Good morning and welcome to Oxford Nanopore Full Year 2021 Results Call. I'm joined today by Tim Cowper, our Chief Financial Officer.

And after the presentation, we'll both be happy to take your questions. Oxford Nanopore, as you all know, has introduced a single molecule sensing platform for DNA, RNA sequencing, the life science research tools market, where which is the focus of our revenues is a $5.8 billion market with the potential for tens of billions of dollars for applied market testing.

Currently, we are in over 120 countries, and at the heart of everything we do, is delivering continuous relentless, agile innovation to our customers. We have a manufacturing facility that we opened in 2019, and we expanded it in 2021 to meet the ever increasing demands from our customers.

We grew company headcount from 600 to 800 people in 2021. So diving straight in here to our revenues for 2021, our headline revenue was £133.7 million, £6.7 million of that was a one off COVID-19 legacy diagnostic payment, which left us with a life science tool of £127 million versus £65.5 million for life science research tools in 2020, which giving us growth of 94% year-on-year.

Now, Tim will get into details of these numbers, but there were some tailwinds in the pull-forward on our Emirati genome project and also some strong growth in the second half of the year on the Omicron variant sequencing demand. In addition to revenues, one of our KPIs is a number of publications.

So since our launch of our early access program in 2014, we have published over 2,500 publications, a thousand of which alone were published in 2021. And that really gives you a sense of the growing momentum in the user community and the technical validation those publications bring.

In 2021, we launched our flagship Q20+ chemistry. On the sample side, we continue to respond to customer leads, launch needs, launching our rapid barcoding kit, our ultra-long sample kit and our ARTIC midnight kit for COVID-19 sequencing.

On the backend software, we launched the ability for customers to do their own workflows with EPI2ME labs, our COVID-19 push button workflow in EPI2ME and Remora which is a plug and play methylation base caller. The Q-20 results have been replicated in the hands of our customers.

The left hand box talks about the high accuracy even for the 9.4 chemistry, and with the improvements with Q20+, we see Mads Albertsen reporting near perfect bacterial genomes and Alexander Wittenberg talking about equivalency to PacBio HiFi reads. So real customer use case is replicating what we launch the product in.

So those innovations that continuous relentless innovations have really driven the user community and our growing revenues. As I've said, we have over 1,000 papers published in 2021.

We have over 6,500 accounts. We've scaled our ultra-high throughput genome program and we've kicked off a series of piloting human genome programs.

As we really start to push forward on showing how the breadth and depth of Nanopore data brings much, much greater insights into genomics. And on that point, I just wanted to remind you the highly differentiated features that Nanopore sequencing brings to the genome.

We read the native DNA, which is very different to all other sequencing bio-services technologies. This provides direct methylation without additional cost complexity and bias by software sequencing.

The re-length can be short, long or ultra long. The data is streamed in real time.

I've got a picture of a color copy Abbey Road here to illustrate why direct native DNA is so important. And there are no labels, no optics, no chemical reactions and fluidics which simplifies the sequencing platforms.

This allows us to design the tech to fit the biological question. Genomes and complex genomic biological questions do not come in one size.

Genomes come in tens of thousands of bases for viral genomes, millions for bacterial, humans and plants run into 3 billion for humans and tens of billions for plants. Our strategy is to have devices that fit the tech to answer the biological question.

Focusing on native DNA versus sequencing by synthesis, the richness of content of native DNA is only provided for by cost effectively by Nanopore sequencing. Traditional shortly sequencing by synthesis, as does Nanopore gives you single nucleotide variance and insertion deletions for the same price in the same experiment we get direct methylation.

In addition, long reads enable us to gain significant biological insights in structural variation and copy number variation again without cost and complexity. And if you add all of this up and put this in the context of the human genome, first and foremost, 8% of the genome is completely unmapped with short read sequencing.

But more significantly, at least a, a third of all disease causing variation is made up of variants that are larger than single based pair substitutions. So when we talk about the cost of the Nanopore genome, which at scale is $325 with a roadmap to getting us below $250 that includes the whole of the genome.

There is no additional cost for by software methylation. There is no additional cost and complexity for synthetic long reads, which add hundreds of dollars to the cost of the complete genome.

In 2021, we also saw strong growth in the use of Nanopore sequencing in infectious disease in fighting the pandemic. We have so far in this pandemic completed over 970,000 COVID genomes in over 85 countries, some of these countries in new sequencing.

And continuing with that theme of rapidly mutating infectious disease pathogens, we have been working with fine and unit aid to develop a genomic workflow for drug-resistant strains of TB. In 2021, we completed a 400 clinical sample evaluation and hit all surpass fine targets, the specificity, sensitivity, clinical accuracy and turnaround times.

The next step in this program will be to run this at three centers with 900 samples. In 2021, we also commenced the clinical proof of concept trial to screen patients who develop respiratory infections in the ICU on a metagenomics workflow, returning results in less than four hours worth typically four days for a path lab.

