Dive Brief:

• Oxford Biomedica is in “preliminary discussions” about selling out to the private equity group EQT after rejecting earlier offers as too low.
• The viral vector manufacturer confirmed the talks after its shares jumped on Wednesday amid speculation about a takeover and a report in the Financial Times about EQT’s interest. Oxford said its board had received previous proposals from EQT as well but rejected them because they undervalued the company and its prospects.
• Now, the company is exploring whether EQT can come up with a cash offer “at a level that the board would be minded to recommend,” Oxford said. EQT has until Feb. 11 to either announce its plans to make an offer or tell investors there will be no bid, Oxford said.

Dive Insight:

Oxford was one of the first companies involved in gene and cell therapy and has more than 30 years of experience in the industry. The company now specializes in producing viral vectors, modified viruses used to deliver gene-based therapies into cells.

With its experience and focus on viral vectors, Oxford has become a key contract development and manufacturing organization as companies developing complex gene and cell therapies increasingly look outside for help in producing them. Oxford’s revenue jumped 44% in the first half of last year.

EQT’s interest in Oxford is unsurprising, given its “unique pureplay viral vector offering,” strong revenue growth and move toward profitability, Stifel analyst James Orsborne wrote in a note to clients. The possibility of a takeover factored into Stifel’s choice of Oxford as a top stock pick for the year, he said. 

There has been some pullback in investment in cell and gene therapy makers as investors look for safer bets. But for Oxford, the market is still robust, Stifel’s Orsborne wrote to clients in November. The company has clients around the world and has continued to see strong demand even amid consolidation in the industry.

EQT, meanwhile, sees an opportunity in the market as some investors pull back, according to an article posted on its website. The company co-led a $135 million financing round for gene therapy startup SpliceBio last year and now is once again setting its sights on Oxford.

In its statement, Oxford cautioned that there’s no guarantee of an offer from EQT and said its shareholders “are strongly advised to take no action at this time.”

But investors appear to be betting on a takeover. Shares of Oxford, which closed at 739 pence apiece Tuesday, rose 13% to about 907 pence in late trading in London Thursday and have more than doubled in the past 12 months. After Oxford confirmed the talks with EQT, Stifel raised its price target to 950 pence from 725 pence previously.