Oxford Nanopore Technologies H2 2024 Earnings Call Transcript

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Provided by Quartr
March 4, 2025

There are 10 speakers on the call.

Operator

Good morning, and welcome to our 2024 full results. I'm Gordon Sanguera, Chief Executive of Oxford Nanopore, and I'm joined today by our CFO, Nick Kehoe. This March marks the twentieth anniversary of Oxford Nanopore, which I cofounded in 02/2005 as a spin out from Oxford University. The company's vision is to enable the analysis of anything by anyone, anywhere. At the core of the company is our electronic single molecule sensing platform that we launched just over ten years ago.

Operator

A decade of Nanopore sequencing was delivered over 14,000 customer publications with approximately 3,000 publications in 24 alone. Today, we're established in more than 125 countries. We've seen sustainable compound annual growth over the last three years, but greater than 30%. We have manufacturing built from the bottom up that is scalable and will allow us to hit our medium term growth and margin targets. Getting straight into our results of 2024, In the second half of twenty twenty four, our revenues were £99,000,000 That is underlying year on year growth of 34% on a constant currency basis.

Operator

Our full year revenues were million, which is 23% underlying constant currency growth. This is in line with our full year guidance of 20% to 30% that we set out last March. And I want to remind you that 74% of our revenues come from our consumable sales. That's our flow cells and kits. So how are we growing in what has been a very tough and challenging life science research tools market compared to our peer group?

Operator

We have targeted end market applications, areas where only we can provide the biological insights. These are of course in the research markets, but also in biopharma where customers are currently evaluating Nanopore sequencing. This segment grew nearly 18%. Clinical customers who are developing RUO Clearwave tests in the short term with a medium to long term view to provide fully regulated tests in this segment, and this segment grew 12% And Applied Industrial customers, including plasmid sequencing service providers and synthetic biology service providers, and it was our fastest growth segment at over 40%. Growth is also fueled through innovation driving platform adoption and increased consumer utilization.

Operator

'24 saw strong continued demand for our P2 platform. At the end of twenty twenty four, we had more than 1,900 P2 sequences in the field. We continue to push the envelope on accuracy and output, which drives up quality and reduces the cost of sequencing, both key drivers of platform adoption and utilization. The continuous improvements have contributed to a 36% increase in Promethion Flowsar utilization from the first half to the second half of twenty twenty four. A real win for us in 2024 and something that we'll consolidate and build on in 2025 is targeting end to end workflows, driving adoption for applications in research, in biopharma, in clinical, and in applied industrial markets.

Operator

These workflows are ever increasingly moving towards regulated workflows. In 'twenty four, we launched Gridiron Q Line. In 'twenty five, we'll be rolling out Promethion Q Line. Our regulated platforms will all be coupled with our sample to answer automated platform, Elysian, which is now in early access. Moving on to our revenue guidance and medium term outlook.

Operator

Our guidance for 2025 is 20% to 23% growth on a constant currency basis, which reflects the strong demand for our technology and also the risks around U. S. Federal funding and export control restrictions, which Nick will talk about in more detail. We expect to deliver gross margin of approximately 59% in 2025, representing an increase of approximately 100 basis points year on year. Overall growth in adjusted costs in 2025 is expected to be at the low end of our medium OpEx guidance, reflecting our continued focus on driving operational efficiencies in the business.

Operator

Again, Nick will talk about this in more detail in his presentation. Our medium term guidance remains unchanged. We continue to target more than 30% revenue growth on a compound annual growth rate through our targeted workflows and applications that are unique to NAPOL sequencing. We are targeting greater than 62% margin and we will be continue to be disciplined in our OpEx spend to meet our goal of adjusted EBITDA breakeven in full year 2027 and being cash flow positive in full year 2028. So summarizing and before I hand over to Nick, one of the questions I get asked a lot is, what is it you're doing that is enabling you to grow in this tough market?

Operator

We're targeting markets where our platform is highly differentiated from all the other short lead legacy systems, which include recent potential new entrants in 2026. That differentiation allows to target hotspots in markets where only we can provide the biological insights. Our innovation and continued commitment and investment into new workflows drives adoption of new applications on our platforms. And last but not least, in the last three years, we have invested heavily in doubling our commercial infrastructure and operations, and we're now reaping the benefits of that investment. Thank you very much.

Operator

And now I'm going to hand over to Nick for a deeper dive into our financials.

Speaker 1

Thank you, Gordon. Turning to the first slide, FY 2024 revenues finished at 183,200,000.0, up 11.1 percent at constant currency and 23.3% on an underlying constant currency basis, which is in line with our stated guidance of 20% to 30% growth and in spite of what was challenging end market conditions. We are particularly happy with the step up in second half revenues with underlying constant currency growth of 34% and as it was consistent across all regions and largely driven by increasing utilization. On balance, I think it's fair to say we believe that we could do better as we go into 2025 from an operational perspective and closing out the year. And as such, we see opportunities to improve upon our performance going forward as we continue to mature our processes and our business as a whole.

Speaker 1

On gross margins, we finished at 57.5%, slightly ahead of guidance, representing a material improvement on FY '23 and driven predominantly on an underlying basis by both manufacturing improvements and recycling activities offset by mix and currency. Whilst this represents a reported improvement of four twenty bps on the prior year, I would note that this has helped by a lack of exceptional items in FY '24 versus FY '23. The resultant increase in revenue and margin alongside a disciplined cost structure, and our adjusted EBITDA loss finished the year 116,100,000.0 ahead of consensus estimates. Whilst this is an increase of 11% on a prior year loss basis, we are starting to deliver operational leverage, which we hope will begin to provide comfort on our route to breakeven and supported further by a small restructuring program completed post year end in q one twenty twenty five. Our balance sheet remains strong with 403,800,000.0 of cash at year end and supported by the 80,000,000 raise from new and existing investors in the second half.

Speaker 1

We have also taken further steps post year end to improve our go forward cash flow position by updating our pricing and business model, which alongside significant cash resources support our ability to meet and surpass both EBITDA and cash flow breakeven. Turning now to slides on revenue analysis of our reported figure of 183,200,000.0 On the left, I would like to highlight the EGP contract and COVID revenues collectively representing a £16,000,000 headwind in 2024, which we managed to replace with new business and hence underlying growth at constant currency of 23%, a better representation of our performance rather than constant currency growth of 11% and reported growth of 8% with currency itself a £5,300,000 headwind. To put our underlying growth into perspective, our top five customers represent just under 8% of our total revenue in 2024, which for me speaks to the quality of this growth coming from such a broad base. On the right hand side, we show the split of revenues by devices services represented 26% of revenue and consumables at 74%. As we move to a more CapEx first approach for our devices, I would anticipate the split changing and a higher proportion of device revenue of potentially 40% before normalizing back as customer utilization continues to ramp.