Of the first 100 samples completed, one-third had a drug resistant infection including one with Whipple's disease, which is a hard to grow pathogen in a culture-based path lab. Continue with the theme of rapid clinical insights on the same day, Euan Ashley at Stanford sequenced to human genome returning clinically accurate deep variant analysis in 7.5 hours.

That is a Guinness World Record. The sequencing time was 2.5 hours, and that was for 60x coverage.

That is a whole human genome, every 2.5 minutes. Think back in 2003 wasn't that long ago.

It took 10 years and cost 3 billion to sequence a genome. This really highlights how the technology, flexibility can bring breakthrough use cases.

And just to focus on one of the 12 patients that they looked at was a 90 day newborn with severe epilepsy. The gold standard clinical panel returned the result that was inconclusive after two weeks.

Euan and his team were able to determine mutations that would drive in the epilepsy and provide the right medication for this newborn. Now, we are really in the foothills of this journey and our focus is to really provide our platforms and that relentless continuous innovation into the discovery science and the translational human research phase.

It has only been five years since Nanopore was established and that richness of content combining single nucleotide variant, insertion deletions with methylation with long reads providing structural variation and copying variation will really bring forward these applied market tests that we will ultimately be able to translate to patients, translate to practice, and into the community. But that journey -- the second half of that journey is a two to three year program.

We have set up, as I said at the beginning of is called, Oxford Nanopore Diagnostics. It's a team that is focused on really starting to raise awareness and pull-through this discovery science, this translational work, and start to bring it closer -- over closer to the patient.

Now, with that, I am going to stop, and hand over to Tim will get into a deeper dive on the results.

Thank you, Gordon. Good morning.

I would like to start by reminding you about our highly differentiated business module. We don't sell devices.

We sell starter packs. A starter pack consists of the use of the device and all the consumers that you need to become familiar with the technology.

These starter packs for price to drive customer adoption, our entry level starter pack the MinION Mk1B is available for $1,000. And in many cases, this will be the first time that a customer sequenced a sample for themselves.

Other starter pack includes the MinION Mk1C for $4,900. The new P2 Solo from just over $10,000.

The GridION starter pack at $50,000, the P24 at $225,000, and the P48 starter pack for $310,000. Just to reiterate, our model is to introduce the customer to the technology through starter packs, and then drive sales of consumables that is kits and flow cell.

We focus on our customers and segregate them by revenue size into three categories S1, S2, and S3. Our S1 customers have annual revenue less than $25,000.

These are the genomic explorers, our innovators, and the core of our user base. We typical interact with these customers electronically through our online portal and in our community.

In 2021, we have just over 5,500 customers in this range. At the other end of the scale are the S3 customers with annual revenues greater than $250,000.

Typically, these are traditional sequencing projects performed in large centers. During 2021, these S3 numbers include a large contribution from the Emirati population sequencing project.

I will refer to this as the EGP from now on, but as I'll be showing you excluding the EGP we've almost doubled the number of customers in this range whilst maintaining average revenue size of approximately $630,000 each. In between these two groups of S2 customers with revenues between $25,000 and $250,000.

These are typically medium scale multi month projects. In many cases, they have relied on using core sequencing labs in the past, but now they're doing the sequencing for themselves.

We see these as our sweet spot that will drive medium term growth in both revenue and profitability. During 2021, the number of customers in this range grew by 70%, which was partly due to the pandemic, but we expect this customer base to continue to expand driving growth over the medium term.

So how has this customer focused approach contributed to our top line growth? Total revenues for the financial year 2021 were £133.7 million, which consisted of £127 million in our core life science research tools business and £6.7 million in our legacy diagnostic sales related to COVID.

Focusing on our life science research tools business growth was 94% in selling terms. This was considerably higher than we anticipated at the time of the IPO.

In particular, this was driven by three factors. First, the second half growth in the consumables used in the EGP was much higher than expected.

Looking at revenue trends over the last six months, I believe that between £5 million and £7 million was pulled forward into 2021 that we was expected 2022. Second COVID sequencing revenues were much higher than expected.

These were heavily influenced by the sequencing of COVID bearings. We estimate that total revenues in the year were £15 million to £20 million.

Based on where we stand today, we anticipate a significant decline in 2022. Finally, there was a continued strengthening in our underlying customer base across all geographies and all customer types.

This was particularly driven by customers moving from starter packs to purchasing consumables. This chart shows that our growth in life science research tools was driven by strong consumable sales from our large customer base.

I previously mentioned that our overall growth was 94% in sterling terms. Starter pack revenues grew by 68% in 2021 whilst consumable sales grew by 116% in the year.

This has resulted in consumable sales representing two thirds of our total revenues in 2021 compared to only 60% in 2020. So let's look at these numbers by customer type.

This chart shows the breakdown of life science research tools revenues by customer type. On the left of the S1 customers are innovators.

Total revenues in this group grew by 24% with an increase in average revenue size to $5,800 per customer. Revenue from the S2 customers grew by 62% in 2021.We had over 780 customers in this range spending on average just over $67,000 per year each.

