REG - Oxford Nanopore Tech - Final results for the year ended 31 December 2022
21/03/2023 07:15
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RNS Number : 5961T Oxford Nanopore Technologies plc 21 March 2023
This announcement contains inside information.
21 March 2023
Oxford Nanopore Technologies plc
Final results for the year ended 31 December 2022
Strong underlying 1 (#_ftn1) LSRT revenue growth of 30% in 2022, driven by
innovation and customer acquisition; expect underlying annual LSRT revenue
growth of more than 30% in both 2023 and in the medium term, reflecting the
continued growth and diversification of the broader user base
Oxford Nanopore Technologies plc (LSE: ONT) ("Oxford Nanopore" or the
"Group"), the company delivering a new generation of molecular sensing
technology based on nanopores, today announces its final results for the year
ended 31 December 2022.
Gordon Sanghera, Chief Executive Officer, commented:
"2022 was another year of significant progress for Oxford Nanopore. Demand for
our differentiated technology continues to grow around the world and across
many areas of scientific research, including human, cancer, animal, plant,
pathogen and environmental genomics. This has underpinned a 30.5% growth in
active customer accounts and underlying LSRT revenue growth of 30% despite a
challenging macroeconomic environment. We have remained relentlessly focused
on innovation, with the well-received new technologies launched in 2022
further strengthening Oxford Nanopore's unique position as a highly
accessible, accurate, information rich platform at any scale.
"This platform makes us well-placed to capture the significant opportunities
we see ahead, both in scientific research and beyond. The partnerships we have
signed in the last year start to demonstrate the attractiveness of our
technology in the clinical and applied markets and provide a strong foundation
for further progress.
"We enter 2023 with good momentum. Our balance sheet remains strong and we
will continue to invest in ground-breaking innovations and operational
expansion to support continuous growth and deliver long-term value for
shareholders."
Summary financial performance
£ million 2022 2021 Change Change
Unless otherwise stated reported CC 2 (#_ftn2)
Revenue 198.6 133.7 +49% +43%
- Life Science Research Tools (LSRT) revenue 146.8 127.0 +16% +10%
- Non-recurring Covid testing revenue 3 (#_ftn3) 51.8 6.7 +673% +673%
Gross profit 123.8 73.2 +69%
Gross margin 62.3% 54.8% +750 bps
LSRT Gross margin 56.3% 53.8% +250 bps
Adjusted EBITDA 4 (#_ftn4) (78.6) (57.7) (20.9)
Loss for the period (91.0) (167.6) +76.6
Financial highlights: strong underlying revenue and margin growth in LSRT
business
· Life Science Research Tools (LSRT) revenue increased by 16% to
£146.8 million (FY21: £127.0 million), up 10% on a constant currency basis,
primarily driven by increasing customer numbers, across a breadth of
applications. Underlying growth, excluding foreign exchange and revenue from
the Emirati Genome Program (EGP) and COVID-19 sequencing, was approximately
30%.
· At a regional level, revenues were predominantly driven by growth
in the Group's two largest regions, the Americas and Europe, as well as strong
growth in China, with revenues up, on a constant currency basis, by 32%, 29%
and 66% respectively. UAE revenue was impacted by a decline in EGP revenue,
resulting in a 54% reduction on a constant currency basis.
· Group revenue increased to £198.6 million (FY21: £133.7
million), reflecting a £19.8 million increase in LSRT revenue and
non-recurring revenue of £51.8 million following the conclusion of the
Group's Covid testing contract with the Department of Health and Social Care
(DHSC), as previously announced.
· LSRT gross profit margin increased by 250 basis points to 56.3%
(FY21: 53.8%), predominantly driven by automation, recycling of electronic
components and improvements in manufacturing techniques.
· Adjusted EBITDA loss of £(78.6) million (FY21: £(57.7) million);
higher LSRT gross profit offset by increased investment in R&D and
commercial and marketing teams, to support long term sustainable growth.
· Reduction in Loss for the period to £(91.0) million (FY21:
£(167.6) million), driven by the higher LSRT gross profit, the settlement of
the DHSC contract, the sale of the Gosling Building and the net decrease in
the provision for employer's social security taxes on share awards, partly
offset by higher operating expenses.
· Cash, cash equivalents and other liquid investments of £558.0
million 5 (#_ftn5) , compared to £618.2 million as of 31 December 2021.
2022 business highlights
Continued innovation to strengthen our unique market position
· Delivering high-accuracy, high-output sequencing technology:
Early access 6 (#_ftn6) launch of "Q20+ chemistry", combining new flow
cells and preparation kits, delivering the most complete and accurate genomic
data, that can be used across the platform on small or ultra-high output
devices. This combines very high single-molecule accuracy (>99%) with the
ability to reach all parts of the genome and characterise all types of genetic
variation
· Highest accuracy: Developer access release of High Duplex flow
cells for the most challenging of use cases, such as 'Telomere to Telomere'
genomes or rare variant detection, duplex 7 (#_ftn7) accuracy delivers over
99.9% accuracy at a single molecule level
· New device formats to reshape market: First early access
shipments of the palm-sized PromethION 2 Solo (P2 Solo) device, a high-output,
low cost nanopore sequencer, designed to make high-output sequencing more
accessible
· Enabling real-time methylation analysis, for broad applications:
Release of Remora, a tool to enable real time, high-accuracy epigenetic
insights with nanopore-based sequencing, making Oxford Nanopore the most
comprehensive technology for characterising methylation
· Platform expansion to sequence any-length DNA/RNA fragments, for
broad applications: Release of Short Fragment Mode to enable nanopore-based
sequencing of native DNA/RNA fragments as short as 20 bases, enabling any
length reads on one platform; a true technology differentiator in the current
market
Continued growth in customers and scientific impact
· Expanding user base and use cases in biological
research: Continued increase in the user base and utilisation of
nanopore-based sequencing in life science research; a net increase
of 1,938 active customer accounts in the period, growth of 30.5%, taking
total active accounts to 8,283 at 31 December 2022
· Scientific publications showcase impact of differentiated
technology: Approximately 3,000 peer review publications published by the
Nanopore community in 2022, highlighting applications across a number of
scientific research areas including human, cancer, animal, plant, pathogen and
environmental genomics. Total of >8,200 publications to date
· Increasing use of technology in clinical and applied/industrial
market uses: Building on foundational research discoveries, increasing
development of methods designed to address needs in health (e.g. cancer, human
genetics, infectious disease) or industrial use (e.g. pharma/biotech QC, food,
agriculture)
Strategic collaborations to develop and access new growth markets
The Group is now driving expansion from use in LSRT for scientific discovery,
through the translational journey where methods are developed and piloted that
address needs in future clinical diagnostic or industrial "applied market"
applications. First partnerships are being established to optimise the Group's
impact in emerging health (such as clinical research) and industrial applied
markets.
Infectious disease:
· Pneumonia: Guys and St Thomas Hospital, progressed service
evaluation on the intensive care unit under the Quality Innovation and
Productivity and Prevention (QIPP) initiative, to demonstrate how real-time
pneumonia metagenomic testing using nanopore sequencing improves early
management of respiratory infections in around half of tested patients
· Tuberculosis (TB): In collaboration with FIND/WHO and Unitaid,
Oxford Nanopore progressed a ~400-sample study for a targeted sequencing assay
to characterise TB and its antibiotic resistance properties from sputum,
working closely with several countries for which TB control is vital to their
health systems
Human genetics:
· Transplants: providing rapid insights and full characterisation of
Human Leukocyte Antigen (HLA) using nanopore long reads, to support
transplantation
- New collaboration with Omixon, the global transplantation diagnostics
company, which is launching NanoTYPE(TM) RUO, a Multiplex Human Leukocyte
Antigen Amplification kit compatible with nanopore-based sequencing for rapid
HLA typing in transplants
- New collaboration with GenDx, which is are developing NGS-Turbo®, a
novel rapid high-resolution HLA typing kit aimed at improving transplant
outcomes
· Carrier screening: new collaboration with Asuragen, a Bio-Techne
company, to develop assays designed to deliver more accurate and reliable
options for reproductive health and carrier screening
Cancer collaborations post period end
· Collaboration with Cyclomics for new "liquid biopsy" workflow
using nanopore sequencing to detect molecules that are associated with cancer,
circulating in blood. Method shows near 100% accuracy sequencing of the TP53
cancer gene and facilitates the detection of mutations at frequencies down to
0.02%
· Agreement with 4bases to combine nanopore sequencing devices and
4bases kits to support rapid, high-accuracy analyses in human and cancer
genetics in Italy and Switzerland, with a first target of same-day BRCA1 and
BRCA2 analysis
Technology collaborations
· New collaboration with 10x Genomics to make single-cell and
spatial full-length isoform transcript sequencing accessible to any laboratory
· New collaboration with Tecan, post period end, to configure Tecan
automation to enable easier nanopore library preparation for high-output or
larger sample numbers
Investment in people to support growth strategy
· Increased global headcount (FTE) to 1,009 (31 December 2021:
803), including significant expansion in North America
· Commercial headcount grew to 291 at 31 December 2022, up 51% in
the period. In February 2023, commercial headcount reached 301; achieving the
goal we set out at IPO of doubling the commercial team
· Duncan Tatton-Brown appointed as Non-executive Chair, adding
extensive experience as an executive and Non-Executive Director of FTSE
companies
Continued strategic progress post period end
· Agreement signed with UPS to drive rapid and easy global logistics
and ease of delivery for broad customer base, with specific impact in North
America and Asia Pacific. Flow cells will be stored in UPS Healthcare's high
tech distribution facility in Singapore for the first time and be delivered
within 24 to 48 hours through UPS's distribution capabilities to destinations
across the Asia Pacific.
Current trading and financial guidance
Whilst underlying demand has not changed, we saw a softening of orders in
March 2023, much of which resulted from a drop in COVID-19 sequencing
following a change in China's zero-COVID policy.
We expect full year 2023 LSRT revenue growth to be in the range of 16-30% on
a constant currency basis, which includes an
anticipated year-over-year headwind from COVID-19 sequencing of
approximately £20m. On an underlying basis, excluding foreign exchange and
revenue from the EGP and COVID-19 sequencing, we expect annual LSRT revenue
growth of more than 30% in both 2023 and in the medium term, consistent with
our performance over the last three years. This reflects the continued growth
and diversification of our broader user base.
Our margin targets are unchanged. For full year 2023 we continue to target
LSRT gross margins of greater than 60% and more than 65% in the medium
term. Margin expansion will be driven by operational improvements including,
automation, improved manufacturing process and recycling of electrical
components.
The company is in a strong financial position, with £558.0 million of cash,
cash equivalents and other liquid investments. Based on our current
development and commercialisation plans, we also continue to target adjusted
EBITDA breakeven by FY2026.
Presentation of results
Management will host a conference call and webcast today at 12:00pm GMT/
7:00am EDT.
For details, and to register, please
visit https://nanoporetech.com/about-us/investors/reports
(https://nanoporetech.com/about-us/investors/reports) . The webcast will be
recorded and a replay will be available via the same link shortly after the
presentation.
For further details please contact OxfordNanoporeTechnologies@teneo.com
(mailto:OxfordNanoporeTechnologies@teneo.com)
ENDS
For further information, please contact:
Oxford Nanopore Technologies plc
Investors: ir@nanoporetech.com (mailto:ir@nanoporetech.com)
Media: media@nanoporetech.com
(mailto:media@nanoporetech.com)
Teneo (communications adviser to the Company)
Tom Murray, Olivia Peters, Lisa Jarrett-Kerr
+44 (0) 20 7353 4200
OxfordNanoporeTechnologies@teneo.com
(mailto:OxfordNanoporeTechnologies@teneo.com)
About Oxford Nanopore Technologies plc:
Oxford Nanopore Technologies' goal is to bring the widest benefits to society
through enabling the analysis of anything, by anyone, anywhere. The company
has developed a new generation of nanopore-based sensing technology that is
currently used for real-time, high-performance, accessible, and scalable
analysis of DNA and RNA. The technology is used in more than 120 countries,
to understand the biology of humans, plants, animals, bacteria, viruses and
environments as well as to understand diseases such as cancer. Oxford
Nanopore's technology also has the potential to provide broad, high impact,
rapid insights in a number of areas including healthcare, food and
agriculture.
