REG - Oxford Nanopore Tech - Preliminary Results and Guidance Update
22/03/2022 07:16
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RNS Number : 5271F Oxford Nanopore Technologies plc 22 March 2022
22 March 2022
Oxford Nanopore Technologies plc
Preliminary results for the year ended 31 December 2021
A year of exceptional technical, commercial and financial progress; increase
in 2022 and 2023 revenue guidance
Oxford Nanopore Technologies plc (the "Group"), the company behind a new
generation of nanopore-based sensing technology, today announces its
preliminary results for the year ended 31 December 2021.
Summary performance
2021 2020
£m £m
Revenue 1 £133.7 £113.9
Life Science Research Tools (LSRT) revenue £127.0 £65.5
COVID-19 testing revenue £6.7 £48.3
Gross Profit Margin 54.8% 41.2%
Adjusted Operating Loss 2 (£82.9) (£73.1)
Adjusted EBITDA 3 (£57.7) (£55.2)
Loss for the year (£167.6) (£61.2)
Full Year 2021 Financial highlights; record revenue growth in core business
· LSRT revenue of £127.0 million, compared to £65.5 million for
2020; a 94% increase during the period, reflecting growth across all customer
groups.
· Total revenue of £133.7 million, compared to £113.9 million for
2020; £61.5 million increase in LSRT revenue partially offset by a £41.6
million 4 expected decrease in revenue from COVID-19 testing.
· Gross margin of 54.8%, compared to 41.2% for 2020; reflecting
greater proportion of consumables revenue and higher margins on PromethION
flow cells.
· Adjusted operating loss of £82.9 million, compared to an
adjusted operating loss of £73.1 million for 2020; increase primarily due to
continued investment in the business to support sustainable long term growth.
· Adjusted EBITDA of negative £57.7 million, compared to negative
£55.2 million in 2020.
· Net loss of £167.6 million, compared to a net loss of £61.2
million for 2020, driven by the share based payment charge and IPO costs.
· Cash and cash equivalents and treasury deposits of £618.2
million as of 31 December 2021, which includes net proceeds of £407.1 million
from the Group's IPO in October 2021.
2021 Strategic and operational highlights; continued innovation and
operational expansion driving growth
Key technology highlights:
· Innovation drove performance enhancements across the nanopore
sequencing platform, including:
- The launch of new technology updates ("Q20+" chemistry; the new "Kit
12" and R10.4 Flow Cells, in combination with new basecalling techniques)
delivering >Q20 (>99%) raw read accuracy and approximately Q30
(>99.9%) accuracy using "Duplex" approach.
- Continued investment in machine learning; launch of new basecaller
Bonito, delivering algorithm improvements and increased accuracy.
· Initial release of Remora(( 5 )), a tool to enable high-accuracy,
real time methylation analysis with nanopore sequencing, a key platform
differentiator that supports multiple applications including cancer and human
genetics.
· Continuous improvement of sequencing devices; announced the
development of the palm-sized PromethION 2 (P2), expected to launch in 2022 in
certain markets, as the most accessible low-cost, high-output nanopore
sequencer.
· New kits to support specific uses of nanopore sequencing,
including:
- Rapid barcoding for low cost multi-sample analysis across a
breadth of application areas
- ARTIC Midnight kit for rapid, high-performance COVID-19
sequencing
- Ultra-long sequencing kit to support the sequencing of high
volumes of ultra-long DNA fragments, providing rich data across a breadth of
application areas
Key user community highlights:
· Substantial increase in the user base and utilisation of nanopore
sequencing in life science research; over 1,400 new accounts added in 2021,
taking total active accounts to over 6,300 across all products.
· Growth in scientific impact of nanopore sequencing; more than
1,000 papers published by the Nanopore community in 2021, highlighting
applications across a number of scientific research areas including human,
cancer, animal, plant, pathogen and environmental genomics.
· In human genomics, scaleup of ultra-high throughput sequencing
operations for the Emirati Genome Program and multiple large scale human
genome pilots, such as: Genomics England in cancer, NIH in neurodegenerative
disease.
· In pathogen genomics, extensive use of nanopore sequencing for
rapid COVID-19 surveillance and sequencing of a range of other pathogens
including TB, drug-resistant bacteria, and African Swine Fever.
· Research demonstrating potential clinical uses of nanopore
sequencing for rapid profiling of central nervous system tumours, rapid
characterisation of rare or neurological diseases, and rapid identification of
pathogens in infectious disease samples.
· Launched the Org.one programme in April 2021 to support the
sequencing of critically endangered species and address biodiversity loss; 30
whole genomes of critically endangered species completed by March 2022.
Key operational highlights:
· Increased global headcount to over 800, including key hires in
senior sales, marketing and support leadership, consistent with the Group's
commitment to scale up rapidly and serve the global market for sequencing
products.
· Strengthened Board of Directors with the appointments of Wendy
Becker and Adrian Hennah as independent non-executive directors.
· Established an Oxford Nanopore Diagnostics team, to focus on
future potential diagnostic uses of nanopore sequencing.
Guidance:
The Group expects full year 2022 LSRT revenue to be in the range of £145
million to £160 million and full year 2023 LSRT revenue to be in the range of
£190 million to £220 million. Revenue guidance accounts for an expected
significant decline in COVID-19 sequencing revenue in 2022 and the recognition
of revenue from the Group's largest customer in the fourth quarter of 2021,
previously expected in the first quarter of 2022.
As disclosed on 9 November 2021
(https://otp.tools.investis.com/clients/uk/oxford_nanopore/rns/regulatory-story.aspx?cid=2700&newsid=1524440)
, the Group was previously targeting LSRT revenue in the range of £135
million to £145 million for full year 2022 and LSRT revenue in the range of
£170 million to £190 million for full year 2023.
All other prior guidance remains unchanged.
Please note that, beginning next year, the Group plans to provide forward
revenue guidance only for the then-fiscal year.
Gordon Sanghera, Chief Executive Officer, commented:
"We are proud of all that we achieved in 2021. We saw a significant increase
in both existing and new research customers using our technology to address
some of the world's biggest problems, from cancer and human genomics to public
health and environmental genomics. The growing scientific impact of nanopore
sequencing is reflected in the increase in scientific publications citing our
technology, a 29% increase in active direct customer accounts and the near
doubling in our core Life Science Research Tools revenue.
"We continued to expand and enhance our technology offering, which now enables
even more comprehensive genomic insights, and breadth of application, while -
crucially - remaining accessible in order to maximise potential benefits to
society. We also continued to invest in growing our commercial capabilities to
support our ambitious global growth goals.
"We see extraordinary opportunities ahead, reflected both in the progress we
have made in the current research market and in the preparations that we are
making to address many potential uses for our technology in applied markets,
from infectious disease to agricultural optimisation. We remain focused on our
mission to bring the widest benefits to society through the analysis of
anything, by anyone, anywhere. The progress we have made over the last year,
combined with the new capital raised in our IPO, puts us in a strong position
to achieve this goal."
Presentation details
Management will host a virtual presentation today, 22 March, at 9:30am GMT,
followed by a Q&A session, accessible via conference call or webcast. To
view the webcast and accompanying slide presentation please register here
(https://webcasting.brrmedia.co.uk/broadcast/621f9831fa16d9059b8427f9) .
The webcast will be recorded and a replay will be available on the Company's
Investor Relations (https://nanoporetech.com/about-us/investors) website
shortly after the presentation.
For details of the conference call please contact
oxfordnanoporetechnologies@tulchangroup.com
(mailto:oxfordnanoporetechnologies@tulchangroup.com) .
ENDS
For further information, please contact:
Oxford Nanopore Technologies plc
Investors: ir@nanoporetech.com
Media: media@nanoporetech.com
Tulchan Group (communications adviser to the Company)
Tom Murray, Olivia Peters, Deborah Roney
+44 (0) 20 7353 4200
oxfordnanoporetechnologies@tulchangroup.com
(mailto:oxfordnanoporetechnologies@tulchangroup.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.
Oxford Nanopore devices sequence DNA and RNA directly and sequence short to
ultra-long fragments of DNA, for a truly comprehensive picture of the genome.
Data is streamed in real-time and can enable rapid insights. The technology
is fully scalable - from pocket-sized to ultra-high throughput devices.
For more information please visit: www.nanoporetech.com
(http://www.nanoporetech.com)
Forward-looking statements
This announcement contains certain forward-looking statements. For example,
statements regarding expected revenue growth and profit margins are
forward-looking statements. Phrases such as "aim", "plan", "expect", "intend",
"anticipate", "believe", "estimate", "target", and similar expressions of a
future or forward-looking nature should also be considered forward-looking
statements. Forward-looking statements address our expected future business
and financial performance and financial condition, and by definition address
matters that are, to different degrees, uncertain. Our results could be
affected by macroeconomic conditions, the COVID-19 pandemic, delays in our
receipt of components or our delivery of products to our customers,
suspensions of large projects and/or acceleration of large products or
accelerated adoption of pathogen surveillance. These or other uncertainties
may cause our actual future results to be materially different than those
expressed in our forward-looking statements.
Chief Executive Officer's Statement
Dr Gordon Sanghera
Chief Executive Officer
"Towards the analysis of anything, by anyone, anywhere"
Our mission and our user community
We believe that we can enable greater democratisation of access to biological
information, initially through sequencing of deoxyribonucleic acid (DNA) and
ribonucleic acid (RNA), with our technology platform and highly differentiated
business model. Enabling our broad user base to do breakthrough science is our
everyday goal, and their incredible achievements inspire all of us at Oxford
Nanopore.
The thriving community of scientists using nanopore sequencing published more
than 1,000 papers in 2021, bringing the total, since Oxford Nanopore
technology was first available, to more than 2,450 to date.
Oxford Nanopore technology is used to study a huge diversity of biology, from
plants and animals to bacteria, viruses and, of course, in multiple human
genomics and cancer research studies. Our users, who are in more than 120
countries, continue to use our technology in more traditional lab environments
but expand the reach of science by sequencing in new environments such as
jungles, deserts, in the Antarctic and on the International Space Station.
