REG - Oxford Nanopore Tech - FY23 Preliminary Results
06/03/2024 07:00
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RNS Number : 7193F Oxford Nanopore Technologies plc 06 March 2024
06 March 2024
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Oxford Nanopore Technologies plc
Preliminary results for the year ended 31 December 2023
Oxford Nanopore Technologies plc (LSE: ONT) ("Oxford Nanopore" or the
"Group"), the company behind a new generation of molecular sensing technology
based on nanopores, today announces its preliminary results for the year ended
31 December 2023.
Gordon Sanghera, Chief Executive Officer, commented:
"We delivered strong underlying revenue growth of 39% in 2023, driven by the
strength of our differentiated technology, commercial model, and strategic
investments in infrastructure. Last year we also delivered breakthroughs in
our platform performance, achieving record accuracy, expanded end-to-end
workflows and increased access to high output applications with the PromethION
2 (P2) product rollout, with 700 P2 Solos sold or leased through starter packs
in FY23.
"As we look forward, our highly differentiated platform and substantial market
opportunity, positions us well to deliver long-term, sustainable growth. We
are focused on key strategic initiatives to drive value, including disciplined
investments in our technology and commercial operations where appropriate to
unlock key opportunities in priority markets. We also remain mindful of
end-market conditions, with sales cycles lengthening at the same time as we
have expanded our commercial and operational infrastructure to support future
growth. These factors have led us to revise our forecast for achieving
adjusted EBITDA breakeven to the end of 2027 as we continue to focus on
delivering against the huge commercial opportunity ahead of us.
"We are confident that we can deliver underlying revenue growth of 20 to 30%
in 2024 and greater than 30% in the medium term."
Summary financial performance
£ million FY23 FY22 Change Change
Unless otherwise stated reported CC(2)
Life Science Research Tools (LSRT) revenue 169.7 146.8 +15.6% +15.3%
Legacy Covid Testing Revenue - 51.8 (100)% (100)%
Total revenue 169.7 198.6 (14.6)% (14.7)%
Underlying(1) LSRT revenue 149.7 107.5 +39.3% +39.1%
Gross profit 90.5 123.8 (26.9)%
Gross margin 53.3% 62.3% (900)bps
LSRT gross profit 90.5 82.7 +9.4%
LSRT gross margin 53.3% 56.3% (300)bps
Adjusted EBITDA(3) (104.9) (78.6) (26.3)
Loss for the period (154.5) (91.0) (63.5)
Notes:
Certain numerical figures included herein have been rounded. Discrepancies in
between totals and the sums may occur due to such rounding.
(1) Underlying revenue excludes revenue from COVID sequencing and revenue from
the Group's largest customer, The Emirati Genome Program (EGP). All references
to underlying growth in this document have been adjusted for COVID sequencing
and EGP revenues.
(2) Constant currency applies the same rate to the FY23 and FY22 non-GBP
results based on FY22 rates.
3 Adjusted EBITDA is the EBITDA adjusted for i) Share-based payment expense on
founder LTIP ii) Employer's social security taxes on Founder LTIP and pre-IPO
awards, iii) Revenue and expenses associated with the settlement of the COVID
testing contract with the DHSC iv) Gain on the sale of property and v)
impairment of investment in associate - see note 5(b).
FY23 Financial highlights
· Life Science Research Tools (LSRT) revenue increased by 15.6% to
£169.7million; underlying revenue excluding revenue from the Emirati Genome
Program (EGP) and COVID sequencing of £12.0 million and £8.0 million
respectively, was £149.7 million, an increase of 39% in the period.
· LSRT revenue growth led by the Americas with revenue up 27% (48%
on an underlying basis) and EMEAI with revenue up 16% (50% on an underlying
basis).
· Strong underlying growth was achieved across all LSRT customer
groups, with the highest-spending S3 customers increasing the most, growing
69% in the period.
· Underlying revenue, excluding EGP and COVID, grew fastest across
the PromethION franchise, representing all devices and flow cell sales from
the PromethION product range, up 83% in the period to £48.8 million (FY22
£26.6 million). Underlying revenue from the MinION franchise, representing
all sales of MinION flow cells and devices that run MinION flow cells
(including GridION and MinION) grew 14% to £58.8 million (FY22: £51.5
million). Other revenues, representing kits, services revenues and other
devices grew 44% on an underlying basis to £42.2 million (FY22: from £29.4
million).
· Total revenue and gross margin decline of 14.6% and (900) basis
points respectively, reflects:
o The previously announced conclusion of the Group's legacy Covid testing
contract with the Department of Health and Social Care (DHSC) in 2022, plus
o 300 bps decrease in LSRT gross margin to 53.3%, predominantly reflecting
the one off and short term impacts from i) the G42 contract (the Group's
agreement to the supply of sequencing tools in support of, the EGP was amended
in December 2023) ii) the write off of excess COVID sequencing kits and legacy
devices alongside; and iii) upgrading the compute on large PromethION devices,
an investment that enables real time basecalling. These headwinds were
partially offset by underlying improvements in flow cell margins, particularly
across the MinION range, in relation to both yields and recycling rates.
o Excluding these one-off items the underlying LSRT gross margin was 58.8%
(FY22: 58.0%).
· Adjusted EBITDA loss of £(104.9) million (FY22: £(78.6
million)); higher LSRT gross profit offset by increased operating expenses,
reflecting investment in commercial and marketing teams, in innovation to
support new product development and manufacturing and logistics
infrastructure, to support long term sustainable growth.
· Increase in loss year-on-year to £(154.5) million (FY22:
£(91.0) million). Taking into consideration that the result for FY22 included
i) the income from the conclusion of the Group's Covid testing contract with
the DHSC as described above, a net benefit of £37.9 million and ii) the
impact of the gain on disposal of property of £18.6 million; the balance of
the increase in loss was primarily due to increases in operating expenditure
in the year, offset partially by a reduction in the share based payment and
associated costs, an increase in finance income as well as the increase in
Gross profit from LSRT.
· Strong balance sheet; cash, cash equivalents and other liquid
investments of £472.1 million 1 (#_ftn1) as at 31 December 2023, compared to
£558.0 million as of 31 December 2022. In October 2023, bioMérieux SA
(bioMérieux) agreed to subscribe for 29,025,326 shares at a subscription
price of 238.08p per share which equated to a total investment of nearly £70
million.
See the financial review for further detail.
FY23 Business highlights
· Delivered a net increase of more than 750 active customer
accounts in the period, taking total active accounts to more than 7,600 in
2023; new customers will be key driver of consumables sales in future years.
· Execution of 2023 innovation goals including higher accuracy
chemistry, PromethION 2 (P2) Solo launch, direct RNA upgrades, basecalling
acceleration and expansion of our informatics products, further
differentiating our platform and broadening demand for our technology.
· Approximately 2,800 peer-reviewed research papers published by
users of Oxford Nanopore technology in 2023, bringing the total to
approximately 11,000 to date, showcasing breakthrough research across cancer,
human genetics and infectious disease and demonstrating continued opportunity
for growth in the genomics research market.
· New strategic collaborations added to develop and access new
growth markets in clinical and industrial applications, including
collaborations with the Mayo Clinic to advance research in cancer and
bioMérieux to develop products that serve the infectious disease diagnostics
market.
· Strategic investment from bioMérieux, strengthens existing
collaboration, which is accelerating expansion of Oxford Nanopore's
technology into infectious disease diagnostics.
· Expansion of commercial teams, including strategic leadership
hires to increase traction in key markets across the Americas, EMEAI and APAC.
Commercial infrastructure is capable of supporting the Group's development
over the coming years to drive long-term sustainable growth.
· Expansion of the leadership team, post period end, to support the
business in its next phase of growth: Nick Keher appointed as CFO and Director
of Oxford Nanopore, adding significant financial leadership experience and a
deep understanding of global capital markets. Nick succeeds Tim Cowper, who
moves into a new role as Chief Operating Officer and will lead Oxford
Nanopore's continuous improvement programmes and expanding international
footprint and operations.
· Expansion of the Board with three new Non-Executive Directors,
including Kate Priestman who adds extensive experience as a biopharma
executive, Dr Sarah Fortune, an academic focused on infectious disease
including TB, and Dr Heather Preston, a long-time biotech and life sciences
investor, with significant experience as a director of technology-based
healthcare companies
· Post year end, the Group announced the retirement of Dr James
("Spike") Willcocks, Clive Brown, and Tim Cowper from the Board as part of
normal Board evolution and in line with best practice governance. As part of
the Group's commitment to board diversity, this evolution will support
progress towards fulfilling the goal of reaching 40% female Board
representation. Following the AGM in June 2024, the Board will include two
executive Directors and seven Non-Executive Directors, three of whom are
women.
See the business review for further detail.
FY24 Financial guidance
We expect full year 2024 LSRT revenue of between 6-15% growth on a constant
currency basis, equating to £180 million to £195 million at current exchange
rates which is 20-30% growth on an underlying basis, when excluding known
headwinds from COVID sequencing of approximately £8 million as well as a
year‐over-year headwind of up to £12 million from the revised amendment to
the Group's agreement with G42 in supply of sequencing tools in support of the
EGP. EGP and COVID sequencing are not expected to contribute meaningfully to
group revenue in 2024 and as such any revenue will be reported as underlying
growth from 2024 onwards.
Whilst revenues are expected to increase across each customer segment, we
expect to see faster growth among S2 and S3 customers, driven by continued
roll out of the PromethION franchise, alongside growth across indirect
channels. Geographically, it is expected that growth will be highest across
the Americas and EMEAI regions in 2024.
There continues to be a material opportunity for Oxford Nanopore to penetrate,
reshape and expand the market, leading to above end market growth. However,
this is balanced against the backdrop of a subdued funding environment for
some of our end markets due to macroeconomic factors, specific dynamics within
the LSRT market alongside geopolitical concerns that have amplified since
2022.
