FT reporting London listing second half of the year.
Valued between £4-7b ($5.5-9.6b) with £52m ($68m) sales in 2019. IP Group currently owns 15%.
Only listed competitor is Pacific Biosciences, currently worth $5.4b and on 2020 sales of $78m.
Illumina is sequencing but many people consider Pacific Bio and nanopore sequencing to be a different category and ARK expects long range sequencing to take market share from short range.
There are tradeoffs and it’s worth remembering Illumina has a large installed base and that many genomics applications will have been tailored to Illumina processes and workshops. Just one example of this is 10x Genomics which has carved out a whole new sub category of single cell genomics (useful for Cancer where you have bunches of differently mutated cells, you’d want to be able to read the DNA of each cell rather than mixing them up and getting the average DNA), they are an ~18bn market cap company and use Illumina machines
That’s not to say Illumina can’t be supplanted, just that with such an entrenched monopoly position it’s hard to predict how fast the market will change.
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LON:SUPP hold about 4% as well.
Although the estimate valuation at launch is around £5 billion, the potential valuations are as high as £22 billion. Either way, it offers very good returns for its current shareholders.
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How have you landed at 22bn?
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As mentioned you can already get exposure through IP Group (LSE: IPO) - it represents a considerable portion of their NAV
I haven’t but some analysts think so but goes without saying I’d take this with a massive pinch of salt but a takeaway company has a valuation of £8 billion so can’t rule anything out.
It will become clear as we get closer to the IPO.
It’s actually 23billion dollars
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Yeah that confused me. The Telegraph are reporting Woodford’s stake got sold during liquidation, but its obviously still listed as a top holding by Schroders.
Yes that’s because Woodford’s failed Equity Income fund, which held a stake in ONT was sold off to Acacia Research (US) as part of a discounted portfolio sale last year.
Schroeder’s UK Public Private Trust (LON:SUPP) formerly Woodford Patient Capital Trust hold around 4% in ONT and it’s their second or third largest holding.
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Thanks for the explanation. Congrats to all holders!
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Oxford Nanopore to float on London Stock Exchange | Technology sector
Oxford Nanopore, a startup spun out from Oxford University whose Covid-19 technology was [snapped up by the UK government and used to track variants of the virus globally, has set out plans to float on the London Stock Exchange in what is expected to be one of the largest debuts of the year.
While the company’s current shareholders have recorded its value at just over £2bn, analysts estimate the life sciences company could reach a market value of between £4bn and £7bn when it goes public.
In what the firm describes as a “pivotal year”, Oxford Nanopore’s fortunes have been transformed by the pandemic. Since the outbreak, it has won contracts worth £144m from the UK’s Department of Health and Social Care, all of which were awarded without competitive tender due to the emergency circumstances. The sum dwarfs its 2019 revenues of £52m.
The flotation is expected to turn its three founders into millionaires. The business was founded in 2005, with funding from IP Group, by three scientists who met at Oxford University: Gordon Sanghera, the chief executive; Spike Willcocks, chief business development officer; and Hagan Bayley, professor of chemical biology at the university.
Sanghera holds a 1.6% stake that would be worth £32m at a conservative £2bn stock market valuation, while Willcocks and Bayley’s holdings would be worth £16m each.
The company specialises in DNA sequencing technology and launched a rapid coronavirus test called LamPORE last summer, its first regulator-approved diagnostic test. It said it would list on the London stock market during the second half of this year, which will be a boost to the government’s declared ambition to become a “science superpower”.
Oxford Nanopore’s biggest shareholder is its early backer, IP Group, a FTSE-250 intellectual property business that invests in life science and technology companies. It holds a 15% stake in the company and has valued its holding at £340m, giving a valuation of more than £2bn for the company.
How technology is powering Covid-19 investigations
Given its technological progress in the past year, Berenberg analyst Tom Jones estimates the business is worth far more, £4bn-plus, while other analysts have pencilled in up to £7bn.
The firm has come a long way since 2015 when it started to sell its first commercial device, a portable DNA/RNA sequencer.
It has played a big role in sequencing the virus that causes Covid-19: around a fifth (170,000) of the Sars-CoV-2 virus genomes in the global database GISAID were generated on one of its devices. It counts labs connected to governments, public health bodies and universities among its clients, and charges anything from several hundred dollars up to $2,000 per human genome sequenced.
Under its first £113m contract with the UK government, struck last August, Oxford Nanopore was to provide 450,000 LamPOre tests initially to NHS laboratories for the regular screening of healthcare and social care workers.
An NHS evaluation study published in January suggested that LamPORE could be used in the Lighthouse laboratories, huge new Covid testing labs that have scaled up the UK’s testing programme to one of the biggest in Europe. It could also be used for seasonal flu-related testing.
But the big growth is expected to come from its DNA/RNA sequencing kit, which is used in many areas including cancer and human genetics research, and to monitor and detect new Covid-19 variants around the world. The kit was used to identify the Brazilian variant. The company has offices in the US, Singapore and China, and employs 600 people globally.
The firm said: “These advances made 2020 a pivotal year for us. However, it is clear to us that we are still only in the foothills of what is possible.”
