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

Good morning, everyone, and welcome to the Citi Global Healthcare Conference. My name is Veronika Dubajova, and I run our European Medical Technology Research. And it is with great pleasure that I'm joined today by Nick Keher, CFO of Oxford Nanopore. Nick, thanks for being here.

Thank you very much for inviting us.

No, it's a real pleasure to have you. So I think everyone's old hands at this. Obviously, we are -- this is an entirely fireside chat Q&A. If you have some questions, please raise your hand, and we'll make sure that we get them answered. I will pick on you if there are no questions in the audience. No, just kidding. But help me out, so I'm not the only person asking questions.

But Nick, maybe we can start with some recent news and then kind of go into big picture. But obviously, you recently raised your top line guidance for 2025 to the top end of the 20% to 23% range. Can you maybe help us understand what's driven this upgrade? I know it's a modest upgrade, but what's driven the upgrade? And maybe comment on how the business is progressing now that we're almost at the end of the year.

Yes, absolutely. So as you know, we had a big second half last year. So as we got into the end of the first half of this year, 28% constant currency growth, clearly ahead of expectations, but we knew we still had a lot of wood to chop in the second half. So it wasn't the right time to think about an upgrade anyway when we were at the interims or the July trading update. As we've gone through the year, we've just grown in confidence in terms of what we've seen. And as always, we risk adjust what the year is going to look like. And as we're getting closer, essentially, we're just unrisking what we can kind of see come through. We've had a good Q3. We've had a good start to Q4. I think geographically, we're getting -- we're encouraged by what we're seeing in the Americas actually. Things are a bit more constructive. I think this may be is not necessarily everything about the NIH funding or anything like that, even though it's maybe a bit more stable. It's more about the opportunities we're seeing, particularly in clinical. And biopharma that are doing -- driving quite a bit of growth. So Americas continue to do well. Asia Pacific, maybe a little bit lighter in the second half, but to be expected given what we've seen for PRECISE being first half contracts and then rolling off. And EMEA continues to do well. So really, it was a bit about that kind of unrisking of the year as we go through, not one specific contract, not one specific thing, very much actually a broad base of revenue growth that we're seeing come through. So just encouraging really.

Okay. That's really helpful. I was going to ask you, just remind us in terms of the larger contract wins. I know earlier in the year, you sort of thought about look, maybe there is some more stuff coming in the back half of the year. Can you comment on any success that you've seen there that you can share with us at this point?

Yes, absolutely. So the biggest single contract that we have with one customer in time bound is actually the U.K. Biobank contract. Now in the first half of the year, we delivered GBP 1 million of revenue against that, and it's a teens million contract for us. We -- and that has now gone into full production. We're very, again, pleased with what we're seeing actually on the ground in terms of scaling up data. But this will predominantly be a '26 revenue generator for us. So we might get a quarter worth this year, but not that much. It's more about what we're going to see next year. And to be honest with you, from where I'm sat at the moment, I'm absolutely fine with that, given everything else we're seeing. So actually being a supportive growth driver for '26 is no bad thing. Otherwise, the NIHR contract will likely come to an end this year, so in the U.K. And hopefully, we can see offshoots of that happen thereafter. GEL contract as per normal 2.0 for cancer and the other things we've done with them, those are just continuing. So otherwise, no large one-offs or anything like that besides the PRECISE contract, $3 million in the first half, $3 million in the second half of last year and nothing at the moment.

Okay. Got it. And in terms of any new contract wins, anything that you can share where you've seen successes in the back half of the year?

