Oxford BioMedica PLC

LSE:OXB

Earnings Call Analysis

Earnings Call Transcript 2023-Q4

[Frank Mathias, executive]

Good afternoon, everyone. And obviously, good morning to those on the other side of the ocean. Thank you so much for joining today's analyst briefing for our '23 preliminary results. I'm Frank Mathias, the CEO of Oxford Biomedica. And it's a pleasure to see so many familiar faces here in this room. So thank you for coming, to be here to speak to those on the webcast and those joining via the conference call lines today.

With me, I have our Chief Financial Officer, Stuart Paynter, our Chief Commercial Officer, Dr. Sebastien Ribault. And I'm also proud for the first time to have joining me, Thierry Cournez, our relatively new appointed Chief Operating Officer, who is also in charge of the U.K. operations. As I believe that you have all met Stuart and Sebastien before, I will let Thierry introduce himself when he starts his section of the presentation shortly.

So looking at 2023, it's obvious that '23 was a year of transformation for Oxford Biomedica as we began building a global pure-play cell and gene therapy CDMO. Throughout the year, we have met significant milestones and celebrated many successes, which have provided me and the board with confidence in our new strategy and its ability to deliver long-term sustainable growth. I will begin this presentation by highlighting these achievements and the progress we have made to transform the company before handing over to Thierry to discuss the integration and transformation of our global operations in greater detail. Sebastian will then provide an update on the strong momentum we are seeing on the commercial side. And Stuart, finally will give an overview of our financial performance for the year and also a midterm outlook.

So this obviously, yes. Right, okay. So mission. As you know at the core of our -- at Oxford medica, we have our mission to enable our clients to deliver life-changing therapies to patients. This mission underpins the incredibly important work we do, and the strategy that we are implementing is geared towards helping us achieving this by providing best-in-class CDMO practice since, and accelerating the time it takes to our clients to bring their treatment to the markets. I will return to a slide we showed in September last year for our interims presentation when we announced our 3-pillar plan. As you will soon hear, we are progressing through the plan to deliver long-term sustainable growth, and have moved into the implementation phase now, delivering on what we have promised last year.

In the last year, we took important steps towards our vision of becoming a global pure-play world-leading CDMO, and cell and gene therapies, increasing our geographical footprint into now 3 geographies: U.K., U.S. and recently the European Union. Reorganizing and aligning our operation and streamlining our structure. The ongoing transformation will provide us with a multi-vector multi-site model, giving us a platform to better serve our clients through offering greater flexibility whilst benefiting from synergies at the same time. As part of our move to multi-vector multi-site model, we have made significant progress in transferring our lentiviral vector capabilities into our Bedford site near Boston, U.S.

The first production ones were initiated in February this year, and we delivered the 5-liter scale down model process and accompanying analytics at the end of March already. In January this year, we were delighted to announce that we had acquired ABL Europe from Institut Merieux in France. This extremely important strategic acquisition increases access to EU-based clients and broadens our international development, manufacturing and testing presence and further increases our capacity in process and analytic development as well as early-stage manufacturing. The addition of the 2 sites in France adds approximately 150 CDMO experts to the group as well as additional vector times to our client offering. It also positions us well to seize further opportunities in the fast-growing cell and gene therapy sector.

For aligning our footprint in the U.K., the U.S. and EU, we have put in place our new One OXB strategy to harmonize and optimize our operations so that we can benefit from increased efficiency and agility. The transformation of the company to a pure-play CDMO is allowing us to scale up our operations globally while maintaining high standards of quality and innovation. As part of our evolution, we have implemented extensive cost management initiatives and refined our structure. By doing so, we laid the foundation for sustainable growth and profitability while leveraging our expertise in viral vector manufacturing.

As a quality and innovation-led CDMO, we are committed to reducing cost per dose and accelerating clinical development, thus expanding patients' access to life-changing therapies. Our latest innovation, the TetraVecta system is a prime example of this. Launched in May 2023, this fourth-generation lentiviral vector delivery system allows for higher quality viral vectors with higher potency and safety. That enables cells and gene therapy companies to overcome previous barriers in therapeutic development. As a result of all these activities, we are already seeing the first successes in -- of the new strategy, demonstrated in 2023 by a 51% increase into business development pipeline, and a 54% growth in the client order value as shown on this slide.