For more information please visit: www.nanoporetech.com
(http://www.nanoporetech.com)
Forward-looking statements
This announcement contains certain forward-looking statements. For example,
statements regarding expected revenue growth and profit margins are
forward-looking statements. Phrases such as "aim", "plan", "expect", "intend",
"anticipate", "believe", "estimate", "target", and similar expressions of a
future or forward-looking nature should also be considered forward-looking
statements. Forward-looking statements address our expected future business
and financial performance and financial condition, and by definition address
matters that are, to different degrees, uncertain. Our results could be
affected by macroeconomic conditions, the COVID-19 pandemic, delays in our
receipt of components or our delivery of products to our customers,
suspensions of large projects and/or acceleration of large products or
accelerated adoption of pathogen surveillance. These or other uncertainties
may cause our actual future results to be materially different than those
expressed in our forward-looking statements.
This announcement contains inside information for the purposes of the UK
version of the Market Abuse Regulation (EU no. 596/2014), which forms part of
English law by virtue of the European Union (Withdrawal) Act 2018. The person
responsible for arranging the release of this announcement on behalf of the
Company is Hannah Coote, Company Secretary of Oxford Nanopore Technologies
plc.
Chair's statement
Overview
It is a great privilege to share my thoughts for the first time as Chair of
Oxford Nanopore, having joined the Board in August 2022. It is an exciting
time to have joined the company; Oxford Nanopore has already achieved a huge
amount and yet it is still in the foothills of its growth journey.
We were delighted to see the Telomere-to-Telomere Consortium finish and
publish the first truly complete, more than 3 billion base pair sequence of
the human genome during the year. Oxford Nanopore's high accuracy and
ultra-long sequencing capabilities finally removed technological barriers to
allow the final 8% of the genome to be revealed.
2022 has been a year of exciting and record-breaking science for customers
using our technology, from Stanford University, who developed a workflow for
ultra-rapid nanopore sequencing that resulted in actionable characterisation
of genetic disease in under eight hours, right through to the University of
Washington and Seattle Children's Hospital, who developed an ultra-rapid
analysis using whole genome sequencing to target a single gene to characterise
inheritance of specific familial variants in under three hours from birth. We
are incredibly proud that our technology can be used in such varied and
inspiring situations.
2022 also marked our first full year as a public company and I would like to
congratulate Gordon and the rest of the executive team's success leading the
Group through its first full year following the IPO. I would also like to
personally congratulate Gordon for being named as a Commander of the Most
Excellent Order of the British Empire (CBE) in the 2023 New Year honours. This
achievement reflects Gordon's enormous contribution to the technology sector
during his career.
On behalf of both the Board and our shareholders, I would also like to
express our thanks and gratitude to my predecessor, Peter Allen, for his
support, guidance and long service to Oxford Nanopore.
A year of strong innovation
Continuous innovation is at the heart of our growth strategy and 2022 was
another strong year for Oxford Nanopore. During the year, our research and
development (R&D) team successfully modified the nanopore, chemistry and
run conditions to achieve high-accuracy, high-performance and high-yield
nanopore data. The latest update included a new V14 chemistry kit which can be
used alongside flow cells that include a new nanopore R10.4.1. These upgrades
allowed our users to achieve Q20+ (>99%) simplex raw-read accuracy with
high sequencing yield. In addition to simplex reads, our new Kit 14 chemistry
and R10.4.1 nanopore combination can also produce duplex reads to further
increase accuracy to Q30 (>99.9%).
During 2022, and in line with our vision to enable the analysis of anything,
by anyone, anywhere, we also expanded our device range with the launch of the
highly accessible PromethION 2 Solo (P2 Solo) device. The P2 Solo is designed
to make high-output sequencing more accessible to users at a low-cost entry
point, enabling cost-effective high output sequencing with relatively low
sample runs. The P2 allows customers to conduct rapid, competitively priced
sequencing of whole human genomes, transcriptomes, single cells, plants,
animals or highly multiplexed targeted samples or pathogens.
Financial performance
In 2022, Group total revenues were £198.6m, which included £146.8m of life
science research tools (LSRT) revenue and £51.8m of Covid testing revenue
from the conclusion of the DHSC contract - no future revenues are expected
from this segment.
Our financial performance was in line with our LSRT revenue guidance. The
total LSRT revenues represented 16% annual growth on a reported basis and 10%
on a constant currency basis. On an underlying basis, excluding the EGP and
COVID-19 sequencing, growth was approximately 36% on a reported basis and
approximately 30% on a constant currency basis. This strong performance
against a challenging economic environment reflects the increased demand for
our technology globally across many areas of scientific research.
Revenue from COVID-19 sequencing grew by around £8.6 million in 2022 to
£26.1 million (2021: £17.5 million), but we expect this to decline in 2023.
We were delighted to see continued growth across different geographies, and in
particular in the Americas. Our 2022 LSRT gross margin increased to 56.3%
compared to 53.8% gross margin the previous year. We are pleased with the
continued progress in this area and look forward to continuing this progress
into 2023.
Corporate governance
As a Board and as a company, we are committed to strong corporate governance.
Following my appointment as independent Chair and Wendy Becker's appointment
as Senior Independent Director during the year, we ended 2022 in full
compliance with the UK Corporate Governance Code.
Following my appointment, I was pleased to speak with a number of our largest
institutional shareholders, who remain supportive of Oxford Nanopore and
excited about our future possibilities. I look forward to the continued
engagement in 2023 and beyond.
We are committed to diversity, in its widest sense, both at Board level and
throughout the company. During 2022, we increased our gender diversity target
for the Board to 40% within three years of our IPO. We expect to further
strengthen our Board in 2023 with the addition of at least one new
Non-Executive Director.
Our impact
Our vision is to bring the widest benefits to society through enabling the
analysis of anything, by anyone, anywhere. This has always been at the core of
Oxford Nanopore and in 2022, we continued to develop a broader set of
sustainability initiatives and also worked on collating data so that we are
more able to measure our impact.
We have updated our method to more accurately identify publications and by
using this method, we have been able to identify over 8,200 publications. The
increase in publications of approximately 3,000 publications during the year
illustrates the broad range of use for our technology, ranging from human
genetics, rare diseases, cancer, food safety and environmental conservation.
This year, we are introducing a new sustainability strategy: product, planet
people. This is part of our commitment to apply a sustainability-embedded
mindset throughout the business. We are also publishing our first report on
our findings against the Task Force on Climate-related Financial Disclosures
(TCFD) framework. This includes an overview of our carbon risks and
opportunity. We look forward to publishing our first detailed Sustainability
Report shortly after the Annual Report.
Outlook for 2023
Oxford Nanopore is only in the early stages of its journey and is well placed
for continued growth in 2023 and beyond. We enter the year in a strong
financial position and with a continued deep commitment to deliver on our
vision to enable the analysis of anything, by anyone, anywhere.
I would like to thank our shareholders for their continued support and our
employees for their continued commitment and dedication and we look forward to
another exciting year ahead and to updating shareholders on our strategic and
operational progress in 2023.
Duncan Tatton-Brown
Chair
CEO's Statement
It has been a great privilege to lead Oxford Nanopore through our first full
year as a listed business. Our technology platform, with its unique
combination of features, and commercial model continue to deliver strong
results against a challenging macroeconomic backdrop and global supply chain
constraints. We have continued to innovate, delivering new technologies and
products to the market and expanded our customer base to 8,283 active
accounts; a net increase of 1,938 customers over the period.
The thriving community of scientists using nanopore-based sequencing published
approximately 3,000 peer-reviewed publications in 2022, bringing the total,
since Oxford Nanopore technology was first available, to more than 8,200.
Oxford Nanopore's technology is used to study a huge diversity of biology,
including human genetics, cancer, plants, animals, bacteria, viruses and
fungi. On the foundations of this scientific research, scientific communities
are beginning to drive translational programmes, developing methods that use
nanopore-based sequencing to generate insights that answer real-world problems
in health, agriculture, food and environments. This is reflected in recent
collaboration announcements for clinical and applied markets, and our
expanding teams working to establish future partnerships. Enabling our broad
user base to conduct breakthrough science that creates foundations for this
long-term goal is our everyday business, and their incredible achievements
inspire all of us at Oxford Nanopore.
Our users, who are in more than 120 countries, continue to use our technology
in traditional laboratory environments and in the field, including in jungles,
deserts, in the Antarctic and on the International Space Station. Sequencing
samples at or near the source of origin is unlocking new uses of sequencing -
whether in public health, food safety, manufacturing quality control, or as a
tool in laboratory developed tests in healthcare settings.
Robust performance
The Group delivered revenue of £146.8 million in our LSRT business, up 16% on
a reported basis and 10% on a constant currency basis. This includes £26.1
million of COVID-19 sequencing revenue (2021: £17.5 million) and £13.2
million of revenue from the EGP (2021: £30.6 million). In the period from FY
2019 to FY 2022, LSRT revenue grew over 41% on a compound annual growth rate.
On an underlying basis, excluding foreign exchange and revenues from the EGP
and COVID-19 sequencing we delivered 30% growth. The strong results we
continue to deliver, in a challenging market are a testament to our highly
differentiated sequencing technology platform and the strength and dedication
of our teams across the globe.
The continued increase in the user base and utilisation of our technology is
reflected in the growth of both consumables and starter pack revenue during
the period, which grew by 12% and 23% respectively. From a customer group
perspective, the S2 and S3 groups were core drivers of LSRT revenue growth. S3
revenue, excluding EGP, increased by 33% to £33.5 million and revenue from
the S2 customer group increased by 36% to £52.3 million. Total revenue in the
period increased to £198.6 million, reflecting growth in LSRT revenue and
non-recurring Covid testing revenue of £51.8 million following the conclusion
of our contract with the Department of Health and Social Care (DHSC) in March
2022.
LSRT gross margin increased by 250 basis points to 56.3%, predominantly driven
by automation, improvements in manufacturing techniques and the recycling of
electronic components in our hardware and consumables.
We saw strong growth across all regions in 2022, excluding the UAE. Revenues
continue to be driven by our two largest regions, with Americas revenue up 45%
(32% on a constant currency basis) and Europe, up 30% (29% on a constant
currency basis). This strong growth reflects our increased commercial capacity
in these regions. There was 76% growth in China (66% on a constant currency
basis) and Asia Pacific and Japan revenue increased by 28% (26% on a constant
currency basis). UAE revenue declined by 52%, (54% on a constant currency
basis), reflecting a £17.4 million decrease in revenue from the EGP, in part
due to accelerated orders of flow cells in the fourth quarter of 2021,
reducing demand for flow cells in the first quarter of 2022.
Looking beyond financial performance, we achieved much more in 2022. We
executed key product launches and platform upgrades, including the early
access release of the PromethION 2 Solo, which we believe to be the world’s
most affordable and accessible high-output sequencer. We expanded our
manufacturing capacity and continued to optimise production processes to drive
margin improvements. In addition, we continued to invest in our most important
asset, our people, and achieved the target we set out at IPO of doubling our
commercial teams within 18 months. Building our international commercial and
support teams has enabled us to drive adoption across the global scientific
community.