Delivering rich biological insights, rapidly and at scale
Our highest-throughput device, PromethION 48, is enabling information-rich DNA
sequencing at unprecedented scale. This supports many types of programmes,
most typically in our 'S3' group of customers and specifically those in human
genomics, plant genomics, or service providers who offer sequencing to many
other customers.
In Abu Dhabi in 2019, the Department of Health launched one of the world's
largest and most scientifically ambitious population-scale genome programmes,
aimed at creating an Arab Reference Genome which will have an impact on
improving health in the region through the use of genomics. The Emirati Genome
Program (EGP) is run by our partner G42 who have established a highly
automated scaled nanopore sequencing facility in Abu Dhabi. In 2021, this
program expanded its operations significantly. Oxford Nanopore has played a
pivotal role, providing the sequencing technology backbone to produce data
from human genomes. We expect these data to include clinically significant
insights only possible with nanopore sequencing.
PromethION is also supporting rapid, clinically relevant insights in whole
human genomes. In 2021, our team collaborated with researchers at Stanford
University who showed that ultra-rapid whole human genome sequencing using
Oxford Nanopore technology could help identify/diagnose genetic diseases in
critical care settings. The workflow took as little as 7 hours and 18 minutes
from sample to clinically actionable data by using multiple PromethION flow
cells simultaneously, in a real-time sequencing process analogous to cluster
computing; the equivalent of one sequence of a human genome per 2.5 minutes.
The 12 patients in the study were in critical care for life-threatening
cardiac or neurological symptoms that required genetic testing to elucidate
genetic variants that the clinical researchers used to identify their
conditions. However, the turnaround time of the standard-of-care genetic tests
is typically weeks, potentially delaying clinical decisions. In this research
study from Stanford, researchers were able to characterise the disease-causing
variants in five out of twelve patients from the sequencing information
produced on the same day highlighting the potential for same day diagnosis to
inform rapid treatment. This method is a paradigm shift in the application of
whole human genome sequencing with the potential to deliver highly accurate
clinically actionable diagnoses from whole genome sequencing in just hours,
compared to sometimes weeks. We believe this is only possible with nanopore
sequencing, and that the low cost and platform accessibility has the potential
to support broader adoption by clinicians of human whole genome sequencing in
many environments.
The need for speed in infectious disease
Just as high-throughput users have taken advantage of Oxford Nanopore's
real-time sequencing feature in human genomics, many pathogen researchers are
taking advantage of the same feature to reach rapid answers - often in time
sensitive environments like critical care. Researchers from Guy's and St
Thomas' Hospital in London have reported results from a study to evaluate a
same-day nanopore sequencing workflow to identify secondary infections in
intensive care patients, resulting in the potential for actionable information
in hours rather than the days that it takes to grow a culture. Their
ground-breaking research demonstrates the potential power of nanopore
sequencing to scan a patient's sample and provide data from which an inventory
of single or multiple infections can be identified. This research shows the
potential for metagenomic analysis, performed using nanopore sequencing, to
enable clinicians to screen for multiple infection-causing pathogens with one
rapid test, rather than multiple hypothesis-driven tests.
The accessible nature of our technology has meant that those in resource
limited settings were able to track the virus without relying on large
laboratories for analysis. In Africa, Oxford Nanopore, the Bill and Melinda
Gates Foundation, Africa Centres for Disease Control and Prevention (CDC) and
other partners are collaborating to transform disease surveillance in the
continent, focusing not only on technology provision but also the development
of networks and skills for longer term impact.
At the same time, with a global network of partners, Oxford Nanopore is
developing a solution to address drug resistant tuberculosis (DR-TB), which
has increased at least 10-fold in the past decade worldwide. A single test
has the capability to detect more than 200 drug resistance associated
mutations in less than seven hours, unlocking potential to enable affordable,
scalable, and rapid TB drug-susceptibility testing.
Our COVID-19 contribution
In 2021, we scaled up our efforts to support the global campaign against
COVID-19, building on the extensive work done by the ARTIC Network, which was
critical in defining the methodologies used to sequence the SARS-CoV-2 genome.
Our technology has been used in more than 80 countries so far in the pandemic,
delivering sequence data for more than 990,000 positive samples to help
epidemiologists and public health decision makers track the pandemic's
evolution.
The rapid results possible with real-time nanopore sequencing have enabled
rapid analysis and data sharing. A nanopore user in the African CDC
laboratory of Dr Sikhulile Moyo was the first to identify and characterise the
Omicron variant in Botswana. Professor Charles Chiu, Director of the
University of California San Francisco (UCSF) clinical microbiology
laboratory, delivered the first full Omicron sequence in the US, within 8
hours of receiving the patient sample. In Sri Lanka, China, Japan and other
countries, a country-wide network of nanopore sequencing devices were
established to support COVID-19 sequencing today, but with the potential to
grow into networks for other types of pathogens or broader use in agriculture
and human genetics. These unique accessible, real-time capabilities enable
rapid insights to be translated into action on local or national scale.
The journey from the bench to the bedside: translational research
The journey to high-impact sequencing applications in healthcare typically
starts with scientific researchers developing new methods of elucidating
actionable information using sequencing technology. In 2021, we saw many
examples in the nanopore user community, of publications describing new,
faster and better techniques to understand disease, that take advantage of the
unique combination of features of nanopore sequencing.
For example, the 2021 World Health Organisation (WHO) classification of
central nervous system (CNS) tumours includes multiple molecular markers and
patterns that are recommended for routine diagnostic use in addition to
histology. If using traditional centralised sequencing infrastructures for
complete molecular profiling, considerable investment may be required, while
batching samples for sequencing and separate methylation profiling can lead to
long turnaround times, often weeks. In 2021, researchers in Heidelberg,
Germany, and collaborators, developed RAPID-CNS2 6 , using the Oxford Nanopore
adaptive sequencing method. This enables comprehensive mutational, methylation
and copy number profiling of CNS tumours with a single, cost-effective
sequencing assay. The method has the potential to be easy to perform and
highly accessible, being able to run on MinION and GridION. This could
radically reduce turnaround time and increase the variants identified
delivering a better outcome.
In Australia, a new DNA sequencing-based test method has been developed by a
team led by Ira Deveson, Head of Genomics Technologies at the Garvan Institute
of Medical Research, and other collaborators. This has the potential to screen
for more than 50 genetic neurological and neuromuscular diseases in a single
test. Currently in research phase, this workflow accurately identifies
diseases caused by unusually long, repetitive DNA sequences in a person's
genes, known as short tandem repeat (STR) expansion disorders. Current genetic
screening for these disorders can involve multiple tests, such as muscle or
nerve biopsies, and take much longer, sometimes years of investigation to
reach an answer.
With these latest developments, users are showing the potential of our
technology to remove the diagnostic odyssey many patients with complex
disorders go through, in order to begin addressing their conditions and
improving their healthcare.
Our applied sequencing opportunities
Whilst our business today focuses on scientific research, we are excited about
the potential to take nanopore sequencing into applied markets, including
human healthcare, agriculture, food and environmental monitoring. In the long
term, we believe there is potential to enter direct-to-consumer (DTC) health
and wellness markets as researchers develop tailored personalised exercise
regimes, diets and other applications based on genomic data.
In 2021, we established the Oxford Nanopore Diagnostics (OND) team, to focus
on accelerating translational research into clinical markets.
An important pillar of our clinical strategy is our relationship with Oracle
Corporation, who are also a new shareholder. In 2021, we signed a memorandum
of understanding whereby our two companies will work together to explore
potential new solutions for applied clinical markets.
We envisage that our partnership will leverage Oracle's reach into the
healthcare market, together with their best-in-class data infrastructure,
coupled to our real-time sequencing platforms. The development of end-to-end
sample-to-answer workflows has the potential to provide clinical users an
integrated solution, with the onward potential to couple directly into
Electronic Health Records.
Enabling a greater understanding of environmental challenges
From the very beginning, users of nanopore sequencing have taken advantage of
its portability to perform in-field analysis upon glaciers, above and below
the ocean, and in the deep jungle or other environments, to understand the
impact of climate change and gain direct insights into a shifting
biodiversity. In 2021, we built on this offering by launching ORG.one, a
programme to support the generation of whole genome sequencing data for
critically endangered animals, where possible using technology in situ to
support the local establishment of a sequencing capacity. As I write, the
sequence data for around 30 species have been generated and released; sequence
data can be used to understand the conservation of these species and to add to
scientific understanding of the utility of sequence data as a conservation
tool.
Our agile platform innovation
We deploy innovation to create high-performance products that are positioned
to access, reshape and expand existing markets as well as creating entirely
new markets. Innovation is at the centre of everything we do, and in 2021 we
used our agile research and development (R&D) model to deliver multiple
upgrades in software, flow cell chemistry, library preparation kits and
hardware - all driving continuous improvement of our technology.
Driving continuous performance improvement: We delivered new product releases across all parts of our portfolio, including the release of new "Kit 12" that included a novel enzyme, and flow cells containing the new R10.4 nanopore. Paired with new breakthroughs in our neural network algorithms, these enabled greater than Q20 (>99%) raw read and around Q30 (99.9%) Duplex sequencing accuracy - this was known as "Q20+ chemistry". Furthermore, hardware upgrades of our PromethION range included the roll out of low noise electronics enabling customers to run the latest Q20+ chemistry at scale.
Expanding device range: Oxford Nanopore devices are designed to meet the
need of a range of user types, from ultra-high throughput to portable. In
2021, we announced the development of the PromethION 2 (P2) device, which we
plan to launch in certain markets during 2022. P2 is a 'hand-held' device that
is designed to enable customers who did not previously have access to
high-output nanopore sequencing technology, to conduct rapid, competitively
priced sequencing of whole human genomes, transcriptomes, single cells,
plants, animal or highly multiplexed targeted samples or pathogens. We believe
that this will drive the creation of new user types for high-output
sequencing.
