Good morning and welcome to our 2024 full results. I'm Gordon Sanghera, Chief Executive of Oxford Nanopore, and I'm joined today by our CFO, Nick Keher. This March marks the 20th anniversary of Oxford Nanopore, which I co-founded in 2005 as a spin-out from Oxford University. The company's vision is to enable the analysis of anything by anyone, anywhere. At the core of the company is our electronic single molecule sensing platform that we launched just over 10 years ago. A decade of Nanopore sequencing has delivered over 14,000 customer publications, with approximately 3,000 publications in 2024 alone. Today, we're established in more than 125 countries. We have seen sustainable compound annual growth over the last three years, but greater than 30%. We have manufacturing built from the bottom up that is scalable and will allow us to hit our medium-term growth and margin targets.
Getting straight into our results for 2024, in the second half of 2024, our revenues were £99 million. That is underlying year-on-year growth of 34% on a constant currency basis. Our full year revenues were £183 million, which is 23% underlying constant currency growth. This is in line with our full year guidance of 20%-30% that we set out last March. And I want to remind you that 74% of our revenues come from our consumable sales. That's our flow cells and kits. So how are we growing in what has been a very tough and challenging life science research tools market compared to our peer group? We have targeted end market applications, areas where only we can provide the biological insights. These are, of course, in the research markets, but also in biopharma, where customers are currently evaluating Nanopore sequencing. This segment grew nearly 18%.
Clinical customers who are developing RUO CLIA-waived tests in the short term, with a medium to long-term view to provide fully regulated tests in this segment. And this segment grew 12%. And applied industrial customers, including plasmid sequencing service providers and synthetic biology service providers. And it was our fastest growing segment at over 40%. Growth is also fueled through innovation driving platform adoption and increased customer utilization. 2024 saw strong continued demand for our P2 platform. At the end of 2024, we had more than 1,900 P2 sequencers in the field. We continue to push the envelope on accuracy and output, which drives up quality and reduces the cost of sequencing, both key drivers of platform adoption and utilization. The continuous improvements have contributed to a 36% increase in PromethION flow cell utilization from the first half to the second half of 2024.
A real win for us in 2024, and something that we'll consolidate and build on in 2025, is targeting end-to-end workflows, driving adoptions for applications in research, in biopharma, in clinical, and in applied industrial markets. These workflows are ever increasingly moving towards regulated workflows. In 2024, we launched GridION Q-Line. In 2025, we'll be rolling out PromethION Q-Line. Our regulated platforms will all be coupled with our sample-to-answer automated platform, ElysION, which is now in early access. Now, moving on to our revenue guidance and medium-term outlook. Our guidance for 2025 is 20%-23% growth on a constant currency basis, which reflects the strong demand for our technology and also the risks around US federal funding and export control restrictions, which Nick will talk about in more detail. We expect to deliver gross margin of approximately 59% in 2025, representing an increase of approximately 100 basis points year-on-year.
Overall growth in adjusted costs in 2025 is expected to be at the low end of our medium-term OpEx guidance, reflecting our continued focus on driving operational efficiencies in the business. Again, Nick will talk about this in more detail in his presentation. Our medium-term guidance remains unchanged. We continue to target more than 30% revenue growth on a compound annual growth rate through our targeted workflows and applications that are unique to Nanopore sequencing. We are targeting greater than 62% margin, and we will continue to be disciplined in our OpEx spend to meet our goal of adjusted EBITDA break-even in full year 2027 and being cash flow positive in full year 2028. Summarizing before I hand over to Nick, one of the questions I get asked a lot is, what is it you're doing that is enabling you to grow in this tough market?
We're targeting markets where our platform is highly differentiated from all the other short-read legacy systems, which include recent potential new entrants in 2026. That differentiation allows us to target hotspots in markets where only we can provide the biological insights. Our innovation and continued commitment and investment into new workflows drives adoption of new applications on our platforms. And last but not least, in the last three years, we have invested heavily in doubling our commercial infrastructure and operations, and we're now reaping the benefits of that investment. Thank you very much. And now I'm going to hand over to Nick for a deeper dive into our financials.
Thank you, Gordon. Turning to the first slide, FY 2024 revenues finished at GBP 183.2 million, up 11.1% at constant currency and 23.3% on an underlying constant currency basis, which is in line with our stated guidance of 20%-30% growth and in spite of what was challenging in market conditions. We are particularly happy with the step up in second-half revenues with underlying constant currency growth of 34%, and as this was consistent across all regions and largely driven by increasing utilization. On balance, I think it's fair to say we believe that we could do better as we go into 2025 from an operational perspective and closing out the year. And as such, we see opportunities to improve upon our performance going forward as we continue to mature our processes and our business as a whole.
On gross margins, we finished at 57.5%, slightly ahead of guidance, representing a material improvement on FY 2023 and driven predominantly on an underlying basis by both manufacturing improvements and recycling activities offset by mix and currency. While this represents a reported improvement of 420 basis points on the prior year, I would note that this has helped by a lack of exceptional items in FY 2024 versus FY 2023. The resultant increase in revenue and margin alongside a disciplined cost structure and our adjusted EBITDA loss finished the year at GBP 116.1 million, ahead of consensus estimates. While this is an increase of 11% on a prior year loss basis, we are starting to deliver operational leverage, which we hope will begin to provide comfort on our route to break even and supported further by a small restructuring program completed post year-end in Q1 2025.
Our balance sheet remains strong with GBP 403.8 million cash at year-end and supported by the GBP 80 million raise from new and existing investors in the second half. We have also taken further steps post year-end to improve our go-forward cash flow position by updating our pricing and business model, which alongside significant cash resources support our ability to meet and surpass both EBITDA and cash flow break-even. Turning now to slides on revenue analysis of our reported figure of GBP 183.2 million. On the left, I would like to highlight the EGP contract and COVID revenues collectively representing a GBP 16 million headwind in 2024, which we managed to replace with new business and hence underlying growth at constant currency of 23%, a better representation of our performance, rather than constant currency growth of 11% and reported growth of 8%, with currency itself a GBP 5.3 million headwind.