A year of disruptive innovation, enabling breakthrough science
2022 was a pivotal year for Oxford Nanopore, culminating in the announcement
of the rollout of our highest-accuracy, highest-output chemistry to the broad
user community. This brings together the disruptive properties of nanopore
sequencing, that our scientific community has used to break new boundaries,
with high performance and cost effectiveness for comprehensive sequencing of
whole genomes or genomic regions of interest.
The scientific journal Nature Methods pronounced the ability to sequence long
fragments of DNA/RNA as 2022 Method of the Year: "To large-scale projects and
individual labs, long-read sequencing has delivered new vistas and long wish
lists for this technology's future."
In 2022 we continued to drive performance improvement through new product and
platform releases, including the early access launch of Q20+ chemistry,
consisting of Kit 14 sample preparation kits and flow cells containing the new
R10.4.1 nanopore chemistry. Q20+ chemistry combines very high single-molecule
accuracy with the ability to reach all parts of the genome and characterise
all types of genetic variation, through the ability to sequence any length
fragments of native DNA/RNA. The platform now delivers Simplex accuracy (when
a single strand is read by the nanopore) of over 99%. Simplex accuracy
delivers market leading SNP, SV and methylation performance. This mode is
extensively used by all large studies of plants, animals and humans.
For the most challenging of applications, such as 'Telomere to Telomere'
assembly of genomes or rare variant detection, Duplex accuracy delivers over
99.9% single molecule accuracy. Duplex data is generated when both template
and complement strands are sequenced and combined. Duplex refers to the
analysis of combined measured signals from double-stranded DNA to produce a
base-pair sequence read.
With the platform as it stands, our users are rapidly moving from technology
evaluation to technology deployment as we deliver complete genomes, discover
novel variants that are highly linked to challenging problems such as cancer
and rare disease. Our technology now fully delivers on accuracy, variant
detection, methylation detection, on any read length; all of this while
retaining our unique features of scalability, accessibility and real-time
sequencing.
In the first six months of the year, we released Short Fragment Mode (SFM) to
enable nanopore-based sequencing of fragments as short as 20 bases. This
latest release enables users to generate highly accurate information-rich
data, rapidly, in real time, on any molecule from 20 bases to millions of
bases long; a true technology differentiator in a market currently divided
into long or short read platforms. SFM enables customers to deploy
nanopore-based sequencing in emerging exciting areas such as liquid biopsy
research for early detection of cancer.
In line with our goal to make DNA sequencing accessible to anyone, anywhere,
we expanded our device range with the early access release of the palm-sized
PromethION 2 Solo (P2 Solo) device. The P2 Solo is designed to make
high-output sequencing more accessible to users with lower sample processing
requirements and allows customers to conduct rapid, whole human genome
sequencing for under $950. The launch of the P2 Solo was well received and we
started shipping devices globally at the end of 2022. In addition to the P2
Solo we have also developed the PromethION 2 (P2), a self-contained benchtop
device with fully-integrated compute and a screen for generating, analysing
and visualising nanopore-based sequencing data. The P2 is available for
pre-order and is expected to be available to a small group of developers in
the first half of 2023 and is expected to progress to early access launch by
the end of 2023. The P2 Solo and P2 devices are vital to enabling high output
sequencing beyond our large S3 customers by broadening the growing user base
of our PromethION platform.
During the period, we further enhanced our ability to deliver richer data by
releasing Remora, a high-performance tool for methylation analysis, into our
operating software, MinKNOW. This now means that all Oxford Nanopore users
have easy access to precise whole genome methylation detection from PCR-free
nanopore-based sequencing by using Remora. Nanopore-based sequencing is now
the most comprehensive technology for characterising methylation, which has an
important role in cancer and many other areas of genomics.
Oxford Nanopore has the only technology that reads native DNA and RNA in any
fragment length. This unlocks significant biological insights that are simply
not accessible with traditional sequencing technologies, including epigenetic
characteristics (i.e. the 'methylome') as well as larger scale structural and
copy number variations which are the subject of increasing scientific
interest. Recent publications have highlighted that as much as 34% of all
disease-causing variation is made of up of variants that are larger than
single base pair substitutions. This 'richness' of nanopore-based sequencing
data sets us apart from every other player in the market. Oxford Nanopore is
the first and currently only company that provides native DNA sequencing. We
place agile innovation at the centre of our strategy to retain our leadership
position in nanopore sequencing. R&D will continue to be the highest
priority in the company and the principal driver of growth over the long term.
Life science research: the foundation for future applied uses
Human genomics and genetics: The mission to sequence the whole human genome
started more than 30 years ago and we were delighted to see the
Telomere-to-Telomere Consortium led by Karen Miga at UCSC finish and publish
the first truly complete genome. Oxford Nanopore's high accuracy and ability
to sequence ultra-long DNA fragments finally removed technological barriers
and enabled the completion of the human genome.
We continue to see multiple publications shedding light on genetic aberrations
that are not possible to read using short read methods.
Cancer: Globally, we are excited to see programmes emerging that seek to bring
whole cancer genome insights leveraging nanopore native DNA sequencing closer
to clinical care. Genomics England are pioneering new methods to deliver
comprehensive whole cancer genome data and related insights, with a goal to
introduce these discoveries into the NHS that have the potential to improve
patient cancer diagnosis and care. We have been proud to collaborate on this
work, and in 2022 we were delighted to embark on the next phase of this
programme with Genomics England. However, the ability of sequencing in cancer
is not limited to whole genomes. The ability of nanopore-based sequencing to
provide native methylation has continued to develop with multiple publications
in 2022 continuing to provide insights in our understanding of cancer.
Microbial organisms /pathogens: Researchers are using nanopore sequencing to
overcome the challenges associated with traditional short-read sequencing
technologies to fully characterise microbial genomes - bacteria, fungi,
viruses, as well as small DNA molecules such as plasmids. This can shed new
light on microbial evolution, pathogenicity, and antimicrobial resistance.
Nanopore sequencing is also proving to be integral in many
biopharma/industrial quality screening processes, such as characterising the
genome integrity and purity of plasmid constructs and Adeno-associated virus
(AAV) vectors that are in development for gene therapy.
In a post-pandemic COVID world the international public health community
continues to deploy nanopore-based sequencing for the surveillance of human
and animal outbreaks, from avian flu to tuberculosis (TB), in addition to
ongoing tracking of coronaviruses, providing near real-time reporting of
evolution and transmission of pathogens. This real-time reporting is critical
to help us better understand and combat known or yet-to-emerge unknown
pathogens, and provide the necessary context for effective preparation for and
responses to future pandemics. Globally, scientific communities seek to blend
these insights with public healthcare system approaches to managing infectious
disease.
The journey from the bench to the bedside
In 2022, we saw strong growth in foundational research in human genetics,
cancer research and monitoring infectious disease, alongside 'translational'
method development to take research discoveries from the bench into
distributed clinical or applied testing markets. Over the longer term, our
thesis is that the very fast, scalable, information-rich, real-time
nanopore-based sequencing will address unmet needs in health as well as
industrial sectors such as agriculture, food and environmental applications.
We have established cross-functional teams and processes to deliver our 'Q
line' platform that will deliver nanopore sequencing for regulated applied
markets such a clinical labs and biopharma QC/QA labs.
Human genomics and genetics: The increasing deployment of our technology in
human genomics research programmes highlights the scientific community's need
for these increasingly comprehensive analyses along with speed and
accessibility. For example, a whole human genome was sequenced in
approximately two hours by teams at Stanford, who were also able to resolve
more cases in their rare disease study.
A team from University of Washington and Seattle Children's Hospital also used
Oxford Nanopore sequencing technology to perform an ultra-rapid analysis using
whole genome sequencing and prior information about a genetic disease to
target a single gene, showing the ability to characterise inheritance of
specific familial variants in under three hours from birth.
Cancer research: The coupling of methylation with the new short fragment mode
(SFM) enabled delivery of a breakthrough publication by Stanford University,
showing that Oxford Nanopore technology is able to analyse cell-free DNA from
blood samples to track the methylation load of cancer samples through
diagnosis, treatment, remission, and recurrence - paving the way for a future
blood-based cancer screening method to support doctors and patients managing
cancer. Our technology has also proven to be a critical tool for users
interested in developing methods for rapidly characterising blood cancers. For
example, research teams at Walter and Eliza Hall Institute of Medical Research
and also the University of Florence have been able to further understand
chemotherapy resistance in chronic lymphocytic leukemia and acute myeloid
leukemia respectively, and teams at Université de Montréal in Canada are
aiming to generate comprehensive and precise transcriptomic profiles for
diagnosis, classification, and treatment selection of acute lymphoblastic
leukemia (ALL) for use in precision medicine, this ground-breaking study
highlighted a method to characterise ALL in just five minutes.
Microbial organisms /pathogens: The same properties of nanopore-based
sequencing that enable distributed surveillance - real-time sequencing with
accessible, easy-to-use devices - has supported the development of methods for
rapid infectious disease management in critical care. At Guys and St Thomas'
Hospital, a pilot respiratory metagenomics programme uses Oxford Nanopore's
products in a critical care setting to detect all bacterial/fungal pathogens
and their resistance profiles within hours versus several days with
traditional methods, from a single analysis. In addition, Oxford Nanopore
successfully completed phase one of a drug-resistant tuberculosis research
study as part of Seq&Treat, work funded by Unitaid and led by FIND, the
global alliance for diagnostics. This involved the development of a rapid
end-to-end sequencing workflow to identify over 100 mutations associated with
drug resistance across the TB genome, directly from clinical samples as part
of a research study.
Future applied market opportunity; to deliver real-world benefits and impact
In 2021, we established Oxford Nanopore Diagnostics (OND) to drive the process
of translating nanopore sequencing from research towards 'applied' clinical
uses of the technology. In 2022, our collaborative programmes have started to
translate the benefits of nanopore sequencing in human genetics to deliver
real-world benefits and impact. Our partners Omixon and GenDx announced assays
that can perform high-resolution Human Leukocyte Antigen (HLA) typing within
hours, to enable transplant patients to be rapidly matched with donors. We
also established a collaboration with Asuragen, a Bio-Techne company, to
develop an expanded carrier screening assay, using nanopore sequencing to
enable the family planning process. As Oxford Nanopore continues to work with
large human genomics programmes that are the basis for future personalised
medicine, we are proud to be building collaborations that have the potential
to give rise to broad types of future applications in human genetics,
including the important resolution of previously uncharacterised rare genetic
diseases.
Manufacturing innovation
Our commitment to innovation extends to our in-house developed manufacturing
processes. We continued to invest in scaling up the manufacturing operations
and the supporting supply chain during 2022, to ensure that production volumes
can be scaled rapidly when required. In the first half of 2022, we separated
our technology transfer operation from production, for greater resilience and
continued to invest in manufacturing innovation to increase the efficiency and
effectiveness of production processes. During the period, we made good
progress automating parts of flow cell manufacturing, to increase efficiency
and scale. To further optimise and scale flow cell manufacturing, we have
invested in multi-function automation systems for assembly of MinION and
PromethION Flow Cells. These new systems will reduce footprint, simplify
processes and double throughput. These systems have been designed, prototyped
and developed through 2022 and are now being prepared for introduction into
the flow cell manufacturing process, starting with MinION Flow Cells in the
first half of 2023 and PromethION Flow Cells in the second half of 2023.
Like many businesses, we experienced constraints on our supply chain in 2022,
with increasing costs of product supplies, particularly generic electronic
components. We successfully navigated unprecedented global supply chain
disruption to deliver the devices our customers ordered, reflecting the
strength of both our relationships with suppliers and our core internal
capabilities. Our operations teams were able to navigate supply shortages by
purchasing and adapting generic components to work in our products. This
effort involved a degree of redesigning every product, recertifying and
manufacturing redesigned products, such that alternate electronics could be
used when the original components were unavailable. We also benefitted from
our decision to enter 2022 with higher levels of inventory than normal,
learning from Brexit and prior disruptive events.