These successes give me full confidence in the medium-term guidance we have provided, which is supported by strong KPIs for the year-to-date. This includes 31% growth in the business development pipeline, which now stands at USD 573 million and growth in the number of clients and client programs to 35 and 51, up from 18 and 34, respectively, as reported in April last year. Furthermore, we saw an increase in the number of late-stage and commercial program from 2 to 5. This increase in the number of clients and program has led to an 11% growth in revenue backlog for the year-to-date, we stood now at GBP 104 million at the end of March.

I would like to note that this figure excludes a new order with a U.S. client preparing for commercial launch, which we announced in March recently. As you can see, we made and continue to make immense progress, and I would also like to highlight that a lot of this progress has been made since September last year, so in the last 6 to 7 months. All those, all this -- allows me to reiterate the guidance communicated to the market recently. We expected full year 2024 revenues to grow by 40% to 50% over last year and to achieve broadly breakeven in 2024, as mentioned before.

So I will now hand over to Thierry to discuss our One OXB transformation and integration work stream. Thierry? Don't forget to introduce you.

[Thierry Cournez, executive]

Thank you, Frank. So Thierry Cournez. I am actually, the Chief Operating Officer for Oxford Biomedica, I'm also the site head for the U.K. site. I've joined the company in the last October after 27 years in a large company organization, pharmaceutical industry with different experience in sales, marketing, and operations. I'm pleased to be here with you today. So as Frank highlighted, we have a new strategy to become One OXB. We have laid down different initiative, and we focus on 6 strategic pillars to integrate and transform the company. Within these 6 strategic pillars, we have structured 20 workstreams, globally aligned with different experts from the different geographies, which focus on leading the transformation of the organization to become a pure-play CDMO with a global network.

This slide is illustrating of this strategy and some of the examples which can explain the advancement that we take in transforming the organization. So we focus first on the quality of our people and experts in the organizations. We want this company to get one company culture with the same values. We want to become workplace for a CDMO expert to join and drive the client project.

We focus as well on becoming a client-centric organization as a pure-play CDMO, focusing on executions, high-quality delivery. We have work on looking at our efficiency on how we organize to ensure that we increase resource allocation on client project. We have developed strong activities towards our CDMO services on our portfolio, refining our go-to-market strategy, and intensifying our marketing effort and brand recognitions to be seen as a global CDMO players in the cell and gene therapy space.

In terms of increasing the revenue and increasing the returns, we look at streamlining our processes, ensuring efficiency gain, and implementing a site-based structures in the 3 geographies in U.S., in U.K. and France. Last but not least, we continue to invest in innovations, making sure that our innovation road map is focusing on the client needs to accelerate their pipeline and to reduce their costs. And I will hand over to Sebastien.

[Sebastien Ribault, executive]

Thank you, Thierry. The initiatives that were described by Thierry have 4 objectives to help the company grow and take on more projects. Why do we need to take more projects because the market is growing as we see here on this slide. The company has been known for a long time as a lentivirus only company. And with the acquisition of our site in Bedford about 2 years ago, we are now delivering routinely AAV and lentiviruses. There was also an experience with the AstraZeneca COVID vaccine in developing adenovirus-based vaccine. And that's why we continue to focus on the adenovirus market as well.

If we're looking at the market as it is today, we're shy of $3 billion market size with a growth that is estimated between 2024 and 2028 of about 20% year-on-year to reach almost $6 billion in 2028. Interestingly, the 3 key segments that we're serving, AAVs, lenti and adeno keep growing. And not only they grow in U.S. and in Europe, but they also grow in Asia. And that is the reason why we wanted to make sure we would have enough capacity to serve the clients wherever they are. That drove the acquisition of the site in Bedford, Massachusetts that also drove the acquisition of the 2 sites in Lyon and in Strasbourg.