We expect LSRT gross margin to be approximately 57% in FY24 reflecting
continued operational improvements including, automation, improved
manufacturing process and recycling of electrical components expected to be
offset by i) growth in the installed base across the PromethION franchise as
customers utilise the inclusive consumables in advance of converting to higher
margin regular flow cell orders, and ii) changes to pricing across our MinION
franchise to drive further adoption, with planned improvements on margin to
offset this impact in future years.
There are a number of higher value, pioneering project opportunities the Group
is prospecting that could accelerate growth to the top end or above FY24
revenue guidance. However, these would also likely be dilutive to gross margin
in the short term as initial phases of projects complete before becoming
longer term, higher margin consumable reorders thereafter as Oxford Nanopore
technologies become embedded within customer workflows. The impact of these
potential wins have been considered in the short and medium term margin
guidance.
During 2024 we will see the annualised cost from investment in our headcount
and infrastructure to support our ambitions. In order to support improving
profitability going forwards, we are assessing current and future investments
with a focus on greater prioritisation of activities to deliver on our growth
objectives whilst supporting a strong ROI.
Revised medium term guidance
Given the end-market dynamics previously discussed and reflected in our 2024
guidance, we have revised our medium- term adjusted EBITDA breakeven target to
FY27 from FY26. This guidance reflects:
· Revenue growth of more than 30% on a compound annual growth rate
at constant currency between FY24 and FY27, in-line with historical
performance
· Gross margins to continue to improve and exceed 62% by FY27 as we
incorporate the potential mix impact from driving top line growth
· An increased focus on financial discipline to leverage the
infrastructure the company has already built and to modulate investment
relative to the outlook.
The Group remains strongly capitalised with adequate resources to implement
our business plan to and through EBITDA breakeven in 2027 and deliver on the
significant growth opportunity in front of us.
Presentation of results
Management will host a conference call and webcast today, 6 March, at 8:00am
GMT. 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 ir@nanoporetech.com
(mailto:ir@nanoporetech.com)
-ENDS-
This announcement contains inside information for the purposes of
the UK version of the market abuse regulation (EU no. 596/2014), which forms
part of English law by virtue of the European Union (Withdrawal) Act 2018. The
person responsible for arranging the release of this announcement on behalf of
the Company is Hannah Coote, Company Secretary of Oxford Nanopore Technologies
plc.
For further information, please contact:
Oxford Nanopore Technologies plc
Investors: ir@nanoporetech.com (mailto:ir@nanoporetech.com)
Media: media@nanoporetech.com
(mailto:media@nanoporetech.com)
Teneo (communications adviser to the Company)
Tom Murray, Olivia Peters
+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 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.
Business review
Last year marked our second as a listed company - and 10 years since we
launched the MinION. Since our IPO two years ago, we've delivered strong,
resilient growth and expanded our customer base to more than 7,600 active
accounts by 31 December 2023. Last year marked a further milestone for Oxford
Nanopore as we detailed our medium-to-long term strategy at our first Capital
Markets Day, designed to address unmet needs in the clinical and applied
markets, building on our commitment to deliver value in the Life Science
Research Tools (LSRT) sector for the short-to-long term.
Today, the majority of our customers are engaged in research, which is
foundational for the emerging translational and future clinical and applied
uses of our technology. The pace of innovation on our platform - and
developments in system performance, including accuracy and data output -
continue to support our impact across a variety of research sectors such as
human genetics, cancer research, infectious disease, applied industrial, plant
and animal biology, food and more. The thriving community of scientists who
are using our technology understand that "what you're missing matters" in
sequencing, as they leveraged the richer insights and capabilities unique to
nanopore sequencing. We are proud to enable them to perform breakthrough
science such as native DNA and RNA sequencing, including methylation detection
without the need for additional steps, all of which is now possible at
speeds faster than any other sequencing device. These scientists published
2,800 peer-reviewed papers in 2023 alone, showcasing the versatility and value
of our technology across a spectrum of fields. This brings the total number of
nanopore-based publications to more than 11,000, a testament to the robust and
engaged nanopore community and the transformative potential of this
technology.
Clinical and applied industrial customers are now building on these scientific
discoveries and are developing emerging applications that have the potential
to drive broad value across health and industrial markets. Our early
partnerships have highlighted the benefits of our platform to serve a variety
of applied contexts, including richer insights, and real-time results in an
accessible and affordable form factor. Our strategy in pursuing these applied
markets is, in the short term, to support our translational customers at the
intersection of research and clinical care or biologics manufacturing. In the
longer-term, it is to enable our customers to develop novel applications,
analogous to the 'apps' model for mobile phones, in which we share in future
revenues as our partners reach commercialisation. Last year we started to
realise meaningful momentum for this approach, signing on new strategic
commercial partners and collaborators including bioMérieux and the Mayo
Clinic, alongside our growing and vibrant customer base. The range and scope
of applications being currently developed is truly remarkable, from cancer
testing during surgical operations, to mRNA vaccine manufacturing.
Despite global supply chain constraints, and other challenging market
conditions, we've continued to innovate, deliver new technologies through
expanded operations and broaden our reach. Our user base, spread across more
than 125 countries, demonstrates the global appeal and applicability of our
technology, from traditional laboratory environments to the most remote
locations on Earth. The adoption of our platform in diverse research
areas-from human genetics to environmental monitoring-underscores the vital
role Oxford Nanopore can play in driving forward scientific discovery and
application. As we look ahead, we are inspired by the achievements of our
community and dedicated to realising our bold vision to serve healthcare and
industrial markets of the future.
Building the right team for success
Our people are vital to the success of our business. The cohesion and
longevity of our executive team epitomise our shared commitment. It's been a
lifelong journey for all of us. The multi-disciplinary expertise of our team
is one of the hallmarks of our success and in 2023, we continued to build on
the diversity and breadth of the leadership talent needed to expand our
commercial presence and meet our ambitious global growth goals.
In the past year, we grew our leadership team both in size and talent,
strategically enhancing our capabilities to navigate our global growth
trajectory. We attracted seasoned commercial leaders within the LSRT sector to
support our commercial expansion in the US and globally. In the Americas, we
hired Julie Collens, a formidable commercial leader in genomics, to head
commercial operations in the Americas. In addition, we also brought on
Kathleen Barnes, an established expert in precision medicine, to join our
clinical team as SVP of Population Health and Precision Medicine, a new
vertical for us that will be critical to our success as we pursue this new
market globally, with initial focus on the Americas. We also convened a
comprehensive search for a new CFO, resulting in the appointment of Nick Keher
in January 2024, replacing Tim Cowper who moved into a new role as Chief
Operating Officer after performing both the role of CFO and fulfilling most of
the responsibilities typically assigned to a COO for the past five years.
Finally, we brought on three prestigious new Non-Executive Directors, Kate
Priestman, Dr Sarah Fortune and Dr Heather Preston, with expertise in human
genetics, infectious disease and company building, all of whom will support
our ambitious growth in complementary ways. Post year-end, we also announced
the retirement of Dr James ("Spike") Willcocks, Clive Brown, and Tim Cowper
from the Board as part of normal Board evolution and in line with best
practice governance. As part of our commitment to board diversity, this
evolution will support our progress towards fulfilling our goal of reaching
40% female Board representation. Following the AGM in June 2024, the Board
will include two executive Directors and seven Non-Executive Directors, three
of whom are women. Beyond our leadership team, we supported our rapid growth
in 2023 through significant investments in our global organisation. Total
headcount reached 1,238 (FTE) at the end of the year, up 22.7% from the
prior year end.
Improved onboarding and talent development through initiatives such as
leadership training, mentoring programmes, six-sigma programmes in production
and operations, and challenger sales training for our commercial teams have
helped to ensure that we are building a solid foundation for the future.
Delivering high accuracy, addressing new market needs
Our relentless pursuit of innovation led to significant advancements in our
kit 14 chemistry and basecalling in 2023, setting new standards to become
among the most accurate sequencing platforms on the market. Last year we
announced further platform improvements to provide another step in DNA/RNA
sequencing performance to drive scientific research, as well as springboard
into clinical and applied markets seeking richer data, fast turnaround and
accessible and affordable sequencing technology.
With the rollout out of Q20+ chemistry achieving completion, our innovation
teams are preparing for their next breakthrough performance in DNA/RNA
nanopore sequencing. At our NCM conference the team demonstrated raw read DNA
sequencing accuracy - reaching a record of Q28 (99.8%) in simplex single
molecule accuracy - powered by machine learning-guided enzyme engineering and
improved models. The longest Q30 (99.9%) read in the dataset was 1.1
Megabases. The team also detailed a novel method to overcome errors in
homopolymer regions that, when combined with other platform updates, pushed
human consensus accuracy up to approximately Q50 and indel f1 accuracy to
99%. Throughout the year, customers joined us at various community events
to showcase how comprehensive mapping of the human genome,
telomere-to-telomere (T2T), is now possible using only nanopore sequencing
having previously been assembled with multiple sequencing technologies.
In response to increasing demand for RNA sequencing, we announced additional
platform improvements in direct RNA to support the emergence of RNA-based
therapies, introducing a new flow cell and kit for direct RNA sequencing that
increased accuracy and output. Since the launch of this flow cell at London
Calling, it is already enabling significant advancements in the RNA research
market alongside novel applications of direct single molecule sensing such as
mRNA vaccine research.
With our platform consistently performing at a high level, our focus has now
shifted towards refining end-to-end workflows, a testament to our commitment
to addressing the evolving needs of growing customer base alongside newer
applied and clinical market customers.
We announced several partnerships with tertiary analysis providers for
comprehensive interpretation of nanopore sequencing to support the push-button
analysis of nanopore sequencing data and enable end-to-end workflows. We
believe this will significantly help drive adoption, in particular by those
customers new to running their own sequencing systems.