During the period, we expanded our facilities in Harwell, Oxfordshire, adding
22,600 square feet of manufacturing space (the Genesis building), to support
scaling of biologics manufacturing and production of our sample preparation
kits at scale. Further to this, we secured a new site in South Oxfordshire,
which we will develop with a focus on warehousing, logistics and technical
laboratories to build the organisational capability we require to continue to
supply product volumes to sustain rapid market growth globally.
Maximising our sustainable impact
From day one, we have sought to make biological information more accessible to
those who need it and we are delighted to see how nanopore users are bringing
our tools to bear on the challenges facing the world. In 2022, we continued to
develop a broader set of sustainability initiatives to measure our impact.
This year we are introducing a new sustainability strategy - product, planet,
people - that encapsulates the consistency of our wider business strategy and
sustainability outcomes. Climate Change, food security and human health are
defining issues of our time that Oxford Nanopore can positively impact. In
particular, the window for climate action is closing rapidly. We are adapting
to, and mitigating against, climate change risks and impacts, through
commitments to improved efficiencies throughout Oxford Nanopore's operations,
including in our products, facilities and value chain. Our products are
already designed to minimise packaging and waste, to dramatically reduce
dependencies on cold-chain shipping and to include recycling of key components
into our business processes.
We look forward to publishing our first detailed Sustainability Report in the
first half of the year.
Our People
Our people are vital to the success of our business; one of the hallmarks of
Oxford Nanopore is the multi-disciplinary nature of our employee base driving
our innovation. We have continued to grow rapidly in 2022 as we expand our
commercial presence, scale our production operations and accelerate the
development of our products.
To support our rapid growth, we made significant investments in our global
organisation in 2022. Total headcount reached 1,009 (FTE) at the end of the
year, up 26% from the prior year. We made key hires across geographies and
functional areas including senior commercial leadership in Europe and the US
and marketing leadership globally. In February 2023, our commercial team
headcount reached 301 achieving the goal we set out at IPO of doubling the
commercial team.
Alongside commercial expansion, we have continued to grow our operational
capabilities with the addition of experienced leadership in our biologics
production and supply chain. In R&D, we have made significant investments
in the expansion of our machine learning and artificial intelligence (AI)
teams, whilst enhancing our software teams and recruiting leading research and
development scientists.
Improved onboarding and talent development through initiatives such as Butcher
Bailey Leadership training, mentoring programmes, six-sigma programmes in
production and operations, and challenger sales training for our commercial
teams will ensure we are building a solid foundation for the future.
Outlook
We are seeing increasing demand around the world for our unique platform and
are hugely proud of the new ground that our customers are breaking with the
aid of our technology, in areas spanning population genomics, viral
surveillance, neurological disorders, cancer, biopharmaceutical production and
environmental conservation. This breadth underlines the scale of the
opportunity we see ahead, as we seek to bring the widest benefits to society
through the analysis of anything, by anyone, anywhere.
The strength of our balance sheet combined with significant investment in
platform development, bespoke electronics, IP, infrastructure and our greatest
resource, our people, puts us in a strong position to achieve this goal. We
see significant opportunities ahead, reflected both in the progress we have
made in the current research market and in the preparations that we are making
to address many potential uses for our technology in applied markets, from
infectious disease to agricultural optimisation.
We have established our platforms globally and our long-term strategy is to
enable our customers to develop novel applications, analogous to the 'apps'
model for mobile phones. Enabling our customers to develop on the platform
will propel us toward a world of real-time, distributed access to DNA/RNA
information. As we begin to understand and measure the biological world around
us and use that information to make decisions with positive impacts from
health to the environment, we are on the cusp of creating the 'Internet of
Living Things'.
Dr Gordon Sanghera
Chief Executive Officer
Financial review
2022 performance
I am proud to report our first full year as a listed company has seen our
strategy and differentiated platform continue to deliver strong results. To
provide a better picture of performance since our IPO we have also compared
FY22 to FY20 below.
The Group delivered revenue of £146.8 million in our LSRT business, up 16% on
a reported basis and 10% on a constant currency basis. This includes £26.1
million of COVID-19 sequencing revenue (2021: £17.5 million) and £13.2
million of revenue from the EGP (2021: £30.6 million).
Underlying LSRT revenue growth, excluding the EGP and COVID-19 sequencing, was
approximately 36% on a reported basis and approximately 30% on a constant
currency basis. This performance was principally driven by the expansion of
our global customer base from 6,345 to 8,283 active accounts; an increase of
over 30% during the year. Compared to FY20 total revenue was up 74.4% and LSRT
revenue was up 124.1%.
Group gross profit increased to £123.8 million, up 69.1% in the period. This
includes LSRT gross profit of £82.7 million (FY21: £68.3 million), with the
remainder (£41.1 million) coming from the proceeds, less associated costs,
arising from the conclusion of the DHSC contract, which was terminated in
2021. LSRT gross margin increased by 250 bps during the period and by 1,340
bps compared to FY20. Group operating loss decreased to £98.5 million
(FY21: £164.5 million), reflecting the growth in revenue and gross profit.
Group revenue increased to £198.6 million (FY21: £133.7 million), reflecting
a £19.8 million increase in LSRT revenue and non-recurring revenue of £51.8
million following the conclusion of the Group's COVID-19 testing contract with
the Department of Health and Social Care (DHSC), as previously announced.
These results, which were achieved against a challenging macro-economic
backdrop and global supply chain pressures, reflect the growing demand for our
technology, our unique commercial model and the strength of our teams.
During 2022, we continued to invest in research and development to drive both
continuous improvement in the performance and usability of our technology, and
to deliver new products and technologies that address a broader range of
applications and users' needs. We also continued to expand our global sales
and marketing team during 2022. Commercial and marketing headcount grew to 291
employees at 31 December, up by 51% during the year.
Despite continuing investment in innovation and sales and marketing, we
finished the year with cash, cash equivalents and other liquid investments of
£558.0 million (2021: £618.2 million) resulting in a reduction in cash of
£60.2 million.
Results at a glance
Two-year basis
2022 2021 % change 2020 % change
£m £m FY22 vs. FY21 £m FY22 vs. FY20
Total revenue 198.6 133.7 +48.5% 113.9 +74.4%
- LSRT revenue 146.8 127.0 +15.6% 65.5 +124.1%
- Covid testing revenue 51.8 6.7 +673.1% 48.3 +7.2%
Gross profit 123.8 73.2 +69.1% 46.9 +164.0%
Gross margin (%) 62.3% 54.8% +750 bps 41.2% +2,110 bps
LSRT gross margin (%) 56.3% 53.8% +250 bps 42.9% +1,340 bps
Operating loss (98.5) (164.5) +40.1% (73.1) (34.7)%
Adjusted EBITDA (78.6) (57.7) (36.2)% (55.2) (42.4)%
Loss for the year (91.0) (167.6) +45.7% (61.2) (48.7)%
Cash, cash equivalents and other liquid investments 558.0 618.2 (9.7)% 80.9 +589.8%
Net assets at period end 693.6 704.0 (1.5)% 185.9 +273.1%
Alternative performance measure
The Group has identified Alternative Performance Measures ("APMs") that it
believes provide additional useful information on the performance of the
Group. These APMs are not defined within International Financial Reporting
Standards ("IFRS") and are not considered to be a substitute for, or superior
to, IFRS measures. These APMs may not be necessarily comparable to similarly
titled measures used by other companies. All adjusted measures are reconciled
to the most directly comparable measure prepared in accordance with IFRS in
note 22.
Directors and management use these APMs alongside IFRS measures when budgeting
and planning, and when reviewing business performance.
Revenue by customer group
At a customer group level, revenue growth was driven by S2 and S3 customers,
excluding EGP, as well as strong growth through our distributor business in
China, boosting indirect sales. We were particularly pleased to see the strong
growth in S1 customers in the second half of 2022, as a result of our
commercial partnership with Avantor, which helps expand our reach and improve
accessibility for entry level products such as MinION. We continue to focus on
driving revenue growth through both rapid expansion and diversification of the
customer base, as well as increasing revenue per customer account.
2022 2021 % change
(£m) (£m)
S1 29.8 23.1 +29%
S2 52.3 38.4 +36%
S3 46.7 55.7 (16)%
- EGP 13.2 30.6 (57)%
- S3 excluding EGP 33.5 25.1 +33%
Indirect 18.1 9.7 +86%
Total LSRT revenue 146.8 127.0 +16%
Covid testing revenue 51.8 6.7 +673%
Total revenue 198.6 133.7 +49%
S3 revenue grew by 33%, excluding the EGP, in 2022. Total S3 revenue
declined by 16% to £46.7 million; strong underlying growth was offset by a
£17.4 million decline in revenue from the EGP during the period. This, in
part, was due to phasing of flow cell delivery in the fourth quarter of 2021,
previously expected in the first quarter of 2022. The number of active
customers in this group (excluding EGP) increased from 55 to 72 during the
period with average revenue per customer of approximately $581,000. This group
consists of a number of Population Genomics studies, particularly focusing on
rare diseases, as well as COVID-19, and other Public Heath Labs, focusing on
COVID-19 and other genomic surveillance. Whilst these two groups represent the
majority of the S3 revenue due to certain large projects, the majority of
customers in the S3 group are focused on clinical research, cancer and human
genomics as well as certain microbial, plant and animal genetic projects. It
is these customers that we believe are in the early stages of developing new
disruptive-use cases for our technology.
S2 revenue grew by 36% during the period to £52.3 million. Active customers
in this group grew by 26% to 989 in 2022, with an average annual revenue of
approximately $66,000 per customer. S2 customers are key to our expansion over
the medium term, as we provide localised high-quality sequencing capabilities
at competitive prices. These customers are able to manage their own projects
rather than continuing to be dependent on centralised sequencing services,
where they have to wait for their samples to be processed. They engage in a
wide range of genomics applications from infectious disease work to plant and
animal projects, with human disease and cancer genetic variation research at
the heart. The increase in this group has come from the need to find the
genetic explanation for unexplained disease and to gain a better understanding
of infectious diseases, whether in surveillance, its impact on economies, or
rapid identification of the causative agent for informed decision making.
S1 revenue grew by 29% during the period to £29.8 million, reflecting
continued demand for our entry-level and portable sequencing devices. Active
customers in this group grew by 31% to 7,210 in 2022, with an average annual
revenue of approximately $5,200 per customer. Growth across the S1 customer
base came from two areas, expansion of end users within organisations and new
accounts in new organisations, with Mk1B being the most popular device. To
date we have had less direct contact with this customer group with most
conversations taking place at conferences, in forums and in our Nanopore
Community. In 2021 we announced we were beginning a collaboration with Avantor
to provide direct contact with these smaller customers who are embracing the
ability to sequence when they need to and access new genomic information.
Avantor increased its contribution to the growth of this group in the second
half of 2022. Avantor is performing equally in the UK & Europe and
Americas regions, as well as maintaining the balance of new business (starter
pack revenue) to ongoing consumable business. The direct contact has also seen
the reactivation of devices already in customers' hands.
Geographical trends
The Group aims to make its technology available to a broad range of scientific
users, and currently supports users in more than 120 countries.
LSRT revenue by region (£m)
2022 2021 % change % change
(£m) (£m) actual CC
Americas 48.3 33.3 +45% +32%
Europe 43.3 33.4 +30% +29%
China 19.3 11.0 +76% +66%
UAE 15.4 31.7 (52)% (54)%
Asia Pacific & Japan 14.3 11.1 +28% +26%
Emerging markets 6.2 6.4 (2)% (12)%
Total LSRT Revenue 146.8 127.0 +16% +10%
At a regional level, revenues were predominantly driven by growth in our two
largest regions, Europe and the Americas, as well as strong growth in China.
