Final results for the year ended 31 December 2022

Strong underlying LSRT revenue growth of 30% in 2022, driven by innovation and customer acquisition; expect underlying annual LSRT revenue growth of more than 30% in both 2023 and in the medium term, reflecting the continued growth and diversification of the broader user base

Oxford Nanopore Technologies plc (LSE: ONT) ("Oxford Nanopore" or the "Group"), the company delivering a new generation of molecular sensing technology based on nanopores, today announces its final results for the year ended 31 December 2022.

Gordon Sanghera, Chief Executive Officer, commented:

"2022 was another year of significant progress for Oxford Nanopore. Demand for our differentiated technology continues to grow around the world and across many areas of scientific research, including human, cancer, animal, plant, pathogen and environmental genomics. This has underpinned a 30.5% growth in active customer accounts and underlying LSRT revenue growth of 30% despite a challenging macroeconomic environment.  We have remained relentlessly focused on innovation, with the well-received new technologies launched in 2022 further strengthening Oxford Nanopore's unique position as a highly accessible, accurate, information rich platform at any scale.

"This platform makes us well-placed to capture the significant opportunities we see ahead, both in scientific research and beyond. The partnerships we have signed in the last year start to demonstrate the attractiveness of our technology in the clinical and applied markets and provide a strong foundation for further progress.

"We enter 2023 with good momentum. Our balance sheet remains strong and we will continue to invest in ground-breaking innovations and operational expansion to support continuous growth and deliver long-term value for shareholders."

Summary financial performance

Financial highlights: strong underlying revenue and margin growth in LSRT business

  • Life Science Research Tools (LSRT) revenue increased by 16% to £146.8 million (FY21: £127.0 million), up 10% on a constant currency basis, primarily driven by increasing customer numbers, across a breadth of applications. Underlying growth, excluding foreign exchange and revenue from the Emirati Genome Program (EGP) and COVID-19 sequencing, was approximately 30%.
  • At a regional level, revenues were predominantly driven by growth in the Group's two largest regions, the Americas and Europe, as well as strong growth in China, with revenues up, on a constant currency basis, by 32%, 29% and 66% respectively. UAE revenue was impacted by a decline in EGP revenue, resulting in a 54% reduction on a constant currency basis.
  • Group revenue increased to £198.6 million (FY21: £133.7 million), reflecting a £19.8 million increase in LSRT revenue and non-recurring revenue of £51.8 million following the conclusion of the Group's COVID-19 testing contract with the Department of Health and Social Care (DHSC), as previously announced.
  • LSRT gross profit margin increased by 250 basis points to 56.3% (FY21: 53.8%), predominantly driven by automation, recycling of electronic components and improvements in manufacturing techniques.
  • Adjusted EBITDA loss of £(78.6) million (FY21: £(57.7) million); higher LSRT gross profit offset by increased investment in R&D and commercial and marketing teams, to support long term sustainable growth.
  • Reduction in Loss for the period to £(91.0) million (FY21: £(167.6) million), driven by the higher LSRT gross profit, the settlement of the DHSC contract, the sale of the Gosling Building and the net decrease in the provision for employer's social security taxes on share awards, partly offset by higher operating expenses.
  • Cash, cash equivalents and other liquid investments of £558.0 million, compared to £618.2 million as of 31 December 2021.

2022 business highlights

Continued innovation to strengthen our unique market position

  • Delivering high-accuracy, high-output sequencing technology: Early access of "Q20+ chemistry", combining new flow cells and preparation kits, delivering the most complete and accurate genomic data, that can be used across the platform on small or ultra-high output devices. This combines very high single-molecule accuracy (>99%) with the ability to reach all parts of the genome and characterise all types of genetic variation
  • Highest accuracy: Developer access release of High Duplex flow cells for the most challenging of use cases, such as 'Telomere to Telomere' genomes or rare variant detection, duplex accuracy delivers over 99.9% accuracy at a single molecule level
  • New device formats to reshape market: First early access shipments of the palm-sized PromethION 2 Solo (P2 Solo) device, a high-output, low cost nanopore sequencer, designed to make high-output sequencing more accessible
  • Enabling real-time methylation analysis, for broad applications: Release of Remora, a tool to enable real time, high-accuracy epigenetic insights with nanopore-based sequencing, making Oxford Nanopore the most comprehensive technology for characterising methylation
  • Platform expansion to sequence any-length DNA/RNA fragments, for broad applications: Release of Short Fragment Mode to enable nanopore-based sequencing of native DNA/RNA fragments as short as 20 bases, enabling any length reads on one platform; a true technology differentiator in the current market