Speaker 1

Whilst underlying growth does look weaker within consumables than devices, this is due to two items. One, a high proportion of CapEx sales year on year and two, a mix effect with minion flow cell revenues declining and permethane increasing to be the largest component overall of our consumable sales. On the next slide, we have both the regional performance and performance by product range. On an underlying basis, the EMEA region performed best with growth of 31.1% overall and 44% in H2 driven by new customer wins and increasing utilization, helping offset the loss of both the EGP and COVID revenues. On a reported basis, the APAC Region was strongest, up 18.622.1% on an underlying basis with the H2 underlying growth of 33% and in spite of a drag on growth from China.

Speaker 1

Across The Americas, we delivered an overall underlying revenue growth of 7% in the year with the second half stepping up to 13% from 2% in the first half as previously guided to. Whilst it was pleasing to see a step up in underlying growth in The Americas region, particularly in the second half, We are cognizant of new risks to federal funding, which we believe we'll cover later. On the right hand side, on revenue by product range, we are pleased to report underlying growth of 55.8% for Promethion, driven by increasing utilization across larger devices and the continued launch of the p two. Whilst mid iron revenues declined close to 10%, I would just flag that this decline is almost entirely due to the removal of the Mach 1C device. And with minimal sales of the Mark 1C in 2024, we hope this represents a floor for the range.

Speaker 1

Now with the launch of the Mark 1D, the Elysian, and the continued rollout of the Grid Q range, we are aiming to return to growth for the miniron product range in 2025. Other revenues predominantly represent kits and services, and growth here reflects the mix effect of both the miniron and permethion ranges and so close to overall group underlying growth. Turning to revenue by end market, Gordon has already spoken to this and the link to overall commercial strategy, but to add some further color. Overall, this reflects reported growth, and hence, whilst growth within our research market looks broadly flat, this does reflect both the decline of the EGP contract and captures the majority of the COVID headwind in 2024. In 2025, this is the segment where we anticipate some weakness given the uncertainty around US federal funding.

Speaker 1

However, given the strong number of contract wins in the EMEA region and APAC, we are aiming to return to growth here in any case. Within the applied industrial market, we believe we can continue to grow a fast clip as the technology continues to differentiate against legacy products in the field of synthetic biology. Within clinical, we're seeing increasing interest from customers aiming to redefine the diagnostic market with incremental biomarkers and information only available on Nanopore to take revenue from established service providers. Finally, within biopharma, the opportunity for Nanopore to define a new market within biopharma manufacturing QC is material and additive to the position in the research space. Stepping back, in spite of the risks to U.

Speaker 1

S. Federal funding, we anticipate solid growth, but below our FY 2025 guidance level 20% to 23% in the research space and above market guidance growth within these three other new end markets. Turning to gross margin, we saw an overall improvement from FY '20 '20 '3 to FY 2024 of April to 57.5% and in spite of a 120 headwind from currency. Being balanced, the largest contributor to the overall improvement in gross margin year on year was the fact that 2023 was impacted by a number of one off charges that didn't repeat in 2024. However, we did also see meaningful improvements in both permethion flow cell margins and devices from improved recycling.

Speaker 1

These benefits were offset by mix effects, but looking forward, we anticipate this headwind to dissipate somewhat, particularly from a product perspective as permethion flow cell margins continue to improve and as we anticipate growth returning to the mid iron product range before we consider any benefits from pricing changes. Combining this revenue and margin performance, we also demonstrated improved cost control of the period, which is evident on this slide. On here, the key takeaway is that we are now showing operational leverage and that this trajectory of this improvement looks set to not just continue, but improve as we target adjusted EBITDA breakeven in 2027. The reacceleration in reported revenues as delivered in H2 delivered an incremental $6,500,000 of gross profit and an improvement of $7,100,000 to adjusted EBITDA, thanks to improved cost control and as incremental R and D spend focuses on later stage development projects. A common question we have had during 2024 was how we intend to be able to grow revenues above market whilst maintaining a tight control over costs.

Speaker 1

Post period end, we entered into a targeted restructuring program reducing headcount by just under 5% and non headcount related expenditure by a similar value. With these changes, this will allow us to reallocate capital to higher growth activities, allowing us to maintain our growth trajectory without a continued double digit increase in the cost base. As such, whilst adjusted spend was up 11.5% in 2024, we anticipate growth in costs in 2025 to be at the low end of our 3% to 8% guidance range. Turning to cash flow, we ended 2024 with $403,800,000 of cash with a thorough C3 level actually more like $412,000,000 when including the R and D tax credit of 8,000,000 which came in in February 2025. The key messages from this slide on a likely improvement in go forward cash profile for the business and on targeting and improving working capital position.

Speaker 1

Whilst cash outflow from operations was $112,000,000 we anticipate this improving as our adjusted EBITDA loss also improves. On working capital, we delivered a meaningful inflow in the year of 18,700,000.0, but we see the opportunity to improve further here as we target inventory levels, particularly as we begin to recycle the permethine flow cell. Finally, on assets with customers, this relates to the OpEx model and in particular, the larger devices being placed with customers that led to an outflow of 20,600,000.0 in '24 and actually higher than that at twenty five point six million in 2023. Based upon the pre existing OpEx business model, this figure was likely to increase at least in line with revenue growth of the foreseeable future, particularly when placing larger devices. Going forward, we anticipate this figure now declining.

Speaker 1

And on an overview as to why we have two slides to help position the changes that we will now turn to. First off, setting the scene as to why we are evolving our pricing model. Over recent years, we've seen increasing adoption outside of the conventional research markets, which we believe is set to increase further thanks to maturation of technology. Historically, the focus of supplying project packs where devices are placed by Oxford Nanopore for free and owned by ourselves has helped seed the market. But with the increasing requirement for greater compute in certain devices and increasing demand to own the box by customers, this was leading to a mismatch in communication between our pricing model and customer expectations.

Speaker 1

We are now moving to simplify this, specifically for the larger devices, whilst maintaining conventional project packs for smaller non compute devices. Before we made these changes, we took the majority of 2024 to review this move to ensure that Oxford Nanopore remains the most affordable and accessible technology on the market and is supported further by enabling grants for academics. With these changes, we believe we are aligning Oxford Nanopore with a broader market whilst maintaining flexibility and a core USB of the technology, the affordability and accessibility of an electronic based sensing system. Turning to the next slide, we'll talk to the potential financial implications of these changes. Overall, these changes could lead to revenue and margin benefits, but I would temper any excitement by the fact that we'll be honoring any existing contract, any tender, or any quote in the system, and, of course, we will be thoughtful about how these changes impact customers first.

