Oxford Nanopore Technologies plc (ONT) Earnings Call Transcript & Summary

Dr. Gordon, please go ahead. Thank you.

Good afternoon, everybody. Hopefully, you've all had an opportunity to watch technology update from Clive London Calling event last week. We will send links to that. Joining me today is Rosemary Sinclair Dokos, Rosemary Dokos as we say, Sinclair, reading the script, SVB Product Management, who will give a brief recap of the key tech updates, and then we're going to dive straight into Q&A, if that's okay with you guys.

Thank you, Gordon. Hi, everyone. Good afternoon. So last week, we had our technology update at London Calling. It's something we do every year. It's a really, really great opportunity for us to engage with our community of users and provide a road map as to where Oxford Nanopore is going. We've had a lot of interest over the past few months around -- and many, many years around our accuracy in Simplex and Duplex. So we kicked the show off with duplex. We've updated our users on how our Duplex rates have continued to improve, both internally, but also in the hands of a very select number of users who had developer versions of the product. We showed internal improvements such that you can get 90 gigabases of human data of a single PromethION flow cell that is composed of 50 gigs of duplex and 40 gigs of unpaired simplex. So that is over 90 gigs of data, which is Q20 and above, with a lot of it at Q30. And those are long, long native human reads. We showed our time line and our road map to get all of this implemented into MinION so it's really easy to run. And we also showed what the technology is actually capable of when it's fed ultra-clean PCR DNA, which is over 100 gigabases of Duplex data from a single flow cell with a 30 -- further 40 gigs of unpaired Simplex. We're making this available to users now. So users today can log in and register interest on our website. From there, they are spoken to by members of our technical team just to make sure that they have everything in place that they need in their labs, and then they will be given access to this technology. We reminded all of our users about our Simplex capabilities, and it's really important to remember that Duplex has been phenomenal for really difficult problems like telomere-to-telomere assemblies. However, when it comes to whole genome sequencing, detecting variants, detecting methylation, Simplex continues to be a market-leading data type. Our outputs on Simplex are routinely over 100 gigabases in our customers' hands, our SNV and our SV and our methylation detection are market-leading and we've made great strength and great improvements in our INDELS performance, particularly in coding regions where we are getting over 99% INDELS performance in coding regions across the whole genome. We have shown a road map on how we're going to get Simplex from 1 genome per flow cell to 2, 3 and then 4 as we continue to have immense headroom in our platform. We've also spoken about our ability to now provide base calling in keep-up mode on the A100. So these are improvements that are going to go out shortly such that customers when they start PromethION run their analysis, not just base calling but also methylation detection and alignment can all happen on device. On modifications, we've spoken about our ability to do the industry standard 5 methyl C, our market-leading ability to do 5 methyl C detection and going into research now is the ability into research, but this is actually research with our customer base is the ability to detect novel modifications in all contexts. RNA was a really big star of the show, not just in Clive's talk, but we also had an RNA talk just before Clive and many other during the conference. And our direct RNA chemistry is getting a significant output boost as well as an accuracy boost, and we are making available tools, early tools for people to start interrogating the modifications in RNA. Around our platform, we've spoken about the availability, the early access of our P2 solo device and our developer release now of the P2 integrated with compute and how all of this continues to drive utilization and drive adoption of our platform. We have a lot of new platforms in the pipeline. So we are -- the MinION is due its first facelift in 10 years. That will be coming later this year, early next year, and its incorporation with iPad brings together the most distributed sequencer on the planet with the easiest-to-use user interface from Apple. And we also have a road map of new ASICs including the SmidgION ASIC, which will lead to a whole host of new and exciting devices, which are incredibly low power and potentially the cost consumable there, too. So that summarizes all of the key points that we made at London calling at the tech talk. And now we'd be happy to take some questions.

[Operator Instructions] The first question comes from the line of James Gordon calling from JPMorgan.

