Oxford Nanopore Reports Mixed 2024 Results Amid Challenging Market Conditions
Why we think this is bad
While Oxford Nanopore achieved revenue growth and improved gross margins in 2024, several concerning factors overshadow these positives. The company continues to operate at a significant loss, with an operating loss of £152.3 million. Despite revenue growth, the pace of growth is slowing, and the company has lowered its near-term revenue growth expectations. The acknowledgment of challenging market conditions, particularly in the US research funding environment, adds to the concerns. The recent restructuring, including a 5% workforce reduction, suggests cost pressures. While the company maintains a strong cash position, it has decreased from the previous year, indicating ongoing cash burn. These factors, combined with the high valuation implied by the price-to-sales ratio, paint a challenging picture for the company's near-term prospects.
Key Points
- Revenue grew 11.1% to £183.2 million on a constant currency basis
- Underlying revenue growth of 23.3%, in line with guidance
- Gross margin improved to 57.5% from 53.3% in the previous year
- Operating loss of £152.3 million, slightly improved from £168.6 million in 2023
- Cash position of £403.8 million, down from £472.1 million in 2023
- Lowered near-term revenue growth expectations to 20-23% for 2025
- Implemented restructuring program, reducing workforce by 5%
- Maintained medium-term guidance of adjusted EBITDA breakeven in 2027 and cash flow positive in 2028
- Facing challenging market conditions, particularly in US research funding environment
- High valuation with a price-to-sales ratio of about 5.9
Summary
Oxford Nanopore Technologies reported its 2024 annual results, showing revenue growth of 11.1% to £183.2 million on a constant currency basis. The company saw an improvement in gross margin to 57.5% from 53.3% in the previous year. However, the company continues to operate at a loss, with an operating loss of £152.3 million. The cash position remains strong at £403.8 million, although this has decreased from £472.1 million in the previous year. The company acknowledges challenging market conditions and economic uncertainty, particularly in the US research funding environment. As a result, Oxford Nanopore has lowered its near-term revenue growth expectations to 20-23% for 2025, below its previous target of over 30% CAGR. The company has also undergone a restructuring program, reducing its workforce by 5%. Despite these challenges, Oxford Nanopore maintains its medium-term guidance of reaching adjusted EBITDA breakeven in 2027 and becoming cash flow positive in 2028.