We also announced Project TurBOT, our benchtop solution designed to offer
integrated and automated extraction, library preparation, sequencing,
basecalling, and data analysis for multiple samples, all within a single
device. This device will enable users to perform a hands-free, simplified
workflow from raw sample to analysis though an intuitive interface,
eliminating manual interventions and enhancing efficiency, reducing errors,
and significantly accelerating the workflow. This will not only increase
throughput but also ensure reproducible and reliable results, as well as
expand the appeal to particular customer types in need of rapid, easy,
sample-to-answer systems.
Finally, we established dedicated teams for regulated product development to
deliver our 'Q line' platform that will accelerate nanopore sequencing
adoption in regulated applied markets such a clinical labs and biopharma QC/QA
labs. These products will be released throughout 2024.
Breakthrough community science highlights the evolution from bench to
bedside
In 2023, we saw further growth in foundational research in human genetics,
cancer research and infectious disease, alongside 'translational' method
development to take research discoveries from the bench into distributed
applied testing markets.
Our thesis continues to be that the benefits of the nanopore platform -
real-time, information-rich, affordable and accessible sequencing - will
address unmet needs in health as well as industrial sectors such as
agriculture, food and environmental applications.
Human genetics: In September, the NIH Centre for Alzheimer's and Related
Dementias (CARD) showcased a pioneering nanopore-based sequencing approach in
Nature, with comprehensive, high accuracy in SNP, structural variant, and
methylation calls. Notably, this method proved to be both cost-effective and
scalable for extensive projects, making a significant stride in large-scale,
native DNA sequencing.
The protocol is being used to sequence thousands of human genomes as part of
the NIH CARD initiative, which aims to unravel the mysteries underlying
Alzheimer's disease and related dementias. Its emphasis on base modification
analysis reveals high concordance in methylation calls, offering reliable,
haplotype-resolved methylation data during the standard sequencing run itself,
without the need for a separate process.
Cancer: Characterisation of cell-free DNA (cfDNA) is an emerging approach for
identifying many diseases. In May, a team from Stanford University published
research (https://pubmed.ncbi.nlm.nih.gov/37138315/) focusing on methylation
profiling of cell-free DNA and its potential for monitoring cancer during
treatment. They chose nanopore sequencing because of its ability to detect
methylation directly. The approach involved single-molecule sequencing to
profile the methylomes of cell-free DNA samples collected from patients with
cancer. For one sample, the technique generated as many as 200 million reads,
which the scientists note was "an order of magnitude improvement over existing
nanopore sequencing methods." Such an analysis could also be useful in drug
discovery efforts focused on methylation biomarkers, as well as in drug
development where noninvasive sample collection can be important to maximize
data gathered in a clinical trial.
Researchers also applied nanopore sequencing toward Personalised Oncogenomics
to show the potential for long-read sequencing to resolve complexities in the
cancer genome, supporting more effective strategies for personalised treatment
and care. At our London Calling conference in May, Dr Janessa Laskin at the
University of British Columbia in Vancouver spoke
(https://nanoporetech.com/resource-centre/london-calling-2023-potential-use-nanopore-sequencing-clinical-cancer-genomics)
about how her team is using nanopore sequencing to integrate whole-genome and
transcriptome analysis into the clinical care of people with advanced cancers
in British Columbia. Her team recently published a preprint
(chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https%3A/www.medrxiv.org/content/10.1101/2024.02.20.24302959v1.full.pdf)
highlighting the results of a study showing how nanopore sequencing is
addressing limitations noted with traditional short-read methods.
Infectious disease: Nanopore-based sequencing, which can be used to measure
long or short fragments of DNA or RNA as needed, can also produce data very
quickly. In a pilot project at the Guy's and St. Thomas' Hospital NHS
Foundation Trust in London, a clinical laboratory team evaluated nanopore
sequencing to support a rapid respiratory metagenomics workflow. They tested
nearly 130 samples from more than 85 individuals with lower respiratory
infections, setting detection thresholds equivalent to culture-based testing
to avoid reporting microbes that were unlikely to be clinically relevant. For
most samples, results were reported to the clinical care team on the same day
the sample was collected. Interestingly, nearly half of the results led to
shifts in antimicrobial selection (in some cases escalating and in others
de-escalating the initial treatment choice). Several unexpected organisms and
cases of co-infections were reported; these would not have been found with
conventional tests. The results
(https://www.atsjournals.org/doi/full/10.1164/rccm.202305-0901OC) highlighted
the value of metagenomic testing in ICU settings - a process uniquely suited
for the features of the nanopore platform.
mRNA manufacturing QC: Beyond clinical applications, research published
(https://www.nature.com/articles/s41467-023-41354-y) this year from the
University of Queensland demonstrated the utility of nanopore sequencing in
biomanufacturing contexts, harnessing the latest platform improvements to
analyse mRNA vaccines and therapies. The researchers showed how nanopore
sequencing can accurately assess the quality of mRNA vaccines and therapies by
directly analysing each individual mRNA vaccine molecule as it passes through
a protein nanopore, providing a real-time measurement of the mRNA sequence
identity and integrity. Researchers noted that approach could also provide a
useful research tool to better understand how mRNA vaccines work by studying
how they behave within cells. Crucially, the impact of this technology could
result in the real-time analysis of mRNA vaccines during production, providing
testing within hours of mRNA manufacture so quality control issues could be
quickly detected. Such rapid analysis is critical during the rapid manufacture
of mRNA vaccines needed during a pandemic - or to support the future
development of personalised therapies.
Embracing Clinical and Applied Markets
This year marked a strategic expansion towards clinical and applied markets
(>$150 billion in 2032), building on our strong foundation in Life Sciences
Research Tools (a market valued at $6.2 billion). Our ongoing product
development efforts, particularly with Q-Line, alongside the expansion of our
regulatory team, further underscore our commitment to meeting the evolving
needs of clinical and applied customers.
On the morning of our first-ever Capital Market Day in October we announced
two significant developments that demonstrated our readiness to capture the
vast opportunities in these emerging sectors. bioMérieux SA, a world leader
in the field of in vitro diagnostics (IVD), announced a strategic investment
in Oxford Nanopore to support development for infectious disease testing
products in our portfolio that serve IVD markets in conjunction with
bioMérieux's commitment to advancing global public health. Through this
partnership and investment, the two companies intend to leverage our
ground-breaking IVD solution and bioMérieux's IVD expertise in R&D,
Regulatory, Medical and Market Access.
Meanwhile, a joint development collaboration with the Mayo Clinic in the US
involves integrating nanopore sequencing in the Mayo's labs to help develop
new clinical tests for human diseases, starting with breast cancer. Also in
cancer, we signed an agreement with Swiss company 4bases to permit them to
employ nanopore sequencing devices with 4bases kits per their
self-certification 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.
In the applied markets, we announced a partnership with BASE to use the latest
and improved nanopore-based sequencing technology to optimise performance and
reduce the time needed to measure mRNA vaccine quality attributes. Researchers
at the University of Queensland have developed a faster way to put mRNA
vaccines through quality control testing using nanopore technology. The BASE
team at UQ's Australian Institute for Bioengineering and Nanotechnology is
recognised as the biggest supplier of research-use mRNA in Australia. In
September, they showcased a new protocol in Nature to expedite the quality
control processes, enabling rapid detection of issues during manufacturing,
which is particularly useful in pandemic scenarios. We also signed a
collaboration with Pathoquest to co-develop the first sequencing-based QC test
solutions targeting the biopharma genetic characterisation and safety market.
Financial Review
2023 performance
The Group delivered total revenue of £169.7 million (FY22: £198.6 million) a
decline of 14.6%, as there was no Covid testing revenue in FY23 (FY22: £51.8
million).
Revenue from our core LSRT business grew 15.6% in the year, 15.3% on a
constant currency basis. Underlying LSRT revenue growth, excluding the Emirati
Genome Program (EGP) and COVID-19 sequencing, grew approximately 39.3% and
approximately 39.1% on a constant currency basis.
Results at a glance
2023 2022 % change
£m £m
Year ended 31 December:
Total revenue 169.7 198.6 (14.6)%
- LSRT revenue 169.7 146.8 +15.6%
- Covid testing revenue - 51.8 (100)%
Underlying LSRT 149.7 107.5 +39.3%
Gross profit 90.5 123.8 (26.9)%
Gross margin (%) 53.3% 62.3% (900)bps
LSRT gross profit 90.5 82.7 +9.4%
LSRT gross margin (%) 53.3% 56.3% (300)bps
Operating loss (168.6) (98.5) (71.2)%
Adjusted EBITDA(1) (104.9) (78.6) (26.3)
Loss for the year (154.5) (91.0) (63.5)
Cash, cash equivalents and other liquid investments(1) 472.1 558.0 (15.4)%
Net assets at period end 643.9 693.6 (7.2)%
(1)Alternative Performance Measures (see note 25)
During the year our global customer base expanded from 6,839 to 7,615 active
accounts; an increase of 11%. We saw particularly strong revenue growth in our
S2 (+20%) and S3 (+19%) customer groups. S2 revenue grew by 42% and S3 by 69%,
on an underlying basis.
Performance across the broader customer base in FY23 was driven by consumable
sales of £124.9 million, which grew by 11% (FY22: £112.5m), which accounted
for approximately 74% of revenue.
In December 2023, the original EGP agreement was revised to provide greater
flexibility to achieve the programme objectives and reflected both parties
desire to refocus on clinical uses of the platform, that can utilize the
platform's unique benefits of richer and faster data. The new agreement
removes the outstanding purchase commitment from the original agreement and
extends the expiration date to 31 December 2026. EGP revenue in 2024 and
beyond is not anticipated to be a material portion of revenue and as such, the
Group will cease reporting EGP revenue separately following these results.