We've seen the FDA and EMA and other regulatory agencies in the world approving new programs, meaning that the maturity of that space is increasing. We continue to see a shift that started some years ago from treatment to cure and the perception of the standard treatment is shifting as well. So cell and gene therapy was a fourth line of treatment, became a third line of treatment and some of the recent ones have been approved as a second line of treatment as well. More programs, but also more capacity needed as we're serving more and more patients. The biotech funding situation is still difficult. But difficult if you're at early-stage and a very small company, we've also seen some of our mature to very mature accounts being well-funded, and that's the reason why, as we'll see later on this deck. We've been able to progress significantly projects and programs that were at late stage and will very soon be at the manufacturing stage.

We have a healthy mix of clients today. As I said, serving AAV, lenti and adenoviruses but also other vectors, and I will not list everything here. If we start by looking at the volume of contracts, the difference between 2022, excluding COVID and 2023 is about 54%. If we're looking at the number of contracts that we've signed in percentage here compared to the market. On the market, about 4% of the projects are coming from the big pharma. About 20% of the new project we've signed in 2023 are coming from the same big pharma. We see that if the market is about 24% with the established biotech well-funded. It corresponds to 23% of the new contracts that we signed in 2023. And 72% of the market is with emerging biotech, and that corresponded to 57% of the new contract that we've signed.

We make sure that the portfolio was well balanced to avoid the issues linked to funding. The more early stage you go, the more emerging biotech you go, the more issues you will find. The more you go towards emerging biotech and big pharma, the less funding issues you will have, but you will also find by far less project with the established biotech and the big pharma. That's why the portfolio needs to be well balanced.

Talking about the balance, you can also compare on the right side of the slide, the market to the vectors that we're delivering to our clients. And as I said, the company was very well known during many years as a lenti only company. And that's why still today, about 50% of the projects that we're delivering are lenti project. But if you think about 2022, when the company was not known at all for being an AAV player, we've literally moved from 0% to 41% of the project being AAV. So our clients have well understood that the track record we had in lenti, the quality level that we have on lenti that could be replicated with AAV, and that's why we've seen a very strong growth in the AAV space in 2023.

Adeno, as I said, we have the experience with the AstraZeneca COVID vaccine. We continue to serve clients who have adeno projects, whether we're talking about oncolytic viruses or a more simple adeno-type project. Last but not least, I mentioned that we're delivering on other vectors, as you see, it's about 3% of our portfolio. And I anticipate that it will continue through 2024. We've seen a significant growth of the orders, but before the orders, we have the pipeline of opportunities, we've seen quite a strong growth between '22 and '23, moving from $291 million to $438 million. And if you look at the first number that we can disclose now in 2024, where it's at $573 million, which means that between 2022 and today, we've pretty much doubled the size of the pipeline. We've expanded the number of vectors that we're offering to client. We've expanded the number of clients. We've expanded the number of programs per existing clients as well.

And we've grown the pipeline in Europe when back in 2022, the vast majority of our clients were U.S.-based, we now have a much better balance between Europe represents about 30% of our overall pipeline versus U.S. Frank mentioned during his introduction, the launch of TetraVecta, part of our lentivector platform. We've also launched an AAV platform, innovate that you see here, and there will be some more news coming through 2024. We continue to capitalize on existing technology. We continue to innovate, and we continue to be ambitious about being recognized as an innovation and quality like CDMO.

The number of late-stage and commercial program are growing. As any CDMO, we want a well-balanced portfolio of active programs. We had a number of clients at early stage. Now we have a more balanced portfolio of clients with about 46 projects as of April 2024, being between preclinical and Phase II. 3 of these programs are late stage, meaning Phase III. And for 2 of these programs, we have commercial agreements, meaning that we're either already producing 4 commercial products or preparing for the commercial launch of a new product. That is giving us a total of 51 to be compared to 28 as of 2022.