Delivering richer information: We believe that we provide the only
sequencing technology on the market today, that can be fitted to the breadth
of the diverse needs of scientific researchers. Our sequencers are uniquely
able to read DNA fragments from short (tens of bases) to long (thousands to
hundreds of thousand bases) to ultra-long (millions of bases), enabling the
elucidation of more genetic variation. We offer device formats ranging from
the pocket-size MinION to the desktop GridION and PromethION 48, the latter we
believe to be the highest throughput sequencing device in the world.
Critically, our technology allows the researcher to interrogate the native DNA
molecule directly. As a result, nanopore sequencers can extract much more
biological insight from DNA/RNA than incumbent or new SBS/fluorescence-based
technologies relying on intermediate steps that produce bias into the reading.
By 'mining' the electronic signal from a direct native nanopore read, we can
draw far more information from DNA and RNA than other techniques. And with
real-time data streaming from nanopore devices, combined with modular device
formats, insights can be generated rapidly and on-demand.
In 2021, we further enhanced the ability to deliver richer data by releasing
kits to enable sequencing of ultra-long fragments of DNA, and the early
release of Remora, a tool to enable high-quality, real-time methylation
analysis at no extra cost.
Protecting innovation: Our in-house innovation, combined with partnerships
with other institutions, means that we have expanded our patent estate to more
than 2,180 issued and pending patents across more than 320 families,
reflecting clear technology leadership in our field. Our strategy has been to
build a sustainable innovation pipeline that feeds into our intellectual
property portfolio, which is an important strategic asset.
We communicate regularly about our technical progress and I would invite you
to follow our social media feed or visit our website to see the latest news
throughout the year.
Manufacturing: a key pillar for innovation
Our commitment to innovation extends to our in-house developed manufacturing
processes. This production model delivers low-cost high volume manufacturing
capabilities for our sequencing platforms, kits and flow cells. The production
model is a mix of internally and/or externally manufactured components that
are assembled, quality controlled (QC), packaged and shipped from our UK
site.
We completed the construction of our 35,5300 square feet manufacturing
facility near Oxford, UK, in 2019 with built-in capacity to meet our demand
over the following few years. Our in-house bioelectronics production allows us
to meet the increasing demand for our flow cells while continually improving
our processes and reducing costs.
During 2021, we have continued to scale up production, while delivering a 10.9
percentage point increase in LSRT gross margin in the period.
Like many businesses, we experienced significant strain on our supply chain in
2021 - particularly electronic components. However, we managed to maintain
production without any stoppages by working closely with suppliers and
investing in inventory. We remain highly vigilant whilst we monitor
developments in our supply chain in 2022.
Our commercial strategy: address, reshape and expand
DNA sequencing has traditionally been a highly centralised market, relying on
'top down' access to technology and biological insights. In 2014, we started
to disrupt that paradigm by providing scientists with the ability to sequence
using their personal MinION device. We now provide technology for users at
any scale, but have preserved the principle of accessibility, so that more
scientists have the opportunity to do breakthrough science on nanopore
devices.
In 2021, we drove growth in all three of our customer groups ("S1, S2 and
S3"), through the deployment and execution of our innovation pipeline and
expanding commercial capacity.
Our S1 customers generate revenue up to $25,000 per year per account. These
users can be 'genomic explorers' who are key to providing new insights in
biology exploiting the unique richness and rapidity of nanopore sequence data
or everyday users of sequencing technology for routine analyses. In addition,
these customers also develop use cases that exploit real-time data streaming
or field-based sequencing in some cases combining both unique features.
Strategically this inclusive approach enables our customers to innovate and
publish novel uses of nanopore sequencing.
These S1 customers tend to purchase our technology, using our digital
resources and e-commerce platform, sometimes with additional support from our
customer services team. Typically, MinION users - the total number of active
accounts in this group reached 5,501 in 2021 growing by 24.1% (4,431 in 2020).
As the MinION platform has matured, we entered into a distribution partnership
with Avantor to extend our market reach to more generalist customers and to
reach in key geographies, primarily in the S1 customer group.
Our S2 customers generate between $25,000 and $250,000 per year per account.
These customers are often experienced users of genomics technology primarily
through sending samples out to service providers or have an existing
sequencing platform. Our technology gives these users access to affordable,
accessible plug-and-play platforms to generate real-time sequencing data as
part of their workflow.
The pandemic has catalysed the installation primarily of GridION in the
laboratories of this customer base. In addition, in 2021 we saw an increase in
demand from this customer group and a growth of 69.6% of active accounts. We
estimate that £15-20 million of revenue in 2021 was driven by COVID-19
sequencing. Our PromethION 2 will be a key enabler and drive growth in our S2
customer group in the coming year. Total active customer accounts in this
group reached 782 in 2021 (461 in 2020).
Our S3 customers generate revenue greater than $250,000 per year per account.
These customers are typically the established large, centralised sequencing
researchers and service providers. Our growth in this group is driven by our
PromethION 24 and 48. A key part of this market is Population Genomics where
thousands of samples are sequenced for novel insights at scale. We have key
partnerships with customers including G42 in the EGP, and other
high-throughput human genomics projects including Genomics England with a
cancer screening project, and National Institutes of Health (NIH) in the USA,
which are using our information-rich data at scale for neurodegenerative
screening. Total active customer accounts in this group reached 56 in 2021 (29
in 2020) with a growth of 93.1%.
We address all of these groups with a ground-breaking 'capital free'
go-to-market strategy designed to break down traditional barriers to entry for
scientists seeking to conduct their own sequencing. Customers are offered
'Starter Packs' of consumables, which come with the provision of the device at
no extra cost, removing the need to purchase or rent equipment in order to
start using the technology. We also offer a CapEx alternative for those
customers who have funding for traditional systems and restrictive spending of
this funding.
In 2021, we concluded our COVID-19 diagnostics offerings as a result of
improvements in the availability of polymerase chain reaction (PCR) supplies,
evidence of the COVID-19 pandemic moving towards an endemic phase, and the
conclusion of the Group's contract with the Department of Health and Social
Care (DHSC). Beyond 2021, no further sales of LamPORE(TM) or PCR tests are
anticipated. We therefore remain strategically focused on driving growth in
our core LSRT business and looking ahead to other potential future
translational and clinical opportunities.
Maximising our sustainable impact
From day one, we have sought to make biological information more accessible to
those who need it and we are delighted to see how nanopore users are bringing
our tools to bear on the challenges facing the world.
Like every business today we must evaluate the opportunities and risks for our
business through the ESG lens. This process needs to be rigorous,
standards-driven and inclusive of all our stakeholders.
We began this process in earnest during 2021 and you will find a brief section
in this Annual Report describing our current ESG profile. We plan to publish
our inaugural sustainability report in mid-2022, providing additional detail
on our sustainability framework and setting out our plans to evolve and
improve our impact over time.
Our people
Our employees demonstrated exceptional resilience during 2021 despite the
severe limitations on office-based work and travel. I am grateful to everyone
for this show of strength in the face of adversity.
To support our rapid growth, we made significant investments in our global
organisation in 2021. Total FTE headcount reached 803 at the end of the year,
up 33.6% from the prior year. We made key hires across geographies and
functional areas including senior commercial leadership in Europe and USA and
marketing leadership globally. As I mentioned before, in 2021 we also
established the Oxford Nanopore Diagnostics team, bringing established
clinical professionals into the organisation.
Alongside commercial expansion, we have continued to grow our operational
capabilities with the addition of experienced leadership in our biologics
production and supply chain.
In R&D, we have made significant investments in the expansion of our
machine learning and artificial intelligence (AI) teams, which we will
continue in 2022 whilst enhancing our software teams and leading research and
development scientists.
One of the hallmarks of Oxford Nanopore is the multi-disciplinary nature of
our employee base driving our innovation.
Our IPO
In October 2021, we completed our IPO on the London Stock Exchange, raising
£428 million in gross proceeds for the company and an additional £174
million in gross proceeds for selling shareholders.
An IPO in London was a natural step for a global business with headquarters
and manufacturing in the UK. The event provided all shareholders the benefit
from the increased liquidity of a public listing.
I am pleased to see a growing ecosystem of life sciences innovators in the UK,
and I hope our IPO encourages others to list in London too.
Towards the internet of living things
As I have often said, we are only in the foothills of the opportunities that
lie ahead of us.
We have established our platforms globally and our strategy is to enable our
customers to develop novel applications, analogous to the 'apps' model for
mobile phones. This permissive development approach is designed to accelerate
our mission to enable the analysis of anything, by anyone, anywhere,
propelling us toward a world of real-time, distributed access to DNA/RNA
information. As we begin to understand and measure the biological world around
us and use that information to make decisions with positive impacts from
health to the environment, we are on the precipice of creating the 'Internet
of Living Things (IOLT)'.
Chief Financial Officer's Statement
Tim Cowper
Chief Financial Officer
Financial performance
Results at a glance
Year ended 31 December: 2021 2020 % Change
Revenue (£m)
- LSRT revenue £127.0 £65.5 94%
- COVID-19 testing £6.7 £48.3 (86)%
£133.7 £113.9 17%
Gross profit (£m) £73.2 £46.9 56%
Gross margin (%) 54.8% 41.2% +13.6pts
Adjusted Operating loss 7 (£m) £(82.9) £(73.1) (13)%
Operating loss £(164.5) £(73.1) (125)%
Adjusted EBITDA 8 £(57.7) £(55.2) (5)%
Loss for the year £(167.6) £(61.2) (174)%
Proceeds from issue of shares (£m) £642.1 £164.0 292%
Cash and cash equivalents and Treasury deposits 9 at period end (£m) £618.2 £80.9 664%
Net assets at period end (£m) £704.0 £185.9 279%
Delivering top-line growth
In 2021, we delivered strong financial results, with £133.7 million of total
revenue. Total revenue included £127.0 million in revenue from our core
LSRT business, an increase of 94% over FY 2020. Our gross profit reached
£73.2 million, an increase of 56%. Our adjusted operating loss increased to
£82.9 million, as anticipated as the Group continues to implement its growth
strategy for expanding into the current markets and penetrating new ones.