Revenue related to the EGP in 2023 (under the original and revised agreement)
was approximately £12 million (2022: £13.2m).
The Group's gross profit and gross margin reduced in FY23 - gross profit by
26.9% to £90.5 million (FY22: £123.8 million) and gross margin by 900 bps to
53.3% (FY22: 62.3%) - primarily due to gross margin generated from the DHSC
contract in FY22, the adverse performance of the EGP contract and several
specific inventory write downs in FY23.
LSRT gross profit increased to £90.5 million (FY22: £82.7 million) in the
period up 9.4% on FY22.
Group operating loss increased to £168.6 million (FY22: £98.5 million),
reflecting the reduction in revenue and gross profit and increase in operating
expenditure.
During 2023, 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 2023. Commercial and marketing headcount grew to 416
employees at 31 December, up by 43% 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
£472.1 million (FY22: £558.0 million) reflecting a total reduction of £85.9
million. In October 2023, bioMérieux agreed to subscribe for 29,025,326
shares at a subscription price of 238.08p per share which equated to a total
investment of nearly £70 million.
Alternative performance measures
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 25 of the preliminary information.
Directors and management use these APMs alongside IFRS measures when budgeting
and planning, and when reviewing business performance.
Revenue
Whilst our reportable segments are LSRT and Covid testing, we continue to look
at revenue by size of customer (e.g. S1, S2, etc.) and geography. In addition
we also analyse revenues by franchise i.e. PromethION and MinION franchises,
which represent revenues generated by each range of our product groups.
Underlying revenue by franchise
Underlying revenues grew fastest across the PromethION franchise, representing
all devices and flow cell sales from the PromethION range, reaching £48.8
million from £26.6 million in 2022, representing underlying growth of 83%
when stripping out the impact of EGP.
Revenues of our MinION franchise, representing all sales of MinION flow cells
and devices that run MinION flow cells (including GridION and MinION) grew 14%
to £58.8 million (FY22: £51.5 million) when stripping out the impact of
COVID sequencing.
Other revenues, representing kits, services revenues and other devices grew
44% underlying to £42.2 million from £29.4 million when stripping out the
impact of EGP and COVID sequencing.
2023 2022 %change
(£m) (£m) actual
PromethION franchise 59.2 38.6 53.2%
Less EGP (10.4) (12.1)
Underlying PromethION franchise 48.8 26.6 83.4%
MinION franchise 63.4 68.2 (7.0)%
Less COVID Sequencing (4.6) (16.7)
Underlying MinION franchise 58.8 51.5 14.1%
Other 47.1 40.0 17.8%
Less EGP (1.5) (1.1)
Less COVID Sequencing (3.3) (9.4)
Underlying Other 42.2 29.4 43.5%
Total LSRT Revenue 169.7 146.8 15.6%
Less EGP (12.0) (13.2)
Less COVID Sequencing (8.0) (26.1)
Total underlying revenue 149.7 107.5 39.3%
Revenue by customer group
At a customer group level (with groups based on size of revenue by customer),
revenue growth was driven by S2 and S3 customers, excluding EGP, as well as
strong growth through our most significant distributor, Avantor (included in
Indirect).
Our commercial partnership with Avantor (signed in 2021) helps expand our
reach and improve accessibility for entry level products such as MinION. We
continue to focus on driving indirect revenue growth through both rapid
expansion and diversification of the customer base, as well as increasing
revenue per customer account. Avantor is performing equally in the EMEAI and
Americas regions, with over 90% of revenue attributable to consumables.
2023 2022(2) % change
£m £m
S1 29.4 26.4 11.2%
Less COVID Sequencing (0.8) (2.5)
Underlying S1 Revenue 28.6 23.9 19.6%
S2 62.3 51.7 20.5%
Less COVID Sequencing (3.1) (10.0)
Underlying S2 Revenue 59.2 41.7 42.0%
S3 55.3 46.7 18.6%
Less EGP (12.0) (13.2)
Less COVID Sequencing (2.4) (9.2)
Underlying S3 Revenue 41.0 24.3 68.8%
Indirect 22.6 22.0 2.8%
Less COVID Sequencing (1.7) (4.4)
Underlying Indirect Revenue 21.0 17.6 18.9%
Total underlying LSRT Revenue 149.7 107.5 39.3%
EGP 12.0 13.2 (9.2)%
COVID Sequencing 8.0 26.1 (69.2)%
Total LSRT revenue 169.7 146.8 15.6%
COVID-19 testing revenue - 51.8 (100)%
Total revenue 169.7 198.6 (14.6)%
(2) FY22 numbers by customer group have been reclassified to reflect Avantor
revenue within the Indirect customer group
NB S1 customers generate revenue of up to $25,000 per year per customer
account. S2 customers generate revenue between $25,000 and $250,000 per year
per customer account. S3 customers generate revenue of more than $250,000 per
year per customer account.
Total S3 revenue increased by 19% to £55.3 million. Underlying S3 revenue
grew by 69% in 2023, reflecting an increase in the number of active customers
in this group (excluding EGP) from 72 to 84 during the period with average
revenue per customer of approximately $641,900 (FY22: $581,000). This group
consists mostly of customers performing human disease and cancer research.
S2 revenue grew by 20% during the period to £62.3 million. Active customers
in this group grew by 25% to 1,210 in 2023, with an average annual revenue of
approximately $64,000 per customer (FY22: $66,800). 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.
S1 revenue grew by 11% during the period to £29.4 million, reflecting
continued demand for our entry-level and portable sequencing devices. Active
customers in this group grew by 9% to 6,298 in 2023, with an average annual
revenue of approximately $5,800 per customer (FY22: $5,700). 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.
Geographical trends
The Group aims to make its technology available to a broad range of scientific
users, and currently supports users in more than 125 countries.
2023 2022 %change
(£m) (£m) actual
Americas 61.5 48.3 27.4%
Less COVID Sequencing (3.1) (8.9)
Underlying Americas Revenue 58.4 39.4 48.2%
APAC 34.1 34.8 (2.1)%
Less COVID Sequencing (1.2) (5.6)
Underlying APAC Revenue 32.9 29.2 12.7%
EMEAI 74.0 63.7 16.2%
Less EGP (12.0) (13.2)
Less COVID Sequencing (3.6) (11.6)
Underlying EMEAI Revenue 58.4 38.9 50.2%
Total LSRT Revenue 169.7 146.8 15.6%
Covid Testing - 51.8 (100)%
Total Revenue 169.7 198.6 (14.6)%
At a regional level, revenues were predominantly driven by growth in our two
largest regions, EMEAI (Europe, Middle East, Africa and India) and the
Americas.
Revenue in APAC declined by 2%, reflecting a reduction in revenue from China,
which reduced by 12%. However on an underlying basis (excluding COVID
sequencing) China grew by 5%. A new logistics hub in Singapore went live
during the period - our distribution hub for Asia Pacific - creating further
revenue opportunities in this region.
Revenue in EMEAI increased by 16%, 50% on an underlying basis, reflecting the
growing success of our commercial team in this region.
In some territories the Group works with Channel Partners whom have the
commercial and technical expertise to enhance our geographic reach, engaging
customers in their country and local language. The Group currently works with:
· Avantor in the European Union and United States.
· A network of Channel Partners across 53 countries in Asia,
Africa, India, Latin America, Middle East and The Gulf, and non-EU European
territories.
· We are expanding this to include a further 40+ countries
including the remainder of Africa and Latin America, today we rely on
specialist logistics brokers who can work directly with the Group's customers
in these territories to ship our platform.
Gross margins
Year ended 31 December 2023 2022 Change
Gross Margin (%) 53.3% 62.3% (900) bps
LSRT Gross margin (%) 53.3% 56.3% (300) bps
Overall gross margin declined by 900 bps in 2023. This was due to a number of
factors:
· FY22 gross margin benefitted from the DHSC contract accounting
for 600 bps
· Impacts on the FY23 gross margin include adverse performance of
the EGP and the impact of write down of excess inventory in Covid sequencing
kits and devices that became end-of-life during the year. Excluding these
one-off items, the FY23 gross margin would have been 58.8% (FY22: 58.0%)
We remain committed to continual margin improvement across all products and
will continue to invest in manufacturing innovation, to deliver this goal.
Impact of headcount
Average headcount (FTEs) 2023 2022 Change (%)
Research and Development 464 380 +22%
Manufacturing 156 149 +5%
Selling, General & Administration 513 393 +31%
Total 1,133 922 +23%
In 2023, the average number of employees across all functions increased by
23%. The Group invested in bringing onboard new Research and Development staff
to execute on our platform and product roadmap. Our Research and Development
teams work on fundamental research for novel sensing applications, sequencing
chemistry, nanopores, enzymes, algorithms, software electronics and arrays to
deliver future platforms and improvement on current products. A significant
investment of 2023 was in the establishment of our regulatory development
teams and expansion of our platform development groups as we support a growing
product portfolio of sample to answer.
The Group's manufacturing team expanded by 5%, primarily in our biologics
production facilities, which expanded during the year providing more
robustness and resilience to our manufacturing capabilities.
Overall selling, general and administration headcount grew by 31%, primarily
within the commercial team, which grew globally by 49% in the year supporting
the Group's growth objectives.
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.
As amortisation related to internally generated assets has increased over
time, management now consider that it is a more appropriate presentation to
present amortisation and the R&D tax credit within research and
development expenses, rather than as previously presented within selling,
general and administration expenses. The comparative numbers have been
re-presented to be consistent with the current period presentation.