Speaker 1

We will not get drawn into hypothetical revenue or margin increases today, but for transparency, this could help drive mid single digit revenue growth and around 50 to 100 bps of margin improvement over the medium term if successful. However, even if revenues and margins don't improve as volumes potentially decline, then we should still see a benefit in cash flow. Going back to an earlier point about the cash impact from assets of customers, with these changes, we would anticipate this outflow of cash improving year on year and hence improving the cash profile of the business from what it is today. Now as we turn to these final four slides that I will present, I just want to recap on what the key messages have been so far over the past ten minutes or so and what I want you to take from this section as well. So first off, we have delivered against what we said we would do at the beginning of twenty twenty four and we have begun to deliver operational leverage and an improvement in adjusted EBITDA.

Speaker 1

Secondly, we have demonstrated cost discipline. And in 2025, we have taken tough decisions internally to ensure that we are as lean as we can be entering the year. Finally, we are evolving and maturing our business model to position us positively for the next three years. Now from the next two slides, what I want people to take away is confidence in further delivery both in terms of revenue and margin. On our revenue outlook, we are seeing our commercial infrastructure mature and further improvements in productivity set for 2025.

Speaker 1

On productivity, our revenue per head has declined since 2023, but this fall has been lower than the dilution caused by the increase in direct and indirect sales teams, which have doubled in size since January 2023. Importantly, peeling the onion layer further, we are showing a material improvement in the opportunity funnel for the business as a whole, with this growth reflecting operational improvements to how we capture this information, but also as the sales teams bed in and become much more productive. Looking forward, this gives us confidence as we enter 2025 from a top line perspective. Turning to margin improvement, a key opportunity for us to work on a '25 to '27 is on the Promethion flow cell, but this is not a new item for the team as something they've been delivering year to date already. The graph on the left reflects the unit cost per permethane flow cell rebates to a hundred as of December 2022 to December 2024.

Speaker 1

As you can see, we have made material improvements over the two year period through improving yields, but whilst also improving the threshold for product release and hence focusing on customer experience. The improvement in the second half of twenty twenty four alone is clear to see, and we enter the year in a healthy position. As we look further forward, we see the potential to improve yields yet again, but also for more material improvement in unit costs as we recycle the promethane flow cell to the same level that we do for the minyan flow cell today. Whilst we are in the early stage of this of this process, if we can continue on the same glide path for Promethion as we did for Minine, then this could see a further 10% improvement in margins for the Promethion product range over time. Through targeted activities such as this, we are confident on improving our margin profile to 2027.

Speaker 1

Turning to guidance for FY '25, we are starting the year with revenue guidance of 20% to 23% constant currency growth. This is a tighter range than normal and reflects continued strong underlying growth that we had delivered in 2024 and the seen at the start of 2025, but tempered by risks, namely uncertainty around federal funding in The US and the NIH specifically, which we estimate total exposure to group revenue of between 10% to 15%. Alongside this, we have assumed tightening of export control restrictions given what we saw at the end of the second half of twenty twenty four. To adequately capture both risks, we are taking a prudent view on the outlook at this point in the year. On the flip side, we could well see benefits from both the recent pricing model changes and increases to consumable prices, but believe these will be second half weighted and so likely modest in 2025 are more meaningful in 2026.

Speaker 1

We see gross margins increasing to approximately 59% in 2025, up around 150 bps on 2024 and driven by operational improvements offset by mix. On costs, with the restructuring in Q1 and continued focus on cost discipline, we see FY '25 costs at the low end of our medium term guidance or around 3% to 4%. Taking all of this into consideration, we see adjusted EBITDA improving meaningfully in 2025 and at least in line with consensus estimates as they are right now, even with the lower than mid range guide on the revenue line. On my final slide, we are reiterating our medium term outlook for adjusted EBITDA breakeven in 2027 and cash flow breakeven in 2028. Whilst our 2025 revenue guide is below our medium term top line CAGR guide of above 30%, this is as we see a further reacceleration in growth as likely as we continue to move faster into non research markets and as uncertainty around federal funding subsides.

Speaker 1

We see gross margins improving to over 62% and supported by focused activities across the business as demonstrated with Promethine Flosar. With continued cost discipline, we aim to keep adjusted costs increasing within a corridor of 3% to 8% CAGR and are taking hard decisions internally to ensure that is the case. Combined with our strong balance sheet and improved financial profile of the business, we see ourselves as well positioned to maintain our EBITDA breakeven guide in 2027 and cash flow breakeven in 2028. And with that, I'll hand back to Gordon. Thanks, Ned.

Speaker 1

I'd like to start by reminding you all of the three things that drive adoption of growth

Operator

in Nanopore sequencing. We have richer insights, That is, native DNA RNA of any fragment length, short, long, and ultra long. We have fast time to results and real time streaming of DNA RNA information. We have platforms from point of care to desktop to high throughput sequencing. All of our platforms are affordable, accessible, and scalable.

Operator

One, two, or all three of these benefits drive adoption and growth of our platform. The unique features of our platform enable us to unlock more of the genome and provide richer biological insights than legacy technologies. With regard to richer biological insights, we have rich native DNA RNA data. Users can see accurate multi omic data that is not visible on any other platform, all in the same sequencing run. Why is it important to look at native DNA?

Operator

Legacy short read systems only pick up small variants. There is growing evidence that large complex structural variants, copy number variation, and repeat expansions are as important as single point mutations seen on these short lead systems. In addition, because we read the native DNA, we do not make copies. We retain the modifications in both DNA and RNA. In DNA, that's methylation, which is smoking gun in all cancers.

Operator

In RNA, the modifications are a key component of vaccine development, opening up biopharma opportunities unique to Nanopore. Short read legacy systems are unable to map what is often referred to as a dark genome, which contains 25% of hard to diagnose human diseases, including neurodegeneration, rare disease, and cancer. In 2024, we transitioned from breakthrough multi omic science to developing partnerships that have the potential to translate into routine clinical applications. In human genetic research, we are laying the foundations for multiomics. In oncology, we are leveraging our native DNA and methylation.

Operator

In rare and undiagnosed disease, we are shedding light on the dark genome and distributed point of care management of infectious disease, and I'll talk a bit more about that shortly. There's real momentum across the spectrum from research to translational studies into clinical practice and ultimately into the community. So just to delve into a little more detail on highlights by customer type. In research, one of our large population scale breakthrough projects was our 10,000 genome nanopore sequencing program with Precise in Singapore. That program will include T2T genomes, and this marks the emergence of the first local comprehensive reference genomes.

