Yahoo Finance Blow to Oxford Nanopore after ministers end Covid testing contract early
Britain's brightest biotech firm, Oxford Nanopore, has been dealt a blow after the Government ended a £113m contract for its Covid tests early despite deeming the tests “life-saving innovations”.
In filings on Companies House, Oxford Nanopore said the Department for Health had decided against taking all the Covid tests it had agreed to buy.
Oxford Nanopore did not disclose how many tests the Government had signed up for, but ministers paid £113m for the kits, suggesting a significant order size. Part of the order was fulfilled.
Oxford Nanopore's 90-minute tests use saliva to tell whether someone has Covid and do not require swabs, making them easier and quicker to conduct.
In the depths of the pandemic, Oxford Nanopore's tests had been deemed a “life-saving innovation” by then-health secretary Matt Hancock. Last August, he said the tests formed a key pillar of the UK's efforts to "break chains of transmission quickly" by providing on-the-spot results for people in care homes and hospitals.
However, Oxford Nanopore revealed that, in April, the Department for Health determined that it “no longer had a requirement for our product”, as the vaccination rollout meant fewer people needed testing, and ended the contract before taking delivery of all the tests.
The deal would have provided a major boost to Oxford Nanopore's revenues ahead of its blockbuster London listing expected later this year.
Analysts have suggested the company could be priced anywhere between £4.5bn and £16bn, putting it among the most valuable floats in the City's history and coming as a boon for the LSE, which has been desperate to attract more biotech leaders.
In March, chief executive Dr Gordon Sanghera said: “We believe that an IPO is the start of the next phase of our journey.
“Gaining access to deeper, international pools of capital would support our growth plans, enhancing our ability to innovate and scale our manufacturing and commercial functions. 2020 was a pivotal year for us.
“However, it is clear to us that we are still only in the foothills of what is possible.”
Despite the government contract ending early, Oxford Nanopore expected revenues to keep rising this year, with indicative growth of more than 80pc in its life science research tool division in the first half. It said it already had other contracts agreed that suggested further revenue growth over the course of the next 18 months.
It comes after a stellar year for Nanopore, which also makes DNA sequencing tools that can track Covid mutations and which have been used for a fifth of all Covid sequencing globally.
Revenues last year hit £114m - more than double the £52m for 2019. Even stripping out the Covid bump from last year, Oxford Nanopore's revenue was up 26pc compared to a market that contracted by 7pc.
Losses also narrowed in 2020 by £11m to £61m despite spending heavily on a new high tech manufacturing facility.
A spokesman for Oxford Nanopore said: “We developed LamPORE, a scalable, gold-standard performance Covid test, in the early stages of the pandemic. It was clearly good news as we went into spring 2021 to see the requirement for Covid testing in the UK was much reduced.
“We continue to provide technology around the world for Covid sequencing, in addition to our core business of sequencing in a range of applications including human, cancer, plant, animal and environmental genomics.”
A Department of Health spokesman said: “The UK is now a testing powerhouse, with over 240m tests conducted which has helped stop the spread of the virus and save lives. Our collaboration with industry continues to be a priority and we are hugely grateful to all the manufacturers and suppliers who have offered their assistance in the production of Covid tests.”