To put our underlying growth into perspective, our top five customers represent just under 8% of our total revenue in 2024, which for me speaks to the quality of this growth coming from such a broad base. On the right-hand side, we show the split of revenues by device and services representing 26% of revenue and consumables at 74%. As we move to a more CapEx-first approach for our devices, I would anticipate this split changing and a higher proportion of device revenue of potentially 40% before normalizing back as customer utilization continues to ramp. While underlying growth does look weaker within consumables than devices, this is due to two items. One, a high proportion of CapEx sales year-on-year, and two, a mix effect with MinION and flow cell revenues declining and PromethION increasing to be the largest component overall of our consumable sales.
On the next slide, we have both the regional performance and performance by product range. On an underlying basis, the EMEA region performed best with growth of 31.1% overall and 44% in H2 driven by new customer wins and increasing utilization, helping offset the loss of both the EGP and COVID revenues. On a reported basis, the APAC region was strongest, up 18.6% and 22.1% on an underlying basis, with the H2 underlying growth of 33% and in spite of a drag on growth from China. Across the Americas, we delivered an overall underlying revenue growth of 7% in the year, with the second half stepping up to 13% from 2% in the first half, as previously guided to.
While it was pleasing to see a step up in underlying growth in the Americas region, particularly in the second half, we are cognizant of new risks to federal funding, which we believe we'll cover later. On the right-hand side and revenue by product range, we are pleased to report underlying growth of 55.8% for PromethION, driven by increasing utilization across larger devices and the continued launch of the P2. While MinION revenues declined close to 10%, I would just flag that this decline is almost entirely due to the removal of the Mk1C device, and with minimal sales of the Mk1C in 2024, we hope this represents a low for the range. Now, with the launch of the Mk1D, the ElysION, and the continued rollout of the GridION Q-Line, we are aiming to return to growth for the MinION product range in 2025.
Other revenues predominantly represent kits and services, and growth here reflects the mix effect of both the MinION and PromethION ranges, and so close to overall group underlying growth. Turning to revenue by end market, Gordon has already spoken to this and the link to overall commercial strategy, but to add some further color. Overall, this reflects reported growth, and hence, whilst growth within our research market looks broadly flat, this does reflect both the decline of the EGP contract and captures the majority of the COVID headwind in 2024. In 2025, this is the segment where we anticipate some weakness given the uncertainty around U.S. federal funding. However, given the strong number of contract wins in the EMEA region and APAC, we are aiming to return to growth here in any case.
Within the applied industrial market, we believe we can continue to grow at a fast clip as the technology continues to differentiate against legacy products in the field of synthetic biology. Within clinical, we are seeing increasing interest from customers aiming to redefine the diagnostic market with incremental biomarkers and information only available on Nanopore to take revenue from established service providers. Finally, within biopharma, the opportunity for Nanopore to define a new market within biopharma manufacturing QC is material and additive to the position in the research space. Stepping back, in spite of the risks to U.S. federal funding, we anticipate solid growth, but below our FY25 guidance level of 20%-23% in the research space and above market guidance growth within these three other new end markets.
Turning to gross margin, we saw an overall improvement from FY23 to FY24 of 420 basis points to 57.5%, and in spite of a 120 basis point headwind from currency. Being balanced, the largest contributor to the overall improvement in gross margin year-on-year was the fact that 2023 was impacted by a number of one-off charges that didn't repeat in 2024. However, we did also see meaningful improvements in both PromethION flow cell margins and devices from improved recycling. These benefits were offset by mix effects, but looking forward, we anticipate this headwind to dissipate somewhat, particularly from a product perspective, as PromethION flow cell margins continue to improve and as we anticipate growth returning to the MinION product range before we consider any benefits from pricing changes. Combining this revenue and margin performance, we also demonstrated improved cost control of the period, which is evident on this slide.
On here, the key takeaway is that we are now showing operational leverage and that this trajectory of this improvement looks set not just continue, but improve as we target Adjusted EBITDA break-even in 2027. The re-acceleration in reported revenues as delivered in H2 delivered an incremental £6.5 million of gross profit and an improvement of £7.1 million to Adjusted EBITDA, thanks to improved cost control and as incremental R&D spend focuses on later stage development projects. A common question we have had during 2024 was how we intend to be able to grow revenues above market whilst maintaining a tight control over costs. Post period end, we entered into a targeted restructuring program, reducing headcount by just under 5% and non-headcount related expenditure by a similar value.
With these changes, this will allow us to reallocate capital to higher growth activities, allowing us to maintain our growth trajectory without a continued double-digit increase in the cost base. As such, whilst adjusted spend was up 11.5% in 2024, we anticipate growth in costs in 2025 to be at the low end of our 3%-8% guidance range. Turning to cash flow, we ended 2024 with GBP 403.8 million of cash, with a fairer cash level actually more like GBP 412 million when including the R&D tax credit of GBP 8 million, which came in in February 2025. The key messages from this slide are on a likely improvement in go-forward cash profile for the business and on targeting an improving working capital position. Whilst cash outflow from operations was GBP 112 million, we anticipate this improving as our adjusted EBITDA loss also improves.
On working capital, we delivered a meaningful inflow in the year of GBP 18.7 million, but we see the opportunity to improve further here as we target inventory levels, particularly as we begin to recycle the PromethION flow cell. Finally, on assets with customers, this relates to the OPEX model and in particular the larger devices being placed with customers that led to an outflow of GBP 20.6 million in 2024 and actually higher than that at GBP 25.6 million in 2023. Based upon the pre-existing OPEX business model, this figure was likely to increase at least in line with revenue growth of the foreseeable future, particularly when placing larger devices. Going forward, we anticipate this figure now declining, and on an overview as to why, we have two slides to help position the changes that we will now turn to.
First off, setting the scene as to why we are evolving our pricing model. Over recent years, we've seen increasing adoption outside of the conventional research markets, which we believe is set to increase further thanks to maturation of technology. Historically, the focus of supplying project packs where devices are placed by Oxford Nanopore for free and owned by ourselves has helped seed the market, but with the increasing requirement for greater compute in certain devices and increasing demand to own the box by customers, this was leading to a mismatch in communication between our pricing model and customer expectations. We are now moving to simplify this specifically for the larger devices whilst maintaining conventional project packs for smaller non-compute devices.