Yes. So the majority of the things we're looking at and winning at the moment are truly in that kind of clinical space in the U.S., where we are landing new customers, and we're having really good conversations. So they're seeing the need for our technology in the rare disease space, but they're already linking it to where they see gaps with their current infrastructure. So I was with a customer yesterday actually and discussing this live with them where they've clearly got a well-established machine that's working for a clinical lab in a hospital. They've got established products that are there that do a very good job, but they can't do as much as they'd like or everything. And they're seeing where our devices and our technology can add more. And so essentially, that's where they're looking to integrate us. And so it's very encouraging because we know that this is a land and expand job for us given the kind of value we can bring. Rare disease is that first bolt hold, but methylation and tumor profiling, absolutely something and then also infectious disease, where we genuinely do have an edge against everything else that's there. So you can see where the customers are going with it, that's really encouraging. Otherwise, large contracts, I mean, biopharma, unfortunately, we're not in a position where we can talk about customer names openly at this moment in time, but we are being used in -- for large vaccine and biologic players where we're either being part of their NDA, so their submission, which means it's a GMP regulated environment and will be tied in or for sterility testing in mRNA vaccine production. So very encouraging. And we might be talking, as we've always said, single million dollars per contract per site per year. But actually, these have the potential to grow 5, 6, 7x from where they are because essentially, we're talking about clinical trial phase for some of these things where it's 1,000 patients when it goes into production, and we start talking about, hopefully, tens of thousands of patients, it can be significantly higher value to us. So those things are happening in the background. Good news in clinical kind of progressing. In terms of the larger kind of Biobank-type studies that are out there, we've got the U.K. Biobank contract we've talked to. Let's see what happens when the data starts coming out of that, but we think that's going to lead to offshoots of more things like it. And in terms of larger population genomic studies, we've got continuing discussions going on. I think it would be premature to talk about them now, to be honest with you, like nothing in the guide. Hopefully, this is going to be something we can talk to you for a '27 event actually more than anything. So not for the next 12 months.

Okay. You touched upon, obviously, the surprise maybe in terms of the guide has been Americas, but not necessarily NIH. How are you feeling about NIH at this point in time? I think some suggestions from some of your peers and other participants in that market that we're maybe hitting a point of stability, maybe a little bit of optimism heading into 2026. What's your best guess at the moment, what we might see? And just maybe remind us when we think about the midterm guidance, how important is that research U.S. segment to you hitting the midterm guide?

Yes. Thank you. So first of all, put into context, about 13% of our revenue in '24 was from NIH U.S. government funded. So we're a min in this, right? We are really small compared to the larger peers, such as Illumina, and the other tools players that are supplying that vast market. So first of all, I don't think we're the bellwether, unfortunately. So I can't -- I mean, any insight I'm going to give you is going to be very about the micro rather than macro, I'm afraid. Now that said, at the beginning of the year, think about the commercial organization. We've got quite a few people in the U.S. When we kind of saw what was happening, we knew we had to lower their targets for this year given the kind of macro backdrop that we're seeing. It was the right thing to do. The confidence of the team since then has clearly been building and the conversations they're having with customers are more productive. They are still seeing delays. They're not seeing things dramatically turn around, but it's more of a stabilization. I think, to your point, that it doesn't today feel like that we're seeing more cuts coming through to how these people think about spending their money. And because at the beginning, if you're a finance director working in one of those institutes, you're going to be thinking about how do you pay your wage bill with an NIH down. I think the bigger thing that people maybe going to think about is actually how about changes to Medicare going to impact actual health care spending overall, particularly as we go into the clinical field more and more. So more constructive.

Okay. That's helpful. And then I'd say the other market that we spent a lot of time debating is China, and lots of things happening there from a kind of big market top-down perspective. Obviously, we've also seen the Illumina export ban lifted. How are you thinking about China as we head into 2026? And maybe just remind us how big of a business it is for you at the moment?

