Is the Oxford Nanopore share price dip a buying opportunity?

At Oxford Nanopore (LSE: ONT) share price has fallen 26% so far this year. Since the stock floated on the public market in 2021, it is down 69%.

However, this innovative company still has a lot to offer. So should I take the stock when it’s at 188p? Let’s find out.

What did they do?

Oxford Nanopore is a life sciences company founded in 2005 as a spin-out of the University of Oxford. It has developed a device that uses a new approach to read the genetic code.

This technology works by passing a sample of DNA or RNA through tiny holes – called ‘nanopores’ – in the membrane. It measures how the genetic material reacts to an electric current, and ultimately encodes the organism’s DNA and RNA.

The company says the sequencer can “any analysis, by anyone, anywhere“. But what makes it unique? I mean, aren’t competing devices also meant to analyze anything anywhere?

Well, competition IlluminaThe NovaSeq DNA reader stands over five feet tall and weighs over 1,000 pounds. The instrument is ideal for sitting on a laboratory workbench. Good luck transporting one of those through the dense forest to sequence the DNA of some rare species in real time!

However, Oxford Nanopore’s ‘minION’ is a pocket-sized device that can provide portable long-read DNA sequencing. And the company doesn’t stop there – the small ‘SmidgION’ device developed into a smartphone.

Result

The company released its annual results today. For the year ending 31 December 2022, the company reported profits of £198.6m, up 43% on 2021 on a constant currency basis.

This could reduce the loss for the period to £91m from the last £167.6m. However, the company does not expect to be profitable for many years. So I think there is a risk that stocks could slide even faster if the market remains risk-averse and if profits remain elusive for a long time.

That said, it is now in a strong financial position to pursue further growth. It still has £558m of cash and cash equivalents, so there is no immediate need to raise capital.

Encouragingly, the business is growing rapidly in China. With a population of over 1.4bn people (almost all of whom have never had their DNA read), China could be a huge growth driver.

The company currently has a market cap of £1.58bn and shares trade at a price-to-sales (P/S) ratio of 8.

Should I buy shares?

I am encouraged by the progress this innovative UK company is making. The device is currently used in more than 100 countries. And I am very confident about the growth prospects of the genomics industry in general.

For example, a large initiative called the Earth Biogenome Project is currently underway. The goal is to sequence the genomes of all complex life on Earth by 2028. That’s about 1.8m species, but so far only a fraction of this number has been sequenced.

However, I note that today CEO Gordon Sanghera said that the company is open to dropping its London listing for foreign exchanges in search of a higher valuation.

That creates a level of uncertainty for me. So I will put the stock on my watch list for now and check back if there is any clarity on the list.