Growth in Americas reflects increased investment in commercial resources in
the region. Revenue growth in this region is principally driven by research in
human disease and genomic surveillance in USA and Canada, but also reflects
the expansion into South America, through an emerging network of distributors.
Revenue in Europe increased by 30%, reflecting the increased commercial
headcount across the region.
Revenue across China grew by 76%. Increased demand in this region is driven by
strong performance of MinION and GridION for infectious disease.
Revenue grew by 28% in Asia Pacific and Japan. In this region, we have seen
customers taking advantage of our technology to gain a more complete picture
of the whole genome to expand the knowledge about the influence of genetic
variation in human disease. During the period, we further strengthened
operations in Australia and Singapore and post period end, we announced a new
logistics hub in Singapore, which will be our distribution hub for Asia
Pacific.
UAE revenue declined by 52%, impacted by a decline in EGP revenue during the
period.
Following the global sanctions against Russia, the Emerging markets fell
slightly in the year as the growth in other countries was more than offset by
the cessation of trade in Russia.
In some territories the Group works with distributors to achieve or enhance
its own commercial presence. The Group currently works with:
• a network of partners in China;
• a strong dealer network in Japan;
• distributors in South Korea, India, Turkey, the United Arab Emirates
and Qatar; and
• specialist logistics brokers who can work directly with the Group's
customers in harder-to-ship-to areas, including Mexico, Brazil, Chile,
Colombia, Costa Rica, Ecuador, El Salvador, Nicaragua, Panama, Uruguay and
parts of Africa.
Growth in margins
Year ended 31 December 2022 2021 Change
Gross Margin (%) 62.3% 54.8% +750 bps
LSRT Gross margin (%) 56.3% 53.8% +250 bps
2022 was an unprecedented year for pressure on supply chain reliability,
quality and lead times. Our technical teams worked closely with our core
suppliers, to ensure that product performance and availability were not
affected by these conditions. During the year, we continued to focus on
manufacturing innovation, improved production techniques and automation, all
designed to increase efficiency and gross margins.
Despite significant supply chain disruptions during 2022 we delivered a 250
bps increase to LSRT gross margin, reflecting improvements in manufacturing
techniques, automation, processes and designs as well as changes in product
mix and recycling of costly components.
We remain committed to our medium-term target of continual margin improvement
across all products and will continue to invest in innovation, to deliver this
goal.
Impact of headcount
Average headcount (FTEs) 2022 2021 Change (%)
R&D 380 291 +30%
Production 149 134 +11%
SG&A 393 280 +40%
Total 922 705 +31%
In 2022, the average number of employees across all functions increased by
31%. The Group invested in bringing onboard new Research and development staff
to support the research phase into early product release across our disruptive
platform. Our Research and development teams work on fundamental research for
novel sensing applications, membrane chemistry, sequencing chemistry,
nanopores, enzymes, algorithms, software electronics and arrays to deliver
future platforms and improvement on current products. As a result,
high-calibre scientists and researchers have been attracted to join the Group
with the goal to realise Oxford Nanopore's vision.
The Group's manufacturing capabilities continued to expand to cater for
increased demand from a growing client base. Production staff increased by 11%
in the year, covering all manufacturing stages and processes.
The largest increase in the Group's average headcount took place in the
selling, general and administration functions including legal functions and
corporate executives, with an increase of 40%. The significant expansion of
the commercial teams in key geographic regions supports the Group's business
growth objectives globally. In addition, the investment in in-field teams and
customer support teams was necessary to maintain and increase customer loyalty
and customer retention.
Research and development expenses
The Group's research and development expenditure is recognised as an expense
in the period as it is incurred, except for development costs that meet the
criteria for capitalisation as set out in IAS 38 (intangible assets).
Capitalised development costs principally comprise qualifying costs incurred
in developing the Group's core technology platform and sequencing kits.
2022 2021
(£m) (£m)
Research and development expenses 64.8 76.0
Adjusting items:
Employer's social security taxes on pre-IPO share awards 9.9 (17.7)
Adjusted R&D expenses 74.7 58.3
Capitalised development costs 19.2 9.3
Total R&D expenses and capitalised development costs 93.9 67.6
Adjusted research and development expenses increased by £16.4 million to
£74.7 million in FY22 (FY21: £9.7 million to £58.3 million). This increase
was principally due to a 31% increase in headcount (FY21: 24% increase)
leading to a £7.1 million increase in payroll costs (FY21: £2.4 million).
Capitalised development costs increased by £9.9 million to £19.2 million in
FY22 (FY21: decreased by £1.5 million to £9.3 million). This included
£10.4m of staff costs (FY21: £5.5 million) and £8.8 million of third-party
costs (FY21: £3.8 million), across a number of projects that occurred during
the year.
Overall investment in research and development was £93.9 million (FY21: 67.6
million); an increase of £26.3 million (FY21: £8.3 million) over the prior
year.
Selling, general and administration expenses
The Group's adjusted selling, general and administrative expenses in FY22
increased by £18.1 million to £116.0 million in FY22 (FY21: increased by
£26.5 million to £97.9 million).
2022 2021
(£m) (£m)
Selling, general and administration expenses 157.4 161.8
Adjusting items:
Share-based payment expense on Founder Long Term Incentive Plan (LTIP) (53.2) (37.6)
Employer's social security taxes on Founder LTIP and pre-IPO share awards 11.7 (21.5)
IPO costs expensed in Income Statement - (4.8)
Adjusted selling, general and administration expenses 116.0 97.9
The main changes were:
• a 48% increase in average headcount of staff within the Group's sales,
marketing and distribution functions (FY21: 22% increase), leading to a £11.7
million increase in payroll costs (FY21: £1.8 million increase). This is in
line with our plan to expand our global sales team
• a 30% increase in average headcount of corporate staff within the
Group's Human Resources (HR), finance, central administration, legal, applied
functions and certain corporate executives to support business growth (FY21:
114% increase), contributing to a £7.9 million increase in payroll costs
(FY21: £8.3 million)
• an increase in depreciation and amortisation of £2.7 million (FY21:
increase of £5.6 million); partially offset by a decrease in share-based
payments (non-Founder LTIP) of £6.9 million (FY21: increase of £12.5
million)
Balance sheet
Our balance sheet remains strong, with £558.0 million of Cash, cash
equivalents and other liquid investments at 31 December 2022. Key movements
during the year are outlined below:
2022 2021
(£m) (£m)
Property, plant and equipment 37.3 47.2
Intangible assets 30.0 23.0
Right-of-use assets 25.9 14.7
Net Deferred tax asset 7.7 6.1
Working capital 70.4 45.0
Other assets and liabilities 11.6 9.9
Provisions (13.3) (35.4)
Cash and cash equivalents and other liquid investments 558.0 618.2
Loans - (9.5)
Lease Liabilities (34.1) (15.3)
Net assets 693.6 704.0
Property, plant and equipment
Property, plant and equipment additions of £23.1 million were made in the
year (FY21: £21.5 million), including £12.6 million on devices with
customers (FY21: £12.7 million) and £8.1 million was spent on manufacturing
facilities and laboratories across our sites in the UK (FY21: £6.0 million).
On 8 July 2022, the Company sold its interest in the Gosling Building (the
Property) to The Oxford Science Park (Properties) Limited (TOSP) for £42.5
million. TOSP immediately granted to the Company an occupational lease of the
Property for 10 years at a rent of £1.8 million per annum (for which a
right-of-use asset and related lease liability were recognised). Overall, the
transaction resulted in a reduction in property, plant and equipment of £15.6
million, and a gain on disposal of £18.6 million.
On completion of the sale and leaseback of the Property, the term loan
facility of £9.5 million with Barclays Bank plc was fully repaid.
Intangible assets
Intangible asset additions of £19.2 million (2021: £9.3 million) were made
in the year relating to capitalised development costs.
Right-of-use assets
During the year Right-of-use asset additions were £15.5 million (2021: £3.5
million), predominantly as a result of the sale and leaseback of the Gosling
Building, resulting in a net book value at 31 December 2022 of £25.9 million
(2021: £14.7 million). As at 31 December 2022, the outstanding balance sheet
liability in respect of the right-of-use assets was £34.1 million (2021:
£15.3 million).
Working capital
The working capital balance of £70.4 million (2021: £45.0 million)
predominantly reflects inventory of £87.7 million (2021: £63.1 million),
trade and other receivables of £62.9 million (2021: £54.8 million) and trade
and other payables of £80.3 million (2021: £72.9 million).
The increase in working capital was due primarily to increased inventory due
to our long-term agreements with key suppliers focused on electric components.
In particular, inventories related to flow cells have increased by £18.8
million, and devices have increased by £11.1 million in the period.
Provisions
Provisions of £13.3 million at 31 December 2022 (2021: £35.4 million),
primarily relates to a provision for employer social security taxes on share
awards of £10.8 million (2021: £33.2 million). The provision is estimated at
each reporting period with reference to both the expected number of awards
vesting and their expected value, using the share price at the reporting date.
The release of the provision during the year is reflective of the reduction in
share price from £6.99 at 31 December 2021 to £2.47 at 31 December 2022.
Cash, cash equivalents and other liquid investments
Cash, cash equivalents and other liquid investments were £558.0 million at 31
December 2022, a decrease of £60.2 million in the period.
Cash flow
In 2022, there was a net cash outflow of £49.4 million from operations (FY21:
a net outflow of £53.2 million).
Cash outflows from investing activities were £65.8 million. This includes:
• the purchase of financial assets of £130.0 million, offset by the
proceeds of other financial assets of £60.5 million
• the purchase of property, plant and machinery of £23.1 million
• the capitalisation of development costs of £19.2 million
• offset by the proceeds from the sale of the Gosling Building (£42.5
million) and interest received of £3.4 million
Cash outflows from financing activities were £13.7 million (2021: inflow of
£622.9 million), which includes:
• the repayment of bank borrowings of £9.5 million (2021: £nil)
• lease and interest payments of £5.6 million (2021: £3.3 million),
offset partially by
• proceeds from issue of shares of £3.7 million (2021: £642 million)
less costs of share issue of £2.4 million (2021: £15.9 million)
Outlook
We remain focused on our vision to bring the widest benefits to society
through the analysis of anything, by anyone, anywhere. The continuous
strengthening of our team, the establishment of strategic partnerships across
the globe, together with significant investment in platform development,
bespoke electronics, IP and infrastructure, combined with the strength of our
balance sheet, puts us in a strong position to achieve this goal and continue
to deliver strong growth.