Yes. So it's just shy of 10% of revenue essentially for us as a business. We're still growing in China, but we can't fulfill the demand is the truth. And we can't fulfill the demand because we have restrictions on export controls to China. We had an example very recently. So one of the benefits of our technology is particularly in plasmid sequencing, where because we can give you long-read information, we can give you the full plasmid for, say, $20, $30 even in an outsourced service environment versus if you want to use Sanger, it's considerably more than that. And it's longer, and we believe the data is actually better off our platform. So in the Sanger space, we've been taking a lot of share. And in China, we had a customer that had multiple, like we're talking 20-plus device order for us, which is the size of us would have been very important. And essentially, that customer went on to the Americas restricted list and essentially, that killed the entire deal. And that is happening still where these things are just completely out of our control. So predicting the future for China is really tricky. We are examining other approaches about how we can act differently in China so that we won't be impacted like this going forward, but these things are going to take time. So I mean, stepping back, it's a great market. It's high growth and the demand for the product is definitely there, either to replace existing technologies or to be adopted for new areas of science. The issue is we're kind of working in a world where restrictions are quite tight. So as we look forward, I don't see that changing.

Okay. And when you say you're exploring other ways of working in China, would that be through a local partnership...

Things like that. So I mean, we could -- there are different ways you can operate in China to ensure that the restrictions that are in place aren't as onerous. So we are thinking about those, yes. But more to update and these things will take months, months and months.

So this is not something we should expect a press release from you on imminent...

No, no, no, absolutely not. This is more of a -- as we go into next year, hopefully, by the end of the year, we'll be talking about these things a bit more openly.

Okay. Okay. That's helpful. We see the other big change for you this year has been around the pricing model. You've put through some price increases at the outset of the year. You've obviously switched away from a sort of an OpEx lease to a more CapEx model. Can you maybe just contextualize for us sort of how meaningful has pricing been so far this year when it comes to that 20% to 23% growth rate that you're expecting well now, 23? And then just looking into 2026, how should we be thinking about price as a driver or a component of growth?

Yes, absolutely. So the big change this year -- so there are 2 changes, as you say. First of all, on the consumables, we put up pricing to help offset the currency headwinds we are seeing because we're predominantly making sterling and we sell in dollars for 60% of our revenue. So essentially, it was the dollar devaluing, it's quite hurting our margin. Bottom line, here's a stat for you, to the half year, our EBITDA is now GBP 10 million worse off than when I joined just because of the devaluation of the dollar. It's quite a headwind. So we need to start thinking about how we offset this. So we put up our prices in certain markets. So in the U.S., 10% to 14%, depending on the type of product. Rest of world around 5% to help with these currency headwinds that we're seeing. The bigger change though, as you're saying, it was on our -- what we're thinking about for the larger devices. So as you know, a USP of this platform is the fact that we don't need a large camera inside and we can miniaturize the technology because it's an electrical sensing platform, like the Mk1D device that you've now got.

[indiscernible] has it.