Finally, the S3 customers drove our growth in the year, which we expect to continue at least over the short term. The EGP came in higher than expected and total revenues were £30.6 million, which was heavily skewed towards the last four months of the year.

But if you look at the S3 customers excluding this project, we have 55 customers with an average spend of approximately $630,000 each per customer that represents the revenue growth of 80% in this top category, excluding the EGP. As well as increasing the number of customers across our customer groups, we continue to diversify customer revenues by geography.

As I mentioned at the IPO, we have been strengthening our commercial teams across Europe and the US. This has been reflected in stronger sales growth in these regions.

This chart shows revenue growth in America of 69%. Most of which was in the U.S.

Growth in Europe is 45% whilst in the rest of the world excluding UAE, growth was 52%. We intend to continue to strengthen our resources across the U.S.

and Europe, as well as focusing on key hubs with particular revenue opportunities. So how does this diversified top line growth affect our profitability?

2021 growth has mainly been driven by increased consumable pull-through reflecting our growing and established customer base. As a reminder of our strategy, starter packs are designed as a short-term investment in our customers in order to grow our customer base whilst recurring high margin revenues are achieved through consumable sales once the customer is established.

Starter packs vary but typically we make a 30% margin over the range including our CapEx offerings. However, established consumables achieve margins of greater than 65%.

These include MinION flow cell and many of our sequencing kits that we have been manufacturing for many years. Moving towards these high margins is a PromethION flow cell, which has had its first full year in full production.

PromethION flow margins have improved during the year, and we expect this to continue to follow the trends step by the MinION flow cell, as it becomes established in full production. Further improvements in margins will be achieved through innovation, increased automation, improved design and further recycling of components.

Gross margin for life science research tools was 53.8% in 2021, an increase from 42.9% in 2020. This was mainly driven by two factors.

The increased proportion of our revenues from consumables compared to starter packs and the increase in margins from PromethION flow cell during the first full year of full production. Gross profit contribution in 2021 was £68.3 million.

That's growth of 143% from £28 million in 2020. Let's look at how this affects our income statement.

Our income statement for 2021 shows our overall revenue is increasing from £113.9 million to £133.7 million. Just to remind you that in 2020, we had £40 million of revenue from our legacy diagnostic COVID testing, which was less than £7 million in 2021.

Overall gross margin has increased from 41.2% in 2020 to 54.8% in 2021. Overall, gross profit increased from £46.9 million in 2020 to £73.2 million in 2021.

Gross profit grew by 56% on a revenue increase of 17.4%. Operating expenses increased to £237.8 million in 2021 from £120 million in 2020.

This was mainly affected by factors relating to the IPO and I will explain these in fall later. The result in loss before tax was £166 million in 2021 compared to £73.2 million in 2020.

Our focus is on adjusted EBITDA. As well as adjusting for depreciation, amortization and certain finance costs and income, we have also adjusted for costs directly related to becoming a public company.

We've adjusted for share based payments related to the founder royalty as well as social security costs on all pre-IPO share reward. These were £37.6 million and £39.3 million respectively.

In addition, we have adjusted to the IPO cost charged directly to the income statement of £4.8 million. Under this alternative performance measure, our adjusted EBITDA was a loss of £57.7 million in 2021 compared to a loss of £55.2 million in 2020.

At this point, I think it would be helpful to further analyze operating expenditure. Federal research and development costs in 2021 were £76 million compared to £48.6 million in 2020.

This is after deducting development expenditure that was capitalized under IAS 38. We continue to invest heavily in research and development.

Innovation is at the core of everything we do. In 2021, average head count in R&D increased to 290 people from 235 people in the previous year.

We intend to continue to recruit talent in our innovation area to drive further product improvements. Included within net R&D expenditure, in 2021, our share base payment charges and provisions for social security costs on share awards of £26 million compared to just over £3 million in 2020.

Excluding these charges, both of which were related largely to share price movements, total R&D costs were £49.6 million in 2021 compared to £45.5 million in 2020. R&D costs continue to grow year-on-year, but growth will not be linear.

Some use expenditure includes additional projects such as late stage chip development costs such as in 2020. Selling, general, admin expenses increased to £161.8 million in 2021 from £71.4 million in 2020, 2021.

SG&A costs included £75.3 million of share based payments and social security costs related to share awards compared to £3.7 million in 2020. A substantial amount of these charges relate to share price movements and revenue growth.

For this reason they, were adjusted for in our alternative measurement on adjusted EBITDA. Depreciation and amortization was £15.6 million in 2021, compared to £10 million in 2020.

We continue to invest in our commercial infrastructure and total selling distribution costs were £24 million in 2021 compared to £20.7 million in 2020. We expect sales and marketing expenditure to increase substantially in 2022, as we return to face-to-face meetings and international travel.

In addition, the full year cost of the increased commercial infrastructure will be realized in 2022. As a reminder, 95% of our revenues in the live science research tools business are exports.

Other general & admin costs increase from £36.9 million in 2020 to £42 million in 2021. This is as a result of strengthening our corporate teams to prepare for becoming a public company together with improving our IT infrastructure and capabilities.