Operator

In December, we announced a program with the UK Biobank to sequence 50,000 patient samples to create the world's first comprehensive methylome. This methylome will be significant and important in advancing our understanding of the role of methylation in cancer. In clinical, and this is one of my favorite use cases, this is interoperative methylation tumor profiling of CNS tumors, providing a neuropathologist in hours guidance on whether they should commit to surgery or other treatment. It really showcases fast time to resolve, leveraging richness and content, which is methylation, in the distributed setting point of care on our affordable, accessible, benign sequencing platform. We continue to make good progress with our partnership with BioMarriott to launch our drug resistant TB profile in the first half of this year, as well as building on our carrier screening kit, which we launched with Asurion at the end of twenty twenty four.

Operator

In the applied industrial markets, we have multimillion, multiyear contracts for plasma sequencing And service providers are driving adoption in the 1,600,000,000.0 synthetic biology market, displacing traditional methods such as Sanger sequencing. In biopharma, we have customers from across the biopharma spectrum, from cell and gene therapy to gene editing, synthetic biology and RNA vaccine developers, each of these with the potential for manufacturing availability as well. There are ongoing lots of really interesting evaluations and workflows that we are developing with these customers and we will be talking a lot more about in 2025. So delving into respiratory metagenomics, one of our most advanced workflows is respiratory metagenomics. Over the last three years, in collaboration with Geyser St.

Operator

Thomas', they have tested four hundred and fifty patients in intensive care with respiratory infections using this metagenomic workflow. They're returning results on the pathogens in four to six hours versus two to three days with traditional methods. And forty five percent of those patients were on a broad spectrum antibiotic that was ineffective. Treatments adjusted the same day. This workflow is now going to be rolled out into 30 NHS trusts, and it has an additional benefit.

Operator

There's a biosecure application here as well. If and when the next pandemic emerges, it will almost certainly be respiratory, and you will see it first in the ICU. This means, in effect, we have an always on screening metagenomic workflow, pandemic radar, if you like, picking up novel new pathogens early. In 2025, we will continue to drive adoption through innovation. A key driver for Promethine adoption and increased utilization is increased throughput.

Operator

We are targeting two genomes per flow cell later this year. We have headroom in the Promethion flow cell to get us towards a $200 comprehensive multi omic genome. That's with full methylation, copy number variation, repeat expansions and structural variation, all in the same run. We will need for our clinical and biopharma customers ever increasingly end market regulated platforms. To that end, we're building on our Q Line gridiron launched in 2024 and ensuring the Promethion fleet is also regulated in 2025.

Operator

Machine learning AI step changes that are occurring in that field enable us to leverage those advances and improvements in accuracy. Most importantly, 2025 in 2025, we will continue to build on our sample to answer end to end workflows in the clinical biopharma and applied industrial arena to really drive adoption with our highly differentiated platform. In my final few slides, I want to talk about 2025 and beyond. A key driver of adoption of Nanopore sequencing into our target applied markets is the affordable, accessible and flexibility of scalability of Nanopore platforms. The shift from centralized monolithic batch based systems to decentralized on demand real time DNA, RNA streaming at the point of sample origin is unique to our platforms and central to market adoption.

Operator

The electronic nature of our sensing platform also has in the medium term potential to scale at least from order of magnitude. And that is being developed on our voltage chip where we are targeting 100,000 channels. As we look forward in 2025, there's growing momentum and interest in looking beyond the four base genome. And I'm very excited about our ability to drive multiomics into uncharted biology. Our platform is unique in providing native DNA sequencing, which includes a fifth base methylation on DNA, and as such is referred to as the epigenome.

Operator

In addition, our direct RNA workflow is generating new insights into modified RNA, and you will hear a lot more about the epi transcriptome in 2025. Last but not least, 2025 will be the year of the proteome, and we will be talking a lot more about our proteome offering later in the year. Before I wrap up, I wanted to remind you that the opportunity that Oxford Nanopore has ahead is not restricted to the current sequencing market. We have shown today a number of examples of successes that show how we are changing the way the biological information is understood and used. Where customers may already run legacy sequences, we are providing richer information.

Operator

Where customers may have relied on service providers, we can give them control of their research with affordable, accessible, high performance platforms. And some customers may simply not have been able to answer their questions at all. With Direct RNA, for example, we're opening up entirely new avenues. As we continue to develop end to end workflow solutions, we'll start to reach more users who want to make decisions rather than users who are exploring novel genomes. There's a real untapped market here, and our medium to long term outlook is to ever increasingly address these markets.

Operator

We are today operating in the life science tools market, but the real opportunity is to cross the chasm into these applied markets. We think the potential addressable market here runs into hundreds of millions, and we are uniquely positioned to take advantage of those markets. So in summary, our key takeaways: full year 2024 results were in line with expectations very strong growth in the second half of the year The fourth quarter was stronger than the third quarter, so real momentum going into 2025. The unique value features and benefits of ONT platform of the ONT platform and our focus on target markets, where we have a unique solution that no other platform can provide, gives us confidence in continued delivery of above market growth in 2025 and beyond in all market conditions. We're very excited about the long term opportunity beyond the current sequencing market and are well capitalized to execute on our 2025 goals and medium strategic priorities.

Operator

With that, I'd like to thank you for your time today. Thanks everyone.

Speaker 2

Thank you, Gordon. We will now begin the Q and A session. The first question comes from the line of Charles Weston from IRBC. Please go ahead.

Speaker 3

Hi, thanks for taking the questions. Two, please. And just one follow-up on what you said earlier. First of all, can you comment on the trading dynamics in the first couple of months of this year? You said in the release it started well, but can you give us a bit more color, particularly around, I guess, NIH in China?

Speaker 3

And on those two points, can you give us a sense of how much caution you've built in for NIH in China? And do you expect either of those to ease in the second half? And I'll pause there.

Speaker 1

Thank you, Charles. It's Nick. So on your first question, so for the first couple of months of this year in Q1, actually as we can see it today, we've actually, like we say, started the year well, trading slightly above the guidance level that we've set, but this is the early stages of the year. EMEA I has actually started very strongly, really continuing the strong growth that we saw in the second half of last year. APAC is slightly below the second half exit run rate that we saw and aligned to that the tighter export control restrictions in China.