Before we made these changes, we took the majority of 2024 to review this move to ensure that Oxford Nanopore remains the most affordable and accessible technology on the market and is supported further by enabling grants for academics. With these changes, we believe we are aligning Oxford Nanopore with the broader market while maintaining flexibility and a core USP of the technology, the affordability and accessibility of an electronic-based sensing system. Turning to the next slide, we'll talk to the potential financial implications of these changes. Overall, these changes could lead to revenue and margin benefits, but I would temper any excitement by the fact that we'll be honoring any existing contract, any tender, or any quote in the system, and of course, we will be thoughtful about how these changes impact customers first.
We will not get drawn into hypothetical revenue or margin increases today, but for transparency, this could help drive mid-single-digit revenue growth and around 50 to 100 basis points of margin improvement over the medium term if successful. However, even if revenues and margins don't improve as volumes potentially decline, then we should still see a benefit in cash flow. Going back to an earlier point about the cash impact from assets at customers, with these changes, we would anticipate this outflow of cash improving year-on-year and hence improving the cash profile of the business from what it is today. Now, as we turn to these final four slides that I will present, I just want to recap on what the key messages have been so far over the past 10 minutes or so and what I want you to take from this section as well.
So first off, we have delivered against what we said we would do at the beginning of 2024, and we have begun to deliver operational leverage and an improvement in Adjusted EBITDA. Secondly, we have demonstrated cost discipline, and in 2025, we have taken tough decisions internally to ensure that we are as lean as we can be entering the year. Finally, we are evolving and maturing our business model to position us positively for the next three years. Now, from the next two slides, what I want people to take away is confidence in further delivery, both in terms of revenue and margin. On our revenue outlook, we are seeing our commercial infrastructure mature and further improvements in productivity set for 2025.
On productivity, our revenue per head has declined since 2023, but this fall has been lower than the dilution caused by the increase in direct and indirect sales teams, which have doubled in size since January 2023. Importantly, peeling the onion layer a layer further, we are showing a material improvement in the opportunity funnel for the business as a whole, with this growth reflecting operational improvements in how we capture this information, but also as the sales teams bed in and become much more productive. Looking forward, this gives us confidence as we enter 2025 from a top-line perspective. Turning to margin improvement, a key opportunity for us to work on in 2025 to 2027 is on the PromethION Flow Cell, but this is not a new item for the team as something they've been delivering year to date already.
The graph on the left reflects the unit cost per PromethION Flow Cell rebased to 100 as of December 2022 to December 2024. As you can see, we have made material improvements over the two-year period through improving yields, but whilst also improving the threshold for product release and hence focusing on customer experience. The improvement in the second half of 2024 alone is clear to see, and we enter the year in a healthy position. As we look further forward, we see the potential to improve yields yet again, but also for more material improvement in unit costs as we recycle the PromethION Flow Cell to the same level that we do for the MinION flow cell today.
While we are in the early stage of this process, if we can continue on the same glide path for PromethION as we did for MinION, then this could see a further 10% improvement in margins for the PromethION product range over time. Through targeted activities such as this, we are confident on improving our margin profile to 2027. Turning to guidance for FY25, we are starting the year with revenue guidance of 20%-23% constant currency growth. This is a tighter range than normal and reflects continued strong underlying growth that we had delivered in 2024 and we've seen at the start of 2025, but tempered by risks, namely uncertainty around federal funding in the U.S. and the NIH specifically, which we estimate total exposure to group revenue of between 10%-15%.
Alongside this, we have assumed tightening of export control restrictions given what we saw at the end of the second half of 2024. To adequately capture both risks, we are taking a prudent view on the outlook at this point in the year. On the flip side, we could well see benefits from both the recent pricing model changes and increases to consumable prices, but believe these will be second half weighted and so likely modest in 2025 and more meaningful in 2026. We see gross margins increasing to approximately 59% in 2025, up around 150 basis points on 2024, and driven by operational improvements offset by mix. On costs, with the restructuring in Q1 and continued focus on cost discipline, we see FY25 costs at the low end of our medium-term guidance or around 3% to 4%.
Taking all of this into consideration, we see Adjusted EBITDA improving meaningfully in 2025 and at least in line with consensus estimates as they are right now, even with the lower than mid-range guide on the revenue line. On my final slide, we are reiterating our medium-term outlook for Adjusted EBITDA break-even in 2027 and cash flow break-even in 2028. Whilst our 2025 revenue guide is below our medium-term top-line CAGR guide of above 30%, this is as we see a further re-acceleration in growth as likely as we continue to move faster into non-research markets and as uncertainty around federal funding subsides. We see gross margins improving to over 62% and supported by focused activities across the business, as demonstrated with the PromethION flow cell.
With continued cost discipline, we aim to keep adjusted costs increasing within a corridor of 3%-8% CAGR and are taking hard decisions internally to ensure that is the case. Combined with our strong balance sheet and improved financial profile of the business, we see ourselves as well positioned to maintain our EBITDA break-even guide in 2027 and cash flow break-even in 2028. With that, I'll hand back to Gordon.
T hanks, Nick. I'd like to start by reminding you all of the three things that drive adoption of growth: Nanopore Sequencing. We have richer insights. That is native DNA/ RNA of any fragment length: short, long, and ultra-long. We have fast time to results and real-time streaming of DNA/ RNA information. We have platforms from point of care to desktop to high-throughput sequencing. All of our platforms are affordable, accessible, and scalable.
One, two, or all three of these benefits drive adoption and growth of our platform. The unique features of our platform enable us to unlock more of the genome and provide richer biological insights than legacy technologies. With regard to richer biological insights, we have rich native DNA RNA data. Users can see accurate multi-omics data that is not visible on any other platform, all in the same sequencing run. Why is it important to look at native DNA? Legacy short-read systems only pick up small variants. There is growing evidence that large complex structural variants, copy number variation, and repeat expansions are as important as single-point mutations seen on these short-read systems. In addition, because we read the native DNA, we do not make copies. We retain the modifications in both DNA and RNA. In DNA, that's methylation, which is the smoking gun in all cancers.
In RNA, the modifications are a key component of vaccine development, opening up biopharma opportunities unique to Nanopore. Short-read legacy systems are unable to map what is often referred to as a dark genome, which contains 25% of hard-to-diagnose human diseases, including neurodegeneration, rare disease, and cancer. In 2024, we transitioned from breakthrough multi-omic science to developing partnerships that have the potential to translate into routine clinical applications. In human genetic research, we are laying the foundations for multi-omics. In oncology, we are leveraging our native DNA in methylation. In rare and undiagnosed disease, we are shedding light on the dark genome and distributed point of care management of infectious disease, and I'll talk a bit more about that shortly. There's real momentum across the spectrum from research to translational studies into clinical practice and ultimately into the community.