Now with those devices, the -- because it is -- you can miniaturize it, it's relatively cheap to manufacture. We have an ability to disrupt the market that other people don't have. So the company rightly chose a disruptive business model, which is just get as many of these devices out there as possible. Now as the company has evolved and our devices have now got GPUs inside, which from NVIDIA can cost multiple thousands of dollars, we've kind of stepped back and changed our approach. And we've changed that approach because of the customers, do you want to own the device rather than have a lease. The communications with the customers has always been very tricky because you can't have a lease unless you've got a direct presence in a market, and that meant it was only really about 10 markets we could do it. And we had open transparent pricing. So there's loads of reasons why. But fundamentally, it then lessens the risk to us as a business as well because we were spending the best part of GBP 20 million a year, placing these larger devices with customers. So the P24s, the P2is, the GridIONs, where we've got a GPU inside. We said that when we made these changes, we're kind of moving all these things through. We were going to honor any contract, any pricing or quote that we had in our system with customers for the old model. But going forward, we were going to charge for the devices upfront. We thought the technology was of age. We've done a lot of pricing analysis, and it suggested that we're still considerably cheaper than all of our competitors. And essentially, it's working. So the percentage of like what we called OpEx to CapEx essentially was maybe depending on device between 90-10 to 70-30. It's now kind of moved considerably where for the [ Proms ] were more the other way as we're exiting the year. So nearly all CapEx now. And it's allowing us to introduce other pricing mechanisms such as reagent rental, which is going to be very important for the clinical market. So that introduction has happened. We always said it would be a benefit to cash flow. We were a bit more coy on kind of the margin and revenue benefit just because it all depends on volume. It all depends on mix and a load of other factors and what happens if it blows up in our face. Fortunately, though, first half of this year, as we reported in the numbers, we saw a GBP 10 million benefit to our cash flow. And so GBP 20 million a year, I think we created quite a lot of value for the company, actually. On margin, we saw a 525 bps improvement to margin, and we said about 2/3 of that is related to the pricing change going CapEx first. That's structural. That's going to sustain. And then on revenue, probably the same amount you saw from the margin benefit as well. Now as we look forward, I actually think the benefit we're going to get from pricing is going to be greater next year because we'll have the full year benefit. And as we kind of talked about at the half year, we missed timing of CapEx cycles -- budget cycles for customers. So we went live with this change in January and announced to customers. We made the changes formally in February. Everybody's budget cycle is Q4. So essentially, we missed and then asking people to find an extra $50,000 to $300,000 in their budget is usually quite difficult. We've now gone through that. And as we kind of go through our own budget process and look about the volume demand where we have names against items for next year from the commercial teams, we see the volumes coming back. So this is for the larger devices, in particular, so the P24, P2i, Grid. So actually, with those 3 things combined, I think we get a bit of a double bubble essentially in terms of we're going to get the volume and we're going to get the full price benefit as well. So I think next year, this could be, again, we're talking about 3%, 4% benefit this year. Full year benefit is to come next year.

So you'd say sort of the 3% to 4% is this year, that's not there for the full year, so it's probably a bit more. And then would you expect that to repeat again next year? Or next year, we're just thinking that the annualization from the 3% to 4% to 5% to 6%, let's say, maybe.

I think we'll get a bit more than 3% to 4%, actually. So just a tad based on the volumes that we're seeing essentially for demand for next year. And the good thing about the kind of the pricing work that we've done and the uplift we've made, this does allow us to be more competitive in the market as well if we need to from a discounting perspective. So it allows the commercial teams to kind of have more freedom. That was another reason why we did it.

Okay. Any pushback you've had from customers? Obviously, you were the low upfront CapEx company. Has that changed the conversations you're having, the type of customers that want to engage with you?

Not really. In fact, this has made it a lot simpler for people. Now don't get me wrong, some people won't like it. And if you go on chat forums, you're going to -- I'm probably going to get strung up at some point for the changes we've gone through. But I think on the whole, people understand why we've done it, which is we kind of -- the technology has evolved, the business has evolved, and we still do the OpEx model for the MinION. And so we still provide the MinION basically for free to people. So like there's still that option there for people who want to get going and be that accessible technology for everybody. So we're still there. We still run a grant program. I don't know how many of the companies do this, but we run a grant program for low middle-income countries, essentially academics that don't have the money to actually buy the product. We give them the product. So essentially, we are trying to kind of remain true to as much of that as possible. But we also have to make sure we become a sustainable company because this is not an environment where you can kind of continue to lose as we did last year, GBP 117 million of EBITDA and GBP 150 million of cash. So we do -- we need to kind of maneuver this in the right way. So on the whole, customers have been receptive to it. Are there always going to be some outliers? Yes.

And you dodged my first question on the consumable price increases. But thinking about 2026, are we going to get another 10% to 14% in the...

Not that much. Not that much.

Okay. Then what should we be penciling in it?

