Interactive Investor

Insider: big spending on company in ‘foothills of growth journey’

17th April 2023 08:55

Graeme Evans from interactive investor

These shares have drifted steadily lower since its IPO, but the price surged recently following latest results and company bosses are bullish. There’s more buying at a small-cap housebuilder too.

Oxford Nanopore Technologies (LSE:ONT) shares worth £215,000 have been bought by its chairman after he told investors the gene sequencing firm is still in the “foothills of its growth journey”.

Former Ocado finance boss Duncan Tatton-Brown made his second major purchase of company shares since his appointment in August at prices between 215p and 222p.

That compares with 425p in the September 2021 IPO that valued the business at £3.3 billion and the all-time high above 700p seen a few weeks after the high-profile listing.

The unwinding of Covid support for biotech stocks has been a factor in the sell-off, which culminated in shares touching a low of 176p on the eve of annual results last month.

Revenues for 2022 were broadly in line with the company’s twice upgraded guidance at £199 million, while the underlying loss of £78.6 million widened by 20% because of R&D investment and the 51% growth of its commercial team to nearly 300 roles.

Shares surged 14%, or 24.5p to 201p on results–day as management led by CEO Gordon Sanghera said the company entered 2023 with good momentum.

Sanghera said: “Demand for our differentiated technology continues to grow around the world and across many areas of scientific research, including human, cancer, animal, plant, pathogen and environmental genomics.”

Revenues from life science research tools rose 10% in constant currency terms in 2022 and are predicted by the company to improve by at least another 16% this year, despite a headwind caused by the loss of Covid-19 sequencing work.

The life sciences gross margin improved to 56.3% in 2022, with the company targeting at least 60% this year and more than 65% over the medium term as it benefits from automation and improved manufacturing processes.

Analysts at Berenberg said the results showed Oxford Nanopore on the path to breaking even at an underlying level by 2026, adding that the company is close to gaining traction in several attractive niches. They had a price target of 529p immediately after the results.

Numis Securities sits at 400p, pointing out that an end-of-year cash position of £558 million is sufficient to maintain an accelerated growth strategy.

The broker also questioned why current valuations placed Pacific BioSciences as the nearest challenger to heavyweight Illumina, even though Oxford Nanopore had outgrown its rival in each of the last three years and captured more new customers.

Numis said: “We think the market has this wrong and would expect Oxford Nanopore’s performance over the coming year to validate our view.”

Shares closed last week at 237p, having risen 8% or 18.2p on Friday after analysts at RBC Capital published a target price of 350p. They said the 50% fall for shares since the IPO was at odds with the 6% upgrade to company guidance for 2023 life sciences revenues over the same period, as well as consensus downgrades of about 22% for close peers on average over the same time period.

The end-of-week flourish for shares also followed Thursday night’s disclosure of recent share purchases by Tatton-Brown, on top of an investment worth £500,000 in September.

He said in his annual results presentation: “It is an exciting time to have joined the company. Oxford Nanopore has already achieved a huge amount and yet it is still in the foothills of its growth journey.”

Directors keep stocking up

Boardroom buying of MJ Gleeson (LSE:GLE) shares continued on Friday when the boss of the company’s Homes division made an investment worth £47,000.

The move by Mark Knight came a fortnight after new chief executive Graham Prothero picked up shares with a value of £145,000 and non-executive director Fiona Goldsmith landed a stake worth £20,000.

The earlier purchases were priced near 400p, whereas Knight picked up his shares at 437p. Gleeson closed the week at 435p, having benefited from City hopes that the housing market downturn may not be as severe as valuations currently suggest.

The company delivers low-cost homes in the North of England and Midlands by redeveloping sites where there is a need for social and economic regeneration. It also has a division promoting land through the planning system for residential development in the South.

Broker Liberum likes Gleeson’s low-cost focus and believes the shares deserve to be at 560p.

It said: “The valuation has fallen most as the stock market worries about the finances of buyers at the lower end of the income scale, but it can easily replace these with customers moving to lower price points in response to financial pressures.

“It only has to sell 2,000 homes per year and is operating in a catchment area in which one million 21–35-year-olds are living in parental homes.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.