Oxford Nanopore Technologies plc (4R0.F) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to the 2026 JPMorgan Healthcare Conference. My name is Zain Ebrahim. I'm a European pharma and life sciences analyst here at JPMorgan. It's my great pleasure to welcome the Oxford Nanopore CEO, Gordon Sanghera; as well as the CFO, Nick Keher, who will join Dr. Sanghera for the Q&A. So as a reminder, we'll follow the usual structure, 20 minutes presentation followed by 20 minutes Q&A, where you'll be able to ask questions either in the audience or through the web link. And with that, I'll hand over to Gordon. Thank you for being here.

Thanks, Zain. Afternoon, everybody. Okay. This has been a 20-year journey for me. We set the company up, spun out of Oxford, I was employee #1, often referred to as patient #1, still here, still going. I am coming to the end of my tenure at the end of this quarter. But our goal 20 years ago was to develop a single molecule electronic sensing platform. The company's vision was to enable the analysis of anything by anyone anywhere. So work in progress. We've done some amazing things from having sequencers in space to the marina trench and Antarctic, not Greenland, I don't think, but maybe we shouldn't talk about Greenland today. Anyway, in that 20 years, we have developed DNA/RNA sequencing. And we are now extending the platform to proteomics as well. I'll talk a little bit about that later. It has the potential as well to measure metabolites and also volatile organic compounds. In 20 years -- well, 10 years ago, we launched products moving forward 10 years. In that time, there have been over 20,000 publications, 20,000 publications showing the multiomic genomics that we provide, which is highly differentiated from everybody else. That decade of innovation in the hands of our customers has enabled us to develop new workflows, new areas of NGS applications that are unique to Nanopore, where we deliver this multiomic workflow. Our growth over the last 5 years has been 28% CAGR. So consistent strong growth with this highly differentiated platform. 2025 was another -- good growth year. Our estimate revenues are GBP 223 million to GBP 224 million. That is 24% growth on a constant currency basis. In all our regions, we outperformed the market significantly with over 20% growth. To remind you all, 70% of our revenues come from our sequencing consumables, and we have cash or cash equivalents of GBP 300 million, just over GBP 300 million. So we're well capitalized to continue this growth. This publication growth, that exponential growth there tells you that we still know very little about our human genome 22 years after it was first mapped. And the more we look, and Jay is in the audience today, the more we look, the more we find it's complicated. The previous talk was about xenografts and HLA regions. These are regions that Nanopore can read cleanly. So it will have an impact across many markets. For us, growth came from our four target markets. Now the lifeblood of this company has been life science research tools workers and 67% of our revenues come from that segment. We grew 15%. That's significantly outperforming the market. In our target areas, clinical grew 60%, biopharma 30% and applied industrial 27%. That today represents 1/3 of our revenues. That shift in the last 2 to 3 years has really shown how the platform has matured from an interesting academic life science research translational tool into applied end markets. And that is why we are growing above market conditions with this platform. This platform is highly differentiated, and I wanted to just remind you all what that means. So we read native DNA directly. We take double-stranded DNA, we singulate it and we pass it through a sensor. The sensor is a nanopore, which is an electronic measurement platform. So there are no fluorescence tags, no amplification. We read the native DNA directly, which means we can see modifications. We also read RNA directly. which was a -- should we do this or not an academic curiosity 5 years ago, it's really empowering our biopharma franchise today. We pair that with rapid real-time live streaming of that DNA/RNA information. And our platforms are affordable and accessible. Those three pillars underpin this highly differentiated sequencer. The richness of content is all provided in one sequencing run. We can see the common SNPs and SNVs, but we can read at any length, short, hundreds of bases; long, tens of thousands of bases; ultra-long, hundreds of thousands of bases. The longest read so far is 4.5 million. We have an ambition at Nanopore that one of our customers will read end-to-end chromosomes in one contiguous fully loaded, fully omic read. Our RNA is the same. It's read directly. It's not a cDNA copy. So we can see modifications, and these are increasingly important in understanding the underpinning of our biology here. That richness of content, rapid real time and affordable, accessible is driving the growth. When we look and how we selected the applications and workflows in those applied markets in particular, we did a lot of analysis. It's a 20 billion to 25 billion market that can take advantage of this highly differentiated platform. As we break that down into the segments we're interested in clinical, biopharma, research, that's 13 billion to 14 billion white space opportunities unique to Nanopore. So that's great, but that's a lot of opportunities. That's a lot of workflows you can think about with a finite amount of cash to do that. So key to growing strongly and picking the right workflows is our partnerships, both at the front end for sample extraction, sample collection, extraction, targeted enrichment, if necessary, and the back end, where we have