Our top-line growth benefited significantly from the partnership with the G42
Group, which launched one of the world's largest population scale genome
programmes to improve health and wellbeing in the region (EGP). Oxford
Nanopore played a pivotal role, providing the sequencing technology backbone
to produce data from human genomes. We expect this dataset to include
clinically significant insights only possible with nanopore sequencing.
In 2021, our technology supported the global effort to sequence COVID-19.
Although it is not possible to foresee COVID-19 sequencing as a recurring
opportunity beyond 2022, our longer-term ambitions are beyond the pandemic in
areas such as pathogen surveillance and antimicrobial resistance.
Alternative performance measure
The Group has identified Alternative Performance Measures (APMs) that it
believes provide additional useful information on the performance of the
Group. These APMs are not defined within International Financial Reporting
Standards (IFRS) and are not considered to be a substitute for, or superior
to, IFRS measures. These APMs may not be necessarily comparable to similarly
titled measures used by other companies. All adjusted measures are reconciled
to the most directly comparable measure prepared in accordance with IFRS in
note 5.
Directors and management use these APMs alongside IFRS measures when budgeting
and planning, and when reviewing business performance.
Rising value per customer account
In 2021, we experienced positive trends across the majority of our financial
measures. These were underpinned by the strength of our customer group
diversification. The accessibility to our products drove uptake and expanded
our market opportunities.
Year ended 31 December (£m) 2021 2020 % Change
S1 23.1 18.6 24%
S2 38.4 23.7 62%
S3 55.7 17.8 214%
Indirect 9.7 5.4 80%
Total LSRT revenue 127.0 65.5 94%
COVID-19 testing revenue 6.7 48.3 (86)%
Total revenue 133.7 113.9 17%
The Group delivered solid revenues from the S1 customer group. The S2
customers exhibited a very strong growth through 2021 due to customers
completing Starter Packs and purchasing consumables highlighting in the most
emphatic way the success of our business financial model. Included in the S2
category are the public health laboratories that rapidly adopted our nanopore
technology for COVID-19 sequencing. The S2 customers are expected to drive
revenue growth over the medium term. In 2021, the S3 customer group exhibited
great dynamism and demonstrated its potential by growing over 200%. Although,
this growth was mainly led by the EGP, the S3 customer group exhibited revenue
growth of 80% excluding the EGP. There is a significant revenue opportunity
within S3 customers in coming years.
While a range of tools are used by biological researchers in their broad life
science research, DNA/RNA sequencing is increasingly a method of choice.
We continued to bring on board new customers, typically situated in
University, Industrial or Government research laboratories, or commercial
laboratories that provide sequencing as a service to other scientists. The
business also included population scale genomics and public health. Oxford
Nanopore's focus in reshaping the market remains unchanged.
Geographical trends
The Group aims to make its technology available to a broad range of scientific
users, and currently supports users in more than 120 countries. In some
territories the Group works with distributors to achieve or enhance its own
commercial presence.
In August 2021, the Group finalised a global distribution agreement with VWR
International, LLC (owned by Avantor, Inc.) ("Avantor"), a leading global
provider of products and services to customers in the life sciences, advanced
technologies and applied materials industries. Since September 2021, MinION
Starter Packs, MinION Flow Cells and library preparation kits became available
through Avantor's e-commerce platform alongside the Group's own e-commerce
platform. The Group's commercial activities around MinION were enhanced by
Avantor's sales and life science specialist teams, who provide local support
for MinION users. The agreement included distribution for MinION devices and
consumables in North America (the US, including Puerto Rico, and Canada from
early 2022) and Europe (EU, UK, Norway and Switzerland). Other regions will be
added in 2022.
This additional global sales distribution capacity has the potential to help
expand the S1 customer community into under-reached groups. For example, to
users in the pharmaceutical and biotechnology industries. Typically, this user
group requires higher-output devices. However, there are many applications for
which MinION would benefit these users, in turn resulting in greater
familiarity with the platform and opportunities to later develop into S2 or S3
customers.
The Group currently works with:
· distributors in Turkey, South Korea, Russia, the UAE, India and
parts of Africa;
· a network of partners in China;
· a strong dealer network in Japan; and
· specialist logistics brokers who can work directly with the
Group's customers in harder to ship to areas, including Mexico, Brazil, Chile,
Colombia, Costa Rica, Ecuador, El Salvador, Nicaragua, Panama, Uruguay and
parts of Africa.
The mission to expand the Group's broad geographic coverage is ongoing.
In 2021, the Group experienced success both in territories where it has an
established footprint, as well as in globally distributed customers. The table
below shows LSRT revenue by geographical region:
Year ended 31 December (£m) 2021 2020 % Change
Americas 33.3 19.7 69%
Europe & United Kingdom 33.4 23.1 45%
China 11.0 7.1 55%
United Arab Emirates 31.7 4.0 693%
Asia Pacific and Japan 11.1 7.4 50%
Emerging markets 6.4 4.2 52%
Total LSRT Revenue 127.0 65.5 94%
The UAE represented the largest growth region in 2021 led by the G42 Group.
There has been strong growth in our largest markets (Americas and Europe &
United Kingdom), as Oxford Nanopore expands traditional sales support teams in
those areas. There is a strong opportunity for growth in these regions.
In Europe, the Group continued to expand by setting up subsidiaries in France,
Denmark and Germany. In Oceania, the Group further strengthened its operations
in Australia, while in the Middle East the Group inaugurated its service hub
in UAE.
Growth in margins
Year ended 31 December (£m) 2021 2020
Gross Margin (%) 54.8% 41.2%
In 2021, a sharp acceleration was achieved in consumables revenue as customers
moved from the Starter Pack phase to consumables ramp up. As a result, the
Group benefited from an increase in revenue contribution from the sale of
consumables relative to revenue generated from the sale of Starter Packs.
These recurring purchases of sequencing consumables provide sustainable growth
through repeat business, alongside more favourable gross margins.
The Group's gross profit and gross margin were positively impacted by these
changes in the product mix as well as improvements in manufacturing
automation, processes and designs. Furthermore, improved logistics, and
recycling of costly components had also a positive impact.
Our growth in margins was also supported by significant investment in
innovation. This includes the development of a new range of products and
improvements to existing products, which has supported customer retention and
drove further purchases of consumables.
Adjusted operating loss analysis
Year ended 31 December (£m) 2021 1 2 3 Sub-total 2021 2020
Reported Adjusted total Reported
Revenue 133.7 - 133.7 113.9
Gross profit 73.2 - 73.2 46.9
Research and development expenses (76.0) - 17.7 17.7 (58.3) (48.6)
Selling, general and administrative expenses (161.8) 37.6 21.5 4.8 63.9 (97.9) (71.4)
Operating expenses (237.7) 37.6 39.3 4.8 81.7 (156.0) (119.9)
Loss from operations (164.5) 37.6 39.3 4.8 81.7 (82.9) (73.1)
Adjusting items include:
1. Share-based payment expense on founder LTIP
2. Employers' social security taxes on pre-IPO share awards
3. IPO costs expensed in Income Statement
Impact of headcount
Average headcount (Number of FTEs) 2021 2020 % Change
Research & Development 291 235 24%
Production 134 106 26%
Selling, general & administration 280 186 51%
Total 705 527 34%
In 2021, the Group increased its number of employees across all departments
and functions highlighting in the most emphatic way our growth trajectory.
The Group invested in bringing onboard new R&D staff to support the
research phase into early product release across its disruptive platform. Our
R&D teams work on fundamental research for novel sensing applications,
membrane chemistry, sequencing chemistry, nanopores, enzymes, algorithms,
software electronics and arrays to deliver future platforms and improvement on
current products. As a result, high calibre scientists and researchers have
been attracted to join the Company with the goal to realise Oxford Nanopore's
vision.
As the Group's manufacturing expanded to cater for increased demand from a
growing client base a significant number of staff were added to production,
covering all manufacturing stages and processes. The ability of the Group's
manufacturing facilities to support modular expansion made it easy to grow the
production teams without facing any problems.
The largest increase in the Group's average headcount took place in the
selling, general and administration functions including legal functions and
corporate executives. The significant expansion of the commercial teams in key
geographic regions supports the Group's business growth objectives globally.
In addition, the investment in in-field teams and customer support teams was
necessary to maintain and increase customer loyalty and customer retention.
The increased investment in IT and building facilities, including
laboratories, was catalytic in supporting the Group's innovation engine.
Operational expenditure
The Group's total operating expenses increased by £117.8 million, or 98% from
£119.9 million in FY 2020 to £237.7 million in FY 2021:
Year ended 31 December (£m) 2021 2020 % Change
Research and development expenses 58.3 48.6 20%
Selling, general & administrative expenses 97.9 71.4 37%
Adjusting items: 81.7 - n/a
· Share-based payment charge on founder LTIP 37.6 -
· Employers social security taxes on pre-IPO share awards 39.3 -
· IPO costs expensed in Income Statement 4.8 -
Total operating expenses 237.7 119.9 98%
Research and development expenses
The Group's R&D expenditure is recognised as an expense in the period as
it is incurred, except for the development costs that meet the criteria for
capitalisation as set out in IAS 38 (intangible assets). Capitalised
development costs principally comprise qualifying costs incurred in developing
the Group's core technology platform and sequencing kits.
Year ended 31 December (£m) 2021 2020 % Change
R&D expenses 58.3 48.6 20%
Capitalised development costs 9.3 10.7 (13)%
Total R&D and capitalised development costs 67.6 59.3 14%
Reported R&D expenses increased by £9.7 million to £58.3 million in FY
2021. This increase was principally due:
· to a 24% increase in headcount leading to a £3.4 million
increase in payroll costs; and
· an increase in share-based payments (non-Founder LTIP) of £5.6
million.
Capitalised development costs reduced slightly by £1.4 million from £10.7
million in FY 2020 to £9.3 million in FY 2021.
Selling, general and administration costs
The Group's selling, general and administrative expenses in FY 2021 increased
by £26.5 million, principally due to:
· a 22% increase in average headcount of staff within the Group's
sales, marketing and distribution functions, leading to a £1.8 million
increase in payroll costs. This is in line with our plan to expand our global
sales team;
· a 114.1% increase in average headcount of staff within the
Group's HR, finance, central administration, legal, applied functions and
certain corporate executives to support business growth contributing to a
£9.0 million increase in payroll costs;
· an increase in share-based payments (non-Founder LTIP) of £12.5
million;
· an increase in depreciation and amortisation of £5.6 million;
and
· IPO costs of £4.8 million.