I think it's reasonable to look at what's going on with currency and assume a portion of that. The problem is if currency moves wildly, you can't do that. But you can try and capture a bit of it to minimize your risk. And the interesting thing that I'm sure anybody could do is if you normalize each of our product prices by territory, you'll see that essentially the Brits are actually -- are paying the most for dollar per gig equivalent. There's a massive disparity. Our market share in the U.K. is actually quite high. Now that's because we're a U.K. company, no doubt. But also I think people are willing to pay for the value of the technology that we bring. So this whole dollar gig argument absolutely exists, but it gets to a point where people start realizing the extra value that we can bring, essentially people are willing to pay for, and that's what I'm hearing from customers yesterday.

Got it. All right. Let's sort of -- we've discussed all the components, maybe a big picture question. Obviously, you have a midterm guidance out there, which calls for 30% plus sales CAGR. Clearly, this was given at a very different time. It was pre-tariffs. It was pre-China issues, pre-NIH issues. How do you sort of feel about that guide today and your kind of thoughts. And obviously, we are below that number, [ 25 ], meaning you'd have to accelerate growth pretty meaningfully both in '26 and '27. Just your view on how realistic that is and maybe that acceleration being front-end, back-end loaded? And how do we think about it?

Absolutely. And I think it's important to put it into the context as we've kind of talked to many times before that the key guiding light is EBITDA breakeven in '27. So that's the North Star that we're aiming for as a company because once we kind of get into that place, I think that we become more -- absolutely more sustainable as a business. And I think we get a different viewpoint from the investors overall, actually. Now -- and sequencing is a bit of a dirty word still in the U.S. relative -- and life science tools is in a very difficult place as well. So we need to get to that EBITDA breakeven. And the way we kind of set it stated at the time, so this is old news, is we've got a growth target over 30% CAGR. And if we don't succeed that over 30% in any year, we'll modulate the cost base to make sure that we do achieve EBITDA breakeven in '27. We've been very consistent with that all the way through. Now last year, 23% growth, just a bit over. This year, 23% growth. We always thought there would be lumpiness and a bit of a ramp to this. And we've always been consistent on that because, yes, we expected research and government revenues to be around about teens growth for us. NIH has not helped with that, but we are -- I mean, first half, we were 22% growth. So it's not like we're not still doing it. Biopharma, clinical and applied, the 3 areas where we believe we can essentially start to see real acceleration, and we still can. Now biopharma, these contracts with a number of companies we're working with take us into a space where we don't see our usual competitors, really important for us. White space opportunities where the size of the market, we believe biopharma QC is a $4 billion opportunity for us, and we are literally at the start. So that could grow incredibly quickly and change the outlook. Do these things take longer than anybody ever wants? They always do. For clinical, grew over -- sorry, over 50%, just shy of 60% in the first half of this year and over 80% in the U.S. And that's actually going better and quicker than expected. And we have throughput advancements on the flow cell that are coming that essentially should lead us to be as competitive with some of the larger players. And I think at that point, actually the ability for us to take more of the clinical market starts to grow. Now we don't have all of the ecosystem around our product to be able to kind of just plug in and play. But it does allow us to be thought of as actually, yes, the price point may have been an issue. It's no longer an issue. So some things have to work in lockstep for this to happen, but it's absolutely still possible. It's just -- has the risk increased because of what we've seen in recent years and because China remains so difficult and outside of our control, yes. Now to that extent, though, like the gross margin, if you strip out the write-off that we had in the first half of this year, so the see-through gross margin is over 61%. We said we'd be over 62% in '27. So I think investors and hopefully yourselves as analysts are getting confident that actually, yes, they're probably going to exceed that 62%.

We'll talk about that. I have a question for you about that later.

Perfect. But -- so if the revenue growth -- so essentially, it does come off at all above 30% CAGR, we've got increased margins, and we've demonstrated control on the cost base. We've gone through 2 rifts this year to essentially reduce our cost burden, and we are committed to that EBITDA breakeven in '27. That said, I'd be much rather...

Get through growth.

Get there through growth. That is absolutely the #1 aim, and it's still possible, but there are things that need to happen, and we've got to make sure we deliver on them.