In addition, we incurred £4.8 million of one-off IPO costs in the year that were charged directly to the income statement. Average hedge count in 2021 increased to 280 people from 186 people in the year before.

Recruitment focused on sales and marketing, information technology and in improving the professional infrastructure required for a public company. We've continued to invest in the business in 2021.

We spent £8.8 million on purchasing property plan and equipment. This was split between additional and improves laboratory facilities, and production expansion.

In addition, we spent £12.7 million on assets under lease. These are the PromethIONs and GridIONs that are held at customer sites.

These assets will continue to drive consumable growth and profitability over the next few years. Let's look at the rest of the balance sheet.

I'd like to highlight two aspects of the balance sheet. Inventory has increased to £63.1 million principally due to our long term agreements with key suppliers focused on core components.

In particular, inventories related to flow cells have increased by £14.8 million and devices have increased £4.5 million. Total cash resources at the end of '21 were approximately 618 million.

This comprised cash and cash equivalence of £487.8 million and short-term investments of £130.6 million. These are principally deposits at banks with the duration of less than 12 months.

We completed two fundraisings in the year including raising net pound at the RPO of approximately £407 million. Before talking about our guidance, I'd like to recap on revenues for 2021.

Our lifetime research tools revenues in 2021 were £127 million compared to guidance that was updated on the 7th of January of greater than £120 million. As I mentioned earlier in my comments, there were two elements of 2021 revenues that distort the underlying growth from 2021 to 2022.

First, we estimate there will be a significant fall in COVID revenues in 2022. Second, we estimate that a proportion of the EGP revenues were pulled forward from 2022 to 2021 resulting in lower quarter one revenues this year for this project.

Factoring in this timing effect, we now expect EGP revenue in 2022 to be in the range of £20 million to £30 million. We believe that revenues for 2022 will be between £145 million and £160 million with a continuing growth story we expect our revenues in 2023 to be between £190 million and £220 million.

Please note that next year we will only be giving guidance for one year, which we feel is appropriate for an established public company, i.e. this time next year, I will only be talking about 2023 revenues and margins.

Our overall gross margins in 2021, moved towards 55% from nearer 41% in 2020. We expect this trend to continue our margins to be greater than 60% in 2023, with the expectation they will be greater than 65% in the medium term.

Based on that business plan, we are still targeting EBITDA breakeven by 2026. Finally, I feel, I must point out some of the risks we face.

I explained at the IPO, how we manage key suppliers through a risk based approach. This has served as well so far, and we've been able to increase our inventories in many of our core components from key suppliers.

However, the current climate facing the Company is challenging. Inflationary pressures exist across all commodities and components.

Shipping products around the world is increasingly difficult and expensive. The uncertainty in Ukraine has come at a time when we are recovering from Brexit and the pandemic.

I'm pleased that we had limited direct exposure to these areas. We are not seeing any immediate reasons to change our plans or our guidance, but we remain highly vigilant whilst we monitor developments.

At this point, I'd like to hand you back to Gordon.

So thanks, Tim. I'm sure you all agree we've had a good year and made great progress in 2021.

And you can see from our 2022 guidance, we expect to see continued strong growth. Now, as I said earlier in my presentation, our focus is to really ramp up this innovation engine in life science research tools in discovery, in translational research to really bring the native DNA, bring the tech to the customer stories to life through a transition into clinical verification, then validation, and then near the patient and directly into the community.

That is a medium term goal. The short-term vision is to continue to pull this relentless innovation into this ever faster spinning wheel to create the use cases that really take us and empower us to the next level of genomic biology.

Now, we will open up for questions. Thank you.

I've got two questions. First for Gordon and then a follow-up Tim.

Gordon, I just -- I guess sort S2 growth stood out for me, it was a big driver up 62%. And you've recently opened up preorders on the P2.

Can you just give us a sense of what demand's been like for that? And are you on track with that for 2022?

Could that be a potential accelerator? And just any comments on the impact on the GridION?

Sure. So, if you look at the gap between a GridION and PromethION 24, there is quite a big lake there, where we think customers want to play.

We know that because we can see the utilization patterns on P24 on P48. Remember, this is not batched by you can run one flow cell or you can run 48.

So, the P2 will allows us to not try and figure out whether we need a 4 channel or a 6 channel or a 12 channel because they can daily change them. So, we think, it will be both a driver in S2 segment, which you're absolutely right.

There is an underneath that central call labors. There is a real demand that we think we have with our value proposition of affordable, accessible, no CapEx.

The P2 demand has been strong. We're on track for the half second half, getting add to the hundred customers.

What's interesting is. We've actually had strong interest from our MinION customers.

So, this really illustrates that if you make it at low enough price points, you will probably allow people to do more powerful biology. I mean, think about a computer, right?

What it took to put somebody on the moon? There's more compute in your washing machine today.

So, the more power you give these people, the more genomics they can do. I think in an affordable, accessible manner, it'll stretch across because at the other end on the F3s, I think they'll daily change 2, 4, 6, 8, or 12 people, and do significant stuff there.

