FY23 trading update
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Oxford Nanopore Technologies plc
FY23 trading update
09 January 2024
Oxford Nanopore Technologies plc (LSE: ONT) ("Oxford Nanopore" or the "Group"), the company delivering a new generation of nanopore-based molecular sensing technology, today provides a trading update ahead of reporting its full-year 2023 results on 6 March.
FY23 financial performance
The Group expects to report LSRT revenue for the 12 months ended 31 December 2023 of approximately £169 million (FY22: £146.8 million), representing year-on-year growth of approximately 15% on a reported basis and 15% on a constant currency basis. Underlying LSRT revenue growth, excluding revenue from Emirati Genome Program ("EGP") and COVID-19 sequencing, is expected to be approximately 39% on a constant currency basis. Strong performance across the broader customer base in FY23 was driven by consumables[1] sales, which accounted for approximately 75% of revenue.
Underlying revenue growth in the second half is expected to be approximately 32%, impacted by slower than expected ramp up of certain new S3 customers. Expected revenue from these customers in FY23 will now fall into FY24. In addition, there was some slow-down in growth in China and in the Middle East following issuance of the recent US semiconductor trade rule further regulating sales of advanced AI semiconductors. Product development plans within 2024 include updates that are expected to mitigate this headwind.
In addition to financial reporting, there was other evidence of market traction and disruption. For example, the Group leased or sold more than 700 PromethION 2 Solos (P2 Solo) in FY23; Oxford Nanopore's most recently launched product represents a new market area of affordable, accessible and high output sequencing. Material associated revenue is anticipated to pull through with consumables sales in FY24 and future periods.
Emirati Genome Program update
The Group has signed an agreement to replace and supersede the existing purchase agreement it has with G42 Laboratories LLC ("G42") in support of the EGP. The new agreement will provide greater flexibility to achieve the programme objectives and reflects the parties' desire to refocus on clinical uses of the platform, that can utilise the platform's unique benefits of richer and faster data. G42 and Oxford Nanopore have agreed to collaborate to leverage the richer data and speed of Oxford Nanopore's technology in areas of unmet clinical need such as developmental disorders, rare human genetic diseases and neonatal intensive care.
The EGP contract, originally announced on 9 November 2021 with a total value of approximately $68 million over a three-year period, has generated revenues of approximately $43.5 million to date, including amounts payable in relation to the amended contract. The new agreement will remove the outstanding purchase commitment from the original agreement and extends the expiration date until 31 December 2026. EGP revenue in 2024 and beyond is not anticipated to be a material portion of revenue and as such, the Group will cease reporting EGP revenue separately following FY23 results.
Revenue related to the EGP in 2023 (under the original and revised agreement) was approximately £12 million, in-line with guidance.
Excluding EGP, the Group's gross margin in FY23 would have been expected to be more than 57%, in-line with guidance. However, as a result of the agreement with G42, the Group's FY23 gross margin is expected to be in the range 53 to 55%. Gross margin in future periods is not expected to be affected by this amendment.
Medium-term Outlook
All medium-term (FY26) targets are unchanged:
The Group continues to expect underlying revenue growth of more than 30% per annum on a constant currency basis, consistent with the Group's recent performance.
The Group's medium-term gross margin target of greater than 65% for FY26 is also unchanged. Margin expansion is expected to be driven primarily by operational improvements already underway and/or planned including improved manufacturing processes, recycling of electrical components and automation.
The Group continues to target adjusted EBITDA breakeven by the end of 2026. This will be achieved through revenue growth and margin expansion, detailed above, and disciplined operating expenditure.
[ENDS]
This announcement contains inside information for the purposes of the UK version of the market abuse regulation (EU no. 596/2014), which forms part of English law by virtue of the European Union (Withdrawal) Act 2018. The person responsible for arranging the release of this announcement on behalf of the Company is Hannah Coote, Company Secretary of Oxford Nanopore Technologies plc.
For further information, please contact:
Oxford Nanopore Technologies plc
Investors: ir@nanoporetech.com
Media: media@nanoporetech.com
Teneo (communications adviser to the Company)
Tom Murray, Olivia Peters
+44 (0) 20 7353 4200
OxfordNanoporeTechnologies@teneo.com
About Oxford Nanopore Technologies plc:
Oxford Nanopore Technologies' goal is to bring the widest benefits to society through enabling the analysis of anything, by anyone, anywhere. The company has developed a new generation of nanopore-based sensing technology that is currently used for real-time, high-performance, accessible, and scalable analysis of DNA and RNA. The technology is used in more than 120 countries, to understand the biology of humans, plants, animals, bacteria, viruses and environments as well as to understand diseases such as cancer. Oxford Nanopore's technology also has the potential to provide broad, high impact, rapid insights in a number of areas including healthcare, food and agriculture.
For more information please visit: www.nanoporetech.com
Forward-looking statements
This announcement contains certain forward-looking statements. For example, statements regarding expected revenue growth and profit margins are forward-looking statements. Phrases such as "aim", "plan", "expect", "intend", "anticipate", "believe", "estimate", "target", and similar expressions of a future or forward-looking nature should also be considered forward-looking statements. Forward-looking statements address our expected future business and financial performance and financial condition, and by definition address matters that are, to different degrees, uncertain. Our results could be affected by macroeconomic conditions, the COVID-19 pandemic, delays in our receipt of components or our delivery of products to our customers, suspensions of large projects and/or acceleration of large products or accelerated adoption of pathogen surveillance. These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements.
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