data streaming, secondary analysis tools and territory analysis and customer workflows. All of those come together and they guide us on what to build and how to build in the target market audience that we're looking for to get the growth. Focusing a little bit on what partnerships and collaborations look like and picking on clinical, which grew 60%. We have partnerships and collaborations in human genetics research, population scale. Methylation is driving our oncology franchises. In rare disease, with the long reads, we can now pick up 150,000 structural variants. We can see all copy numbers. We can see gene fusions. In oncology, I forgot to mention, 97% of the methylome is uncovered by Nanopore sequencing. And remember, that is part of the sequencing run. In infectious disease, rapid real-time insights in acute and critical care are driving adoption. So I want to spend a few minutes talking about these target areas in research, clinical and biopharma and give you some examples of how we are either taking market share from existing sequencing or creating whole new workflows. So starting with research. And this really is our lifeblood. All the end market applications I'm going to talk about in clinical and biopharma shortly, all started in research. It all begins in research because we are redefining and rewriting what multiomics genomics looks like. So our population scale programs, we've just completed PRECISE, 10,000 genomes in Singapore. We have an active European long-read program, ELRIN. The PRECISE U.K. Biobank program is to sequence 50,000 samples to create the first 5 base genome. So we will publish the methylome of that data set. And I think that will be as significant as the first human genome as we look at that fifth base. All of these large data sets are not just revenue generating for big population scale programs. They create that pillar of innovation that is driven from those data sets. And with the potential of machine learning AI, we can do this at accelerated speeds. So that leads us into exciting new areas. I'm going to -- 5 years ago, RNA was an academic curiosity. Today, it's driving our biopharma. We're just scratching the surface on understanding RNA. TRNA epitranscriptomics codes for proteins. So understanding mutations in DNA, understanding full-length transcripts directly in RNA and modifications, particularly epitranscriptomics will really allow us to understand how we're coding and the messenger systems and those synthetic biological process to make the proteins, which will be significantly important in drug discovery. So I'm really excited about that, and you'll hear a lot more about tRNA in the next couple of years. But there's so much more that happens in the academic space. This is a really hard slide to build because there were so many interesting things. Next-generation antibiotics, are being developed by sequencing the cell microbiome, getting nature to tell us how we can do something about these difficult pathogens. So all these research opportunities, today's revenue generators in LSRT are tomorrow's big blockbuster applications that are coming through. In clinical, our most advanced programs are in infectious disease. 4 years ago at Guy’s and St Thomas’' they started looking at respiratory metagenomic scanning of patients in ICUs. That now has turned into a program funded by the U.K. government, the Office of Life Sciences to roll out this respiratory metagenomic workflow in ICU, in acute and critical care settings to 30 hospitals. We're in 7 now. And what we see is 1 in 3 people are on a broad spectrum antibiotic that is not going to do anything for them. Turnaround time is 2 to 3 hours versus 2 to 3 days. We had a delegation of U.K. KOLs come over to Guy’s and St Thomas’' and the Advent Group took away the learnings and set up a pathogen ID workflow and brought it in-house. In their first pilot, they are saving $250,000 per annum. Sequencing is replacing traditional microbiology. That workflow for Advent is going to be rolled out into 20 hospital groups. Now one other thing that you get from the respiratory metagenomic scanning, Guy’s and St Thomas’' very cleverly partnered with the U.K. HSA and all of the data is uploaded to the HSA. That gives us an early warning on a novel new variant, respiratory variant and almost certainly, the next pandemic will be a respiratory pathogen. So as we roll out beyond the 30 hospitals into the whole of the NHS, we will have an always-on pandemic radar. That comes for free. First COVID genome in the U.K. was discovered in Brighton in ICU in a patient with respiratory infection. So we know that's how we're going to prevent the next pandemic. On panels, clinical panels, we have an enabling technology, which is adaptive sampling. What is that? That is on sequencer intelligent, real-time targeted enrichment. So we don't have to do an enrichment step prior to putting it on the sequencer. As the DNA goes through the hole at 400 bases per second in the first second or 2, the sequencer will decide whether it's a gene of interest. So when we think about our hereditary cancer panel, there are 258 genes. You literally program them in, agile sample. You don't have to spend time, cost and complexity enriching, and it will read those 258 genes. And because it's full length, it is more -- it closes all the gaps you have as well. We see this as a real accelerator of our clinical applications into the panel space. Similar story with our partnership with Asuragen. They have 11 challenging medically -- I knew I was going to get that wrong, 11 genes that have a lot of long-read issues, copy number, gene fusion, we can read those cleanly, which gives us a comprehensive panel with one workflow for those 11 genes