Speaker 1

Americas is a bit weaker. And looking at the detail and looking at the channels where we can see the revenues are essentially broadly flat to down against last year as well, they are within that research and government space where we are exposed to federal funding. So we've started well in all of those markets where we continue to deliver very strong growth at the end of last year, continued into this year. We're not expecting this growth to kind of improve for the NIH piece or China in the second half. In fact, we're being cautious and prudent in terms of how we're setting this guidance to reflect the fact that we could see further weakening from where we are today to be able to take the risk out of the numbers today and have a guidance level that we are very confident with.

Speaker 1

So how much caution are we building for NIH and China specifically? So for NIH, we've factored in a significant headwind for federal funding overall in The U. S. With this guidance. We're in a period of uncertainty here where this could get worse than where it is today.

Speaker 1

And rather than bake it in being flat to what we've seen so far or even an improvement, we've essentially gone the other way and said let's take the risk out of the number now so that we don't update negatively during the year and relate it back to the federal funding piece. On the second part for China, we have been conservative again in terms of the growth rate to for product sales to that market with this guidance. And again, that's so that we can kind of start the year with a solid base in terms of our guidance expectation and hopefully update positively during the year, particularly as we start to see what's happening from a pricing dynamic with the changes that we put through and hopefully some alleviation around those uncertainty factors that we can see today.

Speaker 3

Thank you. And my follow-up was on the two gs net by flow cell. This is something that you've talked about for a while, has taken a bit longer than expected. What now gives you confidence that you can achieve that in 2025?

Operator

Hi, Charles, it's Gordon here. I did famously say we'd do that a year after we signed our G42 program about four years ago. It's I think just we didn't realize we were right on the sort of cliff edge. We thought a slightly deeper wow, slightly longer run times. It was a low risk development program and it turned out to be far more complicated.

Operator

So it's taken us a couple of years to really understand the chemistry that underpins what we do. And we've made some significant changes, and we've done some limited early access, and we're replicating much higher outputs. We're not quite there yet, but we do now fully understand the mechanisms that we're holding back the output, and it's just a case of peeling through the onion layers to get there. So it is now more of a development program than understanding the drivers of what was inhibiting output. So we are confident.

Operator

We're not going to talk about timelines yet. We're going to get it into early access and see how that goes in the second half of the year.

Speaker 3

Okay. Thank you very much.

Speaker 2

The next question comes from the line of James Gordon from JPMorgan. Please go ahead.

Speaker 4

Hello, James Gordon, JPMorgan. Thanks for taking the question. On the revenue guide, one question, we've just been 2025 in terms of phasing H1 versus H2. Are you seeing all the headwinds immediately? Or could I think it sounds like maybe things could work in through the year.

Speaker 4

So how are you thinking about H1 versus H2 growth? And then growth beyond, so the '26 and '27, so where things are going to accelerate on the top line. But other than NIH being the base, what do you think is going to be better? Is any tailwind from the shift in the pricing model that's an upside scenario rather than something already baked in for the acceleration? And clinical and applied sounds like it's going well, but about 70% of the business is still research use.

Speaker 4

So what's the assumption about what happens there in 2026 and 2027? And does the guide assume any competitive pressure from Roche in that part of the business?

Speaker 1

Thanks, James. Quite a bit to unpack there. So I think I've written them all down, but correct me if I'm wrong in any way. So the first one on just half one, half '2. So similar to last year, we'll have we're starting the year expecting around about a 45%, maybe 46% in the first half, 55%, fifty four % second half.

Speaker 1

So a bit more of an improvement and it's not assuming like I say, we've tried to take the risk out of the number from an NIH perspective and then the export control restrictions to China. And so that is throughout the year. One question, so this isn't expecting a rebound in any way at all. On the second question, in terms of what we're then expecting for a reacceleration of growth in 'twenty six and 'twenty seven, because absolutely right, we are maintaining our 30% growth CAGR from 24% to 27%, which implies that growth will accelerate to around 35% in 2627%. So why are we confident and believe this is going to happen?

Speaker 1

First of all, it is the growth within that applied biopharma and clinical market. That's around a third of the business today. But as we've just demonstrated, it's growing very quickly. It's very sticky. It's repetitive.

Speaker 1

The synthetic biology market, as Gordon has pointed to, dollars 1,900,000,000.0. We're at the early stages of how we are starting to take material market share here. And so we think from what we can see, it's interesting even in The U. S, say, today where the federal funding headwinds are being seen, the non research markets are growing incredibly quickly. So we're still confident, we can see it coming through in the numbers, that third of the business is going to continue to accelerate.

Speaker 1

And by 2027 end, biopharma will be 20% to 30% of our overall revenue, and that's going to be driven by significant contract wins that hope to talk about this year that are going to start ramping up as we accelerate it going to 'twenty six and firmly in 'twenty seven. So in terms of research, what's our expectation here? When we set the guide originally for twenty twenty seven breakeven, we said then that we were not expecting a buoyant research market, not at all, because it's lumpy, it's outside of our control, and government funding is challenged, right? Now, we hadn't anticipated this federal funding hit coming from the side, but absolutely, we had baked in some headroom against where our expectations were when setting that guide originally a year ago. So we can weather this storm.

Speaker 1

We're going to take the noise and the risk out of the number for this year. But we can see that with the research market not being as strong this year, we're still growing it because we're still going to grow in EMEI and APAC, like the UK Biobank contract, like the GEL contract. We're still going to grow there. It's just in The U. S.

Speaker 1

Where it challenged today. But the acceleration that we're seeing in those non research markets is going to not just continue, but actually step up. And then your third, I think I've answered your questions there, but is there anything I've missed?

Speaker 4

Maybe just the final bit was just what would you say what is the medium term guide whether Roche will actually have any impact on you with their new product?

Speaker 1

So just from a numbers perspective, no. So the device is expected to launch during 2026. And as we've kind of said today as well, and I know Gordon will add to this, we see the device really firmly being up against the existing legacy short read sequencing products in the market in the high throughput commoditizing space of the whole genome sequencing market. So this is not where we're seeing our growth. Where we are seeing our growth is in the differentiation of our technology by adding methylation and greater insights from longer reads, which will continue.

Speaker 1

And then also from adding going into new markets, be that biopharma manufacturing QC where sequencing doesn't really exist today or into the world of synthetic biology where we're not going up against legacy technologies that are SBS or soon to be SBX as well. Actually, we're talking more about Sanger instead. But Gordon?

Operator

Yes. I think when you look at the product offerings approach, it very much is targeting the large centralized high throughput centers. And as we talked in our presentation today, the flexibility and scalability nature of the platform with the richness of content is what drives adoption of our platform. And when you look at where the SPX system from Roche is, it's more closely aligned with legacy systems rather than what we do.