So, we see it getting across all of the segments. With respect to cannibalization of GridION, you didn't say that, but that's not going to happen because they're completely different outputs.

You're looking at sure sharp panels and amplicon sequencing and viruses, which as I said in my presentation, that's a different segment to do higher throughput, which is where PromethION flow cells come in and that's all about the tech fitting the biology.

Yes, that's interesting on those MinION users sort of extending to P2. I guess that's a solo or is it all the way to the fill on P2?

We don’t know yet because we haven't really delineated that in terms of interest depended on where they might go. The other thing to remember is you can plug the solo into GridION compute.

And then, just one for Tim. Just can you help us overall with the underlying growth rates and guidance?

I guess you've been quite clear on the EGP, but just if we out the EGP and the COVID tailwinds and can you just give a sense '21 and then just four for ’22?

Thank you, Stefan. Yes, we've been showing how -- our diversified customer base has really contributed to our growth.

You just mentioned that 62% in growth in the S2 revenues. If you look at the S3 revenues excluding the EGP, it's 80% growth in that category.

So, we feel confident about the where the underlying growth is going. When you look at the COVID sequencing, we estimate to be between £15 million to £20 million.

That is across all of those customer regions and all geographies. It's very put out -- we've actually had COVID sequencing 85 countries.

So stripping out the EGP and stripping out the COVID sequencing, and making similar adjustments to those that were in 2020 as well. We see strong and diversified growth of a rate greater 30% -- between 30% and 40% in 2021.

And we remain committed to the guidance we gave that the IPO of medium term growth of greater than 30%.

Just to clarify on that final point because I guess you just said that you're forward guidance is going to revert to one year, but beyond that, the midterm, you still committed to 30% plus.

We believe that's how we are intending to run the business, but that's correct. And just -- that is our guidance not at ambition.

I have three, please. The first is on the S3 customer category.

Excluding the EGP, it seems like you had a very big step up in the number of customers. And I would imagine that the more mature customers would pull-through more consumables.

Can you give us a sense of what the difference might be between mature customer pull-through versus say year one customer pull through?

Thank you, Charles. When we start with a new customer, it simply starts to with the start pack.

So they would very much be focused on the start packs for the PromethIONs and GridIONs in particular last can last for 12 months, they have used for those consumables for 12 months. With the numbers of consumables that we give with those starter packs, they can use those consumables quite quickly, and it varies from customer-to-customer.

But the GridIONs is plug in place, but very often they will get through their starter pack revenues quickly, and then move on, and that's perfectly possible in the PromethIONs as well. So, it is once you get past the starter pack stage, all of our revenues, really apart from a little bit of licensing, our consumable base, that is the basis of the business and that's where we focus.

So that would always be where we expect mature customers to go.

Okay. And then, the second question, please, on your investment plan for 2022.

Just in terms of how much you're expecting to increase your investment in the business in staff in CapEx, et cetera.

Okay. We made a commitment to significantly increase our sales and marketing and commercial operations.

And we continue to do that. We've recruited since the IPO and just before the IPO we've recruited some senior leadership.

We feel as though we're making good progress in that respect. Other sales and marketing costs will also increase.

So, as I mentioned, just because we're back to face to face contact and people are traveling again and we're getting to meet our customers. So those, there, there will be significant increases there, we are continued to spend money on R&D and to really try and increase the talent that we have within our R&D team and continue to work to on that.

So that will also be an area of, where we expect expenditure to increase significantly. As far as CapEx, the real area of CapEx that we focus on is the one that really drives the growth, and that's placing PromethION and GridION at customers.

We have -- those are the assets that really, really drive the consumable growth. If you look at ordinary CapEx, we have a large manufacturing facility.

There's always improvements you can make to laboratories and things, but similar levels to this year would be my expectation for ordinary CapEx. And we will continue to invest in the hardware that the customers need in order to purchase consumables and be successful with our product.

Just clarifying that. Do you have a sense of how big the team might be in, let's say, a year's time in terms of number of employees?

It’s a moving piece, Charles. We set out this sort of two to three year headcount improvements, but like we said, 18 months and we've made good progress since the IPO, but the cadence of the hiring and on-boarding and training kind of makes that not a linear process.

And we're pleased with our hiring process, we strengthened team senior leadership on the hiring side and being a public company helps. We're able to offer very competitive PLC packages as well.

And, but right now, we've said we've grown from 600 to 800. And what that looks like this time next year, we'll report back to you in September and this time next year.

Thank you. Just last one, please.

I know that your technical differentiation goes beyond just read length, but have you heard any customers talk about synthetic long reads either from Illumina or elements, obviously, both have been talking about that recently?

I don't think they're out there yet. The only thing that we can do is, dig into the valve and look at molecular.

We have some senior leadership in marketing from 10x Genomics. So we know something about that, but we will hold our counsel until we've seen the products in the hands of customers.

I will emphasize if you could choose between a synthetic long read and a native long read. Native always wins.