versus multiple assays that they have to do today to look at carrier screening. So we're excited about unraveling these challenging areas. Okay. This slide should have a lot of partners on it. But every single one of our biopharma partners said we can't talk about what we're doing with them. What I can tell you is in these three pillars, in discovery, in biomanufacturing QA/QC and ultimately, fee-for-service providers, we have lots of partnerships. It's almost easier to think about who is not on this list, but we can't talk about that. What I can tell you, and if I pick a couple of examples, if you look at mRNA, modifications drive both potency and stability. We take a workflow that takes 6 to 8 orthogonal analytical measurements, and it takes a month to characterize the DNA -- the modified RNA, sorry. We can do that overnight in one run. So that's radically transforming the discovery cycle for individual RNAs is 3 months. A month of it is characterization and testing. At the same time, once we have made that RNA, we can then manufacture it and look at the QA/QC. And ultimately, some of these workflows are bleeding into fee-for-service CRO providers. The second one I want to talk about is adventitious agent viral testing, so viral contamination. Again, same story. It takes 2 to 3 weeks, and it's 6 to 8 orthogonal measurements. It's not real time. And we can do this in real time, and we have early access customers evaluating. We have customers who are looking to put it into routine testing. And ViruSure has launched the fee-for-service CRO AVA workflow. And one of our service providers, Eurofins did some sterility testing for a biopharma and saved a batch, early warning and saved a $15 million recall. This just shows you the power and the biopharma community are conservative. They're highly regulated, so it takes time, but you can see glimpses and that strong growth at 30% is coming from these groundbreaking unique to Nanopore workflows. So it's not just about putting a lot of very smart sample-to-answer end-to-end workflows together. We continue to understand that we will create further new novel applications with these multiomic genomes. So our frontier innovations continue to drive sales in the research segment. We are looking at modifications beyond methylation. We're up to 4 on DNA. I talked about adaptive sampling. I think that is going to be a game changer in panels. And our direct RNA is going really well for biopharma, but tRNA is coming next, and that will be exciting as that biology is better understood. We are closer to proteomics, one step closer. We can now measure 20 to 30 peptides in a row. So we believe there's an application there, unique peptide measurement. And our amino acid callers are coming along. So we're making good progress on pure sequencing of proteins as well. Our product platforms, we launched P2i, which is driving a strong PromethION adoption. It's a 2-channel PromethION. Mk1D, which replaces the MinION classic. If you have one of these, keep it, it will be worth a lot of money one day. We continue to improve outputs and accuracy. We are already the most accurate sequencer on the planet. Yes, we started our journey 10 years ago with something that was barely sufficient with regard to accuracy, but that's the way disruptive technologies come into the marketplace. Think digital photography, think early mobile phones, think Nanopore. Today, we provide the most comprehensive, the most accurate, the most complete genome. But there's more to come. We're at Q30. I'm pretty confident Q50 will be enabled, particularly catalyzed by the machine learning AI models that are coming at us at Lightspeed. That really will be transformative. End-to-end workflows drive these applied market applications, which give us sticky revenues, incredibly important for us. So looking at the time, 2026, what am I excited about? We're currently typically for the last couple of years on PromethION, our APA has been around 1 human genome per flow cell. We're in early access, 2 genomes per flow cell. The headroom in this platform is 4 genomes per flow cell. That gets you into a couple of hundred dollar fully loaded genome. So that's coming. There's still lots more headroom. End-to-end workflows paired with our regulated platforms are driving the clinical and biopharma markets. And for us, for me, I'm really excited about proteomics. We don't need to go to full protein sequencing. You all know there are a lot of peptide drugs out there. We can now characterize those at the single molecule level. We can see modifications on those. So that's a really exciting space for us as we move into next year. So in summary, GBP 223 million, GBP 224 million, GBP 0.25 billion. I never thought I'd be standing here saying that. It's like just still pinch me. 24% growth on a constant currency basis. GBP 300 million in the bank to continue our ambitious growth. And we're moving to the next stage. I will be stepping down in March. We're bringing in Francis Van Parys, comes from a bigger company. We've laid the foundations. He was at GE, in Cytiva, so biopharma experience. He was running Radiometer, several billion-dollar company, so clinical experience. We've laid the foundations on our innovation engine in the hands of our customers in our Life Science Research Tools business. We now really want to scale these businesses in the applied markets. So I'm looking forward to handing the baton on. I think we're in good shape, and I'm excited about that. And I want to leave you with this David Barry quote because a lot of people have asked what am I going to do next. And what he said when asked that, I don't know what I'm going to be doing next, but I can assure you, it will not be boring. Thank you.

