical diagnostics. FY24 revenue guidance is for c $4.4bn; (2) Thermo Fisher Scientific (TMO NYSE, market cap $232bn), who provides a wide range of genomic and molecular diagnostic solutions, including next-generation sequencing platforms and assays. FY24 sales of $42-43bn are guided; and (3) Qiagen (QGEN NYSE, market cap $9.5bn), which offers molecular diagnostics solutions and assays, including those for cancer and infectious diseases, leveraging genomic and epigenetic technologies. FY24 sales guidance is for c $2.0bn.

Clinical success: the path from awareness to adoption

The versatility of the EpiSwitch platform means it can be employed at multiple points in treatment pathways, providing actionable decision-making information. This can range from the initial diagnosis and prognosis to therapy selection and monitoring, recurrence monitoring, and patient screening. Pragmatically, rather than attempting to address as many opportunities as present themselves, management focus has been on applications that have a clear need and a more rapid route to market. The lead programmes address commercially attractive indications where the benefits are easily communicated and well understood.

The marketing processes within the diagnostic industry are well honed. For instance, Guardant Health highlights there are four key steps in the successful adoption of liquid biopsy diagnostics, ensuring the effective integration of liquid biopsies into clinical practice. We summarise these as:

• the generation of robust, compelling clinical evidence, to prove clinical utility and show how it materially improves treatment decision making;
• gaining relevant regulatory approvals, not simply to demonstrate adherence to stringent safety standards, but to help build broader trust among healthcare providers and payors;
• establishing attractive reimbursement (for both the company and payors) and coverage (especially Medicare and large insurers) to maximise patient access; and
• ensuring widespread oncologist adoption is achieved, through extensive engagement efforts with physicians employing multiple education and awareness programmes across multiple channels.

While the same themes apply, commercial success for a smaller diagnostic player competing for clinician attention against such major, well-resourced multinationals requires a creative and targeted strategy. The classic AIDA marketing model (Awareness, Interest, Demonstration, and Adoption), in our view, works well in diagnostic applications. The key is to be focused and resource efficient, targeting niches where there is greater flexibility in decision making, with shorter and less bureaucratic chains, and a patient demographic that has a higher level of involvement in treatment selection. In such a setting the benefits of EpiSwitch can be conveyed more readily and effectively, with the early traction here, over time, broadening into other, larger, demographics and settings.

EpiSwitch PSE commercial roll-out gaining traction

EpiSwitch PSE is positioned as “the 94% test”, a reference to its accuracy and differentiating it from a raft of other existing tests. Management has chosen to initially target the concierge sector, where EpiSwitch PSE is particularly well suited. Concierge medicine, also known as retainer medicine, is where patients pay a membership fee or retainer directly to their physician or practice. This fee provides them with enhanced access to their doctor, often including same-day or next-day appointments, longer consultation times, and more personalised care. It is a small, but growing, segment with 12,000 to 15,000 physicians, and around 2,000 clinics, which compares to over one million within the whole US healthcare system. In terms of patient numbers, there are around one million patients enrolled and that compares to a population of c 330 million; management believes this could translate into an addressable market of 150,000 cash pay tests per annum. The growth in demand reflects better patient knowledge and rising expectations, with patients that opt for concierge medicine seeking more accessible and individualised care, especially preventative medicine, even if it costs a premium. Management believes this segment, together with other channels, can generate c 1,000 tests per month, which should be achievable within the next two years.

While the concierge segment provides a more readily accessible, yet sizeable, opportunity in the US, this is not easily replicated with European markets. Hence, for example, despite good traction with private providers, such as The London Clinic and Goodbody in the UK, we do not expect these to become major revenue generators. Their value, in our view, lies in raising awareness and interest in EpiSwitch PSE and should be seen as part of a broader multi-faceted promotional campaign. Notable other activities include gaining the support of Dr Garrett Pohlman, a urologist who hosts a well followed Prostate Health podcast, who recently provided an overview of his experience using the EpiSwitch PSE test. These activities ensure high profiles across social media, search engines, and professional media, and are important elements in discussions with potential distribution partners, which we believe are underway in other geographies.