Just to delve into a little more detail on highlights by customer type. In research, one of our large population-scale breakthrough projects was our 10,000-genome Nanopore Sequencing Program with PRECISE in Singapore. That program will include T2T genomes, and this marks the emergence of the first local comprehensive reference genomes. In December, we announced a program with the UK Biobank to sequence 50,000 patient samples to create the world's first comprehensive methylome. This methylome will be significant and important in advancing our understanding of the role of methylation in cancer. In clinical, and this is one of my favorite use cases, this is intraoperative methylation tumor profiling of CNS tumors, providing a neuropathologist in hours guidance on whether they should commit to surgery or other treatment.
It really showcases fast time to result, leveraging richness and content, which is methylation, in the distributed setting point of care on our affordable, accessible MinION sequencing platform. We continue to make good progress with our partnership with bioMérieux to launch our drug-resistant TB profile in the first half of this year, as well as building on our carrier screening kit, which we launched with Asuragen at the end of 2024. In the applied industrial markets, we have multi-million, multi-year contracts for plasmid sequencing, and service providers are driving adoption in the 1.6 billion synthetic biology market, displacing traditional methods such as Sanger sequencing. In biopharma, we have customers from across the biopharma spectrum, from cell and gene therapy to gene editing, synthetic biology, and RNA vaccine developers, each of these with the potential for manufacturing availability as well.
There are ongoing lots of really interesting evaluations and workflows that we are developing with these customers, and we will be talking a lot more about in 2025, so delving into respiratory metagenomics, one of our most advanced workflows is respiratory metagenomics. Over the last three years, in collaboration with Guy's and St Thomas', they have tested 450 patients in intensive care with respiratory infections using this metagenomic workflow. They're returning results on the pathogens in four to six hours versus two to three days with traditional methods, and 45% of those patients were on a broad-spectrum antibiotic that was ineffective. Treatment was adjusted the same day. This workflow is now going to be rolled out into 30 NHS trusts, and it has an additional benefit. There's a biosecure application here as well.
If and when the next pandemic emerges, it will almost certainly be respiratory, and you will see it first in the ICU. This means, in effect, we have an always-on screening metagenomic workflow, a pandemic radar, if you like, picking up novel new pathogens early. In 2025, we will continue to drive adoption through innovation. A key driver for PromethION adoption and increased utilization is increased throughput. We are targeting two genomes per flow cell later this year. We have headroom in the PromethION flow cell to get us towards a $200 comprehensive multi-omic genome. That's with full methylation, copy number variation, repeat expansions, and structural variation, all in the same run. We will need for our clinical and biopharma customers ever-increasingly end-market regulated platforms. To that end, we're building on our Q-Line GridION launched in 2024 and ensuring that the PromethION fleet is also regulated in 2025.
Machine learning AI step changes that are occurring in that field enable us to leverage those advances and improvements in accuracy. Most importantly, in 2025, we will continue to build on our sample-to-answer end-to-end workflows in the clinical, biopharma, and applied industrial arena to really drive adoption with our highly differentiated platform. In my final few slides, I want to talk about 2025 and beyond. A key driver of adoption of Nanopore Sequencing into our target applied markets is the affordable, accessible, and flexibility of scalability of Nanopore platforms. The shift from centralized monolithic batch-based systems to decentralized on-demand real-time DNA RNA streaming at the point of sample origin is unique to our platforms and central to market adoption. The electronic nature of our sensing platform also has, in the medium term, potential to scale at least from order of magnitude.
And that is being developed on our voltage chip, where we are targeting 100,000 channels. As we look forward in 2025, there's growing momentum and interest in looking beyond the four-base genome. And I'm very excited about our ability to drive multi-omics into uncharted biology. Our platform is unique in providing native DNA sequencing, which includes the fifth base, methylation, on DNA, and as such, is referred to as the epigenome. In addition, our direct RNA workflow is generating new insights into modified RNA, and you will hear a lot more about the epitranscriptome in 2025. Last but not least, 2025 will be the year of the proteome, and we will be talking a lot more about our proteome offering later in the year. Before I wrap up, I wanted to remind you that the opportunity that Oxford Nanopore has ahead is not restricted to the current sequencing market.
We have shown today a number of examples of successes that show how we are changing the way that biological information is understood and used. Where customers may already run legacy sequences, we are providing richer information. Where customers may have relied on service providers, we can give them control of their research with affordable, accessible, high-performance platforms. Some customers may simply not have been able to answer their questions at all. With Direct RNA, for example, we're opening up entirely new avenues. As we continue to develop end-to-end workflow solutions, we'll start to reach more users who want to make decisions rather than users who are exploring novel genomes. There's a real untapped market here, and our medium to long-term outlook is to ever-increasingly address these markets.
We are today operating in the life science tools market, but the real opportunity is to cross the chasm into these applied markets. We think the potential addressable market here runs into hundreds of millions, and we are uniquely positioned to take advantage of those markets. So, in summary, our key takeaways: full year 2024 results were in line with expectations, very strong growth in the second half of the year. The fourth quarter was stronger than the third quarter, so real momentum going into 2025. The unique value, features, and benefits of the ONT platform, and our focus on target markets, where we have a unique solution that no other platform can provide, gives us confidence in continued delivery of above-market growth in 2025 and beyond in all market conditions.
We're very excited about the long-term opportunity beyond the current sequencing market, and are well capitalized to execute on our 2025 goals and medium strategic priorities. With that, I'd like to thank you for your time today. Thanks, everyone.
Thank you, Gordon. We will now begin the Q&A session. If you would like to raise a question from your phone lines, please press star one on your telephone keypad. If you change your mind and want to withdraw your question, please press star two, and please ensure your lines are unmuted locally as you'll be prompted when to ask your question. The first question comes from a line of Charles Weston from RBC. Please go ahead.
Hi, thanks for taking the questions too, please, and just one follow-up on what you said earlier.
First of all, can you comment on the trading dynamics in the first couple of months of this year? You said in the release it started well, but can you give us a bit more color, particularly around, I guess, NIH and China? And on those two points, can you give us a sense of how much caution you've built in for NIH and China? And do you expect either of those to ease in the second half? And I'll pause there.