And I guess, conceptually, if you are to get there through growth, is it fair to assume that '27 is the bigger growth year than '26? Or you think both of them should see meaningful growth acceleration versus '25?

So I mean both of them should. But the '27 year is likely going to -- only because of the throughput advancements on the flow cell. So we have live examples where we've landed in rare disease with some of these big players in the U.S. where they essentially are showing -- we're working with them on contracts to take oncology hereditary panels and whatnot, where if we can get to a price point then we'll get the business from the volume perspective. And the volume uplift from getting this type of business is 5 to 10x what we're doing in rare disease. So like if we -- these throughputs, like if we can get to that 2 genome plus essentially per flow cell, which has always been an aim. But let's wait and see. And I think that starts to drive us into the clinical market even quicker than where we are at the moment. And that is going to be a data-driven piece where this year, it's about delivering it and showing it. '27 will be about then the full execution coming through. But Biopharma coming earlier. So that would be a '26 event.

Yes. Okay. That's helpful. I do want to talk about financials, but maybe before we move on to that, just your thoughts on Roche. Obviously, it's clear that they're not a direct competitor to you per se. But obviously, it is another player in the market. That's going to influence the dynamics a little bit. They are not necessarily going long read, but they're going somewhere between short and long and it's not entirely clear where just yet. How are you thinking about it? How much is it coming up in your conversations with customers at this point in time? To what extent do you see this as posing a threat for you guys either in the shorter term or in the midterm?

So I mean, I think we'd all prefer it if we had less competition than more competition. So that's the obvious point on all of this. Now in terms of what do I think? I think the risk is really around pricing. And I think it's around does this create more friction or noise in the market that leads to delays from customers because there will be a new technology that they may want to evaluate and that might just make people pause, delay ordering by 3, 6 months whilst they kind of reevaluate something or maybe a year because these are big decisions that people have to make because once you start your lab building out something, this is like a -- it's a 5-year commitment, 10-year commitment, millions of dollars invested. People aren't going to take these decisions lightly. So I think we've got to be aware that that's potentially a threat. Now against us specifically, though, I think this is more of a competitor for other people than it is for us given what their technology does against what ours does. So we -- why are we growing 23% in a year where everybody else, I think, is either declining or single-digit growth? People -- we have to kind of look at those reasons why. And we are able to grow at that level because of the incremental insights, the richer insights we get off a Nanopore, our Nanopore versus other people's types of technology. And that doesn't change with the launch of the Roche platform. They definitely have speed and they definitely have scalability, absolutely. But in terms of the richness of insight on our long-read capability, that's still unique to us. And so direct reading the DNA, direct reading of the RNA. So I don't see the biopharma QC threat as being challenged by this. And even the clinical conversations that we've been having yesterday, I think this is more of a threat for the established large incumbent and as it -- so our ability to go on top of these competitive products, I think, is still there. So it's -- so I don't want to dismiss at all because I think it could cause delay and pricing is my concern because if the whole genome is $100 or $80 or whatever the number ends up being, if that ends up coming down, I think it brings the entire market down with it because you struggle to be able to keep your premium for a premium product against the price that is kind of coming down. So I think it's going to be interesting to see how it plays out.

Okay. That's helpful. Let me see if there are any questions in the room. And if not, maybe we can talk a little bit about financials. You stole the words out of my mouth on gross margin earlier, which is obviously we're at 61% in the first half of the year on an underlying basis. I think the guidance you gave on the September call, the second half should be similar to maybe slightly lower, but somewhere around there. I guess are you still comfortable with that? Any incremental positives or negatives that we should bear in mind versus where we were in September?

