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Why the share price of Oxford Nanopur is falling so fast


The Oxford Nanopur (LSE: ONT) The share price is falling. At its IPO on September 30, its share price was 425p. Then they rocketed from 50% to 615p the next day. However, in the last two weeks, its share price has fallen to 548p. Yes, some early investors will take profits. But what else is happening?

Business model

The company has “Developed a new generation of sensing technology that uses nanopores integrated into high-tech electronics for precise molecular analysis.” In plain English, it is the market leader in DNA and RNA sequencing technology. The company has developed a product that analyzes DNA, removes small pore (DNA) samples and measures how it reacts to electric currents.

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Its main products, Minion, The only portable real-time DNA / RNA sequence on the market. It has dozens of current applications, including virus detection, Ebola monitoring, environmental tracking, antibiotic resistance monitoring, food safety monitoring, cancer analysis, agricultural development, and fetal DNA analysis.

The technology can also be used for air-conditioning monitoring and airport testing for pathogens. And its portable nature makes it valuable for doctors to visit patients at home as well as for paramedics in ambulances. The possibilities for the future are endless, and the prospects for significant revenue are very real. I understand why the share price has risen so much in the beginning.

Financial

Prior to the IPO, Oxford Nanopur’s revenue rose from 52 52 million in 2019 to 3 113.9 million in 2020. This is mainly due to government contracts for coronavirus test kits to help deal with the epidemic. However, although the company has almost doubled its revenue, it has not yet posted a profit. But as growth stocks, investing income in research and development is not uncommon. And with the prospect of higher returns in the future, some investors seem ready to wait for the company to turn a profit.

However, in this current inflationary environment, interest rate increases are almost at an angle. So I think loss-making growth stocks are particularly weak now. Analysts do not expect the company to make a profit by 20226. In its latest figures, Oxford Nanopur brought in £ 59 million in revenue in the first six months of this year, with a loss of £ 44.4 million.

On the plus side, CEO Gordon Sanghera has control over a special stake to veto an unwanted takeover over the next three years. This means that the biotech firm will not be subject to adverse acquisitions at its expansion stage. It appeals to me as a long-term investor.

My verdict for the Oxford Nanopur share price

The share price of Oxford Nanopur is still 30% higher than the IPO two weeks ago. But I think some of the reasons for this rise are that investors have become overly excited about a rare UK biotech list. And I believe its technology could soon be replicated elsewhere. Profits seem to be many years away, I would ignore the Oxford Nanopur share price. It may be revolutionary, but I am concerned about the financial viability of the company as the monetary policy is strict.

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Charles Archer has no position in any of the shares mentioned. Motley Flower UK has no position on any of the shares mentioned. Opinions expressed in the companies mentioned in this article may differ from those of the author and therefore our official recommendations in our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.





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