And now we move into the Q&A portion of the session. So if you would like to ask a question, raise your hand and we can get a mic to you and also you can ask questions through the portal. Maybe I'll start off with a question whilst we wait for the audience. Gordon, maybe let's start there in terms of -- it's been an incredible tenure, 20 years as CEO, launched groundbreaking technology in Nanopore sequencing in terms of pioneering it and then bringing it to market with MinION over a decade ago. And then over the last -- and then bringing Oxford Nanopore as a company publicly about 5 years ago now. So how do you reflect on your journey in terms of your key thoughts and takeaways? And what are you most excited about for the next chapter?

First of all, I must thank JPM, 15 years ago we started coming here to showcase and talk to you guys. It's been brilliant. What I'm excited about, I think we've just laid the foundations of this platform. I would like to see this become as ubiquitous as a telescope or a microscope, and I think it can. And you've seen some of those use cases. I see in less than 5 years, all infectious disease will be run through Nanopore sequencing. And -- it's been a tough 5 years in the public domain, but it feels -- this conference feels like the green shoots of recovery are coming back, and I'm excited about that. The only thing I'll be disappointed about is the share price is going to go up just as I leave. But I'll take some credit for that. So I think we're kind of coming out of the post-COVID hangover. I mean I expected a 2- or 3-year hangover. It's now year 5, and it's still there. But I think I'm optimistic for the sector and for us.

And building on those green shoots, I mean, we've seen that from some of your peers, but you also reported overnight, as you said -- or this morning, U.K. time, as you said, overnight at San Francisco with a strong set of numbers in terms of 3% beat versus consensus and revenues ahead of where you initially set the guide. So can you talk through what were the key areas of strength that drove the outperformance versus the guide and maybe versus consensus in your view?

Do you want to take that, Nick?

Yes, absolutely. So we're very happy with the performance that we delivered in 2025, but I think it's full credit to the team essentially that kind of very focused during the year. So the areas of outperformance, when we set the guide of 20% to 23% is because we were at this conference last year, we just delivered 34% constant currency growth in the second half, and we're very excited about going into the new year. And then clearly, we had quite a few upsets in terms of NIH funding that kind of impacted the whole economy. We saw that as a key risk. So we set out some prudent guidance at the beginning of the year, said 20% to 23%. We've delivered 24%. We think we've taken share in the Americas, in particular in the research space. But we also kind of refocused in terms of those applied market opportunities and delivered quite substantial growth. So as Gordon has talked to, planting those kind of seeds and they've kind of grown up now and the clinical market growing 60%, biopharma 30% with a lot more room to grow. And in applied growing 27%. We're very pleased with how that's kind of performed overall. Clearly, we didn't do as -- we set cautious expectations for the Americas, in particular, the U.S. research space. And if anything, what we saw was actually we took share overall with collectively across a lot of customers, essentially, we just saw more orders, smaller orders essentially going through, which speaks to the value of the platform as well.