2023 (£m) *2022 (£m)
Research and development expenses 103.8 69.2
Adjusting items:
Employer's social security taxes on pre-IPO share awards 0.6 9.9
Adjusted R&D expenses 104.4 79.1
Amortisation of capitalised development costs (18.4) (11.4)
Capitalised development costs 19.5 19.2
Total R&D expenses and capitalised development costs 105.5 86.8
* See note 8 for details regarding the re-presentation
Adjusted research and development expenses increased by £25.3 million to
£104.4 million in FY23 (FY22: £79.1 million). This increase was principally
due to a 22% increase in headcount (FY22: 31% increase) leading to a £7.0
million increase in payroll costs (FY22: £7.1 million).
Amortisation of capitalised development costs increased by £7.0 million to
£18.4 million. There is now £77.2 million of costs that have been
capitalised as at 31 December 2023 (31 December 2022: £57.7 million), so
driving the increase in amortisation.
Capitalised development costs increased by £0.3 million to £19.5 million in
FY23 (FY22: £19.2 million). This included £11.3m of internal staff costs
(FY22: £10.4 million) and £8.2 million of third-party costs (FY22: £8.8
million), across a number of projects that occurred during the year.
Overall investment in research and development was £105.5 million (FY22:
£86.8 million); an increase of £18.7 million (FY22: £9.4 million) over the
prior year.
Selling, general and administration expenses
The Group's selling, general and administrative expenses in FY23 increased by
£2.1 million to £155.2 million (FY22: decreased by £3.7 million to £153.1
million).
On an adjusted basis selling, general and administrative expenses in FY23
increased by £22.9 million to £134.6 million (FY22: increased by £13.8
million to £111.7 million).
2023 2022
(£m) (£m)
Selling, general and administration expenses 155.2 153.1
Adjusting items:
Share-based payment expense on Founder Long Term Incentive Plan (LTIP) (20.9) (53.2)
Employer's social security taxes on Founder LTIP and pre-IPO share awards 0.3 11.7
Adjusted selling, general and administration expenses 134.6 111.7
The main changes were:
· a 49% increase in average headcount of staff within the Group's
sales, marketing and distribution functions (FY22: 48% increase), leading to a
£14.4 million increase in payroll costs (FY22: £11.7 million increase). This
is in line with our plan to expand our global sales team
· a 4% 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 (FY22:
30% increase), contributing to a £1.7 million increase in payroll costs
(FY22: £7.9 million)
· an increase in depreciation of £1.6 million (FY22: increase of
£ 4.8 million); partially offset by a decrease in share-based payments
(non-Founder LTIP) of £1.5 million (FY22: decrease of £6.9 million)
Balance sheet
Our balance sheet remains strong, with £472.1 million of Cash, cash
equivalents and other liquid investments at 31 December 2023. Key movements
during the year are outlined below:
2023 2022
(£m) (£m)
Property, plant and equipment 49.9 37.3
Intangible assets 32.9 30.0
Right-of-use assets 32.5 25.9
Net deferred tax asset 5.5 7.7
Working capital 84.6 70.4
Other assets and liabilities 21.0 11.6
Provisions (13.0) (13.3)
Cash and cash equivalents and other liquid investments 472.1 558.0
Lease liabilities (41.7) (34.1)
Net assets 643.9 693.6
Property, plant and equipment
Property, plant and equipment additions of £34.9 million were made in the
year (FY22: £23.1 million). This included:
· £25.6 million on devices with customers (FY22: £12.6 million),
of which £14.9 million was on compute upgrades, and
· £5.7 million was spent on manufacturing facilities and
laboratories across our sites in the UK (FY22: £8.1 million).
Intangible assets
Intangible asset additions of £21.4 million (FY22: £19.2 million) were made
in the year relating to capitalised development costs and patent and license
purchases.
Right-of-use assets
During the year right-of-use asset additions were £12.0 million (FY22: £15.5
million), resulting in a net book value at 31 December 2023 of £32.5 million
(2022: £25.9 million). As at 31 December 2023, the outstanding balance sheet
liability in respect of the right-of-use assets was £41.7 million (2022:
£34.1 million).
Working capital
The working capital balance of £84.6 million (2022: £70.4 million)
predominantly reflects inventory of £101.5 million (2022: £87.7 million),
trade and other receivables of £61.5 million (2022: £62.9 million) and trade
and other payables of £78.4 million (2022: £80.1 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 and devices have increased by
£7.8 million and by £5.2 million respectively in the year.
Provisions
Provisions of £13.0 million at 31 December 2023 (2022: £13.3 million),
primarily relates to a provision for employer social security taxes on share
awards of £9.9 million (2022: £10.8 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 £2.47 at 31 December 2022 to £2.08 at 31 December 2023.
Cash, cash equivalents and other liquid investments
Cash, cash equivalents and other liquid investments were £472.1 million at 31
December 2023, a decrease of £85.9 million in the period. See note 25.
Cash flow
In 2023, there was a net cash outflow of £137.3 million from operations
(FY22: £63.8 million *), the difference is primarily driven by the FY22 cash
flow including the benefit of the DHSC income.
Cash outflows from investing activities were £61.8 million (2022: £51.4
million *). This includes:
• the purchase of financial assets of £150.0 million (2022: £130.0
million), offset by the proceeds of other financial assets of £104.6 million
(2022: £60.5 million)
• the purchase of property, plant and machinery of £5.9 million (2022:
£8.6 million *)
• the purchase of IP licences of £1.9 million (2022: £nil)
• the investment in associate of £3.0 million (2022: £nil)
• the capitalisation of development costs of £19.5 million (2022: £19.2
million); offset partially by
• interest received of £13.9 million (2022: £3.4 million).
Cash inflows from financing activities were £64.7 million (2022: outflow of
£13.7 million), which includes:
• proceeds from issue of shares of £71.6 million (2022: £3.8 million)
less costs of share issue of £0.4 million (2022: £2.4 million). This was
primarily generated by the investment of nearly £70 million made by
bioMérieux, and
• lease and interest payments of £6.5 million (2022: £5.6 million).
*restated - see notes 8 and 22
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.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
Note 2023 2022
Restated *
£000 £000
Revenue 4 169,668 198,603
Cost of sales (79,187) (74,793)
Gross profit 90,481 123,810
Research and development expenses * (103,842) (69,186)
Selling, general and administrative expenses * (155,248) (153,103)
Loss from operations (168,609) (98,479)
Finance income 18,853 5,941
Finance expense (2,206) (1,628)
Other gains and losses 9 2,278 13,186
Share of loss in associate (228) (238)
Write-back/(impairment) of investment in associate 144 (2,193)
Loss before tax 6 (149,768) (83,411)
Taxation 10 (4,739) (7,614)
Loss for the year (154,507) (91,025)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Fair value movements on investment bonds 9 4,024 936
Exchange (losses)/gains arising on translation of foreign operations (3,880) 4,021
Taxation 10 (1,240) -
Other comprehensive income for the year, net of tax (1,096) 4,957
Total comprehensive loss (155,603) (86,068)
Note 2023 2022
Pence Pence
Loss per share 7 19 11
* See note 8 for details regarding the restatement of comparatives.
Consolidated Statement of Financial Position
as at 31 December 2023
Note 2023 2022
Restated *
£000 £000
Assets
Non‑current assets
Property, plant and equipment 12 49,890 37,294
Intangible assets 11 32,910 30,039
Investment in associate 742 826
Right‑of‑use assets 13 32,526 25,906
Other financial assets 16 208,325 84,144
Deferred tax assets 5,486 7,681
329,879 185,890
Current assets
Inventories 14 101,548 87,698
Trade and other receivables 15 61,475 62,905
Current tax assets 1,030 -
R&D tax credit recoverable 12,819 9,148
Other financial assets 16 49,514 119,411
Derivative financial assets 17 261 2,060
Cash and cash equivalents 22 220,536 356,778
447,183 638,000
Total assets 777,062 823,890
Liabilities
Non‑current liabilities
Lease liabilities * 20 37,333 30,042
Share‑based payment liabilities 141 108
Provisions 19 6,538 8,645
44,012 38,795
Current liabilities
Trade and other payables 18 78,447 80,249
Current tax liabilities - 1,639
Lease liabilities * 20 4,322 4,056
Derivative financial liabilities 17 - 962
Provisions 19 6,430 4,633
89,199 91,539
Total liabilities 133,211 130,334
Net assets 643,851 693,556
Issued capital and reserves attributable to owners of the parent
Share capital 86 83
Share premium reserve 698,553 627,557
Share‑based payment reserve 21 203,099 168,200
Translation reserve (173) 3,707
Accumulated deficit (257,714) (105,991)
Total Equity 643,851 693,556
* See note 8 for details regarding the restatement of comparatives.
Consolidated Statement of Changes in Equity
as at 31 December 2023
Share capital Share premium Share-based payment reserve Translation reserve Accumulated deficit Total equity
£000 £000 £000 £000 £000 £000
At 1 January 2022 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
Loss for the year - - - - (154,507) (154,507)
Other comprehensive income - - - (3,880) 2,784 (1,096)
Comprehensive loss for the year - - - (3,880) (151,723) (155,603)
Issue of share capital 3 71,562 - - - 71,565
Cost of share issue - (566) - - - (566)
Employee share‑based payments - - 34,995 - - 34,995
Tax in relation to share‑based payments - - (96) - - (96)
Total contributions by and distributions to owners 3 70,996 34,899 - - 105,898
At 31 December 2023 86 698,553 203,099 (173) (257,714) 643,851
Note 21
Consolidated Statement of Cash Flows
for the year ended 31 December 2023
Note 2023 2022
Restated *
£000 £000
Net cash outflow from operating activities 22 (137,302) (63,826)
Investing activities
Purchase of property, plant and equipment * (5,906) (8,632)
Proceeds from sale of property 12 - 42,500
Capitalisation of development costs 11 (19,522) (19,163)
Purchases of IP licences (1,862) -
Investment in associate (3,000) -
Interest received 13,898 3,443
Purchase of other financial assets (150,000) (129,962)
Proceeds from sale of other financial assets 104,598 60,459
Net cash outflow from investing activities (61,794) (51,355)
Financing activities
Proceeds from issue of shares 71,597 3,751
Costs of share issue (366) (2,378)
Principal elements of lease payments (4,291) (4,111)
Repayment of bank borrowings - (9,500)
Interest paid (1) (221)
Interest paid on leases (2,205) (1,256)
Net cash inflow/(outflow) from financing activities 64,734 (13,715)
Net decrease in cash and cash equivalents before foreign exchange movements (134,362) (128,896)
Effect of foreign exchange rate movements (1,880) (2,166)
Cash and cash equivalents at beginning of year 356,778 487,840
Cash and cash equivalents at end of year 22 220,536 356,778
* See note 8 for details regarding the restatement of comparatives.