So on gross margin, we guided this year to 59%, just to recap for everybody in the room. We hit 58.2% in the first half. And essentially, that was because of -- we took a GBP 3 billion -- GBP 3.4 million write-down, which is about 300 bps essentially of our gross margin. So if we hadn't had that, we would have been 61.2% to your point. And that was a good see-through margin for how we've achieved. Now going into the second half of this year, we kept to our 59% guidance, and we're still keeping to it. There are puts and takes against this. Currency is always a bit of a niggling one because essentially it's outside of our control. It continues to be a headwind against it. And even though last year, we kind of went through that, there's still a risk. From where we sit today, still comfortable with the 59%. If it ends up being around that 59%, so 58.5% to 59.5%, that's maybe kind of like more we're thinking, but still keeping with the 59%. I think it's just -- there are always going to be things and swings and roundabouts towards the end of the year that kind of like move it around. And in particular, it's mix. So am I going to stop the salespeople from selling an extra device but is a much lower margin than a flow cell? No. So like if mix is outside of our control, it's outside of our control. But it's hitting the top line is more important, I suppose.

Okay. Got it. So maybe think 58.5%, 59.5%.

That range. Around 59%...

We are in that range, though.

No keep it to 59%.

Okay. Okay. Fundamentally, how are you thinking about gross margins? I guess, if we are at around 61% underlying this year, we're getting very close to the 62%, which is not a target until 2027. Do you think we hit that target sooner potentially already next year? And then I guess, is there a new number that we should have in mind for gross margin as the sort of '27 and beyond target?

So we always said over 62% for 2027, and we will stick with that. It will be over 62%. I -- yes, like the see-through of 61% in spite of the currency headwinds is really impressive, and we've still got the full year benefit from pricing to happen next year. So absolutely, I think there is a chance here that this is to be more constructive over the gross margin. And in particular, because the key driver for how we really moved this originally when we set all of our guidance, we didn't -- we knew pricing was a lever, but we needed to do the work before we can kind of pull it. The lever that I see essentially continues to be PromethION Flow Cell recycling. So just for everybody's awareness, so the MinION -- we have 2 product lines in reality, the MinION Flow Cell, the PromethION Flow Cell. MinION Flow Cell has been around for over 10 years. We recycle this. And essentially, we get the most expensive part of it back. We strip it down, clean it thoroughly and put it into a new chip, and it can go round and round for multiple times. This actually reduces our cost of goods substantially and means that our gross margin on the MinION is substantially higher than our group gross margin. On the PromethION, we've just started recycling this. We're nowhere near the same percentage recycling. But if we get even half of the way there, then we'll see the group gross margin rise above that 62% quite comfortably. And that is -- I think that is very likely.

Okay. And the time frame for that, do you think...

So we've started now. These things take time because you need to work through the process because you want to make sure that the product quality is good that goes out to customers. But by '27, we should be thinking about a proportional step -- a big step in terms of percentages of flow cells recycled. And the good thing is the MinION Flow Cell, we send it out to like thousands of customers out there who may be on a MinION and only buying a few of them, they're returning them. It's quite hard to get them all back. The Prom Flow Cells, they're going to very large customers who are buying quite a lot of them. And actually, it's much easier to get them back. So we've got warehouses full of PromethION Flow Cells that returned already to use. And so this actually could be a very big unwind for working capital as well.

And any bottlenecks that you're encountering as you're moving to recycling, anything that's not going to plan?

Well, only on the MinION that we need to think about how we can get these back from a dispersed customer base...

Yes, but on the PromethION...

No, I mean -- sorry, in terms of the process itself, fundamentally, it's the exact same thing we've got to go through. It's a bit trickier because it's a deeper well. So the Nanopore, the Prom essentially is longer. So essentially -- and the -- so that's the part that we've got to kind of figure out for because the chip itself is deeper. And so that -- so how you clean it properly to make sure it hasn't any remnants in it.