And maybe building on that in terms of the NIH exposed segment, is that where you saw the smaller orders? Was that within academic institutes mainly? And how did you see the government channel perform in the year?

Yes. So I mean, it was still a very tough year. Academic institutes, we actually saw about teens growth in the first half, and we're looking at the full detail still now. But for the full year overall in the Americas, when we look at combined with the distributor piece as well, our research and government market actually saw small growth. It's single digit, nearly high single digit against the rest of the market where we think the rest of the peers will be down. We think that just speaks to the fact that we've actually captured share in this market environment. So we're very happy with that. And it's also worth just calling out as well like regionally, we've done very well in the Americas with the second half performance of 30% growth. When we look at EMEA, it delivered very strong growth yet again, very consistent on a 3- and 5-year view. We'll continue to take market share. And in APAC, even in spite of a very large contract rolling off in the second half, we still delivered over 20% constant currency growth. So -- and that's a key thing to take away. This is not just one thing, one market. This is all markets, all product lines, we saw growth.

And you shifted business models as well early last year with the shift to CapEx model versus previously the OpEx model. It seems customer reception to that has been positive. So can you talk through that in terms of customers' reactions and how much of a tailwind that was to growth in '25? And what we should expect in '26?

Yes, absolutely. I mean I don't think we'd necessarily say that this has been over the moon with the change that we put forward, but we have seen adoption happen. So why did we do it? So essentially, we had a business model with the MinION, which clearly mass produce that, get it to as many hands as possible, get people sequencing, make perfect sense. With the large devices where we've got the GPUs inside, placing the instrument with customers, it was the right thing to do. We've now shifted that to actually match what essentially our competitors do in the market of selling the device upfront. It's better for our cash flow. It's more consistent with the customers expect with how they treat with other of our competitors, and it makes communication easier with them as well. So it's greater for transparency, easier by region and whilst we caught people out in terms of timing because of the budget cycles, which is what we saw, as we go into next year, we are looking at the fundamental bottom-up approach to our budgeting, we can see that the volume growth is coming back as well. So we saw a good Q4 for volumes overall for devices. We're looking at that kind of continuing now into next year. And as we think about the fact that we now charge for the device upfront, we think we've actually still got a bit of a tailwind to come. So we talked about the fact in the first half that we delivered about over 500 bps improvement in our gross margin, which I know we'll come to. And for the first half, we said that about 300 to 400 bps of that was related to the kind of pricing benefit that we saw as well. And that is not temporary, that is structural. And then from a cash perspective, we've improved our cash flow by about GBP 20 million a year as well from changing the business model approach, which thankfully, the customers have adopted as well. We're still here. So we didn't get too much of a bad response from people. But clearly, we're very pleased and happy with how the customers have responded to this change.

And beyond the CapEx model in terms of '26, thinking about what the key moving parts are, could you contextualize that for us?

Yes. So when you introduce something like this, clearly, we're not going to make everybody buy a device upfront, particularly if they had a quote order in the system or even -- at that quote stage, sorry. So we've honored everything in there. So if you imagine at the beginning of the year, when we introduced it, we were still seeing the majority of our sales with that kind of OpEx approach or kind of like a lease model. That's essentially dwindled down to the point now that the exit, we're more like 100% CapEx. So as we go into next year, we're going to get the full year cycle benefit now plus the volume aspect as well. So that's the kind of key moving part to it.

Makes sense. And thinking about overall revenue growth in '26 in terms of the key puts and takes, what would you say they are? It sounds like U.K. Biobank could be quite a strong contract for you. NIH funding pressure was maybe one to think about, but any other factors that we should be thinking about?