Speaker 1

And just to add as well, just to follow-up on my own piece. Clearly, as this product comes to market during that 'twenty six, 'twenty seven timeframe, and it's more clear and obvious about where they are going with the technology, over time, there could be some longer term risk on pricing, but within that market where we're not even really looking at today as well. So I don't want to come across as we're dismissing this in any way because that is not what we're trying to do. We're just trying to lay out the positioning of our growth, which is into markets where today this technology is not aligned with where we're going.

Speaker 4

Thank you.

Speaker 2

The next question comes from the line of Paul Cadden from Deutsche Bank. Please go ahead.

Speaker 5

Yes. Thank you very much. I've got two please. Just firstly, the H1 to H2 growth on the Industrial segment was quite impressive, but I just wonder if you could elaborate on any single customer concentration within that. I mean, is there anything in there that's sort of EGP like that might sort of fall away in the future?

Speaker 5

Would you think this is the start as a more kind of high quality revenue stream? And secondly, you've highlighted biopharma as being a kind of core growth driver through to 2027, but perhaps you could comment on potential concerns over mRNA kind of platforms for kind of vaccines and other therapeutics given the quality control issues that have been evident over the last few years? Thank you.

Speaker 1

Yes. Thanks, Paul. So on the revenue mix particularly, so one of the things we're definitely trying to emphasize in the growth that we've seen last year is actually the high quality nature of it because it's coming from such a fragmented customer base, which for us speaks to the kind of the improving quality overall of the business. So there is the largest customer we have in the applied industrial space is actually the plasmidsaurus contract, but it is not a significant proportion overall. And as we highlighted, top five customers less than 8% revenue now of the company.

Speaker 1

We're very pleasing to see that the big driver in the Promethion range has been a material step up in utilization of the larger devices with existing customers. So 53% underlying growth in utilization of device, essentially for the larger devices that we have in the market, it speaks volumes. It's essentially the technology coming of age and being adopted quicker by the customer base as well. So there is nothing within that applied segment today that concerns us from a concentration perspective. As we grow in that biopharma segment, just to kind of lead into that before I know Gord wants to take it on, As we sign customers within that segment who are under evaluation today, who are evaluating our technology for the QC space, there could be some significant sized contracts that come there.

Speaker 1

For us, these are under the $10,000,000 range, say, single million digits. And the idea would be to win a number of them to kind of broaden out that kind of growth amongst a broader base. But that's the only future concentration risk that we're really seeing. Is that because the service providers more broadly in the applied space with synthetic biology, they're seeing what's happening here. They're seeing that those customers that have adopted Promethion for plasmid sequencing in particular are able to steal share from other customers from other service providers because it's cheaper, it's quicker and it's more accurate.

Speaker 1

So they're all having to kind of follow suit there now as well. But biopharma, Google.

Operator

Sure. So I think on RNA vaccines, we are uniquely positioned because we're the only sequencing company that measures direct RNA. And the benefit of that is at the moment, when they make an RNA vaccine, they will invariably add some modifications to the RNA, which helps stabilize it and provide potency. And we are the only company who can read that direct RNA. What that means is you can take six to eight analytical instruments and orthogonal measurements, which take one month, and that's around $1,000,000 of equipment, and do it on a gridiron in two days.

Operator

So you and it typically takes three months to develop an individual personalized vaccine. So you're taking a month out of it. There's a lot of discussion about the economics of developing personalized vaccines. Distributed sequencing goes hand in glove with individual personalized mRNA vaccines. But that's just one piece of the biopharma story, as Nick says, in cell and gene therapy, in viral vector contamination, in gene editing and synthetic biology applications, we also have a role to play.

Operator

And there are lots of really interesting evaluations and workflows that we're working on with pretty much most of the big players in the biopharma segment and more to talk about as and when these workflows come together in partnerships.

Speaker 4

Thank you very much.

Speaker 2

The next question comes from the line of Sam England from Berenberg. Please go ahead.

Speaker 6

Hi guys. Thanks for taking the questions. The first one is just on the 2025 guidance. I was wondering if you could give us a sense for how conservative do you think you've been on the 20% to 23% growth guide if we ignore The U. S.

Speaker 6

And China issues that you've discussed? I suppose how much visibility do you think you have on delivery on the guidance at this point in the year? And do any of the larger contracts you have coming in giving you particular visibility or comfort? And then the second one is just on for me to eye on. Obviously, growth this year has been largely driven by increased utilization and growing revenue per device.

Speaker 6

But can you give us a sense of how much further you think utilization will grow in 2025? And then how you see the mix of revenue growth developing this year between new customer additions and higher utilization of devices in the market?

Speaker 1

Thanks, Sam. So just on the first, on the new guide, and I think we both can answer this one as well. What we're setting here is a guidance level of 20% to 23%, which is, I think, fair to say, significantly above what the market growth is. And we are very confident in delivering it this year because we are being conservative in terms of the risks that we're seeing in the market and removing them from the numbers today. We're setting this guidance range as the base essentially where we know we can deliver this guide.

Speaker 1

And we're going to see what happens throughout the year, particularly as we see what happens with the uncertainty and then with pricing and see what we can where it can go from there. Now on the second question sorry, just I know Gordon will answer it in a minute. But on the second question of the Promethion growth rate and utilization, quite an interesting question. So we're doing extremely well at placing out a significant number of P2 devices into the market, which is essentially seeding the market here. And as we see growth from those customers accelerate in terms of utilization per device, there is actually an opportunity to convert them to a P24 P48 in time and grow that customer even further.

Speaker 1

For the P24 range, the larger devices where we've seen that significant step up in utilization, there is definitely things to unpack there about how we can help certain customers accelerate their utilization of the device by adopting workflows that other customers are using today as well. So there is there's a bit two things here. One is growth of the technology, further workflows are going to and adoption of them is going to drive that utilization rate. But there's also what I'm talking to here is an operational point where we can actually clean up our installed base as well and get people on the right devices over time or graduate them from the lower devices to the higher devices as well.

Operator

Yes. I think the stickiness and increased utilization is probably also a reflection of the maturing customer base because applied market customers have a fixed number of runs they do versus research where they might use it. It's very lumpy in terms of utilization. But one thing never goes away, improve quality, accuracy, increase output, drive down cost per gigabyte, drives adoption across everything. But I think the increased utilization we will see will come from those end to end workflows where they're as I said in my presentation, they're seeking an answer to a question rather than doing novel research, which we know is going to be challenged in the next couple of years, particularly with the NIA squeeze.

Operator

And so that is why the drive to applied end market end to end workflows will and should enhance utilization and adoption.