Notes to the Consolidated Financial Statements
for the year ended 31 December 2023
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. The Group is primarily involved in researching, developing, manufacturing
and commercialising a novel generation of deoxyribonucleic acid ("DNA") or
ribonucleic acid ("RNA") sequencing technology that provides rich data, is
fast, accessible and easy to use, and which allows the real-time analysis of
DNA or 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 unaudited preliminary financial information comprises the consolidated
income statement, consolidated statement of comprehensive income, consolidated
balance sheet, consolidated statement of changes in equity, consolidated cash
flow statement and extracts from the notes to the financial statements for the
year ended 31 December 2023. The unaudited preliminary financial information
should be read in conjunction with the Annual Report 2022, which has been
prepared in accordance with International Accounting Standards, in conformity
with the Companies Act 2006. The financial information incorporates the
results of the Company and the entities under its control (together the
"Group" and individually "Group companies").
The unaudited preliminary financial information has been presented in Pounds
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.
2 Going concern
As at 31 December 2023, the Group held £472.1 million in cash, cash
equivalents and other liquid investments (note 25).
The going concern assessment period is the twelve months to the end of March
2025. 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 2025, 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 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 these financial statements.
3. Critical accounting judgements and sources of estimation uncertainty
In applying the Group's accounting policies, the Directors are required to
make judgements, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Critical judgements in applying the Group's accounting policies
The following are the critical judgements and estimates that the Directors
have made in the process of applying the Group's accounting policies and that
have the most significant effect on the amounts recognised in the financial
statements.
Judgements
i. Internally generated intangible assets research and development
expenditure ("R&D")
Critical judgements are required in determining whether development spend
meets the criteria for capitalisation of such costs as laid out in IAS 38
"Intangible Assets," in particular whether any future economic benefit will be
derived from the costs and flow to the Group. The Directors believe that the
criteria for capitalisation as per IAS 38 paragraph 57 for specific projects
were met during the period and accordingly all amounts in relation to the
development phase of those projects have been capitalised as an intangible
asset during the period. All other spend on R&D projects has been
recognised within R&D expenses in the income statement during the period.
Management does not have a formal timesheet process for monitoring time spent
by employees on projects in their development stage. Instead, management
consults with the relevant project leaders on a regular basis to understand
and estimate the time spent on projects in their development stage. When a
percentage allocation has been agreed, in line with the estimation process
described below, this is then applied to other, non-employee related
development costs to ensure that costs are consistently and appropriately
capitalised. The net book value of internally generated capitalised assets at
31 December 2023 was £30.8 million (2022: £29.7 million).
Estimates
Key sources of estimation uncertainty
i. Inventory
The Group holds inventory across a number of locations for the purposes of
fulfilling sales orders and contractual obligations. Additionally, certain
components of inventory are held for use within research and development. Net
inventory at 31 December 2023 was £101.5 million (2022: £87.7 million). In
line with the requirements of IAS 2 Inventories, inventory is stated at the
lower of cost and net realisable value.
Management is required to make a number of estimates around the net realisable
value of inventory, which represents the estimated selling price less all
estimated costs of completion. In cases where the net realisable value is
below cost, management records a provision such that inventory is held at the
lower of cost and net realisable value.
To estimate the inventory provision, management uses inputs based on the
location and status of inventory held by the Group. This includes the intended
use of the inventory, including whether it is expected to be sold or used for
research and development purposes.
Management makes assumptions around the net realisable value of each category
of inventory. These estimates are then applied to the inventory balance, based
on its cost, location and intended use, to record a provision in cases where
the net realisable value is below cost.
If the net realisable value had increased by 5%, then the value of inventory
would have increased by £1.5 million and the revised stock value would have
been £103.0 million (2022: £1.2 million and £88.9 million respectively). If
the net realisable value had decreased by 5%, then the value of inventory
would have decreased by £1.5 million and the revised stock value would have
been £100.0 million (2022: £1.2 million and £86.5 million respectively).
ii. Share-based payments
In June 2021, awards were granted to the Executive Directors of the Company
under the Oxford Nanopore Technologies Limited Long Term Incentive Plan 2021
(Founder LTIP). Half of the awards are subject to a non‑market revenue
performance condition which drives number of awards expected to vest depending
on when certain revenue targets are met. At each reporting date, management
makes an estimate as to the extent to which the revenue condition is expected
to be achieved by the end of each future reporting period. This is driven by
revenue forecasts. Whilst management may make an appropriate estimate of the
annual revenue target on grant date, this estimate might change in future
periods. If the annual revenue forecast to 31 December 2024 decreased by 10%,
the Group recognised total expenses of £35.0 million relating to
equity‑settled share‑based payment transactions would decrease by £2.7
million.
In addition, the Founder LTIP awards in issue give rise to an associated
employer's social security liability. Management updates the estimate for this
liability at each reporting period with reference to both the expected number
of awards vesting and their expected value, using the share price at the
period end date. Half of the Founder LTIP awards are linked to a share price
condition, which is a market-based performance condition incorporated into the
fair value calculation and to which no subsequent adjustments can be made from
an IFRS 2 charge perspective. However, management has estimated the proportion
likely to vest for the purposes of assessing the employer's social security
contributions to accrue at each period end using a Monte Carlo simulation
model which calculates the average expected vesting based on a large number of
randomly generated projections of the Company's future share price. At 31
December 2023, the expected vesting of the share price linked awards was
estimated at 50.8% (2022: 56.3%).
Other sources of estimation uncertainty
iii. Internally generated intangible assets research and development
expenditure ("R&D")
Estimates are made in determining the capitalisation of costs in relation to
the development phase of R&D projects. Management capitalises development
costs in respect of R&D projects based on an estimate of the percentage of
time spent on the project by employees while the project is in its development
phase. Development costs capitalised in 2023 amounted to £19.5 million (2022:
£19.2 million). If the estimated time spent on these projects had varied by
up to 5% then the development costs capitalised in 2023 would have been in the
range £18.5 million to £20.5 million (2022: £18.2 million to £20.2
million).
iv. Non-standard customer contracts
As noted in the revenue recognition accounting policy, revenue contracts for
the sale of bundled goods and services require the allocation of the total
contract price to individual performance obligations based on their
stand-alone selling prices. The Group occasionally enters into larger bespoke
contracts which might include a clause linked to the performance of the
products and options on the total units of certain consumables to be purchased
under the contract. This requires management to estimate the number of items
likely to be delivered under the contract.
4. 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:
2023 2022
£000 £000
Geographical region
Americas 61,542 48,300
EMEAI 74,037 115,498
APAC 34,089 34,805
Total revenue from contracts with customers 169,668 198,603
2023 2022
£000 £000
Category
Sale of goods 141,907 177,672
Rendering of services 17,445 9,902
Lease income 10,316 11,029
Total revenue from contracts with customers 169,668 198,603
2023 2022
£000 £000
Timing of revenue recognition
At a point in time 141,907 177,672
Over time 27,761 20,931
Total revenue from contracts with customers 169,668 198,603
Notes 15 and 18 disclose assets and liabilities the Group has recognised in
relation to contracts with customers.
Revenue recognised in relation to contract liabilities:
2023 2022
£000 £000
Revenue recognised that was included in the contract liability balance at the 15,848 17,670
beginning of the year
5. 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. No revenues were
expected in this segment after 2022, and none were reported in the current
year. We do not expect this segment to continue after this year's results.
The accounting policies of the reportable segments are the same as the Group's
accounting policies.
(a) Information about major customers
In the year there were no individual customers representing more than 10% of
the Group's total revenue. In 2022, the Group had one major customer, the
Department of Health and Social Care ("DHSC"). Revenue from this customer was
£51.8 million, which represented 26.0% of Group revenue and was reported
within the Covid testing segment.
The following is an analysis of the Group's revenue, results, assets and
liabilities by reportable segment.
LSRT Covid Testing 2023 LSRT Covid Testing 2022
£000 £000 £000 £000 £000 £000
Revenue
Americas 61,542 - 61,542 48,300 - 48,300
EMEAI 74,037 - 74,037 63,710 51,788 115,498
APAC 34,089 - 34,089 34,805 - 34,805
Total revenue 169,668 - 169,668 146,815 51,788 198,603
(b) Adjusted EBITDA
LSRT Covid Testing 2023 LSRT Covid Testing 2022
£000 £000 £000 £000 £000 £000
(Loss)/profit after tax (154,507) - (154,507) (128,824) 37,799 (91,025)
Tax expense 4,739 - 4,739 7,614 - 7,614
Finance income (18,853) - (18,853) (5,941) - (5,941)
Finance expense 1 - 1 221 - 221
Interest on lease 2,205 - 2,205 1,382 25 1,407
Depreciation and amortisation 41,627 - 41,627 31,799 72 31,871
Share-based payments (Founder LTIP) 20,886 - 20,886 53,182 - 53,182
Employer's social security taxes on Founder LTIP and pre-IPO share awards (888) - (888) (21,634) - (21,634)
Gain on sale of property - - - (18,620) - (18,620)
Settlement of COVID-19 testing contract - - - - (37,896) (37,896)
(Write-back)/impairment of investment in associate (144) - (144) 2,193 - 2,193
Adjusted EBITDA (104,934) - (104,934) (78,628) - (78,628)
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) impairment of investment in associate; iv) gain on sale of
property; and v) settlement of the COVID-19 testing contract.