Thank you, Charles. It's Nick. So, on your first question, so for the first couple of months of this year in Q1, actually, as we can see it today, we've actually, like we say, started the year well, trading slightly above the guidance level that we've set, but this is the early stages of the year.
EMEA, it's actually started very strongly, really continuing the strong growth that we saw in the second half of last year. APAC is slightly below the second-half exit run rate that we saw and aligned to that, the tighter export control restrictions in China. Americas is a bit weaker, and looking at the detail and looking at the channels where we can see the revenues are essentially broadly flat to down against last year as well, they are within that research and government space where we are exposed to federal funding. We've started well in all of those markets where we continue to deliver very strong growth at the end of last year, continued into this year. We're not expecting this growth to kind of improve for the NIH piece or China in the second half.
In fact, we're being cautious and prudent in terms of how we're setting this guidance to reflect the fact that we could see further weakening from where we are today, to be able to take the risk out of the numbers today and have a guidance level that we are very confident with. So, how much caution have we built in for NIH and China specifically? So, for NIH, we've factored in a significant headwind for federal funding overall in the U.S. with this guidance. We're in a period of uncertainty here where this could get worse than where it is today.
And rather than baking in being flat to what we've seen so far or even an improvement, we've essentially gone the other way and said, let's take the risk out of the number now so that we don't update negatively during the year and relate it back to the federal funding piece. On the second part for China, we have been conservative again in terms of the growth rate for product sales to that market with this guidance. And again, that's so that we can kind of start the year with a solid base in terms of our guidance expectation and hopefully update positively during the year, particularly as we start to see what's happening from a pricing dynamic with the changes that we put through and hopefully some alleviation around those uncertainty factors that we can see today.
Thank you. And my follow-up was on the two-genome flow cell.
This is something that you've talked about for a while, has taken a bit longer than expected. What now gives you confidence that you can achieve that in 2025?
Hi, Charles. It's Gordon here. I did famously say we'd do that a year after we signed our G42 program about four years ago. I think just we didn't realize we were right on the sort of cliff edge. We thought a slightly deeper wow, slightly longer run times. It was a low-risk development program, and it turned out to be far more complicated. It's taken us a couple of years to really understand the chemistry that underpins what we do. And we've made some significant changes, and we've done some limited early access, and we're replicating much higher outputs. We're not quite there yet, but we do now fully understand the mechanisms that were holding back the output.
And it's just a case of peeling through the onion layers to get there. So, it is now more of a development program than understanding the drivers of what was inhibiting output. So, we are confident. We're not going to talk about timelines yet. We're going to get it into early access and see how that goes in the second half of the year.
Okay. Thank you very much.
The next question comes from a line of James Gordon from JP Morgan. Please go ahead.
Hello, James Gordon, JP Morgan. Thanks for taking the question. On the revenue guide, one question moves to 2025. In terms of phasing H1 versus H2, are you seeing all the headwinds immediately, or it sounds like maybe things could work in through the year? So, how are you thinking about H1 versus H2 growth?
Then growth beyond, so for 2026 and 2027, so where things are going to accelerate on the top line. Other than NIH being the base, what do you think is going to be better? Is any tailwind from the shift in the pricing model that's an upside scenario rather than something already baked in for the acceleration? Clinical and applied sounds like it's going well, but about 70% of the business is still research use. What's the assumption about what happens there in 2026 and 2027? Does the guide assume any competitive pressure from Roche in that part of the business?
Thanks, James. Quite a bit to unpack there. I think I've written them all down, but correct me if I'm wrong in any way. First one on just half one, half two.
So, similar to last year, we'll start in the year expecting around about a 45%, maybe 46% in the first half, 55%, 54% second half. So, a bit more of an improvement. And it's not assuming, like I say, we're trying to take the risk out of the number from an NIH perspective and then the export control restrictions to China. And so, that is throughout the year. On question, so this isn't expecting a rebound in any way at all. On the second question, in terms of what we're then expecting for a reacceleration of growth in 2026 and 2027, because absolutely right, we are maintaining our 30% growth CAGR from 2024 to 2027, which implies that growth will accelerate to around 35% in 2026 and 2027. So, why are we confident and believe this is going to happen?
First of all, it is the growth within that applied biopharma and clinical market. There's around a third of the business today, but as we've just demonstrated, it's growing very quickly. It's very sticky. It's repetitive. The synthetic biology market, as Gordon's pointed to, $1.9 billion. We're at the early stages of how we are starting to take material market share here. And so, we think from what we can see, it's interesting, even in the U.S., say today, where the federal funding headwinds are being seen, the non-research markets are growing incredibly quickly. So, we're still confident when we can see it coming through in the numbers that that third of the business is going to continue to accelerate. By 2027 end, biopharma will be 20%-30% of our overall revenue.
And that's going to be driven by significant contract wins that hope to talk about this year that are going to start ramping up as we accelerate it going to 2026 and firmly in 2027. So, in terms of research, what's our expectation here? When we set the guide originally for 2027 break even, we said then that we were not expecting a buoyant research market, not at all, because it's lumpy, it's outside of our control, and government funding is challenged, right? Now, we hadn't anticipated this federal funding hit coming from the side, but absolutely, we had baked in some headroom against what our expectations were when setting that guide originally a year ago. So, we can weather this storm. We're going to take the noise and the risk out of the number for this year.
But we can see that with the research market not being as strong this year, we're still growing it because we're still going to grow in EMEA and APAC, like the UK Biobank contract, like the Genomics England contract. We're still going to grow there. It's just in the U.S. where it's challenged today. But the acceleration that we're seeing in those non-research markets is going to not just continue, but actually step up. And then your third, I think I've answered your questions there, but is there anything I've missed?
Maybe just the final bit was just what does the medium-term guidance [say about whether] R&D will actually have any impact [on] when you would then your product?
So, just from a numbers perspective, no. So, the device is expected to launch during 2026.
And as we've kind of said today as well, and I know Gordon will add to this, we see the device really firmly being up against the existing legacy short-read sequencing products in the market in the high-throughput commoditizing space of the whole genome sequencing market. So, this is not where we're seeing our growth. Where we are seeing our growth is in the differentiation of our technology by adding methylation and greater insights from longer reads, which will continue. And then also from going into new markets, be that biopharma manufacturing QC where sequencing doesn't really exist today, or into the world of synthetic biology where we're not going up against legacy technologies that are SBS or soon to be SBX as well. Actually, we're talking more about Sanger instead. Gordon?