And we're now serving clients, as you can see from the logo at the bottom of the page, on many different type of vectors as it was our plan when we spoke about a year ago. It was important to grow the capacity. It was important to add some new capabilities. It was also important to give access to our clients who want to be next to our process development scientists, analytical development scientists, or GMP teams when the activities happen in our plants, which was one of the driver of the acquisition of the 2 new sites in Lyon and Strasbourg that we acquired from ABL Europe. So the geographical location was one of the drivers. Increasing the number of vectors that we can deliver was another one of these drivers, and you see here some example listed of vectors that we iterate from ABL.

The last driver was to be able as I said earlier, to deliver for all geographies. And obviously, having now 2 sites in Continental Europe is giving us the opportunity to deliver in Europe for Europe. But also deliver for some of our APAC customers who wanted to have a delivery site in Europe when they want either to target the European market or minimize the time difference with, for example, U.S. when they are historically working with the U.S. CDMO. So we'll continue to strengthen our commercial efforts to fill these capacities. And they already demonstrated that the integration effort is ongoing to make One OXB out of these 3 geographies.

I'm going to now hand over to Stuart the financial part.

[Stuart Paynter, executive]

Thank you, Sebastian, and good afternoon to everyone. So I'm going to take you through 3 slides. The first one is a review of 2023. The second one looks at near-term guidance in 2024. And the last is a distillation of what Sebastian was talking about in terms of our position within this market and our growth opportunity over the next 2 to 3 years, which, as you'll see, is very exciting. So for 2023, first thing to say about both the revenue and the cost is that when we guided in September, we've come out more or less spot on where we guided. So revenues at the end of 2023 of just shy under GBP 90 million compared to 2022 at GBP 140 million with a number greater than GBP 40 million in the vaccine revenues in 2022, which were nonrecurring.

In the underlying piece of the business, there was a very modest growth. So we really consider this to be the baseline revenue that we're currently out of GBP 90 million. Unfortunately, that was supporting a much bigger cost base. So if we go on to pillar #2 here, the cost base supported meant that we made a loss EBITDA loss of GBP 52 million in the year, which obviously is unsustainable, and we took actions throughout the year to make sure that we're rebasing those to both give us a launch pad for '24 and beyond in terms of delivering the growth and being able to do the transformation programs, which Thierry outlined, new ways of working and becoming a pure-play CDMO. That exercise generated sort of perpetualized GBP 30 million of savings, which we completed the project in the second half of 2023, and we'll see those benefits coming forward. Below the line, there was an impairment of GBP 99 million.

It's just worth reflecting on that. We take this very seriously. We reflect on the deal that we did in 2022 for the Oxford Biomedica solutions as was part of Homology that we bought. And there were 4 value pillars to that deal. They were the -- there's the equipment, the people and the expertise, the technology, and the contract with Homology themselves. The first 3 of those pillars are forming the backbone of our strategy. So the facilities, which are world-class facilities in Boston in the right place for our clients, more than 100 people with significant AAV expertise, which are adding to our offering to the clients, which Sebastian talked about and the technology itself, which is proven in patients in the AAV world. The last one was a binary risk that we knew we were taking with Homology themselves on a contract, which is guaranteed for 12 months. That has now crystallized in terms of losing the contract with Homology leading to this level of impairment.

So we still think that it's a highly strategic deal for us in terms of the first 3 pillars. But unfortunately, the risk crystallized on the single customer risk that we knew we were taking on at the time. So a one-off impairment spread across multiple asset classes, but that's where we are for 2023. At the end of 2023, we've got an extremely strong balance sheet. So we've got a cash balance of more than GBP 100 million.

We believe with the plans that have been laid out, and we will lay out in the next few slides, we are well placed from a cash perspective to see ourselves through the transformation period through One OXB to the growth and ultimately to self-sustainability and cash generation. And what gives us that confidence? Well, Sebastian has already outlined a few of these numbers, but in pillar 4 here, we look at the KPIs. The early barometers of what we think is -- our success for the next few years. We already know that the orders have grown. The orders significantly grew from about GBP 85 million to GBP 130 million in 2023. Of course, that's going to flow through to revenue over time. And also the revenue backlog is growing very nicely from GBP 95 million at the end of the year, GBP 94 million to GBP 104 million at the end of March, not including the sizable deal we signed in March and led to orders in April.