Adjusted EBITDA is used as a key profit measure because it shows the results
of core operations exclusive of income or charges that are not considered to
represent the underlying operational performance.
(c) Supplementary information
LSRT Covid Testing 2023 LSRT Covid Testing 2022
£000 £000 £000 £000 £000 £000
Depreciation of property, plant and equipment 18,105 - 18,105 15,968 - 15,968
Depreciation of right‑of‑use assets 5,031 - 5,031 4,403 72 4,475
Amortisation of internally generated intangible assets 18,419 - 18,419 11,378 - 11,378
Amortisation of acquired intangible assets 72 - 72 50 - 50
Additions to non‑current assets(*) 68,259 - 68,259 57,775 - 57,775
Segment assets
Investment in associate 742 - 742 826 - 826
Acquired intangible assets 2,136 - 2,136 346 - 346
Other segment assets(**) 276,213 - 276,213 243,496 - 243,496
Total segment assets 279,091 - 279,091 244,668 - 244,668
Deferred tax assets 5,486 7,681
R&D tax credit recoverable 12,819 9,148
Current tax asset 1,030 -
Derivative financial assets 261 2,060
Other financial assets 257,839 203,555
Cash and cash equivalents 220,536 356,778
Total assets 777,062 823,890
Segment liabilities
Total segment liabilities (133,211) - (133,211) (127,733) - (127,733)
Derivative financial liabilities - (962)
Current tax liabilities - (1,639)
Total liabilities (133,211) (130,334)
Net assets 643,851 693,556
* 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 2023 LSRT Covid Testing 2022
£000 £000 £000 £000 £000 £000
Americas 13,130 - 13,130 11,255 - 11,255
EMEAI 310,208 - 310,208 166,572 - 166,572
APAC 1,055 - 1,055 382 - 382
324,393 - 324,393 178,209 - 178,209
6. Loss before tax
2023 2022
£000 £000
This is after charging/(crediting):
Non‑staff research and development costs 35,671 32,651
Amortisation of intangible assets 18,491 11,428
Depreciation of property, plant and equipment 18,105 15,968
Depreciation of right‑of‑use assets 5,031 4,475
Loss/(gain) on disposal of property, plant and equipment 3,663 (16,740)
Cost of inventories 49,162 42,559
Write‑down of inventories 9,839 6,045
Short-term lease costs 928 602
Impairment of intangible assets - 736
(Write-back)/impairment of investment in associate (144) 2,193
Net foreign exchange gain (1,385) (2,490)
All amounts relate to continuing operations.
7. Loss per share
2023 2022
Pence Pence
(a) Basic and diluted loss per share
Total basic and diluted loss per share attributable to the ordinary equity 19 11
holders of the Group from continuing operations
2023 2022
£000 £000
(b) Reconciliation of earnings used in calculating earnings
per share
Loss attributable to the ordinary equity holders of the Group used in (154,507) (91,025)
calculating basic and diluted loss per share from continuing operations
2023 2022
Number Number
(c) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares and potential ordinary shares used 833,960,358 823,742,709
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 years ended 31 December
2023 and 31 December 2022. These options could potentially dilute basic
earnings per share in the future.
8. Re-presentation and restatements
(a) Re-presentation of development-related costs
As amortisation related to internally generated assets has increased over
time, management now considers that it is more appropriate to present
amortisation and the R&D tax credit within research and development
expenses, rather than as previously presented within selling, general and
administration expenses. The comparative income statement has been
re-presented to be consistent with the current year presentation. The net
effect on the statement of comprehensive income is nil as shown below:
2023 2022
£000 £000
Research and development expenses
Before re-presentation 95,509 64,842
Re-presentation of amortisation and R&D tax credit 8,333 4,344
After re-presentation 103,842 69,186
Selling, general and administrative expenses
Before re-presentation 163,581 157,447
Re-presentation of amortisation and R&D tax credit (8,333) (4,344)
After re-presentation 155,248 153,103
Total operating expenses
Before re-presentation 259,090 222,289
After re-presentation 259,090 222,289
(b) Restatement of current and non-current lease
liabilities
In 2023, the Group identified a misclassification of £10.9 million of
non-current lease liabilities incorrectly presented as current lease
liabilities in the financial statements for the year ended 31 December 2022.
The misclassification has been corrected by restating the 2022 current and
non-current lease liabilities line items within the 2023 financial statements
as shown below. There is no effect on the total liabilities of the Group.
2022 Increase/(decrease) 2022
£000 Restated
£000 £000
Non‑current liabilities
Lease liabilities 19,049 10,993 30,042
Current liabilities
Lease liabilities 15,049 (10,993) 4,056
Total liabilities 130,334 - 130,334
(c) Restatement of assets subject to operating leases in operating cash
flows
In 2023, the Group identified that the cash outflows associated with additions
to assets subject to operating leases of £14.4 million had been incorrectly
classified in the cashflow statement within the 2022 financial statements as
cash used within investing activities. Following a review of relevant
accounting requirements, the Group has restated these 2022 cash outflows to be
presented as cash used in operations to correct the presentation in the 2023
financial statements. The presentation of the cash flow in 2023 is consistent
with the restated presentation. See below for details regarding this
restatement of comparatives. There is no effect on the net cash position or
total cash outflow of the Group.
2022 Increase/(decrease) 2022
£000 Restated
£000 £000
Cash used in operations
Increase in inventory (24,717) (14,439) (39,156)
Total cash used in operations (50,621) (14,439) (65,060)
Net cash outflow from investing activities
Purchase of property, plant and equipment (23,071) 14,439 (8,632)
Total cash outflow from investing activities (65,794) 14,439 (51,355)
Total cash outflow (128,896) - (128,896)
9. Other gains and losses
2023 2022
£000 £000
Gain/(loss) on derivative financial instruments 2,125 (5,434)
Gain on investment bonds 153 -
Gain on sale of property - 18,620
2,278 13,186
2023 2022
£000 £000
Fair value movements on investment bonds (included in other comprehensive 4,024 936
income)
10. Taxation
Income tax recognised in statement of comprehensive income
Income tax recognised in profit and loss
2023 2022
£000 £000
Current tax
Notional tax on R&D expenditure credit 2,446 1,187
Prior year adjustment in respect of notional tax on R&D expenditure credit (48) 159
Prior year adjustment in respect of current tax (822) 519
Tax payable on foreign subsidiary 2,949 6,059
Total current tax 4,525 7,924
Deferred tax
Origination and reversal of temporary differences 214 (310)
Total deferred tax 214 (310)
Total tax 4,739 7,614
Income tax recognised in OCI
2023 2022
£000 £000
Deferred tax on investment bonds 1,240 -
Total tax 1,240 -
Current tax balances have been calculated at the rates enacted for the period.
The effective rate of Corporation Tax is -3.16% (2022: -9.13%) 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:
2023 2022
£000 £000
Loss for the year (154,507) (91,025)
Income tax expense 4,739 7,614
Loss before income taxes (149,768) (83,411)
Tax rate in the UK for period as a percentage of losses at 23.5% (2022: 19.0%) (35,196) (15,848)
R&D incentives 2,067 813
Adjustment in respect of overseas tax rates 410 1,104
Adjustments to tax charge in respect of prior year 133 62
Impact of share options 6,634 12,337
Movement on unrecognised deferred tax 29,775 7,845
Other timing differences (1,160) 287
Expenses not deductible for tax purposes 2,076 1,014
Total tax expense 4,739 7,614
11. Intangible assets
Capitalised development costs Patents and licenses Total
£000 £000 £000
Cost
At 1 January 2022 38,464 446 38,910
Additions 19,163 - 19,163
Foreign exchange movements 36 - 36
At 31 December 2022 57,663 446 58,109
Additions 19,522 1,862 21,384
Foreign exchange movements (22) - (22)
At 31 December 2023 77,163 2,308 79,471
Accumulated amortisation and impairment
At 1 January 2022 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
Charge for the year 18,419 72 18,491
At 31 December 2023 46,389 172 46,561
Net book value
At 31 December 2022 29,693 346 30,039
At 31 December 2023 30,774 2,136 32,910
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.
12. 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 2022 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
Additions - 161 679 4,828 25,600 3,583 34,851
Disposals - - (63) - (9,785) (4) (9,852)
Transfers between classes - 1,106 4,982 (6,162) - 74 -
Foreign exchange movements - (27) (26) - (902) (88) (1,043)
At 31 December 2023 - 11,733 28,169 1,498 54,758 19,830 115,988
Accumulated depreciation and impairment
At 1 January 2022 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
Charge for the year - 1,609 3,477 - 10,213 2,806 18,105
Disposals - - (63) - (6,122) (4) (6,189)
Foreign exchange movements - (8) (22) - (462) (64) (556)
At 31 December 2023 - 6,209 17,706 - 27,133 15,050 66,098
Net book value
At 31 December 2022 - 5,885 8,283 2,832 16,341 3,953 37,294
At 31 December 2023 - 5,524 10,463 1,498 27,625 4,780 49,890
The Group leases some of its devices to customers. Lease payments in relation
to these devices are received in full either in advance or on shipping of the
device, meaning that there are no undiscounted future lease payments expected
to be received on these devices.
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, in
2022 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.
