NEW YORK – Facing an uncertain federal funding environment in the US, particularly with regard to the National Institutes of Health (NIH), and tightening export control restrictions from China, Oxford Nanopore Technologies on Tuesday issued what the company called a "conservative" revenue guidance for 2025.
For full-year 2025, the UK nanopore sequencing company said it expects revenues to grow 20 percent to 23 percent on a constant currency basis, reflecting "continued strong demand across the business" while factoring in risks from the US and China.
"What we are seeing from customers big and small in the research space, particularly in the US, that are exposed to federal funding, is, they don't know [the future outlook] themselves," Oxford Nanopore CFO Nick Keher told investors in a conference call recapping the firm's 2024 financial results. "Rather than trying to pre-guess that this is going to be an okay moment, we'd rather be conservative with the guide and take the risk out of the number."
In making the guidance, Keher said the company baked in "significant headwind for federal funding overall in the US" and "assumed tightening of export control restrictions" in China to "adequately capture both risks."
According to Keher, while the company started this year "trading slightly above the guidance level" as a whole, business in the Americas has been "a bit weaker." Sales to customers within the research and government space supported by federal funding in particularhave been "broadly flat to down against last year," he added.
"We are not expecting the growth to improve," Keher said. "We are setting this guidance to reflect the fact that we could see further weakening from where we are today."
Oxford Nanopore's conservative outlook comes after a year of growth across all market segments during 2024, especially outside traditional research, such as applied industrial, biopharma, and clinical markets.
For the year ended Dec. 31, the firm booked £183.2 million ($233.5 million) in revenues, up 8 percent compared to £169.7 million in 2023 and narrowly missing analyst expectations. On a constant currency basis, growth was 11 percent, in line with the company's expectations announced in January. On average, analysts had expected £184.9 million in revenues from the company.
Revenues from the Emirati Genome Program (EGP), previously one of the company's largest customers, were £1.8 million, down 85 percent from £12.0 million in 2023. COVID sequencing revenues were £2.2 million in 2024, down 73 percent from £8.0 million in the prior year.
Excluding revenues from the Emirati Genome Program and COVID sequencing, Oxford Nanopore's core revenues were £179.2 million, up 20 percent from £149.7 million in 2023 or 23 percent on a constant currency basis.
Revenues for the second half of the year were £99.0 million, according to CEO Gordon Sanghera, representing 34 percent growth year over year on a constant currency basis, driven by increasing utilization of the company's platforms across all geographical regions.
Of 2024 revenues, 74 percent came from consumable sales, which include flow cells and reagents, while the remaining 26 percent came from device sales and services.
By product, the company's PromethIon product line generated £77.3 million in revenues, up 31 percent from £59.2 million in 2023. Meanwhile, revenues for the MinIon product range were £55.0 million, down 13 percent from £63.4 million in the prior year. Revenues from other products were £50.9 million, an 8 percent increase from £47.1 million a year ago.
By geography, Oxford Nanopore's revenues in the Americas were £63.1 million, up 3 percent from £61.5 million in 2023. Revenues in Asia–Pacific, excluding India, were £40.4 million, representing a 19 percent increase from £34.1 million in 2023, despite "a drag on growth from China," Keher said. Revenues in Europe, the Middle East, Africa, and India were £79.6 million, up 8 percent from £74.0 million a year ago.
Looking at customer types, revenues from applied industrial customers, including plasmid sequencing service providers and synthetic biology service providers, were £23.5 million, a 42 percent jump from £16.6 million in 2023 and representing the fastest growing sector for the company.
Revenues from clinical customers, who are mostly developing nanopore-based clinical tests, were £17.3 million, up 12 percent compared to £15.4 million in the prior year.
Biopharma customers, including vaccine developers, generated £14.9 million in revenues in 2024, up 18 percent from £12.6 million in 2023.
Lastly, revenues from basic and translational research customers, the company's largest user base, were £127.5 million, up 2 percent from £125.1 million during 2023. Given the uncertainty around US federal funding, Keher said this is the segment for which the company anticipates "some weakness" in 2025. Nonetheless, Keher said he is hopeful the potential setback in the US can be offset by "the strong number of contract wins" in other regions.
Oxford Nanopore's net loss in 2024 was £146.2 million, or £.16 per share, compared to a net loss of £154.5 million, or £.19 per share, in 2023. Analysts, on average, had expected a £.18 per share loss.
The firm's full-year R&D spending decreased 5 percent to £98.9 million from £103.8 million in 2023. The change was due to an increase in capitalized development and payroll costs, partly offset by an increase in a research and development tax credit.
The company's SG&A spending increased 2 percent to £158.8 million from £155.2 million in 2023, primarily driven by an increase in headcount in the commercial teams.
Oxford Nanopore grew its workforce across all functions in 2024. By the end of the year, it had 1,315 full-time employees, up 16 percent from 1,133 in 2023. Of the total, 512 work in R&D, a 10 percent increase from 464 in 2023. Headcount in manufacturing grew from 156 in 2023 to 158 by the end of 2024, while the number of employees working in SG&A grew 26 percent, from 513 in 2023 to 645 by the end of 2024.
However, in line with the company's medium-term goals to achieve adjusted EBITDA breakeven in 2027 and cash flow breakeven in 2028, Oxford Nanopore has carried out what it called "a targeted restructuring" in January to help streamline its operations and reduce costs.
"In 2025t, we have taken tough decisions internally to ensure that we are as lean as we can be entering the year," Keher said. "This will allow us to reallocate capital to higher growth activities, allowing us to maintain our growth trajectory without a continued double digit increase in the cost base."
As a result of the restructuring, about 5 percent of the workforce has been let go, Keher noted.
In addition to the operational restructuring, Oxford Nanopore also modified its pricing and business strategies for the larger devices starting in February after "considerable pricing analysis work" and "a hell of a lot" of internal debate, according to Keher.
Consequently, instead of the traditional reagent-rental model of the company placing instruments in customers' labs for free while it owns the platforms, Oxford Nanopore now sells or leases to customers directly.
Free instrument placement "has helped seed the market, but with the increasing requirement for greater compute in certain devices and increasing demand to own the box by customers, this was leading to a mismatch in communication between our pricing model and customer expectations," Keher said. "We are making it much simpler and much more transparent for customers, whereby they can decide how they want to purchase the device."
Commenting on Roche's upcoming SBX nanopore sequencer, Sanghera that said when the platform purportedly comes to the market in 2026, it is "going to be targeting the ultra-high-throughput, large, centralized markets, and that is where we have least penetration."
"Right now, we are comfortable," Sanghera told investors. "We will be vigilant and note to see if they bring out smaller devices, which we think would be potentially more of a threat."
In a statement, Oxford Nanopore also noted that it "has worked diligently to build a strong patent portfolio covering nanopore-sensing-related technologies that is also broader than its current product portfolio." As such, the company said it "will enforce its IP position when in its stakeholders' interests, and we will continue to look closely at competitor products as they become available."
Oxford Nanopore ended 2024 with £403.8 million in cash, cash equivalents, and other liquid investments.
By market close on Tuesday on the London Stock Exchange, Oxford Nanopore shares were down 13 percent at £91.30.