Adam Barker, healthcare analyst at Shore Capital, said: “The government contracts are a recognition of the value of Oxford Nanopore’s technology and it’s certainly proven very useful in helping sequence Covid-19 variants and hence take the fight to the virus.”
Numis analyst Stefan Hamill said: “Its technology is becoming an industry standard for long read, rapid portable DNA sequencing, and is moving beyond early adopter research setting into large addressable applied markets, evidenced through the broad role it is playing in Covid-19, where it is tracking the spread of Sars-CoV-2.”
Oxford Nanopore was one of the once fêted, then disgraced fund manager Neil Woodford’s investments, but investors trapped in the LF Equity Income fund will not benefit from Oxford Nanopore’s success because the administrators of Woodford’s failed flagship investment fund sold the holding along with other assets to Acacia Research last June. Investors in Woodford’s former investment trust, Patient Capital, which is now being managed by Schroders, have fared better, as Oxford Nanopore is the second-largest holding in the Schroders trust.
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Wrong link?
It was supposed to be a story from the guardian
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I guessed that but you provided tonnes of info 
I’m still learning, lol sorry
We really need this IPO on freetrade @Freetrade_Admin
Biggest UK IPO of the year, right there. @freetradeteam
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I think this company will be huge
The company’s handheld DNA sequencing device — called MinION — is the size of a cellphone, runs off a laptop USB plug and costs just $1,000, making it simpler, cheaper and faster to sequence without the need for big clinical laboratories.
Since the outbreaks of COVID-19 last January, Oxford Nanopore’s sequencing technology, which competes with California-based Illumina ILMN , has been used to support scientists in more than 85 countries, including China and more recently Brazil, to track the emergence of new variants of the coronavirus that causes COVID-19.
Our DNA and RNA sequencing technology is well-positioned for accelerated use across multiple applications; we believe that there is huge potential for near-sample, rapid, low cost, sequencing-based analyses across scientific research, healthcare and industrial settings,” the company said.
The company also hopes to boost its rapid COVID-19 testing capability. Last year, it joined forces with the U.K. government to provide its LamPORE COVID-19 test that can determine whether a user has coronavirus in under an hour.
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Hope to see this on Freetrade when it arrives.
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Agree
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Having a look at the IPO documents there seems to be a unusually large amount of information disclosed, including specific guidance which is always a good sign.
They disclose their business propositions as providing “broader access to its technology”, “unlike current competitors”, by:
removing the dependency on capital-intensive devices and instead offers “starter packs” for a supply of consumables (items such as kits and ‘flow cells’ that are used to perform sequencing) along with a device, at no additional cost to the user. The Company also seeks to broaden access by continuously striving to make its products easy-to-use for a range of applications, and convenient to order online and ship to their destination. Because starter packs require no upfront capital cost to the customer; their spend is focused only on the consumables for their experiments, thereby significantly reducing the financial barrier to adoption.
This lines up well with their eventual goal of moving beyond scientific and research markets. Their devices are well known for being portable, and while their main competitor in Pacific Biosciences may excel in various use cases, its easy to see how the company can carve out one, if not several, niches.
Financials-wise, they look very strong for a private growth biotech. They have achieved 51% revenue CAGR for 2018-20 and a historical gross margin of just under 50%, although that worsened to 41% in 2020. Management predicts revenue of around £90m for 2021, 55% gross on that, and then £164-75m in 2023 and 60% GP, with medium term targets of 30% for revenue growth and over 65% for gross margins beyond that. Operating losses increased from £62m to £73m between 2018 and 2020. Jefferies predicts the company will continue to rack up £394m in operating losses by 2025 before posting an operating profit of £41m the year after. The balance sheet is solid, with £283m in cash and only £9.5m in debt, and with estimated IPO proceeds of at least £625m, the company will be capitalised-enough for its growth plans. Receivables have also not ballooned with sales which is always a good sign for cash generation. Revenue, aside from their massive UK COVID contracts, is quite geographically diversified, and their growth excluding testing was 109% up YoY in the first half.
Comparables are fairly few and far between, given the dominance of Illumina in the industry and the infancy of long-read sequencing. Roche acquired stratup Stratos Genomics for $250m in 2020, so its likely Oxford Nanopore would have a seven figure takeover floor (although Illumina would probably be ruled out given their offer for PacBio was disallowed for anti-trust). The main competitor is PACB, although it has seen essentially flat revenue growth for several years before COVID gave them a boost. It is expected to grow revenues at around 40% to 2023. Like ON, Pacific Biosciences is very well-capitalised, including raising almost £900m in debt last year. They historically traded on a EV/Sales multiple of between 5-15x, however leadership changes, new products and COVID helped lift the stock dramatically, where it has now spent much of the year consolidating at a multiple of between 50-75x. Illumina is more established and trades at a 15-20x sales multiple, however I believe this is a weaker comparable as they serve different use-cases and Illumina is essentially a monopoly. Assigning a conservative multiple of 30 values Oxford Nanopore at £3.4b, and this puts it nicely at 20x 2023 revenues which is where PacBio is sitting for that year now too. Depending on how much they raise that means the equity could easily be worth over £4b. Its also worth noting Jefferies believe the stock will have scarcity value being the only large biotech listed in London.
Correction: I previously noted management expected revenue for this year to be c. £158m. This was an error on my part - expectations have been upgraded and are now c. £112m.
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