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Oxford Nanopore Shares Sink 15 Percent on Weak Preliminary 2023 Revenues

NEW YORK – Oxford Nanopore Technologies' shares fell more than 15 percent on Tuesday after the company reported lower-than-expected preliminary revenues for 2023.

For the year ended Dec. 31, the UK nanopore sequencing company booked approximately £169 million ($215 million) in life science research tools revenues, up 15 percent on a reported and constant currency basis from £146.8 million in 2022 but missing analysts' consensus estimate of £177.4 million.

Excluding revenue from the Emirati Genome Program (EGP) and COVID-19 sequencing, year-over-year LSRT revenue grew about 39 percent in 2023 on a constant currency basis but only 32 percent in the second half of the year due to "slower than expected ramp up of certain new S3 customers," Oxford Nanopore said in a trading update on Tuesday.

"Expected revenue from these customers in FY23 will now fall into FY24," the company noted. "In addition, there was some slowdown in growth in China and in the Middle East following issuance of the recent US semiconductor trade rules further regulating sales of advanced AI semiconductors."

The firm added that product updates it has planned for 2024 "are expected to mitigate this headwind."

Growth in 2023 was driven by consumables sales, Oxford Nanopore said, which accounted for about 75 percent of revenues. It leased or sold more than 700 PromethIon 2 Solo instruments in 2023.

Further, the firm reported that it has signed a new agreement with G42 Laboratories, which supports the EGP, replacing and lowering the total value of its existing contract. The original EGP agreement, signed in 2021, had a value of approximately $68 million over three years and has generated about $43.5 million in revenues for Oxford Nanopore to date.

The new agreement "will remove the outstanding purchase commitment from the original agreement" and has been extended until Dec. 31, 2026, according to the firm. "EGP revenue in 2024 and beyond is not anticipated to be a material portion of revenue and as such, [Oxford Nanopore] will cease reporting EGP revenue separately following FY23 results," the company added.

Also, the new contract "reflects the parties' desire to refocus on clinical uses of the platform," according to Oxford Nanopore, and the partners plan to use the nanopore technology "in areas of unmet clinical need such as developmental disorders, rare human genetic disease, and neonatal intensive care."

Looking forward, the company said it continues to expect revenue growth of more than 30 percent per year on a constant currency basis. It also still expects to reach "adjusted EBITDA breakeven" by the end of 2026.

Near the end of trading Tuesday, Oxford Nanopore's shares on the London Stock Exchange were down almost 15 percent at £1.72.