The increase was partially offset by a tax credit of £4.2 million claimed
under the Research and Development Expenditure Credit (RDEC) tax relief
scheme. In 2021, the Company qualified as a large company, so was no longer
eligible to claim R&D tax relief available to small and medium enterprises
in the UK. However, the Company is now eligible to claim tax relief in the UK
through this RDEC scheme. The tax credit is included with selling, general and
administrative expenses.
Balance sheet
Key elements of change in the balance sheet during the year comprised the
following:
· Inventory of £63.1 million in FY 2021 has increased by £27.4
million from £35.6 million in FY 2020 due to our long-term agreements with
key suppliers focussed on electric components. In particular, inventories
related to flow cells have increased by £14.8 million, and devices have
increased by £4.5 million;
· Trade receivables of £38.2 million in FY 2021 has reduced by
£10.8 million from £49.0 million in FY 2020. The balance at the end of 2020
included a large amount of debt relating to LamPORE™ sales in December 2020,
which was paid in early 2021; and
· Provisions of £35.4 million in FY 2021 (FY 2020: £1.5 million),
primarily relates to a provision for employer social security taxes on share
awards of £33.2 million.
Cash flow
· Cash and cash equivalents of £487.8 million and treasury deposits
of £130.4 million, increased by £537.4 million over FY 2020 reflecting the
two fundraisings in the year - gross funds raised of £202 million during
April and May 2021 and £428 million at the IPO.
Manufacturing & operations
In order to achieve our scaling up goals, we have pursued non-stop
manufacturing optimisation through continuous improvement ensuring that our
platform can be manufactured at high volume and low cost.
As a result, we invested further in extending our manufacturing operations and
the surrounding supply chain, with the aim of improving manufacturing
automation, manufacturing processes and design. We will continue to bring
manufacturing in-house over time to increase margins and to reduce associated
risks and costs.
In 20201 the Group has successfully managed its supply chain, through
challenging conditions, where we continue to see increasing costs of product
supplies (particularly concerning electronics industry components, including
ASICs and related processors).
Outlook
In 2022, Oxford Nanopore will continue its transformation journey achieving
new heights of innovation and scientific excellence while delivering strong
financial performance. 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 make me believe that Oxford Nanopore can target broad markets
and achieve rapid growth.
The growth in our S3 and S2 customer groups is expected to drive our
short-term revenue growth.
We anticipate the release of new kits or protocols to expand applications, as
well as the release of new flow cell device formats to expand the repertoire
of user types. Regarding the long-term pipeline, the Group has established
programmes designed to deliver substantial step-changes to its platforms in
the medium-to long-term (being the next 36-60 months), including a pipeline of
new bioelectronic innovations.
Key Performance Indicators (KPIs)
The Group uses a range of financial and non-financial KPIs to measure
strategic performance.
LSRT revenue growth
Definition: LSRT revenue this year compared to LSRT revenue in the previous
year, expressed as a percentage.
Target: Our products are sold in a number of currencies including US Dollars,
GB Pounds, Euros and Japanese Yen. However, management monitors revenues in GB
pounds, as this is the Group's reporting currency. Management is targeting a
minimum 30% year-on-year growth in line with Guidance.
Year ended 31 December (£m) 2021 2020 2019
LSRT revenue £127.0 £65.5 £52.1
LSRT revenue growth 94% 26% 60%
FY 2021 performance: LSRT revenue rose by 94% in FY 2021. We are very pleased
to have achieved this revenue growth in 2021, where growth was seen across all
our devices and consumables and geographical territories.
LSRT gross margin percentage
Definition: Gross margin percentage is the LSRT gross profit expressed as a
percentage of LSRT revenue.
Target: Management is expecting further improvement in LSRT gross margins,
targeting an overall gross margin of greater than 60% in 2023, in line with
Guidance.
Year ended 31 December (£m) 2021 2020 2019
LSRT revenue 127.0 65.5 52.1
LSRT gross margin 68.3 28.1 25.6
LSRT gross margin (%) 53.8% 42.9% 49.2%
FY 2021 performance: The gross margin of our LSRT segment was 53.8% (2020:
42.9%), due primarily to the change in product mix, with a larger contribution
from consumables sold compared to Starter Packs, and also specific margin
improvements from PromethION flow cells, as the product manufacturing process
was refined.
Adjusted EBITDA
Definition: EBITDA is Loss for the year before finance income, loan interest,
interest on lease, income tax, depreciation and amortisation.
Adjustment has been made to EBITDA (Adjusted EBITDA) for the following
expenses:
· compensation arrangements granted prior to IPO and described in
the Prospectus as Founder LTIPs;
· the employer social security taxes on pre-IPO share awards;
· the impairment of investment in associate; and
· IPO costs.
The Group believes that it is appropriate to treat these as adjusting items to
provide a measure of the underlying performance of the business.
Adjusted EBITDA reconciles to Loss for the year as follows:
Target: Based on our plans for revenue growth and improvement in gross margin
the Group is targeting a break-even Adjusted EBITDA by 2026.
Year ended 31 December (£m) 2021 2020 2019
Loss for the year (167.6) (61.2) (72.2)
Tax expense / (credit) 1.6 (11.9) (8.3)
Finance income (0.2) (0.1) (0.5)
Loan interest 0.2 0.3 0.2
Interest on lease 0.7 0.5 0.4
Depreciation of property, plant and equipment 12.9 10.1 11.1
Depreciation of right-of-use Assets 2.7 2.4 2.0
Amortisation of internally generated intangible assets 9.1 4.8 1.7
EBITDA (£m) (140.6) (55.2) (65.6)
Adjusting Items:
Share-based payments expense on Founder LTIP 37.6 - -
Employers social security taxes on pre-IPO share awards 39.3 - -
Impairment of investment in associate 1.2 - -
IPO costs 4.8 - -
Adjusted EBITDA (57.7) (55.2) (65.6)
FY 2021 performance: Adjusted EBITDA losses increased in 2021 (by £2.5
million). This was driven by an increase in share-based payments (excluding
the charge relating to the Founder LTIP) of £18 million to £24.9 million in
2021 (2020: £6.9 million).
Number of publications
Definition: The number of scientific publications that include nanopore
sequencing, as publicly available in online resources, including PubMed and
BioRxiv. All efforts are made to avoid duplication of pre-print versus peer
review publications, and to count these publications accurately.
Target: Publications are an indicator of the breadth and diversity of the use
of nanopore sequencing in the scientific community. We aim to drive growth of
nanopore usage in the scientific community, such that the number and breadth
of publication consistently increase year on year.
Year ended 31 December 2021 2020 2019
Number of publications 1,011 821 325
FY 2021 performance: The number of publications increased by 190 in 2021,
indicating both a traction of nanopore sequencing in the scientific community
and expanding customer communities.
Staff attrition rate
Definition: The number of leavers in the period divided by the average number
of employees in the period.
Target: Staff retention is a key mission of the Group. Management has targeted
an attrition rate of less than 10%. The average voluntary turnover in Life
Sciences industry for 2020 was 9.5% 10 . The Group recognises that some
attrition is normal, and in fact it can have a positive impact on the business
and its productivity if it is linked to poor performers. Employee attrition
could benefit a company as it provides the opportunity to bring in new talent
while understand how to enhance the existing talent. It also encourages the
introduction of new ideas, the implementation of changes and the adoption of
new approaches from new employees.