Yeah, I think when you look at the product offering approach, it very much is targeting the large centralized high-throughput centers. And as we talked in our presentation today, the flexibility and scalability nature of the platform with the richness of content is what drives adoption of our platform. And when you look at where the SBX system from Roche is, it's more closely aligned with legacy systems rather than what we do.
And just to add as well, just to follow up on my own piece, clearly, as this product comes to market during that 2026, 2027 timeframe, and it's more clear and obvious about where they are going with the technology, over time, there could be some longer-term risk on pricing, but within that market where we're not even really looking at today as well.
So, I don't want to come across as we're dismissing this in any way, because that is not what we're trying to do. We're just trying to lay out the positioning of our growth, which is into markets where today this technology is not aligned with where we're going.
Thank you.
The next question comes from a line of Paul Cuddon from Deutsche Bank. Please go ahead.
Yep, thank you very much. I've got two, please. Just firstly, the H1 to H2 growth on the industrial segment was quite impressive, but I just wonder if you could elaborate on any single customer concentration within that. I mean, is there anything in there that's sort of EGP-like that might sort of fall away in the future? Or do you think this is the start of a more kind of high-quality revenue stream?
And secondly, you've highlighted biopharma as being a kind of core growth driver through to 2027, but perhaps you could comment on potential concerns over mRNA kind of platforms for kind of vaccines and other therapeutics, given the quality control issues that have been evident over the last few years. Thank you.
Yeah, thanks, Paul. So, on the revenue mix particularly, so one of the things we're definitely trying to emphasize in the growth that we've seen last year is actually the high-quality nature of it because it's coming from such a fragmented customer base, which for us speaks to the kind of the improving quality overall of the business. So, the largest customer we have in the applied industrial space is actually the Plasmidsaurus contract, but it is not a significant proportion overall. And as we highlighted, top five customers, less than 8% revenue now of the company.
It's very pleasing to see that the big driver in the PromethION range has been a material step up in utilization of the larger devices with existing customers, so 53% underlying growth in utilization per device, essentially for the larger devices that we have in the market. It speaks volumes as essentially the technology coming of age and being adopted quicker by the customer base as well, so there is nothing within that applied segment today that concerns us from a concentration perspective. As we grow in that biopharma segment, just to kind of lead into that before I know Gordon wants to take it on, as we sign customers within that segment who are under evaluation today, who are evaluating our technology for the QC space, there could be some significant size contracts that come there.
For us, these are under the $10 million range, say, single million dollar digits, and the idea would be to win a number of them to kind of broaden out that kind of growth among a broader base, but that's the only future concentration risk that we're really seeing. It's that because the service providers, more broadly in the applied space for synthetic biology, they're seeing what's happening here. They're seeing that those customers that have adopted PromethION for plasmid sequencing in particular are able to steal share from other customers, from other service providers, because it's cheaper, it's quicker, and it's more accurate, so, they're all having to kind of follow suit there now as well, but on biopharma, Gordon?
Sure, so, I think on RNA vaccines, we are uniquely positioned because we're the only sequencing company that measures direct RNA.
The benefit of that is at the moment, when they make an RNA vaccine, they will invariably add some modifications to the RNA, which helps stabilize it and provide potency. We are the only company who can read that direct RNA. What that means is you can take six to eight analytical instruments and orthogonal measurements, which take one month, and that's around $1 million of equipment, and do it on a GridION in two days. It typically takes three months to develop an individual personalized vaccine. You're taking a month out of it. There's a lot of discussion about the economics of developing personalized vaccines. Distributed sequencing goes hand in glove with individual personalized mRNA vaccines. That's just one piece of the biopharma story.
As Nick says, in cell and gene therapy, in viral vector contamination, in gene editing, and synthetic biology applications, we also have a role to play. And there are lots of really interesting evaluations and workflows that we're working on with pretty much most of the big players in the biopharma segment. And more to talk about as and when these workflows come together in partnerships.
Thank you very much.
The next question comes from a line of Sam England from Berenberg. Please go ahead.
Hi guys, thanks for taking the questions. And the first one's just on the 2025 guidance. I was wondering if you could give us a sense for how conservative you think you've been on the 20%-23% growth guide if we ignore the US and China issues that you've discussed.
And I suppose how much visibility do you think you have on delivery on the guidance at this point in the year? And do any of the larger contracts you have coming in give you particular visibility or comfort? And then the second one's just on PromethION, obviously, growth this year has been largely driven by increased utilization and growing revenue per device. But can you give us a sense for how much further you think utilization can grow in 2025? And then how you see the mix of revenue growth developing this year between new customer additions and higher utilization of devices in the market?
Thanks, Sam.
Just on the first on the new guide, and I think we both can answer this one as well. What we're setting here is a guidance level of 20%-23%, which is, I think, fair to say, significantly above what the market growth is. We are very confident in delivering it this year because we are being conservative in terms of the risks that we're seeing in the market and removing them from the numbers today. We're setting this guidance range as the base, essentially, where we know we can deliver this guide. We're going to see what happens throughout the year, particularly as we see what happens with the uncertainty and then with pricing and see what we can, where it can go from there.
Now, on the second question, sorry, just, I know Gordon will answer it in a minute, but on the second question of the PromethION growth rate and utilization, quite an interesting question. So, we've done extremely well of placing out a significant number of P2 devices into the market, which is essentially seeding the market here. And as we see growth from those customers accelerate in terms of utilization per device, there is actually an opportunity to convert them to a P24 or a P48 in time and grow that customer even further. For the P24 range and the larger devices where we've seen that significant step up in utilization, there is definitely things to unpack there about how we can help certain customers accelerate their utilization of the device by adopting workflows that other customers are using today as well. So, there's a bit two things here.
One is growth of the technology. Further workflows are going to, and adoption of them is going to drive that utilization rate. But there's also what I'm talking to here is an operational point where we can actually clean up our i nstalled base as well and get people on the right devices over time or graduate them from the lower devices to the higher devices as well.