Got it. Got it. Obviously, you said earlier, the kind of guiding light for the business is this EBITDA breakeven goal in 2027. How do you, in your seat, think about balancing the growth opportunities that you see, some in the short term, some may be longer out against kind of managing that OpEx? I know you've held very tight reins on the P&L since your arrival. But how are you kind of thinking about it from where you sit today, especially as you think about your 2026 budgeting process?

It's not easy, to be honest, but I'd much rather be in this position. So essentially, we are delivering really strong top line growth. We've got increasing gross margins, and we've got loads of opportunities ahead of us because this technology can go so far and wide. What a great opportunity, right? It's just like just -- but it's still hard because the thing is everybody's got great ideas about what they want to do and how they want to take it forward. So it's limiting that and being the no person internally is difficult. But the way we've gone about it is a significant process we've gone through this year where -- and you have got time. So first of all, we've looked at the 47 segments that essentially our technology is applicable to. So we've taken it across clinical, applied research, biopharma, QC. And we see 47 independent market opportunities that we've looked at. We've validated this with a third party and speaking to customers in the market as well. Then we've evaluated right, where does our technology actually add real value here? Where are we differentiated against our peers? And then how easy is it for us to actually access this market? So for instance, clinical, quite difficult to access the market because the IVD regulations are around it or because you actually need to partner more extensively because we're not -- we are not going to have hundreds of market access people trying to get reimbursement, things like that. Biopharma QC, potentially the hurdles are a little bit lower because there's maybe only 50 to 100 customers. There's only 200 companies that make drugs. There's only 50 of them that are going to be applicable for our technology. It's a real sweet spot in terms of actually ease of access. And our technology is offering real value to those customers because we're speeding up development times by months, saving them millions of dollars and making their products better. So it's an easier sell. So we've got those 47 end market segments. We put them all on a map. We've figured out where we wish we would be targeting and gone down to a smaller segment of that. And then we've thrown over all of the R&D opportunities that we're doing today. And anything that didn't fit those high priority segments, we've had to take a hard decision. But we've gone through a process. So how do we do this? You have to go through a fair and balanced process that involves everybody. And basically, it becomes obvious that we can't do this, we can't do that anymore. That is a great idea, but it's not now. Still is difficult. But we've done it successfully this year. We have stopped a number of programs that have been going on for a long time in the company. and we'll see the benefit of that next year in particular.

Got it. Look, we're almost out of time. So my final question, which I think has kind of been on top of people's minds, I see lots of departures from the senior leadership. We've seen Gordon announced his retirement, Rosemary and Spike have left, Clive left late last year. Anything to read into this? And I guess to what extent this is signaling a change in terms of the culture, priorities, ambitions in the business?

Yes. So I think what -- so Gordon essentially announced he was stepping down as CEO after 20 years. And he says it brilliantly actually when he's ever asked this question about how he cares more about the future of this company than he does about being CEO. And he realizes it's now time to kind of -- the company to evolve and bring on a new CEO, who can help with many of the great things we're looking at. We haven't even got on to the Danaher relationship, the bioMérieux relationship, and the fact that we want to have more relationships like that to actually penetrate markets quicker. So the need for a new CEO to come in and do that was -- it's kind of there now. 20 years is a great innings. The guys have created fire, right? So it's now about how do we make the best product from this fire to be able to kind of penetrate the markets even quicker. So Clive, announcing he was going last year, left in July. Gordon in August time. It's a natural evolution. And so following that, yes, a number of people have left as well. It is really that kind of evolution of the management team. And people could ask me last year when I first joined, and I think it was something the Board have also opined on as well, we do need to bring in more capability. We're a company that essentially -- the team have done incredible, but there is always a time when a kind of company -- revenues get beyond 200 million or scaling 1,400 people in the company, FTSE 250 listed business from where it was from a founder-led enterprise, like 20 people, it's kind of time to think about adding more capabilities around the team as well. So that's all I'd say.

Nick, that's a great note to end on. Thank you so much for being here. Really appreciate your time.

Thank you very much. Appreciate it.

Thanks very much.