Speaker 7

Great. Thanks.

Speaker 2

The next question comes from the line of Jiang Ankyuan from Citi. Please go ahead.

Speaker 8

Hey, thanks for taking my questions. I have two, please. The first one is, could you please talk about your expectations for growth by customer segment in 2025, in particular with regards to the Applied Industry segment, which grew, I believe, more than 40% last year? Also, what could the split by customer segment look like by 2027? And I know you earlier mentioned that biopharma could grow to 20% to 30%, but how about the other slices of the pie?

Speaker 8

And my second question is more of a point of clarification. With regards to the NIH, you are guiding to a material reduction. What do you assume around the contribution to revenue where it could go to from the current 10% to 15%? Thank you.

Speaker 1

Quite a few there. So again, if I don't answer them all, come back to me. In terms of customer segment in 2025 expectations, really, I would just look at the fact that in research, in spite of the NIH or federal funding headwind that we've got there, we should still deliver growth actually ahead of what we've done in 'twenty four. For the rest and balance of the third of the business, the overall growth rates that you saw in 'twenty four should actually happen again in 'twenty five. And we continue to believe that we can grow at a strong clip in the applied market in particular.

Speaker 1

Biopharma, it's just going to be there'll be a timing element to this where when we announce contracts, there will be a time where it would just it could take six to twelve months for them to ramp up within those customer segments who have signed them. And then within the clinical space, this will be more of a 'twenty six, 'twenty seven event in terms of stepping up meaningfully because it does again take time for customers to port over their current tests onto Nanopore from existing legacy techniques. In terms of what the overall segments could be by the end of 'twenty seven, I mean, Gordon and I debate this quite a bit about where it could be. We do think biopharma will be in the 20% to 30% overall of group revenue and the entire non research markets could be more about 60% overall of the business, just kind of emphasizing the kind of growth that we're seeing coming through the and the we're at the early stages of this uptake in a Synthetic Biology market being as big as it is, and we believe we can take a significant proportion of it. You did have a did you have a last one there as well that I've missed?

Speaker 1

I'll take that as a no.

Speaker 2

The next question comes from the line of John Sowen from Barclays. Please go ahead.

Speaker 8

Hi, good morning. John Owen here from Barclays. My first question is on the gross margin and the loss of potential NIH revenues in 2025. Do you expect any mix impact from that? And how might that affect gross margin in 2025 and 2026?

Speaker 8

And then just what needs to happen on the gross margin from 59% in 2025 to 62% in 2027?

Speaker 1

Yes. No problem. So we've seen changing well, mix was the kind of key reason why our margin didn't accelerate even higher than the 57.5% that we've just delivered in the year just gone. As we look forward, the potential loss of federal funding revenues that we have today would be a headwind on the gross margin, but we've factored that in from where the guide is at the moment for 59%. In terms of what needs to happen to see that gross margin accelerate to above 62% in 2027, In the presentation today, we kind of laid out the kind of key lever, which is going to be around Promethion flow cell manufacturing improvements.

Speaker 1

So the yield improvements that we've delivered so far are showing a really good reduction in unit cost per flow cell that's got left the door. As we look forward, we can see further improvements in yield. Then actually starting now, really, now we're recycling the permethion flow cell. If we can continue to do that and get it to the same level that we do for the min

Speaker 8

mid iron flow cell,

Speaker 7

that could be another 10%

Speaker 8

gross margin jump just

Speaker 1

to the Promethion range. And that overall weighting will actually help us accelerate above the 62%. Just to remind that when we set this guidance a year ago of over 62%, we didn't fully factor in all the benefits from recycling, and we also assumed a really negative mix impact coming through over time. They may not well, the negatives might not happen and the positives might not might happen. The other piece is the pricing changes that we put through.

Speaker 1

We have adjusted on the consumable side. We've adjusted for currency headwinds that we've seen in the year. We've adjusted for inflation. And we've also moved to that CapEx first approach for the devices, for the larger devices, which mean that we should see in time an improvement in not just revenue, but gross margin and actually cash as well.

Speaker 8

Okay, cool. Thank you. And then just my second question is on the sort of change in financing options for customers. How much of that is driven by a one for Okta kind of port to reduce the CapEx expense versus customers actually requesting it? And then what are your assumptions around the rate at which we could see the cash flow line items decline over the next couple of years?

Speaker 1

Yes. So on the move to a CapEx first approach for the larger devices, bear in mind, we made the most affordable and accessible technology in the market. The MINION and the P2 Solo continue to be devices that we're going to distribute as widely as possible. It's the best way of seeding the market for getting people on NanoPort and then graduating them to the larger devices as well. That strategy still holds true completely.

Speaker 1

On the larger devices, there was confusion in the market and we're making it much simpler and much more transparent for customers whereby they can decide how they want to purchase the device. And now there will be no mismatch, if you like, in pricing between buying the device outright as CapEx or leasing it, if that's the way they want to go through as well. So absolutely, during 'twenty four, we started these discussions in the first half of the year. We've done considerable pricing analysis work. We have debated this internally a hell of a lot.

Speaker 1

We understand the customer drivers and pulls and takes that are going for it as well. And I would also just flag those that third of the business going to Applied, Industrial, biopharma, clinical, they want to own the box. So essentially more and more the pull is going to be from customers that want to own the box. So we need to make sure our messaging to customers is completely aligned if they want to lease it or if they want to own it. That's what we're doing here.

Speaker 1

And clearly, if it all gets adopted, then this could be a driver to our revenue and margin profile as a business, as I say, also to cash. On your cash question, GBP 21,000,000 spent last year placing assets with customers and that really does reflect the larger devices where we have a GPU inside. The switch to this CapEx first approach, let's give it a bit of time to see how quickly it happens. But even if even conservatively, I would expect around half of that to kind of ebb away within the first year of its rolling forward. Now but just does that mean from February 5 when we started these pricing changes, that's going to be the case?

Speaker 1

No, because any existing contract tender or quote that we had in the system will honor. Don't be wrong, if the customer says, actually, I want to buy it, we'll sell it to them instead, we'll change it. But if they want to lease it, we'll honor that. So that's why we're saying this could be a benefit from the second half. And then from the second half, July 1 onwards, you should expect a material improvement in the cash flow.

Speaker 8

Okay. Thanks very much.

Speaker 2

The next question comes from the line of David Westenberg from Piper Sandler. Please go ahead.

Speaker 7

Hi. Thank you for taking the question. I appreciate the conservatism around NIH and research funding in general. Can you maybe talk about some of the dynamics that are more your applied your applicable markets and exposures? Namely, I'm thinking about, you're more likely to be in a decentralized setting versus centralized setting.