James Gordon, JPMorgan. First question was about things you can sequence. So there was quite a lot of talk about duplex sequencing and RNA sequencing in the presentation. How widely do you think each will be needed? So do you think in future, you're going to get a very large proportion of people using and oppose using Duplex? And similar sort of question of RNA sequencing. Is that going to be very big? Or is that quite niche. I think there was a comment before that maybe 5% of the sequencing market will be RNA. So could that be conservative? And actually, it could be a much bigger commercial opportunity. And a second question was just accuracy, even further improvements. But are we now there on accuracy? Or are further improvements actually needed? And are you going to see a lot more -- further improvement?

Thank you. So on the Duplex, RNA, Simplex, I think Duplex, it's been an immense interest. The telomere-to-telomere work that happened sort of last year and leading into this year, has really sparked to an immense amount of imagination. So Duplex, the telomere-to-telomere work is generating a lot of attention because you can apply it to humans, but also there's a lot of efforts now in doing perfect assemblies of plants and animals. And so whilst it will drive a lot of scientific discovery, when it comes to how much sequencing happens on the planet today, which is de novo assembly, which is what Duplex is really useful for versus how much sequencing happens on the planet today for just run-of-the-mill variant detection. The vast majority is run-of-the-mill bearing detection, which is why Simplex is such an important technology to Oxford Nanopore, but also, we want to feed not just run-of-the-mill capabilities, we also want -- we want to provide a tool that can also lead science in new directions. And so both are very, very important. RNA is a very -- again, a very interesting market because RNA changes. It's a dynamic molecule, whereas DNA, of course, modifications change slightly, but it's a more static genomic fingerprint. RNA is something that changes all the time. So whilst again, it is today, perhaps not as big a market as DNA sequencing in the future and years to come RNA can be -- can become much, much bigger than what it is today, especially given interesting tools and interesting capabilities that we'll be working with our community to develop over the coming years. The other question was accuracy, further improvements, are we there yet? I think it's really important as a company that we never say we're there. We always -- there's always more to come from an innovation standpoint. That's what will keep us ahead of the competition. Where we are today is incredibly competitive performance versus the rest of the market and the ability to answer customers' questions. So we are there in terms of what our customers need today, but we always need to be ready for what they want tomorrow, and that's what the innovation team worked hard to deliver.

The next question comes from the line of Odysseas Manesiotis from Berenberg.

First of all, I understand you didn't talk about RT sequencing and protein sequencing. I'd say all the other [indiscernible] are quite clear, but could you give us a bit more color on your progress and in particular, on the RT side? And then I'll ask another one.

Sure. I think the trouble with London Calling is that we could probably fill 3 days just of Oxford Nanopore progress, but that wouldn't be really very interesting for all of our customers. So we do have to be a little bit brutal into what makes it into our technology talk. RT is still in -- with our research teams, our accuracies continue to improve, and we continue to get -- we continue to develop new capabilities, such as things like site selection that Clive has spoken about before. So the team continues to do well. It isn't something that's going to -- that is imminently available to our users, which is why we chose to not talk about it. Protein sequencing, again, it's on the same sphere there. We've made a lot of progress internally and the teams are really, really excited about where we are. But we really felt that this conference we should be focused on what users are going to be using in the near term as opposed to things which are more sort of medium term in terms of delivery. So again, we had to make a very difficult choice in terms of focusing on Duplex, RNA, Simplex and we will come back and talk to us about our team protein sequencing as they near product readiness.

That's helpful. And could you take us through a bit more detail on the early access program for Cyclomics, what will it look like? And what's the roadmap to getting it cleared for clinical use?

So the early access -- so one thing that is important to note about Oxford Nanopore is that we've got a few stages that our products go through. We have developer -- developer releases, early access. And early access for us is already a commercialization path in the customers are ordering product and receiving it. The early access Cyclomics, that is a pure play, that is a tool. So it is not the -- it's not -- it isn't the kit with a specific clinical use case. So what we're doing is making that capability available to our whole community through an early access program so that they can develop applications. Does that -- I hope that makes sense. So what we're doing is launching a kit so that the research community can develop applications and then come back to us with things that they find are incredibly valuable with that type of chemistry.

