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The rise of digital has led to the appearance of a new generation of companies at the crossroads of medicine and technology, which the Anglo-Saxons, with their usual pragmatism, have quickly baptized “medtechs”. Once is not custom, this portmanteau word also works in French. Oxford Nanopore Technologies is therefore a medtech created by researchers who invented a new method of DNA sequencing. Schematically, they are able to sequence DNA by measuring the changes in electric current produced by the passage of a molecule through nanopores, that is to say everything, very small holes.
The fact is that this technology enabled ONT, as the financiers call it, to develop a portable sequencing platform in 2014 called MinION (another neologism that works in several languages). It has been very well received by the community of researchers, clinicians or companies using this type of service, who have praised its portability and high-speed capabilities.
It took until September 2021 for ONT to attempt the stock market adventure. The IPO took place at £425 per share, which is quite significantly above current prices. Clever little guys had even made the file skyrocket to 736 pounds just after it hit the market. September 2021 was still a carefree time when free money flowed freely and any well-sold carabistouille could be valued for billions. ONT does not fall into this category, but that did not make the title immune to speculation.
Another small player in the medical world
Notably because the company had benefited from the coronavirus pandemic. It was able to generate additional turnover which improved its financing capacities at a key moment in its existence. The source is not dried up but it tends to be reduced. This is why turnover, which soared between 2020 and 2022, should stagnate this year, before picking up again next year. The break-even point at Ebitda level should be reached in 2025. Concretely, revenues are expected at 206 million pounds this year, for a cash consumption which should slightly exceed 80 million pounds. The management is aiming for average annual growth of 30% over the medium term, accompanied by twice as rapid growth in results.
The company is still in the process of setting up its business model. It cannot therefore be valued on the basis of the criteria of mature companies. It is then necessary to concentrate on the qualities that make its potential. Three main ones can be mentioned. First, the existence of recognized products, resulting from applied research, which already have concrete uses in several sectors. Then, the quality of these products. In this case, the intellectual property is solid and the technological barriers to entry are not negligible, since reputable laboratories (Roche in particular) have broken their teeth there. Finally, the existence of a promising market. From this point of view, DNA and RNA sequencing is on the rise because it has many outlets, particularly in medical research.
The other side of the coin is higher than average risks. In fact, ONT remains a small player in the medical world, facing competition that does not sit idly by. Two American rivals (Pacific Biosciences and Illumina) walk on its toes. This small size is also a drag on funding, a threat that will persist until the company is able to support itself. At this stage, however, its ample liquidity allows it to see ahead. And if management’s blueprint is followed, ONT has the potential to become a significant player in the diagnostics landscape for years to come.