Yeah, I think the stickiness and increased utilization is probably also a reflection of the maturing customer base because applied market customers have a fixed number of runs they do versus research where they might use it. It's very lumpy in terms of utilization. But one thing never goes away. Improve quality, accuracy, increase output, drive down cost per gigabase, drives adoption across everything.
But I think the increased utilization we will see will come from those end-to-end workflows where they're, as I said in my presentation, they're seeking an answer to a question rather than doing novel research, which we know is going to be challenged in the next couple of years, particularly with the NIH squeeze. And so that is why the drive to applied end market end-to-end workflows will and should enhance utilization and adoption.
Great, thanks.
The next question comes from a line of Yuan Zhi from Citi. Please go ahead.
Hey, thanks for taking my questions. I have two, please. The first one is, could you please talk about your expectations for growth by customer segment in 2025, in particular with regards to the applied industrial segment, which grew, I believe, more than 40% last year? Also, what could the split by customer segment look like by 2027?
I know you earlier mentioned that Biopharma could grow to 20%-30%, but how about the other slices of the pie? And my second question is more of a point of clarification. With regards to the NIH, you are guiding to material reduction. What do you assume around the contribution to revenue, where it could go to from the current 10%-15%? Thank you.
Quite a few there. So again, if I don't answer them all, come back to me. In terms of customer segment in 2025, for expectations, really, I would just look at the fact that in research, in spite of the NIH or federal funding headwind that we've got there, we should still deliver growth actually ahead of what we've done in 2024.
For the rest of the balance of the third of the business, the overall growth rates that you saw in 2024 should actually happen again in 2025. And we continue to believe that we can grow at a strong clip in the applied market in particular. Biopharma, it's just going to be, there'll be a timing element to this where when we announce contracts, there will be a time where it could take 6 to 12 months for them to ramp up within those customer segments who have signed them. And then within the clinical space, this will be more of a 2026, 2027 event in terms of stepping up meaningfully because it does, again, take time for customers to port over their current tests onto Nanopore from existing legacy techniques.
In terms of what the overall segments could be by the end of 2027, I mean, Gordon and I debate this quite a bit about where it could be. We do think biopharma will be in the 20%-30% overall of group revenue. And the entire non-research markets could be more, it's about 60% overall of the business, just kind of emphasizing the kind of growth that we're seeing coming through the, and the early stages of this uptake, synthetic biology market being as big as it is, and we believe we can take a significant proportion of it. You did have a, did you have a last one there as well? I've missed.
I'll take that as a no.
The next question comes from a line of John Unwin from Barclays. Please go ahead. Hi, good morning. John Unwin here from Barclays.
My first question is on the gross margin and loss of potential NIH revenues in 2025. Do you expect any mixed impact from that and how might that affect gross margin in 2025 and 2026? And then just what needs to happen on the gross margin to move from 59% in 2025 to 62% in 2027?
Y ep, no problem. So we've seen changing, well, mix was the kind of key reason why our margin didn't accelerate even higher than the 57.5% that we've just delivered in the year just gone. As we look forward, the potential loss of federal funding revenues that we have today would be a headwind on the gross margin, but we've factored that in from where the guide is at the moment for 59%.
In terms of what needs to happen to see that gross margin accelerate to above 62% in 2027, in the presentation today, we kind of laid out the kind of key lever, which is going to be around PromethION flow cell manufacturing improvements. So the yield improvements that we've delivered so far have shown a really good reduction in unit cost per flow cell that's opened the door. As we look forward, we can see further improvements in yield. Then, actually starting now, really, now we're recycling the PromethION flow cell. If we can continue to do that and get it to the same level that we do for the MinION flow cell, that could be another 10% gross margin jump just to the PromethION range. And that overall weighting will actually help us accelerate above the 62%.
Just a reminder, when we set this guidance a year ago of over 62%, we didn't fully factor in all the benefits from recycling. And we also assumed a really negative mix impact coming through over time. They may not have, well, the negatives might not happen and the positives might not, might happen. The other piece is the pricing changes that we've put through. We have adjusted on the consumable side. We've adjusted for currency headwinds that we've seen in the year. We've adjusted for inflation. And we've also moved to that CapEx-first approach for the devices, for the larger devices, which mean that we should see in time an improvement in not just revenue, but gross margin and actually cash a s well.
Okay, cool. Thank you. And then just my second question is on the sort of change in financing options for customers.
How much of that is driven by a want for Oxford Nanopore to reduce their CapEx expense versus customers actually requesting it? And then what are your assumptions around the rate at which we could see the cash flow line item decline over the next couple of years?
Yeah, so on the move to a CapEx-first approach for the larger devices, bear in mind, we've made the most affordable and accessible technology on the market. The MinION and the P2 Solo continue to be devices that we're going to distribute as widely as possible. It's the best way of seeding the market for getting people on Nanopore and then graduating them to the larger devices as well. That strategy still holds true completely.
On the larger devices, there was confusion in the market, and we're making it much simpler and much more transparent for customers, whereby they can decide how they want to purchase the device. And now there will be no mismatch, if you like, in pricing between buying the device outright as CapEx or leasing it if that's the way they want to go through as well. So absolutely, during 2024, we've started these discussions in the first half of the year. We've done considerable pricing analysis work. We have debated this internally a hell of a lot. We understand the customer drivers and pulls and takes that are going for it as well. And I would also just flag that third of the business going into applied, industrial, biopharma, clinical, they want to own the box.
So essentially, more and more, the pull is going to be from customers that want to own the box. So we need to make sure our messaging to customers is completely aligned if they want to lease it or if they want to own it. That's all we're doing here. And but clearly, if it all gets adopted, then this could be a driver to our revenue and margin profile as a business, as I say, also to cash. On your cash question, GBP 21 million spent last year placing assets with customers. And that really does reflect the larger devices where we have a GPU inside. The switch to this CapEx-first approach, let's give it a bit of time to see how quickly it happens. But even conservatively, I would expect around half of that to kind of ebb away within the first year of us rolling forward.
Now, but just does that mean from February 5th, when we started these pricing changes, that's going to be the case? No, because any existing contract, tender, or quote that we had in the system will honor. Don't get me wrong, if the customer says, "Actually, I want to buy it," we'll sell it to them instead. We'll change it. But if they want to lease it, we'll honor that. So that's why we're saying this could be a benefit from the second half. And then from the second half, July 1st onwards, you should expect a material improvement in the cash flow.
Okay, thank you very much.
