Losses at Oxford Nanopore Technologies widened in its maiden full-year results as a public company after accounting for large potential costs from lucrative share-based incentive schemes.
Oxford Nanopore posted a statutory loss last year of £166 million, compared with £73.2 million in 2020, due to an estimated £37.6 million of future share payouts to four executives including Gordon Sanghera, a co-founder.
The provision was from a retention equity award scheme introduced before the initial public offering in September, the value of which remains subject to the company’s future revenue and share price performance. It will vest over five years.
Sanghera, 61, who has been chief executive since the company was spun out of Oxford University in 2005, will share the award with Clive Brown, chief technology officer, Tim Cowper, chief financial officer, and Spike Willcocks, a co-founder and chief strategy officer.
The losses also included an additional provision of £39.3 million to cover the social security cost of hundreds of employees potentially exercising pre-flotation share options. A source said that the vast majority of employees have retained their options.
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Shares in Oxford Nanopore surged by 44 per cent on their London Stock Exchange debut at the end of September from an issue price of 425p a share, giving it a market capitalisation of £4.8 billion. The stock peaked at 716p in December, but has since fallen below its flotation price, amid a pullback in wider international biotech markets and before the end of a post-float lock-up period in April that has prevented shareholders from selling stock.
The shares closed down 17½p, or 4 per cent, at 424½p despite better than expected annual sales and a revenue upgrade for the next two years in its core business.
Oxford Nanopore, based at the city’s science park, develops devices to sequence DNA and RNA, including portable products. The devices are used for research and supported more than 1,000 published papers last year spanning human, cancer, animal, plant, pathogen and environmental genomics. Bosses believe that its sequencing technology has potential beyond life sciences to provide insights in food and agriculture and, longer term, to enter the consumer health and wellness markets as researchers develop personalised exercise regimes and diets.
Sales of life-science research tools almost doubled to £127 million, supported by demand from sequencing the Omicron variant and after bringing forward revenue from a new large contract with G42. The artificial intelligence specialist based in Abu Dhabi is one of Oxford Nanopore’s biggest shareholders and is supporting a large-scale, state-backed human genomics programme in the region. The revenues helped to more than offset an 86 per cent decline in legacy Covid-19 diagnostic testing revenue to £6.7 million.
Oxford Nanopore forecast revenue from life-science research tools to be in the range of £145 million to £160 million this year and £190 million to £220 million next year. The guidance accounts for an expected “significant” decline in Covid-19 sequencing revenue. On an adjusted basis, operating losses increased to £82.9 million from £73.1 million as it invested to “support sustainable long-term growth”.
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Analysts at Berenberg said: “We think that there is little reason to pay significant attention to the higher-than-expected net loss as a few one-offs are baked in and do not signify much if non-cash expenses are excluded.”