So we're in a really good spot in terms of predictability and visibility for delivery in '24 and '25. And that gives us the confidence to really push forward and be able to guide in which -- what we think is an accurate and exciting way. So just looking at '24, we've reiterated the guidance, as Frank said, we expect the revenues in 2024 to be between GBP 126 million and GBP 134 million. That's a 40% to 50% growth over baseline FY '23. Broadly breakeven in the underlying business, that's excluding France, which closed in February this year, and with France, a modest EBITDA loss. So we expect France to be a modest EBITDA loss this year, but that's fully funded from the way we did the deal with cash injections from Institut Merieux.

CapEx will be limited. So we are looking at particularly strategic initiatives, things like transferring the platforms from one location to the other. We are really, really well set from a CapEx perspective. We've made significant investments, as people know, in the last few years, including Oxbox and other things. And we've got a really nice infrastructure base to support the growth out to about 2028. So no big infrastructural investments in things like GMP suites until that time. We've got some -- human resources to play around with to make sure we can deliver for our clients, but nothing big in terms of CapEx. And we're on track to achieve that medium-term profitability in 2025 and then beyond because we've made this commitment. We've made this commitment for the medium term to 2026.

And we said, and we're reiterating here, 35% revenue CAGR, including France now, you can see what that means to that chart. And you will remember what Sebastian said about the market as well. We're looking to significantly beat the market in terms of growth. We believe we've got great visibility, a great client roster to be able to do that and take advantage of this maturing industry with no further huge CapEx investments required to at least double our revenues and beyond to '28. And that's really, really exciting. And this is going to be high-quality revenue streams coming through in the next few years. That's going to lead in the year 2026 to an operating EBITDA margin of greater than 20%.

We know that -- the journey does not stop there. We know that the best-in-class CDMOs in our sort of area making 30%. But that's going to take a few years for us to, again, build the scale to be able to do that. But you can see there that the list of the reasons why we believe this is a true possibility because when you think about it, we're sitting on this infrastructure, we can more than double the revenues into that infrastructure, and that's going to really drive the EBITDA growth in the business. So with the visibility we have and with the opportunities ahead of us, we think this is a very deliverable plan, and we're fully committed to it. And I'll hand back to Frank.

[Frank Mathias, executive]

Thank you so much, Stuart. So -- and thank you so much also for the outlook. For the remainder of 2024, we continue to execute on our new strategy and focus will turn to integrating all sites to fully create as Thierry has shown One OXB, a united company alongside growing our global portfolio of clients and programs. This slide shows us the flywheel, our flyway which is a nice summary of our strategy. Central to everything at OXB is our employees. Our employees are the most valuable asset and are crucial for us to be able to operate a client-centric organization, and to deliver excellent client experience. This will, in turn, lead to expanded client partnerships as we already see, we'll attract new clients, as we already also see, we'll generate increasing revenues will allow us to invest to serve our clients and so on. It's a typical flywheel. So ultimate goal is to get the flywheel to turn on its own.

So while we have made significant progress, it is important to note that the numbers, obviously, we are presenting a backward looking. But as a CEO, I have to look forward. And as you have seen in the presentation, we reiterate the guidance for this year. The share price may not currently reflect the progress made by OXB throughout the year. However, we are confident, the team here is confident, the Board is confident that we are on the right trajectory and that our efforts and performance will be recognized in due course.

So before we open the room for questions, I would like to take this opportunity also to thank our employees for their hard work and contributions as well as the ability to embrace change. And there is a lot of change currently, both now and in the future. That dedication and hard work has been instrumental in our transformation and achieving the many successes along the way.

We will now be pleased to take the questions. from those in the room. And Sofia will bring a microphone. You have always the microphone Sofia before we take questions then from the conference call lines. So Sofia, please? There is one question from Charles.