The commercial opportunity for an accurate diagnostic for prostate cancer is clearly sizeable. There are c 47m men aged 50 to 74 in the US, with c 299k new cases of prostate cancer diagnosed and c 35k deaths directly related to it each year. About one in eight men will be diagnosed with prostate cancer during their lifetime, with the average age at diagnosis being 67. The main problem with the currently available blood tests for prostate cancer is their low positive predictive value (PPV) which results in unnecessary referrals to secondary care and invasive and costly testing (notably biopsies). Despite its well documented limitations, around 35% of men aged 55 to 69 (c 25m) had at least one PSA test in the last year and c 1m biopsies were performed, with the number of biopsies far outweighing the number of diagnoses.

EpiSwitch CiRT robust clinical data will drive adoption

The activities required to commercialise EpiSwitch CiRT differ markedly from those undertaken for EpiSwitch PSE. While the elements to drive awareness, interest and adoption are similar, the target audience and messaging is different. EpiSwitch CiRT is employed when the patient has already been diagnosed, the tumour type is established, and the question to be answered is whether immunotherapy is the right treatment option. This means the primary target is a clinical oncologist working in a specialist centre and, crucially, a key decision maker is the payor, who can reduce a sizeable source of wasted cost. Here the patient (and family) is clearly involved but is not as actively part of the process and becomes one of the secondary targets.

Since launch the company has built up a cohort of early-adopter oncologists who regularly use the tests. Management has also adopted a “top down” approach, targeting Chief Medical Officers (CMOs) of larger institutions and regional networks. Often these CMOs are also KOLs (Key Opinion Leaders) but may not be specialists, hence local and national specialist KOLs are being made aware of the utility and benefits of EpiSwitch CiRT. A unifying theme across all messaging to this primary audience is to relate to patients and demonstrate using case studies. An appropriate case study is a powerful and memorable means to convey complex information and position EpiSwitch CiRT’s role correctly. From a payor’s perspective, a diagnostic able to materially alter a treatment cost base will certainly find an attentive audience. Here case studies are less relevant and, in our view, clinical validation and health economic arguments will be the swing factors.

Clinical validation is clearly a key determinant of a test’s value and management has put a prospective registry study (PROWES – Prospective Real-World Evidence Study) in place (recruitment started in June 2024). This is a pan-US observational study that aims to enrol up to 2,500 patients across multiple specialist oncology institutions. The goal is to compare the predicted response and the actual response rates to checkpoint inhibitors across multiple oncological indications. Such real-world data form an essential part of the Health Economics and Outcomes Research (HEOR) package that will provide robust evidence to support inclusion in the National Comprehensive Cancer Network (NCCN) and similar guidelines. Inclusion in such guidelines will be critical to gaining widespread adoption across institutions.

The market opportunity for a test that is able to accurately guide ICI (immune checkpoint inhibitor) therapy is significant. The use of immunotherapy continues to rise, with 10 PD-1 inhibitors and four PD-L1 inhibitors now approved, addressing 43 distinct indications. The annual spend on ICI is expected to be c 44bn globally, and c $25bn in the US this year as over 500k patients initiate treatment in the US alone. Initially we expect a test would be used at the treatment review stage, typically after a few treatment cycles, to help clarify whether continuation of therapy is warranted. Over time, once its predictive value is firmly established, such a test could be used earlier and help guide the initial treatment decisions.

Sensitivities

In common with most innovative healthcare companies, the three main sensitivities relate to development and regulatory aspects, commercial execution, and the financial resources required to accomplish these. Having successfully developed several diagnostics, management’s focus is clearly on commercial execution, notably for the EpiSwitch CiRT and EpiSwitch PSE tests, and securing sufficient funds to support this. More specifically we view the key sensitivities as:

The liquid biopsy space is a complex, crowded, and highly competitive arena. There is a material risk that breakthrough advances in technology could leapfrog EpiSwitch and completely bypass, or significantly reduce, the need for such an approach. Similarly, better resourced competitors may establish their diagnostic offering, even if inferior, in the market and squeeze out the EpiSwitch tests.

The EpiSwitch platform lies at the forefront of the emerging epigenetic diagnostic applications and the utility of the tests developed to date have yet to be proven in a wide patient population. The studies undertaken so far have involved relatively small patient samples and widespread clinical adoption will require a rigorous validation within a representative sample of real-world target patients.

Clinical acceptance is seldom gained easily despite positive study publications, posters, articles and KOL endorsements. The sales process is complex, with numerous hurdles needing to be overcome, of which the reimbursement code is simply one of the most visible. Even with compelling clinical evidence, successfully navigating these administrative processes is time consuming, resulting in a lengthy period of time elapsing before meaningful revenues and profits are realised.

