Oxford Nanopore Technologies PLC at Morgan Stanley Analyst Fireside Chat Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tejas Savant - Morgan Stanley - Analyst : <_ALACRA_META_ABSTRACT>Maybe, Gordon, just to take things off, many of your Life Science peers have been seeing a challenging macro that's leading to lengthening sales cycles, a constrained funding environment. How would you describe those dynamics today versus at the start of the year when you already had baked in caution into your initial guidance framework? Could you just describe what you're seeing in the marketplace? And how you've navigated through those conditions in the first half of the year? Gordon Sanghera - Oxford Nanopore Technologies PLC - Chief Executive Officer, Co-Founder, Executive Director Sure. So what we are seeing is a continuation of last year, particularly the second half, we started to see this general slowdown. As I've said before, I think it's not a hangover from the pandemic. It's just a new normal. There is just a lot less money available for government-funded programs. And we did see lengthening sales cycles. But also, we've seen even granted funding takes longer to get going as well. Because whilst they've secured a grant, we find that they haven't got the ancillary staff or the additional setups they need, particularly in population scale large programs where you need your limbs for tracking and all these things. So we absolutely feel that pain the rest of the market is feeling. Now what we've worked hard on doing is really looking at the unique value proposition we have with the native DNA, with the long-read methylation, structural variation, all of those features real-time near the point of origin. And so we've managed to overlay. We've seen underlying growth as we expected in this new normal, slower growth in LSRT, and we've met that expectation. But we've got these additional applications, which we can talk about later, like Plasmidsaurus, which have really allowed us to continue to grow in a market where our competitors are shrinking. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / NTS, MS.N - Oxford Nanopore Technologies PLC at Morgan Stanley Analyst Fireside Chat

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. And how has the customer conversation change. Guys with the availability of the better accuracy nanopores, the customers essentially see Oxford's accuracy issues as being a thing of the past at the moment? And what is still left to get the platform to Q30 simplex accuracy?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. And then on Duplex sequencing, guys, can you just provide feedback from users of that chemistry, what applications do you see being most frequently used today? And how are they thinking about the trade-offs between greater accuracy versus throughput and cost?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Okay. So Gordon, actually, that's a nice segue to my next question. You launched that T2T workflow for POPC customers. How does the Nanopore-only workflow improve upon how T2T has been done previously?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Makes sense. Switching to the P2, I think you talked about over 1,350 devices in the field today. You're, I think, now in early access for the P2i, can you just tell us how the P2I fits into your overall product portfolio? And any early feedback from your customers?

Question: Tejas Savant - Morgan Stanley - Analyst : Yeah. There you go. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / NTS, MS.N - Oxford Nanopore Technologies PLC at Morgan Stanley Analyst Fireside Chat

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. And then the MinION Mk1D, guys, that's -- it's a really cool sort of instrument, hooks up to the new iPad Pro. Where do things stand on the development front there? And how are you thinking about that opportunity? Has your thinking evolved at all versus when you sort of first talked about it?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Makes sense. Gordon, I want to ask you on the path to a sub-$200 genome on the PromethION obviously. Can you remind us how much the genome cost today on your platform? And how long you anticipate it'll take you to get to that $200 or sub-$200 price point? And what gets you there? And also, I guess, on a related note, can you just speak to the applications that can be unlocked as you sort of move down that path?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. I want to switch to direct RNA seq. That was -- I mean, certainly got our attention back when you talked about it first at London Calling. Can you just talk about -- as you think about the applications that, that can unlock with that capability, give us a flavor for what's the customer feedback been? And how do you see that sort of journey and when do you expect to go live there?