[Charles Weston, analyst]

This is Charles Weston from RBC. Three, please. The first is on the revenue backlog. You've provided a sort of an April update on the business development backlog, but you've only given us a March update for the revenue backlog. And I know you said you signed this big contracts. So presumably not going to close the number, but can you give us a sort of an order of magnitude of a potential increase? Are we talking 20%, 50%? What's the sort of broad uplift that we should be looking for?

[Stuart Paynter, executive]

Yes. So Charles, we can't calculate the backlog because we need to calculate the April revenues [indiscernible] the backlog. So it's a formula calculation. It's auditable number. So backlog, plus orders less revenue equals closing backlog. So we haven't done that, albeit we can't until we -- in April. And as Sebastian said, I think that's a good word significant. We can't give any more details now. They will come in due course. As you know, we're committed to the communication plan of being far more frequent into the market now and give more frequent updates on our progress in terms of trading updates, and you'll see that when we do our next trading update.

[Charles Weston, analyst]

Okay. It was worth a go. Secondly, on network utilization, obviously, you've got a lot of capacity as Stuart was talking about and relatively low utilization at the moment. So can you give us a sense of what is your percentage capacity utilization where we stand today? And what I'm obviously trying to drive out there is what full looks like from a revenue generating capacity within the current network without any more meaningful CapEx.

[Thierry Cournez, executive]

Yes. So capacity has different components, in terms of infrastructure, resources, equipment. Right now, we do have the capacity to deliver on the GMP batches, which are planned for making our numbers this year. France on the U.S. side give us additional capacity for process development activities, which help us to bring a new project, which will feed the GMP manufacturing in the future. So.

[Stuart Paynter, executive]

We can more than double our revenues with no -- like we said, more than our revenues from [ 92 to low 200s ] without making any further investments in the capacity that you're talking about the GMP capacity. And beyond to 2028 is what we've said. So from '26 to '28 is another 2-year gap with significant growth in there. So that's the number you're looking for. It's between double and triple, were triple where we are now.

[Charles Weston, analyst]

And just last question. You talked about the pipeline in terms of early stage being up to Phase II and then Phase III and commercial. But obviously, for cell therapies and gene therapy, sometimes Phase IIs are actually the pivotal trials. So could we think that even in that early stage, there are actually some pivotal studies? Or do you classify them as a Phase III in your chart.

[Sebastien Ribault, executive]

No, they are classified as Phase II. There is still a -- probability of failure that is quite high still. But one of the projects that you do not see as late stage right now went from early stage to late stage in less than 6 months. But I prefer to classify them in early stage and have a good surprise, then put them in late stage and have a bad surprise.

[John Priestner, analyst]

John Priestner from JPMorgan. Just 2 questions for me. So around the guidance mainly. So the guidance is for a modest operating EBITDA loss in 2024. And you've suggested that the revenues will also be kind of H2 weighted. So should we think of H2 '24 being the start of operating EBITDA profitability and pushing on from there? And then in terms of the 2024 revenue guide, can you just describe some of the kind of pushes and pulls around what could make you hit the kind of top end or the lower end of that guidance.

[Stuart Paynter, executive]

Yes. So in terms of the first piece of the question, we will be back end weighted. So we'll be half 2 weighted in terms of the delivery. So it could be what you suggest in terms of EBITDA profitability in the second half as opposed to the first, but we're not going to guarantee that. I mean it's a mathematical outcome depending on how weighted we are. We have really good visibility of 2024 now in terms of what we've got to deliver. There's a couple of projects we're working on outside of the traditional GMP manufacturing and commercial development, which may allow us to go to the top of that or even above.

And then it's a case of delivery. So 2024 now is -- as Thierry said for a reason, right? We're now into a stage of -- we've done some really good work on the backlog. We've done some really good work on the orders. Now we've got to deliver on those to get the revenues in for the year. So sort of long-winded way of saying we're very comfortable with the guidance. There are a few interesting things that could push us towards the top end of that, but we're not baking those in for reasons of prudence.

