Shareholders in Oxford Nanopore Technologies (LSE:ONT) were having a good day today (12 January), with the stock rising to the top of the daily FTSE 250 performance charts.
As I write mid-afternoon, it’s up 9.9% while the wider mid-cap index is down 0.2%.
Let’s take a closer look at Oxford Nanopore to see whether the news behind today’s rise makes me want to invest.
The company at a glance
For those wondering what this quirkily named business is, it’s a biotech specialising in DNA and RNA sequencing.
Its novel technology works by passing an electric current through a tiny hole called a ‘nanopore’ in a membrane (hence the Oxford-based firm’s name). This enables researchers to read the molecular code.
The company listed in late 2021, but the share price has fallen around 74% since then. That’s largely because it’s still posting losses, which turns off a lot of investors, especially when decent risk-free and low-risk returns can be made from cash and gilts.
Nevertheless, after today’s jump, the stock is up by an impressive 20% year to date. So, the market’s quickly starting to re-assess the company’s growth prospects.
Why is that?
The reason for today’s rise relates to Oxford Nanopore’s trading update for 2025. For the full year, the group expects to report revenue of approximately £223m-£224m, representing robust year-on-year growth of 24% at constant currency.
This was slightly ahead of its previous guidance range of 20%-23%. More impressively, this is significantly faster growth than the wider life sciences tool industry, which has hit a bit of a speedbump in recent years.
Impressively, growth of 20%+ came from all regions (Americas, Asia Pacific, and Europe, Middle East, Africa, and India). All segments contributed, including Clinical (up around 60%), followed by BioPharma (+30%), Applied Industrial (+27%), and Research (+15%).
The firm said growth was driven by its PromethION range, which grew by more than 40% on a reported basis. The PromethION is its high-throughput benchtop sequencing system.
Its other MinION devices are portable, pocket-sized sequencers about the size of a mobile phone.
Should I buy some shares?
I’m on the lookout for my first stock purchase of 2026. Does Oxford Nanopore fit the bill?
Well, the firm said it made progress on its path towards profitability. It expects to reach breakeven on an adjusted EBITDA basis next year, then turn cash flow positive in 2028.
Of course, loss-making companies like this add risk for investors because the business model hasn’t been tried and tested. If something happens to delay Oxford Nanopore’s progress, more cash might need to be raised, potentially diluting existing shareholders.
However, with such strong revenue growth and £302m in cash and equivalents, the path towards profitability looks clearer today than it ever has.
In theory, Oxford Nanopore could become a very profitable business in future, as it operates a classic ‘razor-and-blade’ model. This is where its innovative sequencing devices (the ‘razors’) open the door to high-margin revenue from consumables (the ‘blades’).
The market tends to place a premium on this type of recurring revenue, which could sustain its price-to-sales multiple of 7.
Adventurous growth investors might want to consider the stock. For me though, I’ll wait until Oxford Nanopore reports final results in March to hear more about its path to profitability.
