Oxford Nanopore IPO Takes Place on the Same Day UK Runs out of Petrol
While applying to be an immigrant lorry driver in UK, I came across a news story that was at odds with the zeitgeist of the country. It said “Oxford Nanopore announces London IPO after hitting $3.3 bln valuation”. I have not followed this company since Neil Woodford, famously known as UK’s Warren Buffet, blew up his funds.
In 2017, I made the forecast that Oxford Nanopore would go out of business by the end of 2017. The argument was simple. Oxford Nanopore had a clever business model of raising and losing more money year after year, and the company had been doing that since Shakespeare wrote Antony and Cleopatra. I argued that such an unsustainable business model would surely end in a tragedy, and therfore no sane investor would take part in it.
Woodford (did I mention that he was called “UK’s Warren Buffet”) thought otherwise and decided to bet the ranch on Oxford Nanopore even after my forecast. A run started on his funds forcing him to fold. These days you read stories like “Neil Woodford: the inside story of his rise and dramatic fall”. You may notice “dramatic” being added to “fall” and not “rise”.
Unlike the linked article, I would not blame Woodford for this debacle. He got ill advice from the biologists and biotechnology “insiders”, who hyped up Oxford Nanopore to an extreme. If you remember past comments on blogs and social media, Oxford Nanopore was supposed to dislodge Illumina as soon as its hand-held sequencers became publicly available. According to those hypersters, Pacbio, its real competitor in the long-read space, was not even worthy of a mention. Instead, they presented the Oxford Nanopre as the “Apple for biotech”, but so did Elizabeth Holmes by dressing up in black hoodies.
What happened since then? Covid came, and Oxford Nanopore found another source with deeper pockets than Woodford. Interestingly, this contract with UK government got terminated way sooner than expected. IPO-related financial articles rarely mentione that fact and instead give us meaningless comparisons like this -
Oxford Nanopore said it is currently able to read an entire human genome in a couple of days for $500, compared to the 13 years and $3bn it took to sequence the very first human genome two decades ago.
Really? Do you promote a sequencing company in 2021 by comparing with Sanger sequencing in 2001?
Otherwise, nothing changed with the company since I looked into its financials three years back, and it continues to run the same business model of raising and losing more money year after year. Here are the numbers for the last few years -
the company continued to finish in the red, ending January–June 2021 with a net loss of £44.8 million ($62 million), compared with a £35.4 million (about $49 million) net loss in H1 2020.
In its registration statement, Oxford Nanopore disclosed that it finished 2020 with a net loss of £61.244 million ($84.7 million) on revenue that more than doubled over 2019, to £113.86 million (about $157.5 million).
Still, Oxford Nanopore’s results last year were an improvement over 2019, when it recorded a net loss of £72.216 ($99.9 million) on revenue of £52.061 million ($72 million). In 2018, the company lost £53.119 million (about $73.5 million) on revenue of £32.521 million (about $45 million).
Regarding being profitable, the company said -
The life sciences company…said it was aiming to reduce its losses to breakeven in the next five years.
Finally, it has not escaped my notice that the IPO valuation of Oxford Nanopore is way closer to Pacbio than Illumina.