This article has been updated with additional information from Oxford Nanopore's press release and earnings call.
NEW YORK – Oxford Nanopore Technologies reported on Wednesday morning that its revenues for the first half of 2023 declined 30 percent year over year as COVID testing dried up. Revenues from life science research tools (LSRT) grew 22 percent, meanwhile, and 16 percent on a constant currency basis, in line with expectations announced in July.
For the six months ended June 30, the UK nanopore sequencing firm booked £86.0 million ($107.9 million) in revenues, all from LSRT, compared to £122.3 million in H1 2022, which included £70.6 million from LSRT and £51.8 million from a COVID testing contract with the UK's Department of Health and Social Care.
Of the company’s total revenues, £64.3 million, or about 75 percent, came from consumable sales, and £21.7 million came from sales of devices and services.
LSRT revenue growth was primarily driven by new customers, Oxford Nanopore said, and was partially offset by a £9.9 million decline in COVID sequencing and a £900,000 decrease in revenue from the Emirati Genome Program (EGP), the company’s largest customer.
Excluding revenues from COVID sequencing and the EGP, Oxford Nanopore’s so-called underlying LSRT revenues totaled £75.6 million, up 53 percent year over year, or 46 percent on a constant currency basis, from £49.4 million in H1 2022. Meanwhile, Oxford Nanopore’s revenue from EGP declined 15 percent to £4.9 million from £5.8 million in H1 2022.
At a regional level, LSRT revenues in the Americas were £32.8 million, representing 41 percent growth from £23.3 million in 2022, driven by demand for PromethIon devices and consumables in human disease research from the US and Canada, including projects looking at cancer and neurological diseases.
"We see the commercial opportunities in the North America region as one of the key drivers of future growth," Oxford Nanopore CFO Tim Cowper told investors in a conference call on Wednesday to discuss the company's financial results.
LSRT revenues in Europe, the Middle East, and Africa were £35.6 million, a 16 percent increase from £30.6 million in the prior-year period. Growth in this region was driven by PromethIon device and consumable sales in the UK and Germany for human genetics and cancer research.
LSRT revenues in Asia-Pacific were £17.6 million, up 6 percent year over year from £16.6 million, with business in the region "dominated by China," Oxford Nanopore said.
"We have seen a growth rate in China approaching 20 percent, but we remain pretty cautious about China in [that] the environment is undoubtedly a challenging one," Cowper said. "We are not placing too much reliance on that [Chinese] market."
"The last couple of years, everything has been shrouded by COVID sequencing, but as that [declines], we are clearly seeing growth in service providers and distributors in pushing towards diagnostics," CEO Gordon Sanghera commented on China. "At the same time, there is an economic slowdown and the macroeconomic, geopolitical considerations, so we are cautiously optimistic about China."
The firm's H1 R&D spending rose 69 percent to £48.2 million from £28.6 million in H1 of 2022, while SG&A spending grew 5 percent to £76.1 million from £72.3 million. Spending in both categories increased primarily a result of a workforce expansion, the company said.
For H1, the company reported an average headcount of 1,049full-time employees, compared to 866 in H1 2022. This included 445 staff members in R&D, a 24 percent increase from 358 in H1 2022; 455 in SG&A, a 27 percent risefrom 358 during the prior-year period; and 150 in production, the same number as last year.
In an email, an Oxford Nanopore spokesperson said the company carried out a "significant expansion" of its commercial team in the US and EMEA, which included sales, marketing, technical and customer service, and digital personnel.
During the call, Sanghera told investors that the company plans to establish customer excellence centers in Houston, Dubai, and Singapore. The company spokesperson said the creation of these centers is "in response to robust regional growth" and "an appetite by our users to explore the possibilities of nanopore sequencing in more depth."
Oxford Nanopore's H1 net loss swelled to £75.4 million, or £.08 per share, compared to a net loss of £25.9 million, or £.04 per share, in H1 2022.
The company ended the first half of the year with £334.8 million in cash and cash equivalents as well as £149.8 million in other liquid investments.
For full-year 2023, Oxford Nanopore now expects LSRT revenues to grow between 18 percent and 25 percent on a constant currency basis. Previously, the company had said it expected LSRT revenues to grow 16 percent to 30 percent.
The updated range includes an anticipated decrease of approximately £18.0 million from COVID sequencing, Cowper said, and the company now expects EGP revenue for 2023 to be lower than last year, when it was £13.2 million.
In Wednesday afternoon trading on the London Stock Exchange, Oxford Nanopore shares were down more than 5 percent to £218.9.