NEW YORK – Oxford Nanopore Technologies saw a 57 percent decrease in revenue from the Emirati Genome Program (EGP) in 2022, a large population genomics project hosted by the United Arab Emirates government. Meanwhile, the firm's full-year revenues rose 49 percent year over year, largely driven by a steep increase in COVID-19 testing.
"There was some volatility in the EGP and COVID sequencing revenues over the last two years," Oxford Nanopore CFO Tim Cowper told investors in a call on Tuesday to discuss the company's financial results. "This is reflected in our overall growth in 2022 and guidance for 2023."
For the year ended Dec. 31, the UK nanopore sequencing company booked £13.2 million ($16.1 million) in revenue from EGP, compared with £30.6 million in 2021.
As a result of the decline, Oxford Nanopore’s life science research tools (LSRT) revenue in the United Arab Emirates decreased by 52 percent, from £31.7 million to £15.4 million. The company’s revenue for the so-called S3 customer group — typically PromethIon users that generate orders of more than $250,000 — also dropped 16 percent from £55.7 million to £46.7 million.
According to Cowper, the "significant headwind" from the EGP was in part due to accelerated orders of consumables in the fourth quarter of 2021, which reduced the project’s demand for flow cells in the first quarter of 2022. The company signed a $68.0 million, three-year contract for the EGP program in November 2021, he said, and EGP’s consumable spending declined by £15.5 million for the year.
While EGP revenue declined, Oxford Nanopore scored £51.8 million in COVID-19 testing revenue in 2022, a more than sevenfold increase from £6.7 million in 2021. However, Cowper told investors that the impact of EGP and COVID is "now largely behind us and is not expected to impact forecasts going forward."
For 2023, the company estimates about £17.5 million in EGP revenue, according to a company spokesperson, and COVID revenue to decrease to approximately £6.0 million.
"We believe that COVID sequencing is now largely stopped," Cowper told investors. "We do not expect COVID sequencing revenues in 2024."
Currently, population genomics studies, including the EGP, and public health labs, which focus on COVID-19 testing and other infectious diseases, account for "the majority of" S3 revenue from large projects, according to Oxford Nanopore.
As the EGP contract is set to expire in 2024 and COVID-19 testing winds down, the company will "continue to focus on expanding and diversifying [its] larger S3, typically PromethIon, customer base and saw good progress in 2022," the spokesperson said.
During the call, Oxford Nanopore CEO Gordon Sanghera highlighted the company’s ongoing involvement with the US National Institutes of Health's recently established Center for Alzheimer's and Related Dementias (CARD), which is using nanopore sequencing to analyze thousands of brain samples as part of a study of Alzheimer’s disease and related disorders. He also noted the firm's collaboration with Genomics England’s new cancer research program, Cancer 2.0, which is exploring long-read sequencing technology to help achieve earlier, faster diagnosis of cancer.
Additionally, Sanghera announced that the company has signed a memorandum of understanding with PathoQuest, a next-generation sequencing-based biosafety testing firm, to commercialize an integration site analysis test — both good manufacturing practices (GMP)-validated and non-GMP — for biomanufacturing quality control.
"ONT has the potential to offer significant advantages within the genetic characterization, safety, and contamination investigation space," Sanghera said. "The development of regulated platforms will be a key enabler in penetrating the biopharma QA/QC testing market."
For full year 2022, Oxford Nanopore booked total revenue of £198.6 million compared to £133.7 million in 2021, in line with the £199.0 million revenue estimate provided by the company in January.
"We are seeing strong momentum across the business," Sanghera told investors. "We continue to push the boundaries of uncovering the dark genome, as well as continuing to innovate on our platform."
The firm's 2022 life science research tools (LSRT) revenue was £146.8 million, 76 percent of which came from consumable sales. This represents a 16 percent increase from £127.0 million the year before, driven by increasing customer numbers across various applications.
Besides the United Arab Emirates, at a regional level, LSRT revenue in the Americas was £48.3 million, representing 45 percent growth from £33.3 million in 2021, mainly driven by research in human disease and genomic surveillance in the US and Canada. LSRT revenue in Europe was £43.3 million, up 30 percent year over year from £33.4 million. LSRT revenue in China increased 76 percent to £19.3 million from £11.0 million, driven by the application of MinIon and GridIon to infectious diseases. LSRT revenue in Asia-Pacific and Japan was £14.3 million, a 28 percent jump from £11.1 million in 2021, while LSRT revenue in emerging markets stayed essentially flat, at £6.2 million, compared to £6.4 million the year before.
Oxford Nanopore also grouped its customers into three segments, based on total orders. S1 customers, representing annual orders of less than $25,000, generated £29.8 million in revenues, up 29 percent from £23.1 million in the prior-year period. S2 customers, representing orders in the range of $25,000 to $250,000, accounted for £52.3 million of revenues, up 36 percent year over year from £38.4 million. Indirect customers, who purchased through distributors, accounted for £18.1 million in revenues, up 86 percent year over year from £9.7 million.
According to Cowper, the company saw a net increase of more than 1,900 active accounts in 2022, boosting the total number of active customers to more than 8,200.
The firm's full-year R&D spending decreased 15 percent to £64.8 million from £76.0 million in 2021. Adjusting employer’s social security taxes on pre-IPO share awards, its R&D expenses increased to £74.7 million, a 28 percent increase from £58.3 million in 2021. Its SG&A spending dipped 3 percent to £157.4 million from £161.8 million while its adjusted SG&A spending grew 18 percent to £116.0 million from £97.9 million.
Over 2022, the company increased its global workforce, including a significant expansion in North America, to 1,009, compared to 803 in 2021. "We've doubled our commercial headcount since the IPO to meet the growth and commercial targets we set out at IPO," Sanghera said.
Oxford Nanopore's 2022 net loss was £91.0 million, compared to a net loss of £167.6 million in 2021. The reduction was mainly driven by higher LSRT gross profit, the settlement of a Department of Health and Social Care (DHSC) contract, the sale of a building, and a net decrease in the provision for employer’s social security taxes on share awards, partly offset by higher operating expenses.
The company ended the year with £558.0 million in cash and cash equivalents.
For full-year 2023, Oxford Nanopore expects LSRT revenue to grow 16 percent to 30 percent.
In Tuesday afternoon trading on the London Stock Exchange, Oxford Nanopore shares were up almost 9 percent to £194.0.