This Biotech Company Sees DNA Testing as Formula for Growth
Oxford Nanopore Technologies produces Covid-19 technology to identify new variants, and tests and analyzes DNA.
Courtesy Oxford Nanopore Technologies
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Biotech company
Oxford Nanopore Technologies
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which listed on the London market eight months ago, produces Covid-19 technology to identify new variants, but its expertise in testing DNA and analyzing data is where its growth lays.
Its technology, with more than 2,000 patents, could disrupt the sequencing market, and is superior to rivals because of the combination of its portability, ability to process real-time data, and skill in reading ultralong DNA fragments. Potential applications stretch far beyond healthcare, and span agriculture, epidemiology, industry, and education.
The markets in which its tech can be used are worth a combined $300 billion long term, Odysseas Manesiotis, an analyst at Berenberg, wrote in a note. But shares (ticker: ONT.UK) in the Oxford, United Kingdom–based company have slumped since it made its debut at 4.25 pounds sterling ($5.55) in September. At a recent £3.23, the stock has been dragged down with its peers as investors rotated from growth stocks to value.
Despite posting a loss in 2021, Oxford Nanopore has raised revenue guidance three times, most recently to a range of £145 million to £160 million. That’s up from £135 million to £145 million, and in line with an estimate of £151 million by RBC Capital Markets.
The dip in the share price means that Oxford Nanopore could be a buying opportunity. David Westenberg, an analyst at Piper Sandler, estimates that the stock could rise to £7.50 because of increased adoption of its tech.
“Potential near-term applications include infectious-disease testing, rare-disease diagnosis, and microbiology,’’ he says. “We estimate these ‘niche’ markets have current addressable markets of more than $1 billion.”
The company, which was spun out of the University of Oxford, has a market value of £2.6 billion and employs about 850 people. It posted a loss of £167.6 million for 2021, deeper than the £61.2 million loss in 2020. Revenue in 2021 was £133.7 million, better than the £113.9 million posted in 2020.
CEO Gordon Sanghera told Barron’s in a statement that “we deploy a powerful innovation engine in our R&D teams to constantly evolve our technology. This helps expand our user base. For example, experts in human genetics and cancer are increasingly using our sequencing platform to gain a more comprehensive picture of those genomes.”
Oxford Nanopore could be well placed to benefit from increased spending by governments that are conducting projects to map the human genome so that Big Data can be used to analyze trends in diseases to plot care and cures.
Stefan Hamill, an analyst at Numis, wrote in a note that governments are expanding their research-and-development spending faster than gross domestic product to build knowledge industries, “despite expected pressure on fiscal balance sheets, with many population genomics programs under way.”
Berenberg’s Manesiotis believes that increasing academic and clinical adoption of Oxford Nanopore’s tech will support about a 30% increase in sales from 2021 to 2026 in terms of a compound annual growth rate. The crunching of data extends into a raft of areas.
Advances in collecting samples from humans, plants, and animals using affordable portable and benchtop devices that analyze information in real time have applications for food safety, animal conservation, and the development of pest-resistant crops. The technology can also help with monitoring the impact of climate change, as researchers use it to characterize microbial diversity and microbiome samples. Its technology is also used in cancer research.
Write to Rupert Steiner at [email protected]