17th Jul 2023 10:10
(Alliance News) - Oxford Nanopore Technologies PLC's decent first-half will soothe investor worries on life sciences market weakness and increased competition, analysts at Berenberg commented on Monday.
Oxford Nanopore's update provided a "big relief" and should trigger a "big reaction" in its shares.
Shares were 3.4% higher at 230.47 pence each in London on Monday morning. It has a market capitalisation of GBP1.91 billion. The stock is down 6.7% year-to-date, and it is currently some 45% below its 425p initial public offering price. The firm floated back in September 2021.
Oxford Nanopore said revenue from its core Life Sciences Research Tools segment increased 22% on-year to GBP86 million in the six months to June 30.
Underlying top-line growth from the unit, which does not include Covid-19 sequencing nor revenue from the Emirati Genome Program, is expected to be 46% at constant currency.
The EGP is a programme in Abu Dhabi that will use Oxford Nanopore's sequencing technology to study the genetic make-up Emiratis.
Analysts at German bank Berenberg said the update will "go a long way to alleviating two key concerns identified in our investor discussions".
Berenberg found that investors have been worried about weakness in the broader life sciences market, however, Monday's report suggests Oxford Nanopore "does not seem to be affected".
There has also been concern that the launch of Pacific Biosciences of California Inc's Revio sequencing system could hurt Oxford Nanopore's progress, according to Berenberg. PacBio is Nasdaq-listed. It has a market capitalisation of around USD3.43 billion.
"[The] launch does not seem to have dented ONT's commercial traction," Berenberg added.
Looking ahead, Oxford Nanopore left annual guidance unchanged. It expects Life Sciences Research Tools revenue to grow 16% to 30% at constant currency for 2023. Revenue at LSRT in 2022 amounted to GBP146.8 million, a 16% rise on a reported basis, and 10% at constant currency. Group revenue overall had totalled GBP198.6 million in 2022, jumping 49%, or 43% at constant currency.
"Underlying LSRT revenue, excluding revenue from the EGP and Covid-19 sequencing, is expected to grow by more than 30% per annum on a constant currency basis in both 2023 and in the medium term," it said.
It targets a gross margin above 60% for the unit this year and more than 65% for the medium-term. The unit's margin in 2022 rose to 56.3% from 53.8% in 2021.
Looking further ahead, and based on "current development and commercialisation plans" it still targets a 2026 breakeven at an adjusted earnings before interest, tax, depreciation and amortisation level.
"We have delivered strong underlying revenue growth in the first half of 2023, as demand for our technology continues to grow from an increasingly broad and diverse base of customers. We have also made considerable progress positioning the business for future growth: launching a number of innovative new products and platform updates that provide users with higher accuracy and richer data than ever before; forming significant collaborations to open up new opportunities in clinical and applied markets; and investing to ensure we have the required levels of inventory to support the continued expansion of our customer base," Chief Executive Officer Gordon Sanghera said.
By Eric Cunha, Alliance News news editor
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