The next question comes from a line of David Westenberg from Piper Sandler. Westenberg, please go ahead.
Hi, thank you for taking the question. I appreciate the conservatism around NIH and research funding in general.
Can you maybe talk about some of the dynamics that are more your applicable markets and exposures? Namely, I'm thinking about you're more likely to be in a decentralized setting versus centralized setting as we think about researchers reducing their spend or being a little bit more concerned. Is there one that's maybe more vulnerable than the other? And then just in general, in terms of plant and animal genomics, is that maybe an opportunity where some of the funding might not be as bad of an exposure? And just anyway, just if you can help us help out the sub-markets that you play in relative to a lot of the other sequencing companies, that would be very helpful. And that would be the only question given the fact that we're more than an hour into the call. Thank you.
Thanks, David. I think a couple of things.
With the MinION and the P2 OpEx models, we have seen, and this happened in 2022, there was strong growth there because when cuts come, it's capital that gets cut first. So people still have OpEx money and consumable money. And so those remain attractive. And absolutely, I mean, we were at AGBT 10 days ago. And everybody, not just us, but NIH-funded customers are also looking at other pools of capital. And AgBio is certainly somewhere. Defense and biosecurity, I talked about our always-on pandemic radar. So we are trying to target those other areas where we think there will be growth. And again, really focusing on moving into the applied markets.
I know you're asking about the research markets, but I do think because the majority of what we do in the research markets is in the MinION P2 end, we think we will be somewhat buffered. We shall see. It's very hard to predict what's going to happen next,
and that's why we've been conservative, so what we are seeing from customers, big and small in the research space, particularly in the U.S. that are exposed to federal funding, is they don't know themselves, so actually, rather than trying to pre-guess that this is going to be an okay moment, we'd rather be conservative with the guide and take the risk out of the number, and then in terms of that centralized versus decentralized, you're absolutely right.
I mean, we actually play everywhere, but in terms of that centralized market space where we have a lower footprint, it's fair to say, and they may have some of our devices, but not the same extent as the other bigger players. You'll know the dynamic here whereby this is going to impact how they think about their spend overall. It's going to alter their budget perspectives. And it could actually lead to a tailwind of more money going directly on direct research spending rather than covering overheads of organizations. And these organizations are funded not just through government and federal funding. They've got multiple other funding lines coming through, like philanthropic and whatnot. So we need this to wash through.
But second-guessing this in terms of decentralized or centralized, when we're hearing similar messages from all customer segments, just says to us, we just need to be conservative at this moment in time until this washes through.
I appreciate it. Thank you very much.
The next question comes from a line of Miles Dixon from Peel Hunt. Please go ahead.
Thank you. Yes, in the interest of time, I'll just keep it to two. Nick, firstly, FY24, the first year where cost control came to the fore, you described kind of workforce reductions and others. Can you perhaps put some color on what those others are and what we might expect moving forward, any other efficiencies? And then thirdly, I'll ask a direct question about the Roche SBX approach. They obviously published some metrics around comparison to Na nopore.
I just wondered if you had any comment on those performance metrics. Thank you.
Thanks, Miles. Yeah, FY24, we did show an improvement in adjusted operating expenses. The key thing is we adjusted our EBITDA loss, particularly second half on first half. I think this kind of demonstrates that we are on that journey. We've turned that corner, and we are completely committed to making EBITDA break even in 2027. During last year, we had multiple conversations about this as well. We were looking at the cost base overall and made some really tough decisions internally. I can't. This has been a. It's a tough step for the company to kind of make these decisions, but it shows that we're making them. We're making the hard decisions to get the cost base in the right frame for the next leg of growth.
Now, the key thing here is removing circa 5% of the headcount cost and those other ancillary costs that go alongside it, be that limiting marketing spend or focusing marketing spend, focusing spend in IT, focusing spend in R&D. That means that as a result, it allows us to reprioritize other activities as well. This is much more about cutting our cloth accordingly, keeping the cost base broadly flat with a little bit of inflation in 2025, and allowing us to reinvest in the business in the right manner so that we can continue to grow our top line well above where the market is today. And on the R oche?
Yep. On the Roche side, they have very much their first box is going to be targeting the ultra-high throughput large centralized markets. And that's where we have least penetration in the traditional core sequencing laboratories across the world.
And so right now, we're comfortable in the richness of content, the nuances they wash out things like methylation because they have to use the bisulfite chemistry. So we think it squarely sits against legacy systems in the high end. And that is an area where we have least penetration. So we think for now, based on what they're saying for their launch in 2026, it will have minimal impact. But as Nick said earlier, we will be vigilant and need to see if they bring out smaller devices, which we think would be more potentially of a threat.
Thanks, Gordon. I was just wondering whether the accuracy and speed numbers that they disclosed for comparison to the Nanopore was something that you re ognized.
So they said they broke the world record on whole human genome.
I think that's one that you and Ashley, the holder of the world record with Oxford Nanopore Technologies, has to answer. And in terms of their accuracy, it's impressive, but it is only 92% of the genome, and it's all short. So it's single-point mutations. So I said in my presentation, 25% of unmapped, hard-to-diagnose diseases are not going to be unraveled. They're fairly and squarely competing with the legacy systems. And we are doing our best to be on the other end of the spectrum, providing high definition, full content, 100% of the genome. So it's quite hard to make an apples-to-oranges comparison. And they will be challenging to short-read legacy systems, but we think our highly differentiated positioning means it's less of an impact to us.
Thank you. There are no further questions. Handing back over to Gordon for closing remarks.
Thanks, everyone.
I think we feel that we are well positioned and poised to really build on our 2024 applied end market applications, particularly we've talked about biopharma, but with applied industrial, more to come beyond plasmid sequencing, taking business off of legacy Sanger sequencing. In the clinical side, we continue to make progress. That is a medium to long-term revenue generator, but nevertheless, good steady progress. And you will hear more about these applied end-to-end workflows and partnerships in the second half of the year. And given the NIH funding crisis, and I don't think that's too strong a word because that's what it is right now when we talk to customers, it will focus us to ever increasingly go for those applied end market workflows.
The focus and the rebasing of the staff and the cost cutting we've put in place really speaks to that increased focus on getting to EBITDA break even in 2027 and then cash net positive in 2028. I'd like to thank you all for your time this morning. Thanks, everyone.