We continue to anticipate annual underlying LSRT revenue growth of more than
30% in the medium term and gross margins greater than 65%.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
Note 2022 2021
£000 £000
Revenue 3 198,603 133,661
Cost of sales (74,793) (60,466)
Gross profit 123,810 73,195
Research and development expenses (64,842) (75,976)
Selling, general and administrative expenses (157,447) (161,752)
Loss from operations (98,479) (164,533)
Finance income 5,941 224
Finance expense (1,628) (908)
Other gains and losses 7 13,186 504
Share of loss in associate (238) (64)
Impairment of investment in associate (2,193) (1,227)
Loss before tax (83,411) (166,004)
Tax expense 8 (7,614) (1,609)
Loss for the year (91,025) (167,613)
Other comprehensive income:
Items that will or may be reclassified subsequently to profit or loss
Fair value movements on investment bonds 7 936 -
Exchange gains arising on translation on foreign operations 4,021 388
Other comprehensive income for the year, net of tax 4,957 388
Total comprehensive loss (86,068) (167,225)
Note 2022 2021
Pence Pence
Loss per share 6 11 23
Consolidated Statement of Financial Position
as at 31 December 2022
Note 2022 2021
£000 £000
Assets
Non‑current assets
Property, plant and equipment 10 37,294 47,232
Intangible assets 9 30,039 23,004
Investment in associate 826 257
Right‑of‑use assets 11 25,906 14,687
Other financial assets 14 84,144 -
Deferred tax assets 7,681 6,077
185,890 91,257
Current assets
Inventories 12 87,698 63,071
Trade and other receivables 13 62,905 54,796
R&D tax credit recoverable 9,148 14,274
Other financial assets 14 119,411 130,628
Derivative financial assets 15 2,060 -
Cash and cash equivalents 19 356,778 487,840
638,000 750,609
Total assets 823,890 841,866
Liabilities
Non‑current liabilities
Loans 17 - 9,500
Lease liabilities 18 19,049 12,694
Share‑based payment liabilities 108 312
Provisions 17 8,645 10,339
27,802 32,845
Current liabilities
Trade and other payables 16 80,249 72,872
Current tax liabilities 8 1,639 4,418
Lease liabilities 18 15,049 2,610
Derivative financial liabilities 15 962 106
Provisions 17 4,633 25,039
102,532 105,045
Total liabilities 130,334 137,890
Net assets 693,556 703,976
Issued capital and reserves attributable to owners of the parent
Share capital 83 82
Share premium reserve 627,557 623,760
Share‑based payment reserve 168,200 96,350
Translation reserve 3,707 (314)
Accumulated deficit (105,991) (15,902)
TOTAL EQUITY 693,556 703,976
Consolidated Statement of Changes in Equity
as at 31 December 2022
Share capital Share premium Share-based payment reserve Translation reserve Accumulated deficit Total equity
£000 £000 £000 £000 £000 £000
At 1 January 2021 36 610,544 35,079 (702) (459,023) 185,934
Loss for the year - - - - (167,613) (167,613)
Exchange gain on translation of foreign operations - - - 388 - 388
Comprehensive gain/(loss) for the year - - - 388 (167,613) (167,225)
Issue of share capital 13 642,145 - - - 642,158
Bonus shares issued 37 - - - (37) -
Cancellation of deferred shares (4) - - - 4 -
Share premium cancellation - (610,767) - - 610,767 -
Cost of share issue - (18,162) - - - (18,162)
Employee share‑based payments - - 60,707 - - 60,707
Tax in relation to share‑based payments - - 564 - - 564
Total contributions by and distributions to owners 46 13,216 61,271 - 610,734 685,267
At 31 December 2021 82 623,760 96,350 (314) (15,902) 703,976
Loss for the year - - - - (91,025) (91,025)
Exchange gain on translation of foreign operations - - - 4,021 - 4,021
Fair value movements on investment bonds - - - - 936 936
Comprehensive gain/(loss) for the year - - - 4,021 (90,089) (86,068)
Issue of share capital 1 3,796 - - - 3,797
Cost of share issue - 1 - - - 1
Employee share‑based payments - - 71,165 - - 71,165
Tax in relation to share‑based payments - - 685 - - 685
Total contributions by and distributions to owners 1 3,797 71,850 - - 75,648
At 31 December 2022 83 627,557 168,200 3,707 (105,991) 693,556
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
2022 2021
£000 £000
Net cash outflow from operating activities 19 (49,387) (53,204)
Investing activities
Purchase of property, plant and equipment (23,071) (21,536)
Proceeds from sale of property 10 42,500 -
Capitalisation of development costs 9 (19,163) (9,281)
Investment in associate - (1,000)
Interest received 3,443 207
Purchase of other financial assets (129,962) (130.375)
Proceeds from other financial assets 60,459 -
Net cash outflow from investing activities (65,794) (161,985)
Financing activities
Proceeds from issue of shares 3,751 642,144
Costs of share issue (2,378) (15,929)
Principal elements of lease payments (4,111) (2,361)
Repayment of bank borrowings (9,500) -
Interest paid (221) (283)
Interest paid on leases (1,256) (666)
Net cash (outflow)/inflow from financing activities (13,715) 622,905
Net (decrease)/increase in cash and cash equivalents before foreign exchange (128,896) 407,716
movements
Effect of foreign exchange rate movements (2,166) (739)
Cash and cash equivalents at beginning of year 487,840 80,863
Cash and cash equivalents at end of year 19 356,778 487,840
Notes to the Condensed Financial Information
for the year ended 31 December 2022
1. General information
Oxford Nanopore Technologies plc (the "Company") is a public limited company
incorporated in the United Kingdom under the Companies Act 2006 and is
registered in England and Wales. The Company's registered office is at Gosling
Building, Edmund Halley Road, Oxford Science Park, Oxford, Oxfordshire, OX4
4DQ. This condensed financial information comprises the Company and its
subsidiaries (collectively the "Group" and individually "Group companies").
The Group is primarily involved in researching, developing, manufacturing and
commercialising the world's only commercial nanopore based sequencing platform
that allows the real time analysis of deoxyribonucleic acid ("DNA") or
ribonucleic acid ("RNA"). This enables our customers to perform
scientific/biomedical research in a range of areas, including human genetics,
cancer research, outbreak surveillance, environmental analysis,
pathogens/antimicrobial resistance, microbiome analysis and crop science.
These emerging uses may include applications in healthcare, agriculture,
biopharma production, food/water supply chain surveillance, and education or
consumer markets; anywhere where DNA information can tell a user about a
sample: for example its identity, whether it is changing, healthy or diseased.
The Company is the parent entity and the ultimate parent company of the Group.
The financial statements are presented in UK sterling because that is the
currency of the primary economic environment in which the Group operates, and
are rounded to the nearest thousand pounds. Foreign operations are included in
accordance with the policies set out in the accounting policies.
The Annual Report and Group financial statements for the year ended 31
December 2022 were approved by the Board of Directors on 20 March 2023. The
report of the auditor on those Group financial statements was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006. The Annual Report and Group
financial statements for 2022 will be filed with the Registrar in due course.
The Annual Report and Group financial statements for the year ended 31
December 2021 were approved by the Board of Directors on 31 March 2022. The
report of the auditor on those Group financial statements was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
2. Going concern
As at 31 December 2022, the Group held £558.0 million in cash, cash
equivalents and other liquid investments (note 22) on the Statement of
Financial Position.
The going concern assessment period is the 12 months to the end of March 2024.
In order to satisfy the going concern assumption, the Directors of the Group
review its budget periodically, which is revisited and revised as appropriate
in response to evolving market conditions.
The Directors have considered the budget and forecast prepared through to the
end of March 2024, the going concern assessment period, and the impact of a
range of severe, but plausible, scenarios, including supply chain issues
driven by demand, logistics interruptions, the pandemic, heightened
geopolitical tension; particularly between the United States of America and
the People's Republic of China and the war in the Ukraine.
In particular, the impact of key business risks on revenue, profit and cash
flow are as follows:
• Reduced revenues due to customer, regulatory and research and
development ("R&D") delays; and
• Increased costs due to supply chain restrictions, rising utilities
costs, rising wages & salary costs, additional R&D requirements and
rising costs of component parts.
Under all scenarios, the Group had sufficient funds to maintain trading before
taking into account any mitigating actions that the Directors could take.
Accordingly, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operation for the foreseeable future and at
least one year from the date of approval of the financial statements. On the
basis of these reviews, the Directors consider it remains appropriate for the
going concern basis to be adopted in preparing this condensed financial
information.
3. Revenue
The Group derives revenue from the transfer of goods and services over time
and at a point in time in the following categories and geographical regions:
2022 2021
£000 £000
Geographical region
Americas 48,300 33,370
Europe and United Kingdom 95,123 40,103
China 19,290 10,975
United Arab Emirates 15,379 31,722
Asia Pacific and Japan 14,286 11,126
Emerging markets 6,225 6,365
Total revenue from contracts with customers 198,603 133,661
2022 2021
£000 £000
Category
Sale of goods 177,672 117,401
Rendering of services 9,902 7,309
Lease income 11,029 8,951
Total revenue from contracts with customers 198,603 133,661
2022 2021
£000 £000
Timing of revenue recognition
At a point in time 177,672 117,401
Over time 20,931 16,260
Total revenue from contracts with customers 198,603 133,661
Notes 13 and 16 disclose assets and liabilities the Group has recognised in
relation to contracts with customers.
Revenue recognised in relation to contract liabilities:
2022 2021
£000 £000
Revenue recognised that was included in the contract liability balance at the 17,670 12,230
beginning of the year
4. Segment information
Products and services from which reportable segments derive their revenues are
set out below.
The information reported to the Group's senior management team, which is
considered the chief operating decision maker ("CODM"), for the purposes of
resource allocation and assessment of segment performance is defined by market
rather than product type. The segment measure of profit evaluated by the CODM
is Adjusted EBITDA, as this is considered to give the most appropriate
information in respect of profitability of the individual segments.
The Directors consider that the Group reportable segments in accordance with
IFRS 8 Operating Segments are as set out below:
Reportable segments Description
Life Science Research Tools ("LSRT") Oxford Nanopore's core business, generating revenue from providing products
and services for research use, including research and development expenditure
and corporate expenditure.
Covid Testing Revenue from providing products for SAR‑Cov‑2 testing. It should be noted
that sequencing products continue to be used for the purposes of COVID genomic
surveillance, including variant identification, but this is reporting within
the LSRT segment.
The accounting policies of the reportable segments are the same as the Group's
accounting policies.
(a) Information about major customers
In the year the Group had two major customers i) the Department of Health and
Social Care, the revenue from this customer was £51.8 million, which
represented 26.0% of Group revenue (2021: £5.3 million, or 4% of total
revenue) and ii) a customer in the United Arab Emirates with revenue of £14.7
million which represented 7.4% of Group revenue (2021: £31.3 million or 23.4%
of total revenue).
The following is an analysis of the Group's revenue, results, assets and
liabilities by reportable segment.
LSRT Covid Testing 2022 LSRT Covid Testing 2021
£000 £000 £000 £000 £000 £000
Revenue
Americas 48,300 - 48,300 33,348 22 33,370
Europe and United Kingdom 43,335 51,788 95,123 33,425 6,678 40,103
China 19,290 - 19,290 10,975 - 10,975
United Arab Emirates 15,379 - 15,379 31,722 - 31,722
Asia Pacific and Japan 14,286 - 14,286 11,126 - 11,126
Emerging markets 6,225 - 6,225 6,365 - 6,365
Total revenue 146,815 51,788 198,603 126,961 6,700 133,661
(b) Adjusted EBITDA
LSRT Covid Testing 2022 LSRT Covid Testing 2021
£000 £000 £000 £000 £000 £000
(Loss)/Profit after tax (128,824) 37,799 (91,025) (168,942) 1,329 (167,613)
Tax expense 7,614 - 7,614 1,609 - 1,609
Finance income (5,941) - (5,941) (224) - (224)
Finance expense 221 - 221 242 - 242
Interest on lease 1,382 25 1,407 666 - 666
Depreciation and amortisation 31,799 72 31,871 23,075 1,616 24,691
Share-based payments (Founder LTIP) 53,182 - 53,182 37,551 - 37,551
Employer's social security taxes on Founder LTIP and pre-IPO share awards (21,634) - (21,634) 39,291 - 39,291
IPO costs expensed - - - 4,829 - 4,829
Gain on sale of property (18,620) - (18,620) - - -
Settlement of Covid-19 Testing contract - (37,896) (37,896) - - -
Impairments 2,193 - 2,193 1,227 - 1,227
Adjusted EBITDA (78,628) - (78,628) (60,676) 2,945 (57,731)
Adjusted EBITDA is defined as loss for the year before income tax expense,
finance income, loan interest, interest on lease, depreciation and
amortisation, adjusted for: i) share-based payment expense on Founder LTIP
awards; ii) employer's social security taxes on Founder LTIP and pre-IPO share
awards; iii) IPO costs expensed in the statement of comprehensive income; iv)
impairment of investment in associate; v) gain on sale of property; and vi)
settlement of the Covid-19 testing contract.