Successfully enforcing and defending intellectual property (IP) rights is a common issue in this field and, for smaller players in particular, encroachment and subsequent litigation risk remains a sensitivity. This is mitigated by employing a multi-layer IP strategy, having over 100 patents granted in 22 families covering the core science, its applications, and key elements of the platform. Confidential know-how and trade secrets are also valuable protective barriers.

Addressing large and competitive markets with novel technologies requires the appropriate clinical programmes to validate and support the technology, together with sizeable commercial teams to perform initial launches and indication roll outs. Such efforts are time consuming and expensive, with competitors often being larger and well-funded. The concern is that securing adequate resources will require selective partnering or access to equity capital, which may not be readily available at the times of need.

At a more pragmatic level, once a sale is made, with the diagnostic test performed successfully and results delivered, the payment chain can be lengthy, cumbersome and administratively intense. This means working capital requirements can be higher than would naturally be expected. The result is that operating margins during the growth phases may be lower than intuitively assumed.

However, these risks, whilst tangible, are in our view known, well documented and containable. Importantly, given the size of the commercial opportunity, even if capturing only a small fraction of the overall market potential, this is sufficiently attractive to merit investor attention.

Valuation

Oxford BioDynamics is transitioning from the development of the EpiSwitch platform to commercialising specific diagnostic tests, with two tests that have been launched and are growing, hence our preferred valuation approach is a three-stage DCF model. This is based on comprehensive cash flow forecasts to 2031, followed by a five-year trending period, and a 1.5% terminal growth rate. We separately forecast revenues for CiRT and PSE, based on potential peak testing volumes (outlined below), which are summed and offset against costs, factoring in CoGS to process the tests, plus central costs (R&D, staff costs, and G&A), all of which are based on the current corporate structure. This is then netted against current net cash/debt. Our model generates a valuation of £162/$203m, or 52p per share (Exhibit 8).

Exhibit 8: Three-phase DCF valuation of Oxford BioDynamics

Source: Trinity Delta   Note: PV = present value; 10% discount rate; 1.5% terminal growth rate; 20% tax rate; $1.25/£ FX rate

The prostate cancer market is large, with an estimated c 299k new cases in the US in 2024, and around 25m PSA tests performed each year in the US alone (and likely similar again in rest-of-world). We assume that EpiSwitch PSE can capture 1% of this market, implying 250k tests per annum. This would also be possible to achieve within existing facilities, with current capacity for 50k tests per quarter, which could be increased substantially through the addition of extra shifts. Hence 250k tests per annum seems achievable in the context of both the market opportunity and capacity, but will require continued spend on commercialisation. We assume peak testing volumes could be reached within the next 10 years.

Global sales of CPIs are around $40bn, with Merck’s Keytruda (pembrolizumab, a PD-1 inhibitor) accounting for $25bn sales in 2023 ($15bn in the US). Based on Keytruda’s $11k list price (three-weekly dose) in the US, and applying Merck’s reported average 37% gross:net discount (across Merck’s entire US pharma portfolio), this suggests >1m doses of Keytruda were prescribed in the US in 2023, for perhaps 200-300k patients, assuming between 4-6 doses per patient. As this is for Keytruda alone, OBD’s identified potential market of 500k patients per annum that could be eligible for a CiRT test seems reasonable. Based on a 5% penetration of this market, we arrive at peak CiRT testing volumes of 25k per annum, which again we assume will be reached within the next 10 years, but will likely require inclusion in NCCN guidelines and continued commercial efforts.

Our valuation and forecasts do not include any contribution from the pipeline. This is owing to limited visibility on the potential timing and terms for any partnering deals for each of the two main pipeline assets (NST and SCB). As this will be key for determining the potential valuation impact of each, we elect to exclude these for now, with upside potential if deal(s) are executed.

Financials

Oxford BioDynamics generates revenues from two commercial tests: EpiSwitch PSE and EpiSwitch CiRT. The market dynamics for each test are unique and volume growth will be achieved through differing commercial strategies, as described previously:

• EpiSwitch CiRT: This test launched in the US in February 2022, and subsequently in the UK in June 2022. Over 1,200 tests have been processed in total since launch (as of end September 2024), with 671 in FY24, including 95 in September 2024.
• EpiSwitch PSE: The PSE test launched in the US and the UK in September 2023 and a total of 747 tests have been processed (as of end September 2024), with 483 in H224 (+86% vs H124), including 90 in each month of the last quarter (July-September 2024).