Question: Tejas Savant - Morgan Stanley - Analyst : And similar sort of question on protein sequencing, guys. There was an article in, I think it was GenomeWeb yesterday that talked about a bunch of papers by a company called portal biotech around nanopore-based protein sequencing. Can you just give us an update on where your protein sequencing efforts stand today? What are the next steps? And is this a medium-term opportunity for you? Or do you think of it more of a moonshot category situation?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Fair enough. I want to switch to the customers, Gordon, a little bit, come at it more from the angle of the clinical customer base, the applied and industrial customers and then the biopharma customers as well. What area do you think you've made the greatest progress in over the last 12 months or so? And then we'll get deeper into each bucket?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Fair enough. Gordon, on the clinical piece, any color you can share on the TurBOT or early access for the -- I guess you got ElysION. Is that how you pronounce?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. I'm going to switch to the academic side of things or the research end market, Gordon. A bunch of questions around just government research funding being pressured, both here in the U.S. as well as in Europe. Obviously, in October, you've got the big funding cut for all of us. What are you seeing in your conversations with that customer base?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. And what -- where is your head at in terms of this push towards multiomics, where it almost feels like there's a view out there that perhaps like sequencing is not enough, and we need to do -- focus more, allocate more budget for the other omics, right? So is there a crowding out effect now? Obviously, Nanopore and long-read offer differentiated value versus short-read, but then you've also got proteomics and single cell and all of those other sort of omics that are making inroads. So how are you thinking about that in terms of the context of the budget?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Fair enough. And then on that note, and a bunch of questions on the competitive landscape as well. But before we get there, a bunch of sequencing companies are now focused on single cell even on spatial or systems biology for some of the incumbents. What are your plans there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / NTS, MS.N - Oxford Nanopore Technologies PLC at Morgan Stanley Analyst Fireside Chat And how do you view those adjacencies?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Switching to the competition, Gordon. One of the concerns, I guess, we hear from investors often is with the launch of the Revio, there's been a significant increase in available long-read capacity on the market. Do you see that as being an issue. I mean not just for PacBio, but also from the point of view of seeding the market in terms of Oxford Nanopore's platforms?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. So switching to Illumina, actually, and you mentioned the five-based genomes. So I'll start there. Not a whole lot of detail to go by yet, but how does -- how do you see the availability of that for free impacting sort of the value prop for Nanopore. Obviously, there's limitations of the short-read genome would still apply. But the fact that it's free, does that mean that they can corner a share of the market there?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. And then what about the comprehensive whole genome sequencing launch with the onflow cell library prep and they're committing to, I think, pseudogenes and large structural variants, phasing, et cetera, how does that sort of impact the value proposition for Nanopore?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. What about just Illumina's new pricing philosophy, Gordon. We've talked about shifting away from price per GB to a workflow-based pricing model. First of all, just curious as to your thoughts on whether that's a viable approach from customers resonating with its standpoint, so to speak? And then how do you see it changing the dynamic for the long-read side of the market?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Switching to BGI, end of August, they launched or, I guess, they unveiled CycloneSEQ. I believe it's going to be available later this year. First of all, how do you think sort of that Nanopore platform differs from what you guys are doing, particularly in terms of accuracy and workflow. And then if they do end up commercializing the system presumably with a focus on China. How are you thinking about sort of the competitive dynamics in China evolving for Nanopore?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Fair enough. The poster with the AGBT sponsors just came out, Gordon, I think it was yesterday or day before, and Roche is up there as the silver sponsor this year. So had to ask you like, what's the latest [scuttle] on genia, Stratos, is that something that we see happening in the next six months? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / NTS, MS.N - Oxford Nanopore Technologies PLC at Morgan Stanley Analyst Fireside Chat

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Fair enough. And then on China, one of the question -- well, two questions, actually. So PacBio is talking of bringing a benchtop instruments to the market later this year, benchtop long-read and they expect that to be a bit of a sort of a driver of growth for them in the region, specifically in China. How are you thinking about sort of that market opportunity, not just from the point of view of BGI and potentially sort of PacBio's benchtop, but also more broadly with some of the chatter around the upcoming stimulus, right? There's been sort of divergent commentary. Illumina has talked about not expecting too much NGS benefit from stimulus just yet. But we've heard sort of contradictory views from a couple of other people as well. So where are you shaking out on stimulus and then the PacBio slash the dynamics for that for you guys?

Question: Tejas Savant - Morgan Stanley - Analyst : Desktop potentially. I mean, they haven't put a sort of fine point on when exactly, but there's some chance we see it by year-end.

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. And speaking of the macroeconomic, geopolitical thing, Gordon, where are you guys in terms of the workaround that you guys were focused on for that NVIDIA GPU and then some of the trade restrictions?

Question: Tejas Savant - Morgan Stanley - Analyst : And then just a couple of quick numbers ones, Gordon, only easy ones. Charlie ensured that I only loft softballs at you in the numbers. So as we think about '25, I know you don't want to guide just yet, but what are some of the pushes and pulls there? And help us sort of contextualize '25 in terms of your path to the medium-term targets that you've laid out and reiterated. I think it's north of the low 60s% gross margin, top line growth of over 30% as well and EBITDA breakeven by '27?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Perfect. Just in closing, guys, at London Calling, Clive talked about a number of projects that you guys are revisiting, the full length chromosomes in a single-read, the voltage chip for rapid whole genome. And I think this is also the SmidgION ASIC as well. Obviously, these are still in development stage, but which of these excites you the most? And maybe just -- how are you thinking about ASHG this year? Not specifically as it relates to these projects, but even some of the earlier stuff we talked about on protein sequencing, direct RNA seq, et cetera? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 26, 2024 / NTS, MS.N - Oxford Nanopore Technologies PLC at Morgan Stanley Analyst Fireside Chat

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Fair enough. This was a great chat guys. So I appreciate you spending the last 60 minutes or so with us and hope to talk to you both soon.