Continued growth in customers and scientific impact

  • Expanding user base and use cases in biological research: Continued increase in the user base and utilisation of nanopore-based sequencing in life science research; a net increase of 1,938 active customer accounts in the period, growth of 30.5%, taking total active accounts to 8,283 at 31 December 2022
  • Scientific publications showcase impact of differentiated technology: Approximately 3,000 peer review publications published by the Nanopore community in 2022, highlighting applications across a number of scientific research areas including human, cancer, animal, plant, pathogen and environmental genomics. Total of >8,200 publications to date
  • Increasing use of technology in clinical and applied/industrial market uses: Building on foundational research discoveries, increasing development of methods designed to address needs in health (e.g. cancer, human genetics, infectious disease) or industrial use (e.g. pharma/biotech QC, food, agriculture)

Strategic collaborations to develop and access new growth markets

The Group is now driving expansion from use in LSRT for scientific discovery, through the translational journey where methods are developed and piloted that address needs in future clinical diagnostic or industrial "applied market" applications. First partnerships are being established to optimise the Group's impact in emerging health (such as clinical research) and industrial applied markets.

Infectious disease:

  • Pneumonia: Guys and St Thomas Hospital, progressed service evaluation on the intensive care unit under the Quality Innovation and Productivity and Prevention (QIPP) initiative, to demonstrate how real-time pneumonia metagenomic testing using nanopore sequencing improves early management of respiratory infections in around half of tested patients
  • Tuberculosis (TB): In collaboration with FIND/WHO and Unitaid, Oxford Nanopore progressed a ~400-sample study for a targeted sequencing assay to characterise TB and its antibiotic resistance properties from sputum, working closely with several countries for which TB control is vital to their health systems

Human genetics:

  • Transplants: providing rapid insights and full characterisation of Human Leukocyte Antigen (HLA) using nanopore long reads, to support transplantation
    • New collaboration with Omixon, the global transplantation diagnostics company, which is launching NanoTYPETM RUO, a Multiplex Human Leukocyte Antigen Amplification kit compatible with nanopore-based sequencing for rapid HLA typing in transplants
    • New collaboration with GenDx, which is are developing NGS-Turbo®, a novel rapid high-resolution HLA typing kit aimed at improving transplant outcomes
  • Carrier screening: new collaboration with Asuragen, a Bio-Techne company, to develop assays designed to deliver more accurate and reliable options for reproductive health and carrier screening

Cancer collaborations post period end

  • Collaboration with Cyclomics for new "liquid biopsy" workflow using nanopore sequencing to detect molecules that are associated with cancer, circulating in blood. Method shows near 100% accuracy sequencing of the TP53 cancer gene and facilitates the detection of mutations at frequencies down to 0.02%
  • Agreement with 4bases to combine nanopore sequencing devices and 4bases kits to support rapid, high-accuracy analyses in human and cancer genetics in Italy and Switzerland, with a first target of same-day BRCA1 and BRCA2 analysis

Technology collaborations

  • New collaboration with 10x Genomics to make single-cell and spatial full-length isoform transcript sequencing accessible to any laboratory
  • New collaboration with Tecan, post period end, to configure Tecan automation to enable easier nanopore library preparation for high-output or larger sample numbers

Investment in people to support growth strategy

  • Increased global headcount (FTE) to 1,009 (31 December 2021: 803), including significant expansion in North America
  • Commercial headcount grew to 291 at 31 December 2022, up 51% in the period. In February 2023, commercial headcount reached 301; achieving the goal we set out at IPO of doubling the commercial team
  • Duncan Tatton-Brown appointed as Non-executive Chair, adding extensive experience as an executive and Non-Executive Director of FTSE companies

Continued strategic progress post period end

  • Agreement signed with UPS to drive rapid and easy global logistics and ease of delivery for broad customer base, with specific impact in North America and Asia Pacific. Flow cells will be stored in UPS Healthcare's high tech distribution facility in Singapore for the first time and be delivered within 24 to 48 hours through UPS's distribution capabilities to destinations across the Asia Pacific.

Current trading and financial guidance

Whilst underlying demand has not changed, we saw a softening of orders in March 2023, much of which resulted from a drop in COVID-19 sequencing following a change in China's zero-COVID policy.

We expect full year 2023 LSRT revenue growth to be in the range of 16-30% on a constant currency basis, which includes an anticipated year-over-year headwind from COVID-19 sequencing of approximately £20m. On an underlying basis, excluding foreign exchange and revenue from the EGP and COVID-19 sequencing, we expect annual LSRT revenue growth of more than 30% in both 2023 and in the medium term, consistent with our performance over the last three years. This reflects the continued growth and diversification of our broader user base.

Our margin targets are unchanged. For full year 2023 we continue to target LSRT gross margins of greater than 60% and more than 65% in the medium term. Margin expansion will be driven by operational improvements including, automation, improved manufacturing process and recycling of electrical components.

The company is in a strong financial position, with £558.0 million of cash, cash equivalents and other liquid investments. Based on our current development and commercialisation plans, we also continue to target adjusted EBITDA breakeven by FY2026.