The next question comes from the line of Charles Weston calling from RBC.

The first topic is on population sequencing programs, please. I appreciate this is not part of a tech update, but there are a couple of presentations from, 1 from EGP, 1 from Genomics England. I just wondered if you can give us a bit of color on that, specifically, I suppose, on EGP, they said, they were looking to sequence 1 million people by 2025, but it was only 83,000 last month, and they talked about PromethION and also [Audio Gap] a sense of how they're looking to accelerate nanopore use there. And Genomics England, they also talked about sort of 1 test for cancer and piloting with Oxford nanopore as well, that would be helpful.

Okay. So the EGP program is 1 million by 2025, but it's not limited to just long-read sequencing. It's also short read as well. And it's public domain information that they are working with BGI and Illumina as well. It's a big program. So the 83,000 update was nanopore sequence genomes. And what the mix looks like and what they end up doing and how all of that plays out, we're not party to that level of information other than we have our contract, which runs until next year and we have a set number of genome that we're doing in that contract. On Genomics England, the -- so I think test is a bit too forward-looking right now. It's -- they're looking with the GLH hubs to roll out and debug what this screening pilot looks like. And it will be on the basis of that, that there will be a clearer time line, if you like, and what that looks like. This is really an exploratory phase right now, exciting but exploratory.

The second topic then, please, on the P2s. I think there was a serial number over to 600 that was shipped. So does that mean you ship more than 600 P2s and it's like from Clive, the first ones need facing. So how many was that? And are these customers new to nanopore or are they upgrading existing capacity?

Yes. So on that, we make lots of P2s, some for customers, some for internal, some for production. So you can't take the serial number in fields as [indiscernible], but we have had an enormous amount of interest in the P2 and it's -- we're just very, very excited with all of the new applications that come out of that customer group every day. In terms of all those new to nanopore, it's a really healthy mix. Some are brand new; some have had GridION, some have had MinIONs. So it's a healthy mix of new users, but also existing users who are going from MinION platform and adding the PromethION to that capability.

The next question comes from the line of Kyle Mikson calling from Canaccord.

Thanks for the update last week, lots of detail there. My first question was going to be about just kind of like a high-level view on the market here and kind of going forward. You talked about this PromethION ultra-high output for PromethION. I think for [ 4 ] genomics flow cell is achievable, maybe like in the near term. But I guess I'm just curious who really needs 20,000 long-read genomics per year today. Like what's the current demand or something like that? And what's a good like per genome price point in your view? Will this only be like a limited update from you in the near term? Or could it expand the market possibly soon and maybe kind of make sense commercially. It's kind of a question about capacity for long read hold genomes right now and kind of how you kind of inter-serve that market segment, I guess.

So I think the demand for population-scale genomics is growing. The more we sequence population scale, the more we need to seem to sequence the less we understand and the variation is proving to be dramatic from region to region and population to population. The key thing to take away from last week's conference was the native DNA with all its modifications, long reads the structural variation and delivering structural variation and copy number variation are game changing across human health and that was particularly highlighted in our clinical translational session on Friday afternoon. So we believe that there isn't a dichotomy in the market between long and short reads. That was something that was created as an illusion when Illumina tried to buy pipe fire. If you started today with a blank canvas and said, you can have very short reads where we've leached out all the interesting things like methylation and we cannot get copy number and we cannot get structural variation or you could have native DNA at any read length you won, the market will naturally migrate. So there is already demand and the EGP program is a flagship for long reads native, nanopore long reads and population scale programs. We are in multiple conversations across the globe and in the conversations. The question we don't know how to answer yet is how you see that transition as we have ever increasing data sets that show native longer DNA is very important. And that is really just a function of time and effort. And 1 driver in population-scale genomics is price. So the BGI and the Illuminas of this world are in that sort of $100 to $300 to $400 range. So we believe we have to be in that range, but then we will be offering a superior data set than anybody else on the planet at scale.

I think there's 1 more point to add there, which is our platforms are really flexible. So the fact that we can do 20,000, if you run the P48, doesn't mean you have to. And certainly, the pricing in place with customers means it's incredibly flexible and it flexes to their demand.

