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Oxford Nanopore Non-COVID Revenues Rise 16 Percent in 2023

This article has been updated with additional information from Oxford Nanopore's earnings call.

NEW YORK – Oxford Nanopore Technologies reported Wednesday morning that its revenues declined 15 percent in 2023 as COVID testing dried up. Meanwhile, revenues from its life science research tools (LSRT) core business grew 16 percent for the year, or 15 percent on a constant currency basis.

For the year ended Dec. 31, the UK nanopore sequencing company booked £169.7 million ($215.7 million) in revenues, all from its LSRT business, compared to £198.6 million in 2022, which included £51.8 million from COVID testing. Revenues were in line with the £169 million revenue estimate provided by the company in January.

Approximately 74 percent of revenues came from consumables sales, which totaled £124.9 million in 2023, an 11 percent increase from £112.5 million in 2022.

Revenues from the Emirati Genome Program (EGP) were approximately £12.0 million in 2023, a 9 percent decline from £13.2 million in the prior year.

The company said it revised the original EGP agreement in late 2023 "to provide greater flexibility" with its partners in the United Arab Emirates. The new agreement removes the outstanding purchase commitment from the original agreement and extends the expiration date to the end of 2026. As a result, the company will cease reporting EGP revenues separately.

By platforms, Oxford Nanopore reported £59.2 million in 2023 revenues for its PromethIon system, including devices and flow cells, representing a 53 percent increase from £38.6 million in 2022. The company booked £63.4 million in revenues for the MinIon system, inclusive of flow cells and the MinIon and GridIon devices that run them, a 7 percent decline from £68.2 million in the prior year.

During a conference call discussing the company’s FY 2023 financial results, Oxford Nanopore's new CFO Nick Keher, who joined the company in January, told investors that the company has "taken the proactive decision to lower MinIon flow cell prices to drive higher growth rates." Similarly, he said the firm has also "improved pricing" across the PromethIon franchise.

"With the launch of PromethIon2 Solo, we wanted to bring PromethIon pricing for single flow cells down from $1,200 to the $800 to $900 range," Oxford Nanopore CEO Gordon Sanghera said during the call. "When you do that … it sticks out that we needed to realign our MinIon pricing as well."

Other revenues, representing kits, service revenues, and other devices, were £47.1 million in 2023, up 18 percent year over year from £40.0 million.

Looking at geographic regions, revenues in the Americas were £61.5 million, representing 27 percent growth from £48.3 million in 2022. "We believe this growth rate could be substantially higher, as we remain underweight versus total market potential," Keher said, adding that the company had hired new commercial management in the region during 2023 to further drive business growth.

Revenues in Europe, the Middle East, Africa, and India were £74.0 million, up 16 percent from £63.6 million a year ago. Meanwhile, revenue in Asia-Pacific dropped 2 percent year over year to £34.1 million from £34.8 million, driven by a 12 percent revenue reduction in China. The company also said it established a new logistics center in Singapore last year to serve as its distribution hub for Asia Pacific. 

The firm also grouped its customers into segments based on total orders. S1 customers, representing annual orders of less than $25,000, generated £29.4 million in revenues in 2023, up 11 percent from £26.4 million in the prior-year period. S2 customers, representing orders in the range of $25,000 to $250,000, accounted for £62.3 million of revenues, up 21 percent year over year from £51.7 million. Revenues from S3 customers, with orders of more than $250,000 per year, were £55.3 million, a 19 percent increase from £46.7 million in 2022. Indirect customers, who purchased through distributors, accounted for £22.6 million in revenues, up 3 percent year over year from £22.0 million.

Oxford Nanopore's 2023 net loss was £154.5 million, or £.19 per share, compared to a net loss of £91.0 million, or £.11 per share, in 2022.

The firm's full-year R&D spending jumped 50 percent to £103.8 million from £69.2 million in 2022, primarily due to increased headcount to support innovation and its growing product portfolio. Its SG&A spending increased 1 percent to £155.2 million from £153.1 million, also mainly driven by the increased headcount.

During 2023, Oxford Nanopore grew its headcount to 1,238 full-time employees, up 23 percent from 922 by the end of 2022. Specifically, the company expanded its R&D team to 464 employees, a 22 percent increase from 380 in 2022, to support the establishment of its regulatory development team and expand its platform development groups. The company also increased the number of employees in manufacturing by 5 percent from 149 to 156, primarily in its biologics production facilities. Lastly, its SG&A team grew 31 percent in 2023, reaching 513 employees compared to 393 in the prior year.

The company ended the year with £220.5 million in cash and cash equivalents and £251.6 million in other liquid investments.

For full-year 2024, Oxford Nanopore expects LSRT revenues to grow between 6 percent and 15 percent on a constant currency basis to £180.0 million to £195.0 million.

Excluding an estimated headwind of £20.0 million from both COVID testing and EGP, the company expects LSRT revenue growth to be between 20 percent and 30 percent. In addition, the firm expects to see growth split between approximately 45 percent and 55 percent in the first and second half of the year, respectively. The lower underlying revenue growth versus the prior year "reflects some caution given the performance we saw at the end of 2023," Keher said.

"We are not entirely immune to macroeconomic pressures reported by others in the life science tools markets," Sanghera told investors. "We're mindful of current conditions, including lengthening sales cycles and a difficult funding environment."

Given the end-market dynamics, the company has also delayed its medium-term adjusted EBITDA breakeven target by a year from FY2026 to FY2027.

In Wednesday afternoon trading on the London Stock Exchange, Oxford Nanopore shares were down 2 percent at £126.30.