Speaker 7

As we think about researchers reducing their spend or being a little bit more concerned, is there one that's maybe more vulnerable than the other? And then just in general in terms of like plant and animal genomics, is that maybe an opportunity where some of the funding might not be as bad of an exposure and just anyway, just see if you can help us, help out the these are the submarkets that you play in relative to a lot of the other sequencing companies, that would be very helpful. And that would be the only question given the fact that we're more than an hour into the call. Thank you.

Operator

Thanks, David. I think a couple of things. With the MINION and the P2 OpEx models, we have seen and this happened in 'twenty two, there was strong growth there because when cuts come, it's capital that gets cut first. So people still have OpEx money and consumable money. And so those remain attractive.

Operator

And absolutely, we I mean, we were at HEPT ten days ago. And everybody, not just us, but NIH funded customers are also looking at other pools of capital. And AgBio is certainly somewhere, Defense and Biosecurity. I talked about our always on pandemic radar. So we are trying to target those other areas where we think there will be growth.

Operator

And again, really focusing on moving into the applied markets. I know you're asking about the research markets, but I do think because the majority of what we do in the research markets is in the MENIR and P2 end,

Speaker 4

we

Operator

think we will be somewhat buffered. We shall see. It's very hard to predict what's going to happen next.

Speaker 1

And that's why we've been conservative. So, yes, what we are seeing from customers, big and small, in the research space, particularly in The U. S, they're exposed to federal funding, is they don't know themselves. So actually rather than trying to pre guess that this is going to be an okay moment, we'd rather be conservative with the guide and take the risk out of the number. And then in terms of that centralized versus decentralized, you're absolutely right.

Speaker 1

I mean, we actually play everywhere. But in terms of that centralized market space where we have a lower footprint, it's fair to say, and they may have some of our devices, but not the same extent than the other bigger players. You'll know the dynamic here whereby this is going to impact how they think about their spend overall. It's going to alter their budget perspectives. And it actually it could actually lead to a tailwind of more money going directly on direct research spending rather than covering overheads of organizations.

Speaker 1

But the and these organizations are funded not just through government and federal funding, they've got multiple other funding lines coming through like philanthropic and whatnot. So we need this to wash through, but second guessing this in terms of a decentralized or centralized when we're hearing similar messages from all customer segments just says to us we just need to be conservative at this moment in time until this washes through.

Speaker 7

I appreciate it. Thank you very much.

Speaker 2

The next question comes from the line of Myles Dickson from Peel Hunt. Please go ahead.

Speaker 9

Thank you. Yes. In the interest of time, I'll just keep it to two. Nick, firstly, FY 2024, the first year where cost control came to the fore, you described kind of workforce reductions and others. Can you perhaps put some color on what those others are and what we might expect moving forward any other efficiencies?

Speaker 9

And then thirdly, I'll ask the direct question about the Roche SBX approach. They obviously published some metrics around comparison to Nanopore. I just wondered if you had any comment on those performance metrics. Thank you.

Speaker 1

Thanks, Miles. So, yes, so FY 2024, we did show an improvement in adjusting operating expenses. Well, the key thing is adjusted EBITDA loss, particularly second half on first half. And I think this kind of demonstrates that we are on that journey. We've turned that corner and we are completely committed to making EBITDA breakeven in 2027.

Speaker 1

During last year, we had multiple conversations about this as well. We did we were looking at the cost base overall and made some really tough decisions internally. I can't this has been a it's a tough step for the company to kind of make these decisions, but it shows that we're making them. We're making the hard decisions to get the cost base in the right frame for the next leg of growth. Now and the key thing here is removing circa 5% of the headcount costs and those other ancillary costs that go alongside it, be there limiting marketing spend or focusing marketing spend, focusing spend in IT, focusing spend in R and D means that as a result, we allows us to reprioritize other activities as well.

Speaker 1

So this is much more about cutting our cloth accordingly, keeping the cost place broadly flat with a little bit of inflation in 'twenty five and allowing us to reinvest in the business in the right manner, so that we can continue to grow our top line well above where the market is today. And on the Roche?

Operator

Yes. On the Roche side, the they have very much their first box is going to be targeting the ultra high throughput large centralized markets. And that's where we have least penetration in the traditional core sequencing laboratories across the world. And so right now, we're comfortable in the richness of content, the non they wash out things like methylation because they have to use the expand on the chemistry. So we think it squarely sits against legacy systems in the high end, and that is an area where we have least penetration.

Operator

So we think for now, based on what they're saying for their launch in 2026, it will have minimal impact. But as Nick said earlier, we will be vigilant and note to see if they bring out smaller devices, which we think would be more potentially more of a threat.

Speaker 9

Thanks, Gordon. I was just wondering whether the accuracy and speed numbers that they disclosed for comparison to the Nanopore was something that you recognized?

Operator

So they said they broke the world record on

Speaker 2

for

Operator

a whole human genome. I think that's one that you and Ashley, the holder of the world record with Oxford Nanopore Technology has to answer. And in terms of their accuracy, it is it's impressive, but it is only 92% of the genome and it's all short. So it's single point mutations. So I said in my presentation, twenty five percent of our mapped hard to diagnose diseases are not going to be unraveled.

Operator

They're fairly and squarely competing with the legacy systems and we are doing our best to be on the other end of the spectrum providing high definition, full content, 100% of the genome. So it's quite hard to make an apples to oranges comparison. And they will be challenging to short read legacy systems, but we think our highly differentiated positioning

Speaker 4

means

Operator

it's less of an impact to us.

Speaker 9

Thank you.

Speaker 2

There are no further questions. Handing back over to Gordon for closing remarks.

Operator

Thanks, everyone. I think we are we feel that we are well positioned and poised to really build on our twenty twenty four applied end market applications, particularly we've talked about biopharma, but with applied industrial, more to come beyond plasmid sequencing, taking business off of legacy Sanger sequencing. In the clinical side, we continue to make progress. That is a medium to long term revenue generator, but nevertheless, good steady progress. And you will hear more about these applied end to end workflows and partnerships in the second half of the year.

Operator

And given the NIH funding crisis, and I don't think that's too strong a word because that's what it is right now when we talk to customers, It will focus us to rather increasingly go for those applied end market workflows. And the focus and the rebasing of the staff and the cost cutting we have put in place really speaks to that increased focus on getting to EBITDA breakeven in 2027 and then cash net positive in 2028. And I'd like to thank you all for your time this morning. Thanks,

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Earnings Conference Call
Oxford Nanopore Technologies H2 2024
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