Remember, particularly because you get methylation and bisulfite sequencing is pretty nasty. There are certain labs who won't even let you do bisulfite sequencing because of the care of proper agents required to get the results out, notwithstanding the cost and complexity of bisulfite sequencing and the biases that brings it.

A couple of questions, but I'll ask them one at a time. One question was so LSRT revenue growth in S2 and S3 was a big driver and partly because of UAE broke out.

But I think, S1 group bit more slowly in the second half. So why -- if that's right, why did S1 slow?

And how are you thinking about the growth if we look through COVID in UAE contributions? How are you thinking about the growth of the three different segments in '22 and '23?

That's the first question.

So, the way to think about the MinION, it really is almost like a direct to consumer play, direct to the genomic researcher play because it's a $1,000 consumable pretty much. And over the five years, since we launched a product, we see people come in, do a PhD, run for a while actively, and then disappear then reappear as an adjunct professor and so on.

So, you got to look at them in isolation. They really are very different go-to-market strategies, customer spend patterns.

Underlying 25% year-on-year, that's something we've seen since the down of map and when we continue to see that. So that's where it should be and it's where it is.

And it's difficult to compare that to an S2 and S3. They're very different types of customers.

There's a technical reason for S1 as well and as customers grow and we're in a growing position, our customers, there's a natural tendency to move from S1 to S2 as well. So, some of those larger customers were in S1 have moved to S2 and contributed to the S2 growth?

And so maybe just to follow-up on that. So would you think that the three segments will grow a similar pace?

If we're taking out UAE in COVID, you need to make similar pace to each other in '22 and '23 or quite different growth rates or more than that?

Yes, we think 30%. Sorry to interrupt.

30% across the board, whether one ends up 33% and another ends up '22%, '23, it's 30% across the board.

And the second question on UAE contract. In 2022, you're thinking could be £20 to £30 million, but you've given '23 guidance.

But what does the '23 guidance assume? Will it be a similar amount?

Yes, we signed a $68 million contract last November, which technically can last for up to three years. As we've seen customer targets can sometimes accelerate or change the cadence per, but we are estimating £20 to £30 million in the current financial year.

And there's no reason to assume it will be any different year after of that. Just to sort of emphasize, we have this focus on all of our customers and we have a risk based approach to how we do our planning, and we're working on opportunities that will affect the S3 numbers and will be -- we have assumed percentage of success and both move up and down over time and it’s the diversification of the customers that really is going to build our growth, and that's where our focus is.

And final question for me. I know you're having your London Calling event in May.

Is this going to be more about application of your existing products, interesting places people have used them or where they could use them? Or could we see material new product updates?

Could there be some unveils in terms of products or new iterations of products?

So the relentless agile innovation drive tends to be, how do we make adoption and happen more quickly. So that's a confluence of platform enhancements, existing platforms, new platforms like P2 chemistry updates, kits responding to what users need.

So it'll be across the board. It'll be similar to previous years.

So, it’s going to be an -- we're excited actually -- it's going to be hybrid this year. So, we're looking forward to meeting customers face-to-face.

So I'll keep it to one, I think actually in this instance. And I'm just curious interested on the Oxford Nanopore Diagnostics team.

You highlighted obviously on the bacterial side. You've got a very cost effective solution there and you solve a lot of the problems with culture and then ID and AST.

I mean, that workflow has been dreadful for a long time as the industry standard. So, it's you've got quite a disruptive product here.

I'm just curious whether it's within bacterial or just overall. What do you think needs to happen because the cost and the price is kind of there?

What do you think needs to happen to really drive that adoption overtime? And how is the diagnostics team going to help push that?

Is it about familiarity with the technology and just awareness versus support? Or how do you view the biggest hurdle that's stopping us given the cost and efficacy is basically there?

Sure. Thank you.

We agree the technology is really there to solve real time point of care multi-drug resistance and that thematically an area that we will be looking at. The ONT team is a separated out tech and commercial team that is really looking to publish market these applications to the traditional big players, to see where there is going to be traction.

Disrupting any diagnostic play is very challenging. Having previously experienced how difficult it was to change the world of blood glucose direct to consumer home testing.

This is not a trivial challenge. What I can say is the Company as a whole from production through to regulatory is geared to be able to do diagnostic products because we launched and released a CE-IVD regulated LamPORE diagnostic higher the pandemic.

So, we have the deep knowledge to do all of this. The real challenge is to now push-through these applications.

And we've been looking at this for a very long time because infectious disease and looking using genomics is something that we felt we should be able to break into this market. And I think the real important thing here is we really realize through our customers that actually in critical care is where we think we might get traction quickly.

And that's kind of the -- that's where we are going with this. And I wouldn't say that's a fully formed strategy and that's what we're going to do, but that is what ONT’s job is to explore, to understand, and then maybe to turn that into a product development pipeline.

That has significant challenges yet we have to do verification. We have to win the hearts and mind in the path lab people.

Then we have clinical trials. So, it is journey and it's expensive and it takes time.

So picking the right pathway here is what the ONT team is tasked with do to.

Congrats on the results and thank you for taking my questions. I'll start with one and follow-up with a couple more.