Translating testing volumes into revenues is not straightforward given a number of variables. This is largely owing to the highly complex reimbursement system in the US, comprising multiple insurance policies with different reimbursement criteria. This leads to variability in the level of reimbursement OBD receives for each test, the proportion of tests that successfully receive reimbursement, and the time taken between the test being processed and OBD receiving payment. We have limited visibility on these and how they are evolving, hence we are focused on testing volumes as the key success metric. Nevertheless, we note that OBD reported FY23 revenues (to end-September 2023) of £510k (FY22: £154k), which comprised £194k (FY22: £nil) from proprietary products (the CiRT and PSE tests); H124 revenues (to end March 2024) were £327k (H123: £220k), with £141k (H123: £81k) from proprietary products.

Cost of sales arise when a test is processed (be it costs to the partner lab on CiRT processing, or costs related to internal processing of the PSE tests), whereas revenues are only recorded once reimbursement has been paid. Cost of sales in FY23 were £244k (FY22: £38k); H124 cost of sales were £193k (H123: £76k). Given the time lag between a test being processed and receipt of reimbursement, cost of sales has been tracking above proprietary product revenues. We expect this to normalise over time towards a more typical >60% gross margin as volumes increase and the timing and rate of reimbursement stabilises.

The core cost base includes R&D, staff costs and G&A with all having increased in order to support commercial activities. H124 R&D spend was £0.33m (H123: £0.28m; FY23: £0.76m); staff costs in H124 were £2.98m (H123: £2.57m; FY23: £5.40m); and H124 G&A was £2.20m (H123: £1.47m; FY23: £3.41m). OBD has also been supported by a number of grants (from PACT and HIPPOCRATES) with £0.40m in H124 (H123: £0.20m; FY23: £0.83m). Together with non-cash items, including stock options of £0.30m in H124 (H123: £0.18m; FY23: £0.33m), this led to an operating loss of £5.99m in H124 (H123: £4.76m; FY23: £10.17m) and a net loss of £4.72m (H123: £4.44m; FY23: £10.83m).

Based on H124 trends, we forecast £630k revenues in FY24e, with £425k from proprietary products (+119%). We forecast a more significant +283% increase in proprietary product sales in FY25e, albeit this is largely a placeholder pending visibility on testing volume growth. Following the recently announced cost-savings initiatives, we forecast a 10-15% YoY decline in FY25e underlying operating expenses (excluding PROWES costs). This reflects cuts in both R&D (ex-PROWES) and G&A, but largely maintains staff costs (with increasing resource being focused on PSE vs CiRT) as we believe continued investment is required to support test uptake. We have limited visibility on the magnitude of the potential cost-cutting, hence there could be further measures that are not yet reflected in our forecasts. With the PROWES study initiated in June 2024, we expect R&D spend in FY24e to remain at a similar level to FY23, and whilst we expect a decline in underlying R&D spend in FY25e, this is more than offset by PROWES related costs. Our forecasts are shown in Exhibit 10.

OBD’s cash and equivalents at end-March 2024 were £1.2m (from £5.3 at end-September 2023). OBD completed a fundraise in March 2024, raising gross proceeds of £9.9m (TD estimate c £9.2m net) through the issuance of 89.2m shares at a placing price of 9p; the shares were admitted to trading in April (ie post period end). We estimate cash at end September 2024 of c £2.6m, which should provide a runway into early 2025, even with the cost-cutting measures that are being implemented. As we have previously highlighted, continued investment in commercial activities will be needed to drive test volume growth, and whilst our peak testing volumes are achievable in context of the market opportunities, further funds will be needed to deliver on this potential. Hence, for the purposes of our model, we include £20m of cash inflows in FY25 (as illustrative short-term debt) which could come from a variety of sources, including financing event(s) and pipeline licensing. Given the cash need, management is conducting a review of strategic options; there could be a number of potential outcomes from this, none of which are factored in our valuation or forecasts.

Timeline of key events

Exhibit 9: Oxford BioDynamics key events

Source: Oxford BioDynamics, Trinity Delta

Exhibit 10: Summary of financials

Source: Company, Trinity Delta  Note: Adjusted numbers exclude share-based payments and exceptionals. FY25e includes £20m of cash inflows included as illustrative short-term debt.

Contact details

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www.oxfordbiodynamics.com

Top institutional shareholdings

Source: Oxford BioDynamics  Note: as of 15/10/24 * as last notified to Oxford BioDynamics