[Max Herrmann, analyst]

It's Max Herrmann from Stifel. Just a couple of points of clarification, really. Just -- I know in terms of your guidance previously, I think you gave in September that you -- originally talked about no longer guiding to licensing and milestone revenues. So I just wanted to clarify whether the guidance for 2024 is sort of an all encompass revenue, which I think your GBP 90 million was -- or where the variability is with regards to licensing and milestones? That's the first question.

[Stuart Paynter, executive]

So first question, I mean, is all encompassing, that GBP 126 million to GBP 134 million, so it's comparable to the GBP 90 million but we don't expect it to be -- I mean the way that we're operating as a pure-play CDMO means that they're not going to be as significant as they once were. As we progress and we do some more work on the clarity of our reporting. That will be something we'll think about because we want to be ultimately comparable in terms of our performance to other CDMOs in this area. Even though no one is focused on this area like we are, there are people with arms and divisions in this area. But yes, it's an all-encompassing number.

[Max Herrmann, analyst]

Okay. Great. And then just -- I mean, I just wanted to understand the organic story here rather than understand the combination. So for example, I think you talked about the revenue backlog being GBP 104 million now in March versus GBP 94 million at the year-end. But year-end, I assume didn't include the French operations and now it does. So is there any growth organically there? Or are we just seeing what's going on when you include the French operations?

[Stuart Paynter, executive]

There is organic growth there.

[Max Herrmann, analyst]

Able to quantify what the -- French operations brought into it or...

[Stuart Paynter, executive]

Yes, we -- I mean we haven't mentioned the number in terms of what they bought in terms of opening backlog. I don't think we want to mention it now. But it's fairly evenly weighted.

[Julie Simmonds, analyst]

Julie Simmonds, Panmure Gordon. Question for you, Sebastian. On the split between the AAV and lenti that you've seen, clearly, there's sort of been a shift towards AAV over the last 12 months. How do you see that settling or sort of in terms of growth at the various areas?

[Sebastien Ribault, executive]

It's a difficult question because the level of maturity of the lenti projects we have in the pipeline and AAV are quite different. So we -- if I look at the number of contracts that we've signed on the AAV side, it's as many as lenti. But on the lenti side, since we were known as a lenti company, we have a lot of companies approaching us because they need a company that has the experience and the track record to bring the product to commercial stage pretty quickly.

When we sign 1 lenti program and it's a Phase II/pivotal versus an AAV that is preclinical. Obviously, the business volume is extremely different. So if number wise, the new AAV clients equal the new lenti clients, more or less. From a revenue standpoint, it's still very, very different. The maturity of the AAV pipeline is obviously growing because we're pushing these AAV project through feasibility, process development and so on. But it will take a few years before we are at the maturity, we see with the lenti programs.

[Paul Cuddon, analyst]

Paul Cuddon from Numis. Just focusing on your U.S. operations really. I mean -- since kind of Homology has sort of ceased clinical activities, kind of to what extent have you been able to retain the kind of key staff there? Can Homology still draw down the last remaining 20% of the kind of acquisition price? And how well is it going sort of taking up lenti over there?

[Frank Mathias, executive]

Yes. If we start with the staff, we were able to retain more or less all the people we wanted to retain, and we are glad retention rate is very high currently compared to competition. So I believe people understand the strategy we want to be part of -- the journey with us. I'm glad about that.

[Stuart Paynter, executive]

The second part was more of a technical question around Homology and they're 20% of the put call. You'll see the put call has been significantly written down in terms of the contingent liability in the balance sheet. Homology don't exist anymore. So Homology have merged into a company called Q32. And there's a contingent value right, which remains for the shareholders of Homology at the time of that merger for that put call. So at this point, they still own 20% of the entity, and there's a fixed mechanism for calculating what that put call will be, which will contractually respect and it goes to the CVR. I think the last thing was success of lenti platform transfer.

[Thierry Cournez, executive]

Yes. We have initiated the lenti transfer to the U.S., we are able now to take a new project in the U.S., we have already started to support some of the U.K. capacity with the U.S. site, and we'll be at a larger scale by the end of the year in the U.S. for lenti. So very successful tech transfer for now.

[Frank Mathias, executive]

And if you want to add some figures, we have about 120 people in U.S. and 150 in France currently and something around 650 in U.K.