13. Right-of-use assets
Total
£000
Cost
At 1 January 2022 20,302
Additions 15,504
Disposals (973)
Foreign exchange movements 586
At 31 December 2022 35,419
Additions 12,024
Disposals (1,336)
Foreign exchange movements (332)
At 31 December 2023 45,775
Accumulated depreciation
At 1 January 2022 5,615
Charge for the year 4,475
Disposals (782)
Foreign exchange movements 205
At 31 December 2022 9,513
Charge for the year 5,031
Disposals (1,142)
Foreign exchange movements (153)
At 31 December 2023 13,249
Net book value
At 31 December 2022 25,906
At 31 December 2023 32,526
14. Inventories
2023 2022
£000 £000
Raw materials 50,888 41,852
Work in progress 39,154 34,960
Finished goods 11,506 10,886
101,548 87,698
The carrying amount of inventories was not materially different from their
replacement cost.
The cost of inventory recognised as an expense includes £9.8 million (2022:
£6.0 million) in respect of write-downs of inventory to net realisable value.
There were no reversals of write-downs in either year.
15. Trade and other receivables
2023 2022
£000 £000
Trade receivables 33,626 38,097
Contract assets 204 3,084
Accrued income and other debtors 7,750 4,724
Accrued interest income 746 1,065
Other taxes 6,351 5,262
Prepayments 12,798 10,673
61,475 62,905
The ageing of trade receivables and the loss allowance calculated using the
Group's provision matrix was as follows:
Not past due 30‑60 days 61‑90 days 91+ days Total
£000 £000 £000 £000 £000
At 31 December 2023 28,495 2,238 1,036 2,804 34,573
Loss allowance (227) (87) (55) (578) (947)
28,268 2,151 981 2,226 33,626
At 31 December 2022 28,654 3,390 2,696 5,971 40,711
Loss allowance (930) (262) (315) (1,107) (2,614)
27,724 3,128 2,381 4,864 38,097
The following table shows the movement in lifetime Expected Credit Loss that
has been recognised for trade receivables in accordance with the simplified
approach set out in IFRS 9:
£000
At 1 January 2022 2,955
Net charges and releases to statement of comprehensive income (464)
Foreign exchange movement 123
At 31 December 2022 2,614
Net charges and releases to statement of comprehensive income (1,425)
Foreign exchange movement (242)
At 31 December 2023 947
16. Other financial assets
2023 2022
£000 £000
Treasury deposits - 101,274
Investment bonds 256,534 100,898
Other financial assets 1,305 1,383
257,839 203,555
These items were analysed as follows:
2023 2022
£000 £000
Current 49,514 119,411
Non-current 208,325 84,144
257,839 203,555
Investment bonds are classified as financial assets at fair value through
other comprehensive income (FVOCI).
17. Derivative financial assets and liabilities
2023 2022
£000 £000
Derivative financial assets
Foreign currency forward contracts 261 2,060
261 2,060
Derivative financial liabilities
Foreign currency forward contracts - 962
- 962
18. Trade and other payables
2023 2022
£000 £000
Trade payables 25,184 23,103
Share-based payments 504 460
Payroll taxation and social security 4,507 2,585
Accruals 33,096 33,801
Contract liabilities 15,156 20,300
78,447 80,249
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 50 days (2022: 59 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 2023 they decreased by
£5.1 million (2022: decrease of £1.3 million). Management expects that most
of the transaction price allocated to unsatisfied performance obligations as
at 31 December 2023 will be recognised as revenue during the following year.
19. Loans and provisions
Provisions
Dilapidation provisions Employer Other Total provisions
taxes
£000
£000 £000
£000
At 31 December 2022 2,346 10,772 160 13,278
Movement in provision for the year 52 (168) 590 474
Payments - (736) (69) (805)
Foreign exchange movements (14) 45 (10) 21
At 31 December 2023 2,384 9,913 671 12,968
Current - 5,759 671 6,430
Non‑current 2,384 4,154 - 6,538
At 31 December 2023 2,384 9,913 671 12,968
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
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 in 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.
20. Lease liabilities
2023 2022
£000 Restated *
£000
Current * 4,322 4,056
Non‑current * 37,333 30,042
Lease liabilities included in the statement of financial position 41,655 34,098
2023 2022
£000 £000
Maturity analysis ‑ contractual undiscounted cash flows
Up to one year 6,865 6,459
Two to five years 28,057 22,996
Greater than five years 21,358 17,705
Total undiscounted lease liabilities at 31 December 56,280 47,160
* See note 8 for details regarding the restatement of comparatives.
Information on the associated right-of-use assets is included in note 13.
21. Share-based payment reserve
2023 2022
£000 £000
At 1 January 168,200 96,350
Equity settled share‑based payment transactions 34,995 71,165
Tax in relation to share‑based payment transactions (96) 685
At 31 December 203,099 168,200
Share-based payment transactions
2023 2022
£000 £000
Expense arising from share‑based payment transactions:
Included in research & development expenses 5,897 6,883
Included in selling, general & administrative expenses 29,179 63,126
35,076 70,009
Equity settled share‑based payment transactions 34,995 71,165
Cash settled share‑based payment transactions 81 (1,156)
35,076 70,009
22. Notes to the cash flow statements
2023 2022
£000 £000
Cash and cash equivalents 220,536 356,778
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.
2023 2022
£000 £000
Loss before tax (149,768) (83,411)
Depreciation on property, plant and equipment 18,105 15,968
Depreciation on right‑of‑use assets 5,031 4,475
Amortisation on intangible assets 18,491 11,428
Loss on disposal of property, plant and equipment 3,854 1,880
Research and development expense tax credit (10,157) (7,084)
Foreign exchange movements (519) 5,556
Interest on leases 2,205 1,407
Bank interest income (18,853) (5,941)
Bank interest expense 1 221
Movements on investment bonds 337 -
Movements on derivatives 836 (1,203)
(Write-back)/impairment of investment (144) 2,193
Impairment of operating assets - 1,173
Share of losses in associate 228 238
Gain on sale of property - (18,620)
Employee share benefit costs including employer's social security taxes 34,908 48,784
Operating cash flows before movements in working capital (95,445) (22,936)
Increase in receivables 118 (7,402)
Increase in inventory and assets subject to operating leases * (43,060) (39,156)
Increase in payables 1,502 4,434
Cash used in operations (136,885) (65,060)
R&D tax credit received 4,088 10,864
Foreign tax paid (4,505) (9,630)
Net cash outflow from operating activities (137,302) (63,826)
* See note 8 for details regarding the restatement of comparatives.
23. Events after the reporting date
The Group performed a review of events subsequent to the balance sheet date
through to the date the financial statements were issued and determined that
there were no such events requiring recognition or disclosure in the financial
statements.
24. 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 2023 were as follows: IP Group (10%), Tencent Holdings (7%), Baillie
Gifford (7%), bioMérieux SA (7%), G42 (5%) and GIC Asset Management (5%).
25. 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 - in order to understand ongoing performance of the core
business, management considers it appropriate to exclude revenues from
contracts that are not expected to recur. We also report underlying LSRT
revenue performance within each of our customer groups and franchises;
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 payments expense
(Founder LTIP) and employer's social security taxes on Founder LTIP and
pre-IPO share awards;
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 and
pre-IPO share awards; iii) impairment of investment in associate; iv) gain on
sale of property; and v) settlement of the COVID-19 testing contract; and
Cash and cash equivalents and other liquid investments: cash and cash
equivalents 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, and treasury deposits, 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:
2023 2022
£000 £000
LSRT Revenue 169,668 146,815
Adjusting Items:
EGP revenue (11,956) (13,172)
COVID sequencing revenue (7,966) (26,112)
Underlying LSRT revenue 149,746 107,531
Growth +39.3% +36.4%
Impact of foreign exchange (140) (5,370)
Underlying LSRT revenue on a constant currency basis 149,606 102,161
Growth +39.1% +29.6%
The following table presents the adjusted research and development:
2023 2022
£000 £000
Research and development expenses 103,842 69,186
Adjusting Items:
Employer's social security taxes on pre-IPO share awards 604 9,890
Adjusted research and development expenses 104,446 79,076
Amortisation of capitalised development costs (18,419) (11,400)
Capitalised development costs 19,522 19,163
Adjusted R&D expenses and capitalised development costs 105,549 86,839
The following table presents the adjusted selling, general and administrative
expenses:
2023 2022
£000 £000
Selling, general and administrative expenses 155,248 153,103
Adjusting Items:
Share-based payment expense on Founder Long Term Incentive Plan (LTIP) (20,886) (53,182)
Employer's social security taxes on Founder LTIP and pre‑IPO share awards 285 11,743
Adjusted selling, general and administrative expenses 134,647 111,664
The following table presents the Group's EBITDA and Adjusted EBITDA, together
with a reconciliation to loss for the year:
2023 2022
£000 £000
Loss for the year (154,507) (91,025)
Tax expense 4,739 7,614
Finance income (18,853) (5,941)
Interest expense 1 221
Interest on lease 2,205 1,407
Depreciation and amortisation 41,627 31,871
EBITDA (124,788) (55,853)
Share-based payments (Founder LTIP) 20,886 53,182
Employer's social security credit on Founder LTIP and pre‑IPO share‑based (888) (21,634)
awards
Gain on sale of property - (18,620)
Settlement of COVID-19 testing contract - (37,896)
(Write-back)/impairment of investment in associate (144) 2,193
Adjusted EBITDA (104,934) (78,628)
The following table presents cash, cash equivalents and other liquid
investments:
2023 2022
£000 £000
Cash and cash equivalents 220,536 356,778
Treasury deposits - 101,274
Investment bonds 256,534 100,898
Less: fair value movements on investment bonds (4,960) (936)
Cash, cash equivalents and other liquid investments 472,110 558,014
1 (#_ftnref1) Cash and cash equivalents of £220.5 million and Investment
bonds of £251.6 million.
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