Yes, that's a really important point. These platforms are pay as you go. So you don't have to maximally load these machines either.

Yes. Sorry, Gordon for cutting off. I know that was a great detail there. Maybe Rosemary, just going to you for a quick question -- for a quick follow-up there. I think that you talking -- there was a question earlier about RNA sequencing. And I think what's important here is that like for this update is the direct RNA sequencing aspect. And it sounds like there's a lot of interest there for the developer access for the flow cells and kits. I guess, like how much of an unmet need is native sequencing of the RNA molecule? And maybe could you just walk through how much of a competitive advantage direct RNA sequencing is in kind of like the overall short-read and long-read field.

So I think the direct RNA is the next native long read for DNA, if you like. People -- we've had direct RNA capabilities for a few years, but their outputs have been low. So it's a price per gig or price per molecule has been high. So it's created a whole new market of people who really need that in-depth information. You can only do that with in-depth information. And as the outputs increase, then it becomes an ever more competitive. So not only does it do the more specialist experiments and the more high-value experiments, but it also starts to do some more run-of-the-mill every day RNA experiments. So yes, it's going to be a very growing market. In terms of benefits, we offer both. We offer direct RNA, but you can also sequence cDNA. So customers today can do single cell, bulk, spatial using our cDNA technologies. Those are long reads already. So they capture isoforms, they capture splice variants. So very much in the same way as DNA, we used to just talk about SNVs And INDELS of Illumina machines. It's really the same thing with cDNA with RNA seek, if you like, people just talk about the expression analysis. That's the only thing they really talk about whereas with the introduction of long-read sequencing into that space, we've started to find novel structures. Direct RNA takes that a step further, and it delivers your isoforms. It delivers all your splicing information, but it also delivers modification. And now that is going to be a journey because there are many, many RNA modifications, many of them who've never been looked at or studied before, but it's certainly a very high-value molecule to sequence and the RNA community is incredibly excited about it.

Next question comes from the line of David Westenberg calling from Piper Sandler.

First, I just wanted to talk a little bit about Duplex and kind of the costs associated with Duplex versus Simplex. I don't know if you have -- I think price kind of vary on kind of a customer-to-customer usage kind of basis. But I don't know if there's any ranges you want to give in terms of -- or maybe like comparative Duplex versus Simplex or if there's a nominal amount for how much that cost to say an S1 versus like an S3 customer? What the Simplex versus Duplex comparison cost is? And really like I think this is pretty exciting on kind of the accuracy that you can get with Duplex, and this really does compare on a SNV basis to some of the companies in short reads and even kind of long-read competitors. So just trying to really get a sense for how low you can get that cost and what the market can get and what you can deliver to the market in terms of that cost.

Sure. So again, 1 thing really important to note is our SNV detection on Simplex is as good or better than Illumina across a whole genome. So it's always really important. I know everyone always gets really, really excited with the highest of high accuracy, but it's really important to remember that Simplex is over 99% accurate and can delve into regions of the genomes that we haven't been able to see up until now. In terms of its -- in terms of Simplex's competitiveness, where we can get it down to between $3 and $5 per gigabase, and those are the kind of outputs when our customers are getting 150, 180. We've got all of those tables up on our website in terms of price per gig. It's incredibly competitive. Duplex is a more expensive data type. But again, it's really important to remember that if you think of a telomere-to-telomere reference genome, I think they typically cost these days somewhere in the region of $20,000 to do a telomere-to-telomere by the time you add all the different methodologies into it. And if we're now saying that you could potentially be doing that with 2, maybe 3 PromethION Flow Cell and you've taken something that used to cost $20,000 down to under 3 and there's immense benefit in that. So again, I think it's -- we need to be careful not to do a sort of a price per gig like-for-like comparison for Duplex because it's just enabling science that was not possible before, whereas Simplex is much more the run-of-the-mill price -- for the customers who are price sensitive in terms of price per gig Simplex is incredibly competitive, for the customers who want to do telomere-to-telomere assemblies, the price just got an enormously amount more affordable for them.