So taking into account that you reiterated your gross margin guidance despite some of the cost pressures you highlighted. Could you please take us through the profitability tailwinds that you're expecting to compensate through these pressures, and in particular, the ones that look better than expected since the last time you set gross margin guidance?

Thank you.

Yes, so the, just to sort of reiterate we've confirmed that we continue to look at gross margins greater than 60% in 2023 and greater than 65% in over the medium term. There are many factors in our gross margins, including our manufacturing techniques, which improve over time as we get used to manufacturing particularly with, PromethION, which had really did have its first full year and full production last year.

And we will continue to get better at manufacturing that as it follows the same trends that we saw with the MinION flow cell. There's also, we are bringing in automation across the various manual processes that we have.

There is -- and we continue to work on that. Recycling is -- recycling of components is really, really important to us for many reasons, one of which is margin.

And we continue to work at that. I think the thing that I've been pleased that we've managed to maintain this year.

We have managed to grow our inventories. We have managed to keep our core suppliers very close to us, and they've been helping us in order to help us grow our inventory.

So from a short-term point of view, we feel in a relative strong place. And we are -- we will continue to focus on growing, growing those margins.

So, all of those margins were greater than and greater than 60% and greater than 65%. We can continue to work on those over time.

Oh, that’s clear. Thank you, Tim.

And could you please clarify what part of the share based payments this year we should consider as nonrecurring as well as some color and how we should estimate these moving with regards to the share price? Just want to make sure whether an about £25 million share based payment annually will make sense for the user?

That's a reasonable start to, to, to look at. The founder LTIP, we treat as an adjusting event, but that will continue to incur share based payment charges and national insurance charges over the course of it -- could be for up to five years from when they were granted last June, that entirely depends on revenue growth and it's driven by revenue growth.

So that will go up or down, depending on how plans and actual revenues adjust. National insurance on share based payments are entirely related to the movements in the share price at the period end.

So, they're not predictable in that respect. So, it's very hard to give any guidance on that at all without marrying what the share price is going to be on 30th to June or 31st of December.

We haven't adjusted for what we consider to be the normal course of business. So, it's about £25 million that is in there that isn't adjusted for.

I think that's a reasonable way of going forward as we've introduced the new LTIP scheme for all of our employees, and they will be receiving the first awards under that shortly. And so, there will be an ongoing cost, and I think that's a reasonable way to look at the number in that sort of region that we won't be adjusting for.

Great. That's very clear.

And last one. So, Genomics England and NIH projects, so how far do you think we are from seeing these in full ramp of mode?

I think genomics and then we're targeting at 200 loss of per week run rate, when do you expect both to sort of maximize the contribution here? Thanks.

That's a very good question. The challenge is one of technology acceptance.

I think we're beyond the technology validation phase. It's now -- you look at population scale genomics, they're geared up around a large monolithic machine in large central facilities and that's safe for people.

And so breaking that is channel, hence our strategy to really focus on getting the discovery piece and the translation research to make it so compelling that the richness of content that we talked about that reading the actual DNA and the long read provides really makes people want to have to overcome that energy activation barrier to change how they do things. And that's not for reveal and very hard to predict when the dam will burst, but I can reassure you we have lots of little hammers bridging that.

I have three please. I'll ask them in turn.

So firstly, just following-up on the EGP, your expectation of £20 million to £30 million this year and £5 to £7 million from last year looks to be quite a strong start to this $68 million contract, which is set over three years. Could you quite possibly get an increase to the size of this contract on the other side given the potential to address a larger part of the local and MRRT population and related to pop gen sequencing.

Could you talk a bit about your progress and your confidence around potentially having some others under your belt in the short term given your track record here?

So, the 68 million over three years is the kind of baseline. The program allows them to flex around in that.

This is the second part of the contract and we have momentum with them, and we like that. Whether that leads to the next phase or is there another phase?

I mean that will be something that will be obviously talking to them and working with them on. We're very excited about entering this next phase, and we believe we have the right level of beat rate in that program.

With regard to other pop gen programs, as I said, in the last question, there's a real activation barrier to switch. So getting those pilot scale one such as NIH gel and others, and really gaining technical momentum that makes it very compelling.

It's only 2019 when talked about how 34% of all diseases are caused by other things in single nuclear type variants. And that's a very short amount of time in science technology validation.

But we have seen strong growth in methylation papers and structural variation papers, and that gained momentum and acceptance will lead to others. So, we have a two-pronged attack look at large scale programs, and we have those in the opportunity funnel and also to really push small pilot scale, because we are uniquely positioned to do that at a affordable accessible way.

And we think will be key as well in helping to make it compelling that Nanopore is not a nice to have, it's a necessity and that's really the strategy.

That's helpful. And then, finally for me on guidance.

Could you help break down the extra 10, 15 million of revenue this year and 20 to 30 next year in terms of those three factors that you talked about? And are you assuming zero COVID sequencing sales in 2023?

Yes. So, the COVID sequencing revenues, they are still happening.

