Oxford Nanopore Technologies boss Gordon Sanghera
Credit: Nigel Chapman
The Oxford vaccine may be the biggest and most dramatic recent symbol of the city’s academic prowess, but less than a 15-minute drive from the labs where the vaccine was created is the home of another game-changing piece of Covid-19 technology.
Here in the heart of Oxford Science Park is the headquarters of Oxford Nanopore, the company behind what has been touted as the world’s “most advanced” DNA sequencing technology. Its tools are being used to spot and track mutations of Covid-19 as well as other viruses.
Now a desperate fight is under way to persuade Oxford Nanopore, which remains in private hands but some analysts believe could be worth as much as $23bn (£16bn) in a possible initial public offering (IPO), to list its shares in London rather than the US.
After all, New York has become the destination of choice for many young UK technology companies in recent years.
Home-grown success story
Oxford Nanopore is certainly riding the crest of a wave which has investment bankers salivating.
Since the virus hit, its DNA tools have been used for a fifth of all Covid-19 sequencing globally, with its technology adopted in 77 countries.
Right now, the prospects “are really strong for the company”, says Alan Aubrey, the chief executive of IP Group, an early backer of the Nanopore team. “It’s fair to say the company is in a very exciting position.”
If it doesn’t act fast, there is a risk the UK could lose out. In late December, Boris Johnson invited tech bosses from a string of companies that are considering a float – including Oxford Nanopore – to Downing Street to discuss what would help to convince them to do so in London.
Nanopore, run by chief executive Gordon Sanghera, is in an enviable position. Amid growing speculation that a public listing could be coming as soon as next year, expectations are high. A valuation of $23bn would dwarf other technology IPOs coming down the track, including Deliveroo and Darktrace.
Others have adopted a more cautious view, with Jefferies analyst Ken Rumph suggesting a £4.5bn valuation could be more realistic. That price tag would still be significantly higher than its £1.7bn valuation at its last funding round late last year. With such a major prize up for grabs it is no surprise that various stock exchanges have launched a charm offensive.
Playing catch-up
“You can pretty much guarantee the London Stock Exchange is pushing for this one,” one insider says. “They’ve been looking at Nanopore for a while now. It’s been on the target list for the past few years.” But whether Britain can keep the listing here is another question.
Listing rules may be under review but they have not been adjusted yet. “It pushes [start-ups] to go to other markets because our listing regime has some rules that have not adapted in recent years,” David Schwimmer, the head of the London Stock Exchange Group, said last month.
Xavier Rolet, who held the post before Schwimmer, agrees: “What we need is a deep set of reforms to give equities a chance. Otherwise, we will remain focused on the past, and at the end of the day, growth will go elsewhere.”
Xavier Rolet, the former head of the London Stockk Exchange Group, has called for the UK to update rules in a bid to retain home-grown talent
Credit: Teri Pengilley
For years, those at the exchange have used Nanopore as an example of the kind of company the UK would like to attract. Now, with Nanopore’s float coming down the line, the question is whether it can move fast enough.
Britain’s review into the listing regime, kicked off by Rishi Sunak last year, is expected to be comprehensive, and there are already some indications of what it will include. On Friday, the Government’s separate Kalifa review into fintech included suggestions on how Britain could become a better place to list. They include reducing the free-float requirement for companies looking to join the premium segment of the London Stock Exchange from 25pc to 10pc of their shares, allowing founders to retain more control.
Listed IPO’s in global market
Writing blank cheques
The UK Listings Review, chaired by Lord Hill, is expected to follow soon with more detailed recommendations. Some have called for significant changes.
In recent days, Rolet has spoken on the need for London to open itself up more to special purpose acquisition companies, or SPACs, which are blank cheque ventures that join the market and then buy innovative companies, taking them public in the process.
“Investors are looking at quick ways to invest in the technologies of the future,” Rolet explains. “The traditional IPO process in Europe and the UK, frankly, takes way too long.”
There may be hope for the review, but after the recommendations are released, it may not be entirely straightforward to have those changes implemented. Multiple different bodies will be responsible for different parts of the recommendations, and each of those different bodies will have processes that they need to follow, which may include consultations.
There is some hope that even the recommendations will be enough to tempt some companies to choose London, leading them to start making decisions based on what the UK listing regime could be like as opposed to its current form.
Entrepreneur and government adviser Alastair Lukies CBE says these changes couldn’t come soon enough. “We’ve got to find our place in the post-Brexit, post-Covid world.”
Efforts to tempt more companies in the immediate future are perhaps unsurprising. Things are moving pretty quickly in the start-up sector. British companies which have been scaling up for years, and reaching unicorn status, meaning a valuation of more than $1bn, are now starting to look to float.
In the next few months, Deliveroo and Darktrace are expected to go public. Others, such as Graphcore, and Babylon Health, are also considering their options – although they are understood to currently be looking overseas.
Buying British (stocks)
A technician holds an Oxford Nanopore device for DNA and RNA sequencing — an example of the innovation that has got investors salivating
Credit: Anthony Kwan/Bloomberg
British companies are a clear priority. “It’s pretty fair to say that any world-leading business in our home market is one that we are focused on and engaged with,” says a senior UK stock exchange executive.
For Nanopore, in particular, its choice of the UK could prompt other biotechs to follow in its path. “I would welcome a very strong UK biotech IPO,” says Liberum analyst Alistair Campbell. “I think it would encourage more coming to think about being listed here. The UK is clearly a leader in terms of actually creating biotech companies with great technologies. It would be great to see more of them decide to list here.” But there remains serious competition for attracting these companies from the US.
Adam Kostyál, Nasdaq’s head of European listings, says the choice for many companies doesn’t just come down to making the listing regime less arduous. “There are so many other commercial values from being in the US, from a recruitment point of view, a growth point of view.”
In the biotechnology and life sciences area, Kostyál says “the frustration that many European growth companies have is that in the EU, they’re quickly bundled into a generic area, whereas in the US, analysts and investors compare them to specific peers in their speciality”.
Some argue this is more true for drug discovery and pharmaceuticals, rather than technologies such as medical devices and digital health apps.
Nanopore fits into the latter and “should really be the kind of company London is able to win”, one insider says.
Nanopore is a company that, for years, has been “the kind of business” that Britain would like to attract for a float. Now it has the chance.
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