Okay. And then I'm going to go back to the interest in terms of the P2. Maybe this is a pretty short direct kind of question. Any sense for how many of those placements are in a production capacity, i.e., the central lab or maybe the core lab, kind of where you would traditionally use those big machines? I'm just trying to get a sense for are you also getting interest from there from a really small platform and then maybe it has a chance to decentralize -- go from centralized to decentralized kind of different from your normal business model, but anyway, just trying to get a sense of that.

Yes. Again, it's gone to a very broad brush of users, a lot of decentralized, a lot of individual labs are picking up the P2 and doing all sort of wonderful experiments. But in the core labs, the interesting part about having the platform in cores is that they can run their larger instruments, their P24s and their P48s. They can run those instruments effectively in production mode if they've got large projects going on. And if they want to try a new chemistry or if they want to try a new improvement, they can deploy the P2s alongside them because it is effectively the same platform. And so that's why we've hit such a big nerve with the P2 launch and that it serves not just customers who've never sequenced before or never used a PromethION before, but it's also going into PromethION labs who want it to run alongside their production units so that they can do experimentation on the smaller device and then scale up on the larger one.

Got it. And then this is a question outside of this kind of the tech update. So feel free to not answer it, if it's -- if I'm answering it or -- asking a question at an appropriate time. But there's been a lot of noise in terms of the China market just in terms of competitive, not just in -- there is a nanopore company there and there is short read companies there. Just any kind of sense for what's going on there overall. And again, I know that's not a tech update question. So maybe I'm asking at the wrong time.

Just the MinIOn has been adopted by the Chinese centers for disease control as it's chosen post-surveillance pandemic network of Choice platform. We continue to make good progress in China. Clearly, the economic landscape has changed over the last couple of years, but some BGI have been there for a very long time, but there is a very sophisticated market in China, and they understand the benefits of native long reads nanopore offers.

The next question comes from the line of Tejas Savant calling from Morgan Stanley.

This is [ Yugo ] on the call for Tejas. Regarding Duplex sequencing, how much of a hurdle is offering this technology for long reads such as ultra-long reads. And can you -- could you talk about the challenges there? And is that something that could potentially occur in the medium term? Or is it more of a longer-term opportunity?

So to do Duplex, you need to put an adapter on both ends of the DNA and the chemistry that we have today for ultra-long doesn't need that. So I think the actual -- better question is, is it going to be necessary to do ultra-long Duplex. I think a lot of the telomere-to-telomere consortia groups have been managing to show incredibly highly contiguous assemblies, which is what the long reads give you with the Duplex as it is today. The Duplex as it stands is generating reads well into the 200 and 300-kilo basis, which is more than -- is very, very long. So it's sufficient to sort of to build the scaffolds that you need for assembly. So I don't think it's going to create a blocker, if you like, in terms of a capability that doesn't exist today. There will be molecular biology ways in which we can address it. However, for now, customers are getting long reads with Duplex. And they are building the scaffolds and assembling the genomes that they need with those long reads and they're accentuating that with ultra-long if they -- if required. Again, remember that the ultra reads are 99.3% accurate. So again, they are incredibly high accuracy. They are Q20 on ultra-long.

Got it. Got it. And then on adaptive sampling, what applications are you seeing the greatest traction? And is this something that could be useful for a needle in a haystack type of applications as well?

So adaptive sampling is really helpful. If you want to look at a genome, if you've got a whole genome, but you only want to look at a little part of it. Adaptive sampling is incredibly helpful because it helps -- it brings the cost down all the time to result down for that region of the genome. Needle in a haystack is when you're looking for 1 copy in 100 or 100,000. So yes, it can help with that, but there are other methods that do a great job of that, too, such as sort of amplification or Cas9. So yes, it can be useful for needle in a haystack applications. But right now, most people are using it for targeting regions of a genome and getting to an answer faster or cheaper by only sequencing the parts that they're interested on and therefore, multiplexing multiple genomes onto the flow cell.