Year ended 31 December 2021 2020 2019
Number of Employees (FTE) 705 527 466
Number of Leavers 47 19 25
Staff attrition rate (%) 6.7% 3.6% 5.4%
FY 2021 performance: In 2020 the pandemic resulted in lower attrition due to
the impact it had on the lives of our employees. As the pandemic lessened in
2021, we saw attrition rates rise slightly to 6.7%, marginally higher than
pre-pandemic life in 2019.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
Note 2021 2020
£000 £000
Revenue 3 133,661 113,860
Cost of sales (60,466) (66,981)
Gross profit (73,195) (46,879)
Research and development expenses (75,976) (48,551)
Selling, general and administrative expenses (161,752) (71,388)
Loss from operations (164,533) (73,060)
Finance income 224 91
Finance expense (908) (747)
Share of loss in associates (64) -
Other gains and losses 504 563
Impairment of investments in associates (1,227) -
Loss before tax (166,004) (73,153)
Tax (expense) / credit 7 (1,609) 11,909
Loss for the year (167,613) (61,244)
Other comprehensive income / (loss):
Items that may be reclassified subsequently to profit or loss:
Exchange gains / (losses) arising on translation on foreign operations 388 (429)
Other comprehensive income / (loss), net of tax 388 (429)
Total comprehensive loss (167,225) (61,673)
2021 2020
Pence Pence
Loss per share 6 23 9
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
Note 2021 2020
£000 £000
Assets
Non-current assets
Property, plant and equipment 47,232 39,386
Intangible assets 23,004 22,867
Investments in associates 257 548
Right‑of‑use assets 14,687 13,815
Deferred tax assets 7 6,077 1,439
91,257 78,055
Current assets
Inventories 8 63,071 35,627
Trade and other receivables 9 54,796 65,906
R&D tax credit recoverable 7 14,274 20,696
Derivative financial assets - 62
Cash and cash equivalents 15 487,840 80,863
Other financial assets 10 130,628 -
750,609 203,154
Total assets 841,866 281,209
Liabilities
Non‑current liabilities
Loans and borrowings 9,500 9,500
Lease liabilities 12,694 12,093
Share based payment liabilities 312 -
Provisions 14 10,339 1,499
32,845 23,092
Current liabilities
Trade and other 11 72,872 69,574
payables
Current tax liabilities 7 4,418 570
Lease liabilities 2,610 2,039
Derivative financial liabilities 106 -
Provisions 14 25,039 -
105,045 72,183
Total liabilities 137,890 95,275
Net assets 703,976 185,934
Issued capital and reserves attributable to owners of the parent
Share capital 12 82 36
Share premium reserve 623,760 610,544
Share based payment reserve 96,350 35,079
Translation reserve (314) (702)
Accumulated deficit (15,902) (459,023)
Total equity 703,976 185,934
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
AS AT 31 DECEMBER 2021
Share capital Share premium Share based payment reserve Foreign exchange reserve Accumulated deficit Total equity
£000 £000 £000 £000 £000 £000
At 1 January 2020 33 479,332 28,215 (273) (397,779) 109,528
Loss for the year - - - - (61,244) (61,244)
Exchange loss on translation of foreign subsidiary - - - (429) - (429)
Comprehensive loss for the year - - - (429) (61,244) (61,673)
Issue of share capital 3 135,061 - - - 135,064
Cost of share issue - (3,849) - - - (3,849)
Employee share-based payments - - 6,864 - - 6,864
Total contributions by and distributions to owners 3 131,212 6,864 - - 138,079
At 31 December 2020 36 610,544 35,079 (702) (459,023) 185,934
Loss for the year - - - - (167,613) (167,613)
Exchange loss on translation of foreign subsidiary - - - 388 - 388
Comprehensive loss for the year - - - 388 (167,613) (167,225)
Issue of share capital 13 642,145 - - - 642,158
Bonus shares issued 37 - - - (37) -
Cancellation of deferred shares (4) - - - 4 -
Share premium cancellation - (610,767) - - 610,767 -
Cost of share issue - (18,162) - - - (18,162)
Employee share-based payments - - 60,707 - - 60,707
Current tax in relation to share-based payments - - 564 - - 564
Total contributions by and distributions to owners 46 13,216 61,271 - 610,734 685,267
At 31 December 2021 82 623,760 96,350 (314) (15,902) 703,976
Note 12 13
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 DECEMBER 2021
Note 2021 2020
£000 £000
Net cash outflow from operating activities 15 (53,826) (63,806)
Investing activities
Purchase of property, plant and equipment (21,536) (15,737)
Capitalisation of development costs (9,281) (10,735)
Investment in associate (1,000) (548)
Interest received 207 81
Investment in other financial assets (130,375) -
Net cash outflow in investing activities (161,985) (26,939)
Financing activities
Proceeds from issue of shares 642,144 163,955
Costs of share issue (15,929) (2,676)
Principal elements of lease payments 15 (2,361) (2,058)
Interest paid (283) (229)
Interest paid on leases (666) (415)
Net cash inflow from financing activities 622,905 158,577
Net increase in cash and cash equivalents before foreign exchange movements 407,094 67,832
Effect of foreign exchange rate losses (117) (61)
Cash and cash equivalents at beginning of period 80,863 13,092
Cash and cash equivalents at end of period 15 487,840 80,863
1. Significant accounting policies
1.1. Basis of preparation
The unaudited preliminary financial information, which 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 2021 has been prepared in accordance
with International Accounting Standards, in conformity with the Companies Act
2006. The financial information incorporate the results of the Company and the
entities under its control (together the 'Group').
The unaudited preliminary financial information has been presented in Sterling
and on the historical cost basis, except for the revaluation of certain
financial instruments.
The financial information does not constitute statutory financial statements
within the meaning of Sections 434 to 436 of the Companies Act 2006 but are
derived from those financial statements. Statutory financial statements for
the financial year ended 31 December 2020 have been filed with the Registrar
of Companies and those for the financial year ended 31 December 2021 will be
delivered in due course. The auditor has reported on the 2020 accounts, their
report was unqualified and did not contain statements under Section 498 (2) or
(3) of the Companies Act 2006.
1.2. Alternative performance measures
Alternative performance measures are used by the Directors and Management to
monitor business performance internally and exclude certain cash and
non‑cash items which they believe are not reflective of the normal
day‑to‑day operating activities of the Group. The Directors believe that
disclosing such non‑IFRS measures enables a reader to isolate and evaluate
the impact of such items on results and allows for a fuller understanding of
performance from year to year. Alternative performance measures may not be
directly comparable with other similarly titled measures used by other
companies. A detailed reconciliation between reported and adjusted measures is
presented in note 5.
For the period ended 31 December 2021, share based payment charges associated
with the Founder LTIP scheme, employer's social security charges on pre‑IPO
share awards, IPO costs and impairment of investment in associate have been
included as adjusting items.
Share‑based compensation is an important aspect of the compensation of our
employees and executives. Management believes it is useful to specifically
exclude the Founder LTIP and employer's social security taxes on pre-IPO share
awards from adjusted profit measures to understand the long‑term performance
of our core business.
The share‑based compensation expenses of the other LTIPs and share award
schemes are not treated as adjusting items.
1.3. Going concern
As at 31 December 2021, the Group held £618.2 million in Cash and cash
equivalents and Treasury deposits (note 5) on the Statement of Financial
Position, following the two significant fund raisings in the year:
· Oxford Nanopore received £202 million in April and May 2021,
relating to a private placement of ordinary shares in the Group; and
· In September 2021, the Company undertook an Initial Public
Offering ("IPO") for admission to the standard listing segment of the Official
List of the FCA and admission to trading on the main market or listed
securities of London Stock Exchange plc (the "London Stock Exchange") of the
ordinary shares of the Company (the "Transaction"). £428 million in gross
proceeds were raised at this time.
The going concern assessment period is the twelve months to March 2023.
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
March 2023, the going concern assessment period, and the impact of a range of
severe, but plausible, scenarios, including the potential impact of any
further COVID‑19 restrictions and regulations. In particular, the impact of
key business risks on revenue, profit and cash flow as follows:
· Reduced revenues due to customer, regulatory and R&D delays;
and
· Increased costs due to supply chain restrictions, additional
R&D requirements and 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.
2. 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 do 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, per the estimate below, this is then
applied to other, non‑employee‑related development costs to ensure costs
are consistently and appropriately capitalised. The net book value of
internally generated capitalised assets at 31 December 2021 is £22.6 million
(31 December 2020: £22.4 million).
Estimates
i. 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. If the estimated number of
additional consumables required to fulfil the contract increased or decreased
by 30%, revenue would decrease or increase by £1.4 million.
ii. Share‑based payments
Details of the share‑based payment schemes operated by the Group are
disclosed in note 13. During the year, 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 make 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 30
June 2022 decreased by 34%, the Group recognised total expenses of £60.7
million (2020: £nil) relating to equity‑settled share‑based payment
transactions in 2021 would decrease by £1.9 million (2020: £nil).
iii. Internally Generated Intangible Assets ‑ research and
development expenditure ("R&D")
Critical estimates are made in determining the capitalisation of costs in
relation to the development phase of R&D projects during the period.
Management capitalised development costs in relation to R&D projects based
on estimating the percentage of time spent on the project by employees while
the project is in its development phase. Capitalisation of R&D expenditure
in 2021 was £9.1 million (2020: £10.7 million). If the percentage of time
spent on the projects were to change by 5% then capitalisation of development
costs would have varied between £8.6 million and £9.6 million (2020: £10.2
million and £11.3 million).
iv. 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 as at the year end is £63.1 million (2020: £35.6 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 were to increase by 5% the group stock value would
increase by £1.1 million and the revised stock value would be £64.1 million.
£11.7m of inventory is supported primarily with respect to income the Group
expects to receive from one major customer of the Group. Should future income
not be received from this customer, then the net realisable value of this
inventory would be nil.
3. Revenue
The Group derives revenue from the transfer of goods and services over time
and at a point in time in the following categories and geographical regions:
2021 2020
£000 £000
Geographical
region
Americas 33,370 19,735
Europe and United Kingdom 40,103 71,375
China 10,975 7,094
United Arab Emirates 31,722 4,058
Asia Pacific and Japan 11,126 7,364
Emerging markets 6,365 4,234
133,661 113,860
2021 2020
£000 £000
Category
Sale of goods 117,401 106,057
Rendering of services 7,309 4,884
Lease income 8,951 2,919
Total revenue from contracts with customers 133,661 113,860
4. Segment information
Products and services from which reportable segments derive their revenues.
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 under 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 In the year, the Group generated revenue from providing products for
SAR‑Cov‑2 testing. It should be noted that its sequencing products
continue to be used for the purposes of COVID genomic surveillance, including
variant identification, but this is reporting within the LSRT
segment.
The accounting policies of the reportable segments are the same as the Group's
accounting policies.
(a) Information about major customers
The Group has one major customer in the United Arab Emirates, which represents
23.4% of Group revenue. Revenues from this customer were £31.3 million (2020:
£3.8 million) and reported within the LSRT segment. No other individual
customer represents more than 10% of the Group's total revenue.
The following is an analysis of the Group's revenue, results, assets and
liabilities by reportable segment.
LSRT Covid Testing 2021 LSRT Covid Testing 2020
£000 £000 £000 £000 £000 £000
Revenue
Americas 33,348 22 33,370 19,735 - 19,735
Europe and United Kingdom 33,425 6,678 40,103 23,097 48,278 71,375
China 10,975 - 10,975 7,094 - 7,094
United Arab Emirates 31,722 - 31,722 4,009 49 4,058
Asia Pacific and Japan 11,126 - 11,126 7,364 - 7,364
Emerging markets 6,365 - 6,365 4,234 - 4,234
Total Revenue 126,961 6,700 133,661 65,533 48,327 113,860
(b) Adjusted EBITDA
Adjusted EBITDA being loss for the period before finance income, finance costs
(comprising interest on the term loan facility with Barclays Bank plc (the
"Term Loan Facility") and interest on leases), tax(charged)/credit,
depreciation and amortisation; Share based payments (Founder LTIP), Employers
social security charge on share-based payments, IPO costs expensed and
impairments.