[Christian Glennie, analyst]

Christian Glennie with Stifel. Just on your pipeline, the $573 million, presumably, that's a -- a not risk-adjusted number. So -- and if you were to apply a risk adjustment, what would that come down to? I mean -- do you just supply the -- typical risk adjustment according to the pipeline -- divided by 3.

[Sebastien Ribault, executive]

Divided by 3.

[Christian Glennie, analyst]

As a rule, okay. And then in terms of your -- you say you started -- you got about 50% of your low-end revenue coverage for the year. Just to -- maybe benchmark that put that in for other CDMOs, -- how that compares to the -- or the ones that are operating maybe at sort of more optimum levels, what should that number be in terms of coverage?

[Stuart Paynter, executive]

It's almost an unanswerable question, but I mean, so we can't -- we don't have the visibility of other CDMOs although we have significant CDMO experience in the room. What we need to have is significant coverage. But then we need to have the ability also to start new client projects. Otherwise, it puts a stop on being able to attract new clients if you can't -- you can't schedule GMP for them for 18 months. And we think we've got the right balance there with the ability to expand existing capacity with, like we said, not the application of more CapEx, but just more skilled people in the building because we already have the infrastructure.

As we look at -- where we are being successful in the area, -- what we see is coverage, as we said, and the visibility we have in prospective orders from existing clients that are not yet booked as orders, they won't be in backlog, but we have really good visibility on nonbinding forecast from our clients. which suggests that both '24 and the majority of '25 is there.

So this is the maturity of these programs all coming along. And like -- you've seen us go from 1 late-stage clinical, 1 commercial to 3 and 2. And the output of that is we've got fantastic visibility into '24 and '25. Now it's, of course, it's a case of scheduling them properly, but delivering -- the materials in a timely way in order that we can recognize the revenue. Ultimately, it's not about signing orders. It's about signing orders and delivering in a quality way, which is what the organization is about quality and innovation at CDMO.

[Frank Mathias, executive]

Any other question -- in the room?

[Unknown Attendee]

Yes. If we currently don't have any questions in the room, we'll go over to the conference call.

[Operator]

[Operator Instructions] We have a question from the line of Miles Dixon from Peel hunt.

[Miles Dixon, analyst]

Great. I think firstly, if I could just ask a quick clarification question on the guidance, particularly around the operating costs. So the outturn for '23 came in at GBP 128 million. I just wanted to check that, that includes the one-off payments for restructuring before we will offer the GBP 30 million for ongoing cost base.

[Stuart Paynter, executive]

Miles, Stuart, if I understand your question correctly, we had an operating cost base if you do the math from an EBITDA cost base of about GBP 140 million. We had GBP 90 million in revenues led to a GBP 50 million EBITDA loss, so GBP 140 million. We don't take out any exceptional's there as everything.

[Miles Dixon, analyst]

Got it. And then secondly, if I could ask, I think it was Sebastien that mentioned about biotech still being difficult. I was just wondering if it was too early to see yet or if you are, in fact, seeing any new emerging pen profile of potential clients, given the challenges at WuXi.

[Sebastien Ribault, executive]

I have not personally been exposed to anyone coming to us and saying, we absolutely want to leave competition, and we want to work with you. Because of U.S. political reasons to put it that way. Are there people concerned about the situation? The answer is yes. Are they looking for backup plans? The answer is yes. Since we're talking about a [ tax ] that has not been voted yet. We're still talking about people looking for backup plans, but there's nothing that I would consider as an active discussion as of now.

[Frank Mathias, executive]

Any other questions?

[Operator]

We have no further questions on the phone lines. So I will now hand the call back to your host for closing remarks.

[Frank Mathias, executive]

Thank you so much. So thank you for your participation. Thank you for the good questions. This was obviously now the end of the meeting. So in the summary, I believe we made it clear we made significant progress over the last few months, and we are extremely confident as long as the future is considered. So let's look forward to keeping in touch and seeing you all again soon. Thank you so much. Bye-bye.