We are right now expecting a significant decline but we -- so it is very hard to predict that one, but right now let's assume there's going to be a decline. Our focus on our broad based growth across all of our customers and all of our regions, and that's how we look at it.

And we -- there is obviously one large customer we've talked about, but other than that we continue to grow with -- we are growing with our customers and they all contribute in many different ways and to the overall growth rates.

Hello. This is Kate Kalashnikova from Citi.

I've got two questions, one on the guidance and one on the competitive environment. So, starting with the guidance, the mid-point of your guidance assumes quite a step up in underlying self growth excluding Emirati project and COVID surveillance benefits.

What gives you confidence to expect this underlying acceleration this year? And what needs to happen for Oxford Nanopore to deliver at the top end of the guidance in both years?

Would it require a major new construct or extension of the Emirati project?

I think, thanks, Kate. The, we've said that we believe the growth in '21 and '22 will be greater than 30%.

We've given you a guidance range. At this time we can't give you any more granularity than that.

What we see in Q1 that leads us to be strongly greater than 30%. And that range.

I guess I was just trying to understand was the top end of the guidance is still possible in your view without major new customers contract for large scale population sequencing project.

Yes. The, we, it's really hard to predict.

Yes, it is possible with that other there's broad based diverse growth across all our segments. And one of the interesting things we did see in ’21, there was some later pent up demand, so that may come back, but really like, we're trying to predict what happens post pandemic here, and that's just quite hard to do.

Okay. Let's deal with Roche expanding first.

Roche have been doing this for almost a decade when they acquired the Nanopore company. And then they shifted from trying to do sequencing to taking a base expanding it 10 times and then reading it, it limits a read length.

It adds huge cost and complexity. It completely removes -- it's a synthetic read by any length.

And what we have as I've said is the, and we are the only company today that measures the native DNA at any read length. I haven't talked about short read lengths today, short, long, medium, super long, which retains a methylation, which is really important.

And I think that also is a differentiator with Illumina. Now you mentioned Illumina have a long synthetic long read.

It's not clear to us what they have and whether it's a kit that goes into it, existing instruments or something else, not withstanding all of that, right at. As I pointed at 34% of all clinical diseases are missed because you don't have the single nucleotide variants, plus the methylation, plus the structural variation, which you get from long reads plus copy number.

So we'll see how this plays out. We cannot predict what it will look like.

We like that Illumina and I finally think that long reads are important, but 10,000 pair is not --10,000 base pairs is not a long read, not by any strength, but not from a technical perspective anyway, and clinical perspective.

I'm going to talk about the competitive environment here. Can -- how do you envision the prices of sequencing on maybe a cost per gig or whatever metric you want in 2022 and 2023 with the launches of some competitive launches in the short read market?

And do you feel pretty isolated because maybe your technology is used more for read length speed and other kinds of things with what I think would probably be pretty dramatic price increase, decreases from what we've seen and since maybe 2014-ish?

So two ways to think about pricing here. Cost per gig is important to some customers, but there's a much broader church.

Affordable, accessible, sequencing with a MinION is a very different customer base to maybe somebody doing medium to height throughput sequencing in labs. These new entrants claiming to be faster and cheaper than Illumina are direct generics to Illumina as it comes off patent.

So, there'll be an interesting game that that gets played out in those highly concentrated sequencing centers today. Our commercial adoption is a much, much broader church and it penetrates all the way down to PhD students, right back up to large scale programs such as EGP.

And so, I don't really think that some those price points will be of competitive against us because remember, you've got a factor in the CapEx and the depreciation. I mean they talk about headline cost per gigabits.

They seem to ignore what the labs have to face and the procurement guys, which is the amortization and depreciation of instruments as well and notwithstanding the CapEx. In addition and strategically, our mantra is affordable, accessible broad.

And I don't think that where we position ourselves, this is a competitive threat to us. We are isolated in that.

I appreciate it.

Uniquely positioned rather than isolated is how I would put it.

Hi folks. Sorry to put you one more at end.

Just and we covered most things, but just on the progress on taking out of silicon out of your chips making it even cheaper, more portable. We saw some encouraging proof-of-concept at the NCM meeting in December.

Just any update where you are with this and how far from the market these new products might be?

So, there are two ways we take silicon out of the chip. One is the short term.

What we call the glass chip or plastic chip. I think it might have been referred to in the IPO.

That's just refactoring and a cheaper way of manufacturing current products and that's progressing well. And that is a foundry based development program.

So the chips have to go off, we make a design change, it takes 16 weeks, 12 to 16 weeks. We get stuff back.

So that's an iteration based process. With regard to the voltage chip, which is the sort of step change which allows us to do orders of magnitude more channels on the same silicon footprint that is progressing well, but that is a real disruptor and a big step.

And we're comfortable with the progress we're making on that trajectory, and we're excited about it for the medium to long term.

I'd just like to thank you all and great questions. It's been an exciting six months for us.

And as you know, our maiden results, we're very pleased with the progress we've made. And we want to thank you all for your continued support.

Thanks very much everybody.