LSRT Covid Testing 2021 LSRT Covid Testing 2020
£000 £000 £000 £000 £000 £000
(Loss)/Profit for the year (168,942) 1,329 (167,613) (75,945) 14,701 (61,244)
Income tax expense / (credit) 1,609 - 1,609 (11,909) - (11,909)
Finance income (224) - (224) (91) - (91)
Loan interest 242 - 242 251 - 251
Interest on lease 666 - 666 496 - 496
Depreciation and amortisation 23,075 1,616 24,691 16,839 496 17,335
Share based payments (Founder 37,551 - 37,551 - - -
LTIP)
Employer's social security charge on pre‑IPO share‑based 39,291 - 39,291 - - -
payments
IPO costs expensed 4,829 - 4,829 - - -
Impairments 1,227 - 1,227 - - -
Adjusted EBITDA (60,676) 2,945 (57,731) (70,359) 15,197 (55,162)
(c) Supplementary information
LSRT Covid Testing 2021 LSRT Covid Testing 2020
£000 £000 £000 £000 £000 £000
Depreciation of property, plant and 12,890 - 12,890 10,125 - 10,125
equipment
Depreciation of right‑of‑use 2,512 145 2,657 2,247 128 2,375
assets
Amortisation of internally generated intangible assets 7,623 1,471 9,094 4,467 368 4,835
Amortisation of acquired intangible 50 - 50 - - -
assets
Additions to non‑current 34,311 - 34,311 26,794 6,365 33,159
assets*
Segment assets
Investment in associates 257 - 257 548 - 548
Acquired intangible assets 396 - 396 446 - 446
Other segment assets** 187,973 14,421 202,394 128,846 48,309 177,155
Total segment assets 188,626 14,421 203,047 129,840 48,309 178,149
Deferred tax asset 6,077 1,439
R&D tax credit recoverable 14,274 20,696
Derivative financial instruments - 62
Other financial assets 130,628 -
Cash and cash equivalents 487,840 80,863
Total Assets 841,866 281,209
Segment liabilities
Total segment liabilities (127,167) (1,223) (128,390) (84,411) (1,364) (85,775)
Non‑current borrowings (9,500) (9,500)
Total Liabilities (137,890) (95,275)
* Additions to non‑current assets include all non‑current assets except
for investments and deferred tax asset.
** Other segment assets include inventory, trade and other receivables and
non‑current assets except for investments, acquired intangible assets and
deferred tax assets.
The Group's non‑current assets, excluding deferred tax assets, by
geographical location are detailed below:
LSRT Covid Testing 2021 LSRT Covid Testing 2020
£000 £000 £000 £000 £000 £000
Americas 6,023 - 6,023 4,508 - 4,508
Europe and United 76,451 2,302 78,753 69,565 2,125 71,690
Kingdom
China 320 - 320 340 - 340
Asia Pacific and Japan 83 - 83 36 - 36
Emerging markets - - - 42 - 42
82,877 2,302 85,179 74,491 2,215 76,616
5. Alternative performance measures
The Group's performance is assessed using a number of financial measures which
are not defined under IFRS and are therefore alternative performance measures
(non-GAAP). These are set out as follows
• Adjusted operating loss, being the loss from operations
for the period before share‑based payments (Founder LTIP), Employer's social
security charge on pre‑IPO share‑based payments and IPO costs expensed;
• EBITDA, being loss for the period before finance income,
finance costs (comprising interest on the term loan facility with Barclays
Bank plc (the "Term Loan Facility") and interest on leases), tax (charge) /
credit, depreciation and amortisation;
• Adjusted EBITDA, being EBITDA, adjusted for Share‑based
payments (Founder LTIP), Employer's social security charge on pre‑IPO
share‑based payments, IPO costs expensed and impairments; and
• Cash and cash equivalents and Treasury deposits, being the
total Cash and cash equivalents, which comprise cash in hand, deposits held at
call and other short‑term highly liquid investments with a maturity of three
months or less at the date of acquisition 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 Group's adjusted operating loss:
2021 2020
£000 £000
Loss from (164,533) (73,060)
operations
Share based payments (Founder LTIP) 37,551 -
Employer's social security charge on pre‑IPO share‑based 39,291 -
payments
IPO costs 4,829 -
expensed
Adjusted operating loss (82,862) (73,060)
The following table presents the Group's EBITDA and Adjusted EBITDA, together
with a reconciliation
to loss for the year:
2021 2020
£000 £000
Loss for the (167,613) (61,244)
year
Income tax expense / 1,609 (11,909)
(credit)
Finance (224) (91)
income
Loan 242 251
interest
Interest on 666 496
lease
Depreciation and amortisation 24,691 17,335
EBITDA (140,629) (55,162)
Share based payments (Founder LTIP) 37,551 -
Employer's social security charge on pre‑IPO share‑based 39,291 -
payments
IPO costs 4,829 -
expensed
Impairments 1,227 -
Adjusted EBITDA (57,731) (55,162)
The following table presents the Cash and cash equivalents and Treasury
deposits:
2021 2020
£000 £000
Cash and cash 487,840 80,863
equivalents
Treasury 130,375 -
deposits
Cash and cash equivalents and Treasury deposits 618,215 80,863
6. Loss per share
2021 2020*
Pence Pence
(a) Basic and diluted loss per
share
Total basic and diluted loss per share attributable to the ordinary equity 23 9
holders of the Group from continuing
operations
2021 2020
£000 £000
(b) Reconciliation of earnings used in calculating earnings per share
Loss attributable to the ordinary equity holders of the Group used in (167,613) (61,244)
calculating basic and diluted loss per share from continuing
operations
2021 2020 *
Number Number
(c) Weighted average number of shares used as the
denominator
Weighted average number of ordinary shares and potential ordinary shares used 731,938,586 705,337,946
as the denominator in calculating basic and diluted earnings per
share
* The 2020 numbers were updated retrospectively to give effect to the
subdivision of shares which occurred on 23 August 2021. See note 12.
There have been no events that have caused any retrospective adjustments
between the date of the Statement of Financial Position and the date of
issuance of the Financial Statements.
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. They could potentially dilute basic earnings per share in the
future. Details relating to the share options are set out in note 13.
7. Tax on loss on ordinary activities
7.1 Income tax recognised in profit or loss
2021 2020
£000 £000
Current tax
Tax on research and development expenditure - (10,934)
Notional tax on R&D expenditure credit (RDEC) 800 -
Prior year adjustment in respect of research and development tax credit 69 (762)
Prior year adjustment in respect of current tax (48) 386
Tax payable on foreign subsidiary 5,344 492
Total current tax 6,165 (10,818)
Deferred tax
Origination and reversal of temporary differences (4,556) (1,091)
Total deferred tax (4,556) (1,091)
1,609 (11,909)
Current tax balances have been calculated at the rates enacted for the period.
The effective rate of corporation tax is ‑0.97% (2020: 16.12%) 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:
2021 2020
£000 £000
(167,613) (61,244)
Loss for the year
Income tax expense / (credit) 1,609 (11,909)
Loss before income taxes (166,004) (73,153)
Tax rate in the UK for period as a percentage of losses at 19% (2020: 19%) (31,541) (13,900)
Expenses not deductible for tax purposes 1,180 716
Adjustment in respect of overseas tax rates 1,031 43
Enhanced R&D relief (323) (4,705)
Adjustments to tax charge in respect of prior periods 120 (376)
Origination of unrecognised tax losses 32,983 8,257
Impact of share options (1,955) (1,690)
Other timing differences 114 (254)
Total tax expense / (credit) 1,609 (11,909)
7.2 Current tax liabilities
Corporation tax payable (4,418) (570)
(4,418) (570)
7.3 Deferred tax balances
The following is the analysis of deferred tax assets/(liabilities) presented
in the consolidated statement of financial position:
2021 2020
£000 £000
6,077 1,439
Deferred tax assets
6,077 1,439
Deferred tax balances have been recognised at the rate expected to apply when
the deferred tax attribute is forecast to be utilised based on substantively
enacted rates at the balance sheet date. The rate of UK corporation tax will
increase to 25% from April 2023. Taxation for other jurisdictions is
calculated at the rates prevailing in the respective territories.
In respect of share-based payments, to the extent that the tax deduction
exceeds the amount of the related cumulative IFRS2 expense the excess of the
associated current tax has been recognised in equity and not in the
Consolidated Statement of Comprehensive Income. For current tax this increases
the charge to the Consolidated Statement of Comprehensive Income by
£561,000.
A deferred tax asset of £6.1 million (2020: £1.4 million) has been
recognised in relation to future share option exercises and other timing
differences in Oxford Nanopore Technologies Inc and other overseas
subsidiaries, because it is probable that the asset will be utilised in the
foreseeable future.
Recognised deferred tax balances are made up as follows:
Recognised Deferred Tax Assets
2021 2020
£000 £000
Share 6,160 1,675
Awards
Provisions 797 271
Accelerated Capital Allowances (880) (507)
6,077 1,439
A deferred tax asset of £202.9 million (2020: £80.9 million) relating to the
UK and the US has not been recognised due to uncertainty that the asset will
be utilised in the foreseeable future. This includes a deferred tax asset of
£131.5 million (2020: £65.2 million) in relation to UK tax losses which has
increased during the period.
Reconciliation of deferred tax
2021 2020
£000 £000
Balance at 1 1,439 348
January
Prior year (99) 12
adjustments
Credit / (charge) to the Statement of Comprehensive Income 4,655 1,079
Foreign exchange movements 82 -
Balance at 31 6,077 1,439
December
7.4 R&D tax credit recoverable
2021 2020
£000 £000
Balance at 1 20,696 17,479
January
Adjustment to R&D tax credit in respect of previous periods (69) 762
Cash (9,763) (8,479)
receipt
R&D tax credit for the period (SME) - 10,934
R&D tax credit for the period (RDEC) 4,210 -
Notional tax charge on R&D tax credit for the period (RDEC) (800) -
Balance at 31 14,274 20,696
December
In 2021 the Company no longer qualifies for SME R&D tax relief, but
instead is entitled to claim an R&D expenditure credit (RDEC). The RDEC is
recognised in the consolidated income statement above the line of loss before
tax. A notional tax charge is recognised within the tax line in the
consolidated income statement, and the net asset is included within current
assets in the consolidated statement of financial position.
