Oxford Nanopore unveils London IPO plans after Covid success

Analysts value the Abu Dhabi-backed company at £4 billion

A scientist at an Oxford Nanopore laboratory. Abu Dhabi’s International Holdings Company invested £39 million in the company last year. Photo: Oxford Nanopore

British genomics company Oxford Nanopore Technologies, a provider of rapid Covid-19 tests, said it plans an initial public offering on the London Stock Exchange, after analysts valued the company at £4 billion ($5.55bn).

The company, in which Abu Dhabi’s International Holdings Company invested £39million last year, is planning a free float of at least 25 per cent of its shares in the IPO, with the aim of reducing its losses to break even in the next five years.

The life sciences company’s DNA sequencing devices, key to identifying and tracking the spread of Covid-19 variants around the world, boosted the company's revenue by 22 per cent to £59m in the six months to June compared with the same period a year ago.

Oxford Nanopore's chief executive and co-founder, Gordon Sanghera, said the decision to list in London came “because the mood music" in the UK capital is good following the recent review of the stock market that aims to make it more attractive for companies to list.

"We as a company are already a global tech player and have a global shareholder base, and when we did an analysis we realised the shareholders you will pick up in London are a similar quality to those you would pick up in New York," Mr Sanghera said.

A London IPO would be a major boost for the LSE because most British pharma and life science companies tend to list on New York's Nasdaq, home to the world's biggest pharmaceutical companies.

One of the recommended rule changes, unveiled by Jonathan Hill in the review of the City’s listing criteria, will allow companies with a dual-class share structure to obtain a premium listing in London for the first time, which enables access to the powerful FTSE indices.

Oxford Nanopore, which will have enhanced shareholder rights for the chief executive designed to prevent a hostile takeover, plans to apply for a premium listing once the rule changes come into effect, Mr Sanghera said.

The last year changed Nanopore’s revenues completely.

Julian Roberts,
equities analyst, Jeffries

Spun out of the University of Oxford in 2005, the company provides DNA/RNA sequencing technology for sectors such as biomedical, infectious diseases, food and agriculture.

The investment from Abu Dhabi’s IHC last year was part of an £84.4m equity-raising exercise to help Oxford Nanopore boost its Covid-19 testing capability.

In May, the company held a £195m round in which Temasek, Wellington Management, M&G Investments and Nikon became new investors.

While the company had a £2.4bn valuation at its previous fundraising in May, analysts estimated a valuation of £4bn based on its 2023 revenue targets and its growth during the health crisis.

Julian Roberts, an equities analyst at Jeffries, said the company is a “frontrunner in the next generation of sequencing technologies".

“The last year changed Nanopore’s revenues completely,” he said. “The pandemic really put them on the map.”

Oxford Nanopore's technology allows scientists to sequence DNA, with its devices used in 85 countries to track Covid variants and the company sequencing about 18 per cent of all genomes globally.

The company doubled its revenue to £113.9m last year, but it had operating losses of £73.1m because of investments in R&D and new manufacturing facilities.

If the London listing goes ahead, it will add to a crowded pipeline of share sales expected to launch in London and other European centres in the coming weeks as 2021 looks set for record volumes of new listings.

London is in first position for the year at the moment with a haul of $17bn, well ahead of the approximately $11bn raised in Frankfurt and Amsterdam, according to Bloomberg. The two continental venues have grown sharply over the past decade, while the UK’s IPO market has spluttered.

“In a busy IPO market as we have had for the past 18 months, it’s quite natural to see venues across Europe win deals,” said Linda Main, head of capital markets advisory at KPMG UK.

“But there is no danger yet of London being unseated from its top position” and listing reforms should help to boost the City’s position, she said.

But London’s prospects took a hit this week after UK Prime Minister Boris Johnson said he would raise taxes to the highest level on record.

The mandate includes an extra 1.25 per cent levy on dividends, which could put investors off British stocks as equity income has been one of the market’s main attractions.