4. Segment information continued
(c) Supplementary information
LSRT Covid Testing 2022 LSRT Covid Testing 2021
£000 £000 £000 £000 £000 £000
Depreciation of property, plant and equipment 15,968 - 15,968 12,890 - 12,890
Depreciation of right‑of‑use assets 4,403 72 4,475 2,512 145 2,657
Amortisation of internally generated intangible assets 11,378 - 11,378 7,623 1,471 9,094
Amortisation of acquired intangible assets 50 - 50 50 - 50
Additions to non‑current assets(*) 57,775 - 57,775 34,311 - 34,311
Segment assets
Investment in associate 826 - 826 257 - 257
Acquired intangible assets 346 - 346 396 - 396
Other segment assets(**) 243,496 - 243,496 187,973 14,421 202,394
Total segment assets 244,668 - 244,668 188,626 14,421 203,047
Deferred tax assets 7,681 6,077
R&D tax credit recoverable 9,148 14,274
Derivative financial assets 2,060 -
Other financial assets 203,555 130,628
Cash and cash equivalents 356,778 487,840
Total assets 823,890 841,866
Segment liabilities
Total segment liabilities (127,733) - (127,733) (122,643) (1,223) (123,866)
Derivative financial liabilities (962) (106)
Current tax liabilities (1,639) (4,418)
Non‑current borrowings - (9,500)
Total liabilities (130,334) (137,890)
Net assets 693,556 703,976
* Additions to non-current assets include all non-current assets except for
investments, and deferred tax assets.
** Other segment assets include inventory, trade and other
receivables and non-current assets except for investments, acquired intangible
assets, other financial assets and deferred tax assets.
The Group's non-current assets, excluding deferred tax assets, by geographical
location are detailed below:
LSRT Covid Testing 2022 LSRT Covid Testing 2021
£000 £000 £000 £000 £000 £000
Americas 11,255 - 11,255 6,023 - 6,023
Europe and United Kingdom 166,401 - 166,401 76,452 2,302 78,754
China 96 - 96 320 - 320
Asia Pacific and Japan 335 - 335 83 - 83
United Arab Emirates 122 - 122 - - -
178,209 - 178,209 82,878 2,302 85,180
5. Loss before tax
2022 2021
£000 £000
This is after charging/(crediting):
Non‑staff research and development costs 32,651 27,101
Amortisation of intangible assets 11,428 9,144
Depreciation of property, plant and equipment 15,968 12,890
Depreciation of right‑of‑use assets 4,475 2,657
(Gain)/loss on disposal of property, plant and equipment (16,740) 837
Cost of inventories 42,559 38,615
Write‑down of inventories 6,045 4,368
Short-term lease costs 602 180
Impairment of intangible assets 736 -
Impairment of investment in associate 2,193 1,227
Net foreign exchange (gain)/loss (2,490) 1,468
All amounts relate to continuing operations.
Amortisation of internally generated intangible assets is included within
selling, general & administration expenses in the consolidated statement
of comprehensive income.
6. Loss per share
2022 2021
Pence Pence
(a) Basic and diluted loss per share
Total basic and diluted loss per share attributable to the ordinary equity 11 23
holders of the Group from continuing operations
2022 2021
£000 £000
(b) Reconciliation of earnings used in calculating earnings per
share
Loss attributable to the ordinary equity holders of the Group used in (91,025) (167,613)
calculating basic and diluted loss per share from continuing operations
2022 2021
Number Number
(c) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares and potential ordinary shares used 823,742,709 731,938,586
as the denominator in calculating basic and diluted earnings per share
Options
Options granted to employees under the Oxford Nanopore Technologies Share
Option Scheme and the Oxford Nanopore Technologies Limited Share Option Plan
2018 are considered to be potential ordinary shares. These options have not
been included in the determination of the basic and diluted loss per share as
shown above, because they are anti-dilutive for the year ended 31 December
2022 and 31 December 2021. These options could potentially dilute basic
earnings per share in the future.
7. Other gains and losses
2022 2021
£000 £000
(Loss)/gain on derivative financial instruments (5,434) 504
Gain on sale of property (see note 10) 18,620 -
13,186 504
2022 2021
£000 £000
Fair value movements on investment bonds (included in other comprehensive 936 -
income)
Further information on derivative financial instruments is disclosed in note
15.
8. Tax on loss on ordinary activities
8.1 Income tax recognised in profit or loss
2022 2021
£000 £000
Current tax
Notional tax on R&D expenditure credit (RDEC) 1,187 800
Prior year adjustment in respect of research and development tax credit 159 69
Prior year adjustment in respect of current tax 519 (48)
Tax payable on foreign subsidiary 6,059 5,344
Total current tax 7,924 6,165
Deferred tax
Origination and reversal of temporary differences (310) (4,556)
Total deferred tax (310) (4,556)
Total tax expense 7,614 1,609
Current tax balances have been calculated at the rates enacted for the period.
The effective rate of Corporation Tax is -9.13% (2021: -0.97%) of the loss
before tax for the Group.
The reasons for the difference between the actual tax charge for the year and
the standard rate of Corporation Tax in the United Kingdom applied to losses
for the year are as follows:
2022 2021
£000 £000
Loss for the year (91,025) (167,613)
Income tax expense 7,614 1,609
Loss before income taxes (83,411) (166,004)
Tax rate in the UK for period as a percentage of losses at 19% (2021: 19%) (15,848) (31,541)
R&D incentives 813 (323)
Expenses not deductible for tax purposes 1,014 1,180
Adjustment in respect of overseas tax rates 1,104 1,031
Adjustments to tax charge in respect of prior periods 62 120
Impact of share options 12,337 (1,955)
Movement on unrecognised deferred tax 7,845 32,983
Other timing differences 287 114
Total tax expense 7,614 1,609
8.2 Current tax liabilities
2022 2021
£000 £000
Corporation Tax payable (1,639) (4,418)
(1,639) (4,418)
9. Intangible assets
Capitalised development costs Patents and licenses Total
£000 £000 £000
Cost
At 1 January 2021 29,183 446 29,629
Additions from internal development 9,281 - 9,281
At 31 December 2021 38,464 446 38,910
Additions from internal development 19,163 - 19,163
Foreign exchange movements 36 - 36
At 31 December 2022 57,663 446 58,109
Accumulated amortisation and impairment
At 1 January 2021 6,762 - 6,762
Charge for the year 9,094 50 9,144
At 31 December 2021 15,856 50 15,906
Charge for the year 11,378 50 11,428
Impairment 736 - 736
At 31 December 2022 27,970 100 28,070
Net book value
At 31 December 2021 22,608 396 23,004
At 31 December 2022 29,693 346 30,039
Development costs have been capitalised in accordance with IAS 38 Intangible
Assets and are therefore not treated as a realised loss until recognised as an
amortisation or impairment charge in the statement of comprehensive income.
10. Property, plant and equipment
Land & Buildings Leasehold improvements Plant and machinery Assets under construction Assets subject to operating leases Equipment Total
£000 £000 £000 £000 £000 £000 £000
Cost or valuation
At 1 January 2021 16,401 6,529 16,420 191 20,002 11,136 70,679
Additions - 745 3,544 1,791 12,711 2,745 21,536
Disposals - - (23) - (2,725) (232) (2,980)
Transfers between classes (1,344) 1,636 (391) - - 99 -
Foreign exchange movements - (2) 7 - 87 14 106
At 31 December 2021 15,057 8,908 19,557 1,982 30,075 13,762 89,341
Additions - 350 1,249 6,897 12,627 1,985 23,108
Disposals (15,057) (1,607) (317) (691) (3,921) (87) (21,680)
Transfers between classes - 2,822 2,059 (5,356) - 475 -
Foreign exchange movements - 20 49 - 1,064 130 1,263
At 31 December 2022 - 10,493 22,597 2,832 39,845 16,265 92,032
Accumulated depreciation and impairment
At 1 January 2021 2,226 1,506 8,612 - 11,494 7,455 31,293
Charge for the year 298 1,139 2,552 - 6,450 2,451 12,890
Disposals - - (9) - (2,130) (4) (2,143)
Transfers between classes (1,293) 1,293 - - - - -
Foreign exchange movements - 1 3 - 52 13 69
At 31 December 2021 1,231 3,939 11,158 - 15,866 9,915 42,109
Charge for the year 149 1,276 3,112 - 9,086 2,345 15,968
Disposals (1,380) (640) (114) - (2,036) (46) (4,216)
Impairments - 28 117 - - - 145
Foreign exchange movements - 5 41 - 588 98 732
At 31 December 2022 - 4,608 14,314 - 23,504 12,312 54,738
Net book value
At 31 December 2021 13,826 4,969 8,399 1,982 14,209 3,847 47,232
At 31 December 2022 - 5,885 8,283 2,832 16,341 3,953 37,294
On 8 July 2022, the Company sold its interest in the Gosling Building (the
"Property") to The Oxford Science Park (Properties) Limited ("TOSP") for
£42.5 million. TOSP immediately granted to the Company an occupational lease
of the Property for ten years at a rent of £1.8 million per annum (for which
a right-of-use asset and related lease liability were recognised). Overall,
the transaction resulted in a reduction in net property, plant and equipment
of £15.6 million, and a gain on disposal of £18.6 million.
The Group leases some of its devices to customers. Lease payments in relation
to these devices are received either in advance or within the year. Therefore,
no maturity analysis of lease payments has been included.
11. Right-of-use assets
Total
£000
Cost
At 1 January 2021 18,141
Additions 3,494
Disposals (1,398)
Foreign exchange movements 65
At 31 December 2021 20,302
Additions 15,504
Disposals (973)
Foreign exchange movements 586
At 31 December 2022 35,419
Accumulated depreciation
At 1 January 2021 4,326
Charge for the year 2,657
Disposals (1,398)
Foreign exchange movements 30
At 31 December 2021 5,615
Charge for the year 4,475
Disposals (782)
Foreign exchange movements 205
At 31 December 2022 9,513
Net book value
At 31 December 2021 14,687
At 31 December 2022 25,906
Additions in the year included £5.0 million for the lease of the Gosling
Building. See note 10 for further details of this transaction.
12. Inventories
2022 2021
£000 £000
Raw materials 41,852 25,781
Work in progress 34,960 17,830
Finished goods 10,886 19,460
87,698 63,071
The carrying amount of inventories was not materially different from their
replacement cost.
13. Trade and other receivables
2022 2021
£000 £000
Trade receivables 38,097 38,198
Contract assets 3,084 275
Other debtors 4,724 2,834
Accrued interest income 1,065 32
Other taxes 5,262 5,353
Prepayments 10,673 8,104
62,905 54,796
Contract assets relate to the Group's rights to consideration for goods and
services provided but not billed at the reporting date for goods and services
provided. They are transferred to receivables when the rights become
unconditional. This usually occurs when an invoice is issued to the customer.