8. Inventories
2021 2020
£000 £000
Raw 25,781 11,738
materials
Work in 17,830 14,363
progress
Finished 19,460 9,526
goods
63,071 35,627
The carrying amount of inventories were not materially different from their
replacement cost.
9. Trade and other receivables
2021 2020
£000 £000
Trade 38,198 49,021
receivables
Contract 275 1,873
assets
Other 2,834 1,310
debtors
Accrued interest 32 16
income
Other 5,353 2,886
taxes
Prepayments 8,104 10,800
54,796 65,906
10. Other financial assets
2021 2020
£000 £000
Treasury 130,375 -
deposits
Other financial 253 -
assets
130,628 -
11. Trade and other payables
2021 2020
£000 £000
Trade (20,486) (31,007)
payables
Share based (1,416) -
payments
Payroll taxation and social security (6,573) (2,890)
Accruals (22,767) (17,849)
Contract (21,630) (17,828)
liabilities
(72,872) (69,574)
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 41 days (2020: 89 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 the performance obligations on
customer contracts which were not satisfied at 31 December. Contract
liabilities have increased by £3.8 million, this is mainly due to an overall
increase in contract activity. Management expects that the majority of the
transaction price allocated to unsatisfied performance obligations as of 31
December 2021 will be recognised as revenue during the next reporting period.
12. Share capital and Share premium
Nominal value Number of shares issued Aggregate nominal value
£
As at 31 December 2021, the Company's share capital
comprised:
Share
class
Ordinary Shares (fully £0.0001 821,557,647 82,156
paid)
Issued Class A Limited Anti‑takeover share of £1 £1 1 1
Issued Class B Limited Anti‑takeover share of £1 £1 1 1
Issued Class C Limited Anti‑takeover share of £1 £1 1 1
82,159
Nominal value Number of shares issued Aggregate nominal value
£
As at 31 December 2020, the Company's share capital
comprised:
Share
class
Ordinary £0.001 32,452,674 32,453
Shares
Deferred £0.005 733,677 3,668
Shares
36,121
Between 1 January 2021 and the period immediately preceding the Bonus Issue
(defined below), the Company issued 166,464 ordinary shares following the
exercise of share options for £1.2 million.
On the 29 March 2021, a resolution was passed to cancel and extinguish £610.8
million of the share premium account of the Company.
On 14 April 2021, the Company redeemed and cancelled 733,677 Deferred Shares
(nominal value £0.005 per share).
On 29 April 2021 the Company raised £202 million through the private
placement of 2,886,667 Ordinary shares at a share price of £70 per share
(nominal value £0.001 per share).
On 23 August 2021, the Company issued its Ordinary Shareholders, on a pro rata
basis, one bonus Ordinary Share for each Ordinary Share then in issue (the
"Bonus Issue"). This amounted to 35,505,805 ordinary shares being issued
(nominal value £0.001 per share).
Immediately following the Bonus Issue, on 23 August 2021, the Company effected
a subdivision of its Ordinary Shares then in issue on a ten‑for‑one basis
(the "Share Subdivision").
Between the Share Subdivision and 31 December 2021, the Company issued
111,441,547 Ordinary Shares (nominal value £0.001 per share) resulting in
additional share premium of £438.9 million.
Transaction costs of £18.2 million for the issue of shares were offset
against the Share Premium Reserve.
13. Share‑based payments
2021 2020
£000 £000
At 1 35,079 28,215
January
Equity settled share‑based payment 60,707 6,864
Current tax in relation to share‑based payments 564 -
At 31 96,350 35,079
December
2021 2020
£000 £000
Expense arising from share‑based payment
transactions:
Included in Research & development 8,666 3,115
expenses
Included in Selling, general & administrative 53,787 3,749
expenses
62,453 6,864
Equity settled share‑based payment 60,707 6,864
expense
Cash settled share‑based payment 1,746 -
expense
62,453 6,864
The total charge to equity settled share‑based incentive plans in 2021 was
£60.7 million (31 December 2020: £6.9 million). Of this amount, £23.1
million (31 December 2020: £6.8 million) arose from the Company Share Option
and Share Incentive plans and £37.6 million (31 December 2020: £nil) arose
from the Founder LTIP.
The Group operates a number of share schemes for certain employees of the
Group. All schemes are equity settled with the exception of the Phantom Shares
awarded under the Plc LTIP scheme, which are cash settled awards. The schemes
are as follows:
‑ Oxford Nanopore Technologies Limited Share Option Plan
‑ Oxford Nanopore Technologies Limited Share Option Plan 2018
‑ Oxford Nanopore Technologies Limited Long Term Incentive Plan 2021
(Founder LTIP)
‑ Oxford Nanopore Technologies Plc Long Term Incentive Plan 2021 (Plc
LTIP)
‑ Oxford Nanopore Technologies Deferred Bonus Plan 2021
‑ Oxford Nanopore Technologies Share Incentive Plan 2021
‑ Oxford Nanopore Technologies 2021 Employee Stock Purchase Plan
Oxford Nanopore Technologies Limited Long Term Incentive Plan 2021 (Founder
LTIP): This is a one‑off discretionary share plan, under which the Company
granted awards over 6.5% of the Company's Ordinary Share capital (at the date
of grant) to the Executive Directors. The Founder LTIP awards are free to the
recipient. The plan was approved by the board on 22 June 2021. Awards were
granted as conditional awards of Ordinary Shares ("Conditional Awards")
subject to achievement of performance obligations tied to revenue and share
price and is subject to holding periods.
During the year, 46.1 million awards were granted and remained outstanding as
at 31 December 2021 with a weighted average contractual life of 5 years.
Valuation models:
The fair value of awards granted during the year was determined using the
Monte Carlo Simulation model and Black Scholes model dependent on the
performance vesting conditions.
The inputs into the valuation models for Founder LTIP awards issued during the
year were as follows:
Monte Carlo Black Scholes
Share price at £3.50 £3.50
grant
Share £4.50 n/a
Price
Expected 50.14% 50.14%
volatility
Expected 2.16 years 5 years
term
Risk‑free 0.4% 0.4%
rate
Expected dividend Nil Nil
yields
The volatility assumption has been derived as the median volatility over a
5‑year period of a bespoke comparator group. The risk‑free interest rate
used reflects the UK Government 5‑year Gilt rate as reported by the Bank of
England.
The weighted average fair value of Founder LTIP awards granted during the year
determined using the Black Scholes model at the grant date was £3.22 per
award.
The weighted average fair value of Founder LTIP awards granted during the
period determined using the Monte Carlo simulation model at the grant date was
£2.18 per award.
14. Provisions
Dilapidation provisions Employer taxes Other Total
provisions
2021 2021 2021 2021
£000 £000 £000 £000
Balance at 31 December 2020 1,499 - - 1,499
Additional provision for the year - 33,183 683 33,866
Foreign exchange movements 4 9 - 13
Balance at 31 December 2021 1,503 33,192 683 35,378
Due within 1 - 24,356 683 25,039
year
Due after 1 1,503 8,836 - 10,339
year
Total 1,503 33,192 683 35,378
2021
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 properties.
The provision is non‑current and expected to be utilised between 2 and 25
years.
The Group has reviewed the provision on the properties at the Oxford Science
Park and considers that no additional charge was required during the year.
Employer taxes relates to the expected Employer's National Insurance
contributions on share-based payments. This is expected to be utilised between
1 and 10 years.
15. Notes to the cash flow statements
2021 2020
£000 £000
Cash and cash 487,840 80,863
equivalents
Cash and cash equivalents comprise cash and short‑term bank deposits with an
original maturity of three months or less. The carrying amount of these assets
is approximately equal to their fair value. Cash and cash equivalents at the
end of the reporting period as shown in the consolidated statement of cash
flows can be reconciled to the related items in the consolidated reporting
position as shown above.
2021 2020
£000 £000
Loss before (166,004) (73,153)
tax
Adjustments
for:
Depreciation on property, plant and 12,890 10,125
equipment
Depreciation on right‑of‑use 2,657 2,375
assets
Amortisation on intangible 9,144 4,835
assets
Research and development expense tax (4,210) -
credit
Loss on disposal of property, plant and 837 1
equipment
Exchange 449 69
loss
Interest on 666 496
leases
Bank interest (224) (91)
income
Bank interest 242 251
expense
Non‑cash movements on 166 538
derivatives
Impairment of 1,227 -
investment
Share of losses in 64 -
associate
Employee share benefit 62,453 6,864
costs
Operating cash flows before movements in working (79,643) (47,690)
capital
Decrease / (increase) in 10,888 (41,484)
receivables
(Increase) in (27,444) (15,592)
inventory
Increase in 33,571 33,655
payables
Cash used in (62,628) (71,111)
operations
Income taxes ‑ R&D tax credit 9,763 8,479
received
Foreign tax (961) (1,174)
paid
Net cash outflow from operating (53,826) (63,806)
activities
1 Certain numerical figures included herein have been rounded. Therefore,
discrepancies in between totals and the sums may occur due to such rounding.
2 Before adjusting items of £81.7m (FY20: £nil). See note 5 for
alternative performance measures. These APMs are not defined within IFRS and
are not considered to be a substitute for, or superior to, IFRS measures.
3 Adjusting items total £82.9m and relate to the IPO costs (£4.8m);
Founder LTIP awards (£37.6m) and Employer social security taxes on pre-IPO
share awards (£39.3m) and impairment of investment in associate (£1.2m). See
note 5 for alternative performance measures.
4 Decrease in COVID-19 testing revenue primarily as a result of the
conclusion of the Group's contract with the Department of Health and Social
Care.
5 Remora is expected to be fully released in March 2022.
6 Rapid-CNS2: Rapid comprehensive adaptive nanopore-sequencing of CNS
tumors, a proof of concept study, Areeba Patel et al., August 2021
7 Before adjusted items of £81.7m (FY20: £nil). See pages note 5 for
alternative performance measures.
8 Adjusted items of £82.9m, of which £81.7m relates to the IPO.
9 Cash and Cash equivalents of £487.8m plus Treasury deposits of £130.4m.
10 Source: Mercer Talent - All Access Report
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