14. Other financial assets
2022 2021
£000 £000
Treasury deposits 101,274 130,375
Investment bonds 100,898 -
Other financial assets 1,383 253
203,555 130,628
These items were analysed as follows:
2022 2021
£000 £000
Current 119,411 130,628
Non-current 84,144 -
203,555 130,628
15. Derivative financial assets and liabilities
2022 2021
£000 £000
Derivative financial assets
Foreign currency forward contracts 2,060 -
2,060 -
Derivative financial liabilities
Foreign currency forward contracts 962 106
962 106
16. Trade and other payables
2022 2021
£000 £000
Trade payables 23,103 20,486
Share-based payments 460 1,416
Payroll taxation and social security 2,585 6,573
Accruals 33,801 22,767
Contract liabilities 20,300 21,630
80,249 72,872
Trade payables and accruals principally comprise amounts outstanding for trade
purchases and ongoing costs. The average credit period taken for trade
purchases by the Group is 59 days (2021: 57 days).
The Group has financial risk management policies in place to ensure that all
payables are paid within the pre-agreed credit terms.
The Directors consider that the carrying amount of trade payables approximates
their fair value.
Contract liabilities primarily relate to performance obligations on customer
contracts which were not satisfied at 31 December. In 2022 they decreased by
£1.3 million (2021: increase of £3.8 million). Management expects that most
of the transaction price allocated to unsatisfied performance obligations as
at 31 December 2022 will be recognised as revenue during the following year.
17. Loans and provisions
2022 2021
£000 £000
Loans
Loan for land and building purchase - 9,500
- 9,500
On 8 July 2022, the Company completed the sale of its interest in the Gosling
Building to The Oxford Science Park (Properties) Limited for £42.5 million.
On completion of the sale, the term loan facility of £9.5 million with
Barclays Bank plc was fully repaid. The average interest rate charged in the
year was 3.51% (2021: 2.90%).
Dilapidation provisions Employer Other Total provisions
taxes
£000
£000 £000
£000
Provisions
At 31 December 2021 1,503 33,192 683 35,378
Movement in provision for the year 826 (21,463) (141) (20,778)
Payments - (1,093) (389) (1,482)
Foreign exchange movements 17 136 7 160
At 31 December 2022 2,346 10,772 160 13,278
Current - 4,473 160 4,633
Non‑current 2,346 6,299 - 8,645
At 31 December 2022 2,346 10,772 160 13,278
Current - 24,356 683 25,039
Non‑current 1,503 8,836 - 10,339
At 31 December 2021 1,503 33,192 683 35,378
The dilapidation provision relates to the leased properties, representing an
obligation to restore the premises to their original condition at the time the
Group vacates the related properties.
The provision is non-current and expected to be utilised between two and 21
years.
Employer's social security taxes relates to the expected employer's taxes on
share-based payments. This is expected to be utilised between one and ten
years. The provision is based on the best estimate of the liability, which is
reviewed and updated at each reporting period. The provision is accrued over
the vesting period to build up to the required liability at the point it is
ultimately due.
18. Lease liabilities
2022 2021
£000 £000
Current 15,049 2,610
Non‑current 19,049 12,694
Lease liabilities included in the statement of financial position 34,098 15,304
The increase in the current year included a £12.6 million liability arising
in respect of the lease of the Gosling Building. See note 10 for more details
on this transaction.
Information on the associated right-of-use assets is included in note 11.
19. Notes to the cash flow statements
2022 2021
£000 £000
Cash and cash equivalents 356,778 487,840
Cash and cash equivalents comprise cash and short-term bank deposits with an
original maturity of three months or less. The carrying amount of these assets
is approximately equal to their fair value. Cash and cash equivalents at the
end of the reporting period as shown in the consolidated statement of cash
flows can be reconciled to the related items in the consolidated reporting
position as shown above.
2022 2021
£000 £000
Loss before tax (83,411) (166,004)
Depreciation on property, plant and equipment 15,968 12,890
Depreciation on right‑of‑use assets 4,475 2,657
Amortisation on intangible assets 11,428 9,144
Loss on disposal of property, plant and equipment 1,880 837
Research and development expense tax credit (7,084) (4,210)
Foreign exchange movements 5,556 1,071
Interest on leases 1,407 666
Bank interest income (5,941) (224)
Bank interest expense 221 242
Non‑cash movements on derivatives (1,203) 166
Impairment of investment 2,193 1,227
Impairment of operating assets 1,173 -
Share of losses in associate 238 64
Gain on sale of property - see note 10 (18,620) -
Employee share benefit costs including employer's social security taxes 48,784 62,453
Operating cash flows before movements in working capital (22,936) (79,021)
(Increase)/decrease in receivables (7,402) 10,888
Increase in inventory (24,717) (27,444)
Increase in payables 4,434 33,571
Cash used in operations (50,621) (62,006)
Income taxes ‑ R&D tax credit received 10,864 9,763
Foreign tax paid (9,630) (961)
Net cash outflow from operating activities (49,387) (53,204)
19. Notes to the cash flow statements continued
(i) Changes in liabilities arising from financing activities
The table below details change in the Group's liabilities arising from
financing activities, including both cash and non-cash changes. Liabilities
arising from financing activities are those for which cash flows were, or
future cash flows will be, classified in the Group's consolidated cash flow
statement as cash flows from financing activities.
Bank loan Lease liabilities Total
£000 £000 £000
At 1 January 2021 9,500 14,132 23,632
Non‑cash changes
New leases - 3,494 3,494
Interest - 666 666
Foreign exchange movements - 39 39
Cash changes
Principal repaid - (2,361) (2,361)
Interest paid - (666) (666)
At 31 December 2021 9,500 15,304 24,804
Non‑cash changes
New leases - 22,523 22,523
Lease surrendered - (191) (191)
Interest - 1,407 1,407
Foreign exchange movements - 422 422
Cash changes
Bank loan repaid (9,500) - (9,500)
Principal repaid - (4,111) (4,111)
Interest paid - (1,256) (1,256)
At 31 December 2022 - 34,098 34,098
20. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on consolidation and are
not disclosed in this note. Details of transactions between the Group and
other related parties are disclosed below.
In 2022 the Company invested a further £3.0 million in its associate, Veiovia
Limited, which is related to the Company by shared directorship of JP
Willcocks. A total of £4.5 million has now been invested in Veiovia Limited.
During the year, an impairment of £2.2 million was recognised through the
statement of comprehensive income.
The Company paid academic research costs in 2022 of £0.5 million (2021: £0.2
million) to the University of Oxford, which is related to the Company by
shared directorship of W Becker.
21. Controlling party
There is no ultimate controlling party of the Group as ownership is split
between the Company's shareholders. The most significant shareholders at 31
December 2022 were as follows: IP Group (10%), Tencent Holdings (8%), Baillie
Gifford (6%), G42 (5%) and GIC Asset Management (5%).
22. Alternative performance measures
The Group's performance is assessed using a number of financial measures which
are not defined under IFRS and are which therefore comprise alternative
(non-GAAP) performance measures. These are as follows:
• Underlying LSRT revenue growth: LSRT revenue growth excluding EGP and
COVID sequencing revenue;
• Underlying LSRT revenue growth on a constant currency basis: LSRT
revenue growth excluding EGP and COVID sequencing revenue, on a constant
currency basis;
• Adjusted research and development expenses: research and development
expenses after adjusting for employer's social security taxes on pre-IPO share
awards;
• Adjusted selling, general and administrative expenses: selling, general
and administrative expenses after adjusting for share-based payment expense
(Founder LTIP), employer's social security taxes on Founder LTIP and pre-IPO
share-based awards and IPO costs expensed;
• EBITDA: loss for the year before income tax expense, finance income,
loan interest, interest on lease, depreciation and amortisation;
• Adjusted EBITDA: EBITDA adjusted for i) share-based payment expense on
Founder LTIP awards; ii) employer's social security taxes on Founder LTIP
pre-IPO share awards; iii) IPO costs expensed in the statement of
comprehensive income; iv) impairment of investment in associate; v) gain on
sale of property; and vi) settlement of the Covid-19 testing contract; and
• Cash, cash equivalents and other liquid investments: total cash and
cash equivalents, which comprise cash in hand, deposits held at call and other
short-term highly liquid investments with a maturity of three months or less
at the date of acquisition. Other liquid investments comprise investment bonds
in which a fixed sum is invested in an asset-backed fund, treasury deposits,
and investment bonds, which comprise deposits held with banks that do not meet
the IAS 7 definition of a cash equivalent.
The following table presents the adjusted underlying LSRT revenue growth
2022 2021
£000 £000
LSRT Revenue 146,815 126,961
Adjusting Items:
EGP revenue (13,172) (30,562)
COVID sequencing revenue (26,112) (17,545)
Underlying LSRT revenue 107,531 78,854
Growth +36.4%
Impact of foreign exchange (5,370) -
Underlying LSRT revenue on a constant currency basis 102,161 78,854
Growth +29.6%
The following table presents the adjusted research and development:
2022 2021
£000 £000
Research and development expenses 64,842 75,976
Adjusting Items:
Employer's social security taxes on pre-IPO share awards 9,890 (17,748)
Adjusted research and development expenses 74,732 58,228
Capitalised development costs 19,163 9,281
Adjusted R&D expenses and capitalised development costs 93,895 67,509
22. Alternative performance measures continued
The following table presents the adjusted selling, general and administrative
expenses
2022 2021
£000 £000
Selling, general and administrative expenses 157,447 161,752
Adjusting Items:
Share-based payment expense on Founder Long Term Incentive Plan (LTIP) (53,182) (37,551)
Employer's social security taxes on Founder LTIP and pre-IPO share awards 11,743 (21,544)
IPO costs expensed in statement of comprehensive income - (4,829)
Adjusted selling, general and administrative expenses 116,008 97,828
The following table presents the Group's EBITDA and Adjusted EBITDA, together
with a reconciliation to loss for the year:
2022 2021
£000 £000
Loss for the year (91,025) (167,613)
Tax expense 7,614 1,609
Finance income (5,941) (224)
Loan interest 221 242
Interest on lease 1,407 666
Depreciation and amortisation 31,871 24,691
EBITDA (55,853) (140,629)
Share-based payments (Founder LTIP) 53,182 37,551
Employer's social security (credit)/charge on Founder LTIP and pre‑IPO (21,634) 39,291
share‑based awards
Gain on sale of property (18,620) -
Settlement of Covid-19 testing contract (37,896) -
Impairment of investment in associate 2,193 1,227
IPO costs expensed - 4,829
Adjusted EBITDA (78,628) (57,731)
The following table presents cash, cash equivalents and other liquid
investments:
2022 2021
£000 £000
Cash and cash equivalents 356,778 487,840
Treasury deposits 101,274 130,375
Investment bonds 100,898 -
Less: fair value movements on investment bonds (936) -
Cash, cash equivalents and other liquid investments 558,014 618,215
1 (#_ftnref1) Underlying growth excludes foreign exchange and revenue from
the Emirati Genome Program (EGP) and COVID-19 sequencing
2 (#_ftnref2) Constant currency applies the same rate to the FY22 and FY21
non-GBP results based on FY21 rates
3 (#_ftnref3) Non-recurring revenue following the conclusion of the COVID-19
testing contract with the DHSC
4 (#_ftnref4) Adjusted EBITDA is loss for the year before income tax
expense, finance income, loan interest, interest on lease, depreciation and
amortisation adjusted for: i) share-based payment expense on Founder LTIP
awards; ii) employer's social security taxes on Founder LTIP and pre-IPO share
awards; iii) IPO costs expensed in the Statement of Comprehensive Income; iv)
impairment of investment in associate; v) gain on sale of property; and vi)
settlement of the Covid testing contract.
5 (#_ftnref5) Cash and cash equivalents, treasury deposits and investment
bonds (excluding unrealised interest) at 31 December 2022
6 (#_ftnref6) Early access: products are available to all customers,
but products are subject to availability and regular changes
7 (#_ftnref7) Duplex refers to the analysis of combined measured signals
from double-stranded DNA to produce a base-pair sequence read
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