Perfect. I think we can get started. Kallum Titchmarsh here from the Life Sciences team at Morgan Stanley. Welcome to day two of the Global Healthcare Conference. Really pleased today to be joined by the team from Oxford Nanopore. We have Francis Van Parys, CEO, and Nick Keher, CFO. Thank you both for being here. Thanks for the opportunity. Just before we get started, for all disclosures, please see morganstanley.com/researchdisclosures. It feels like an exciting time for the business. Perhaps just to set the stage, could we just talk about how 2026 has played out so far versus your initial expectations? Anything that has surprised you for the better, anything that's come in for the worse, and then we can dive in a little more into the business. Sure. Yeah, been in the role now for about seven months. Made a really interesting start. I feel as excited to be with the business as I started on day one. We feel first half has gone reasonably well. We've had a few headwinds in the Middle East. Obviously, that's not exclusive to us. But also, a few headwinds in China that we've been struggling with. We don't expect those to go immediately. They've put some pressure on our first half revenues. But we feel we've got a good line of sight towards the full year, and looking to get to the guidance we've given for the full year. So, so far so good. Nick, anything else you'd call out from the quarter or the half, I guess? Yeah. We always knew there was going to be a second half weighting to revenue because of various contracts that essentially had rolled off, particularly in Europe and Asia Pacific. That's all played through as expected. As Francis said, China was clearly a bit of a weak point for us due to export control restrictions and some things on our side. But in spite of that, actually we saw a meaningful improvement in our gross margins, and our adjusted EBITDA loss narrowed to GBP 22 million in the half, so down about GBP 26 million versus the prior year, about GBP 16 million sequentially. So we've really made progress on that kind of progression to break even. At results, we could talk about some positive things as well in terms of a global diagnostics contract being signed and other things as well. First half had a bit of ups and downs, but we're certainly on track. Exciting. A lot to dig into there. But maybe Francis, again, you've been in the CEO seat now for I think coming seven months. What has stood out to you the most during that journey so far, outside of the operations and the financials that we have heard of? Mm-hmm. I joined because I was, and am, super excited about the technology and its potential. That is still the case. Having been here now for seven months, that expectation has fulfilled itself. Do not think we have seen the adoption of technology as much as the science deserves. My ambition will be to scale the company in an accelerated fashion by focusing in on fewer applications, higher value applications that we feel we have a really clear path to win. Really passionate about the team. There is a lot of good talent in the business. We have added selectively to the management team to complement some of the skill sets that exist in the business but can be further developed as we embark on our new strategic chapter. I am pleased that after six months, we were able to communicate a new direction for the company that hopefully brings some clarity on where we are going, how we intend to scale the business, and how we intend to see the business by 2030. Great. Maybe diving in a little more into the results. You called out China, and I think the Middle East as those two main areas of weakness, but device sales were very strong. How should we be thinking about the timing and the magnitude of the consumable pull-through on those device sales? What do you think would need to change for both China and the Middle East to begin that recovery? Do you want to cover? Yeah. You are absolutely right. First half device sales were very strong, as they were last year as well. There is usually a circa three-month period, I would say, between placing devices and essentially customers getting ramped up. There is always timing aspects and limitations to that as well, and it also depends on what the customer is doing. As we look forward, we are confident in essentially our consumables pull-through starting to pick up both in the second half and as we go into next year. In spite of the consumables growth number being actually only single digits, it is also worth pointing out that the volume increases was over 20% on our key lines like the PromethION. We are confident that essentially as we go into the second half with these new devices placed, but existing customers as well, we are going to see that pull-through come through. On China itself, as Francis has said, we do not expect this to be a recovery in the second half. To talk through what happened, as I think everybody knows, export control restrictions have been very tight. They have been tightening over the last few years. It is a reason why we have had a number of existing customers cut off from supply. Going into this year, we had seen that increase again. I think some of that is the issue. Part of it is also us, in that we are restructuring our commercial organization in China at the moment. We have actually done most of it now. We are also reviewing our distributor network and changing things there as well. As we go into the second half, we expect stabilization. We have expected the decline to be the same, so 16%, but stabilization from a fundamental perspective. We are not giving up on China as a market for us as we go into next year. And that mix shift over to your applied end markets, is that happening quicker than you perhaps assumed? It seems some very strong growth rates there during the first half. What's that being catalyzed by? Yeah. On the clinical side, adoption in rare disease, infectious disease, and oncology. They're the three areas where we're seeing that kind of really happen. It's worth saying that we're going on top largely here of existing platforms that are available, besides in infectious disease where I think you can see is becoming more frontline, and rare disease, whilst we're landing and going on top of existing platforms, there's a bigger opportunity for us to actually become a frontline test over time. On biopharma, we're very excited about the opportunity here. There's both R&D, so things like target ID, antibody characterization, and then things like in the QC market, particularly with the mRNA personalized cancer vaccine space. So we've seen good adoption and that growth come through. Arguably, it could be better. Actually, as we begin to focus more with the focus strategy that Francis is bringing as well, we anticipate we can actually do better over time, because we've historically tried to do too much and now bringing that focus and putting the commercial teams aligned to it, maybe we can do better. What about those industrial markets? It was interesting for me to see that evolve as well. Maybe just unpack what you're seeing on the ground there. There's different types of use cases within this. Within our applied industrial space, we grew slightly weaker than we'd like because the plasmid market, which we are doing very well in, is seeing quite a bit of price deflation in the market itself. More people are trying to use as many of our flow cells as possible to juice them as much as possible. We're seeing more multiplexing happening at this moment in time. Now, we're getting to a price point, though, that may allow us to open up a new market segment altogether and actually drive a considerable volume growth over time. But this is going to take a bit of time to kind of come through, particularly on the R&D roadmap piece. It may still be for the next couple of years, maybe a low growth market for us. Within the food safety testing market and other aspects that we have historically focused on, with the focus strategy now of circa 20 target application areas, it's likely that we're not going to put resource into these areas as well. Whilst we may continue to take share, we're not guiding for that because our focus areas is going to be on these other 20 applications instead. Yeah. Yes, we've done very well historically, but the size of the market opportunities are arguably greater than other places, and that's where we're going to focus. Makes sense. Then on the 2026 guide, 16%-20% constant currency revenue growth on the core business. We can cover the margins a little later on. But you've spoken to pretty good coverage for that guide and visibility in the back half. What are some of the puts and takes that takes us to the upper bound versus the lower bound of the range? It's the opportunity pipeline. We have the same visibility at this point in the year as we did last year when we delivered. We guided to 20%-23%, we delivered 24% growth, and we have the same relative coverage now from what's been done already and then scheduled to go out the door, already booked in, plus our underlying run rate business. The piece that goes on top of that is the opportunity pipeline that could kind of where are we going to swing within that guidance range, and there are a number of opportunities out there. I think some of it is actually for the U.S. and the NIH space and other research-type activity because these projects can fall in or out. Within the applied markets, it's more about how quickly they kind of continued on that ramp-up curve. But to answer your question, it's the opportunity pipeline and how much of that falls in. Yeah, that makes sense. I want to dive a little deeper into the clinical business, up 35% year-over-year in the first half. You called out the reimbursement-funded labs running assays or developing new clinical methods as a support there. How is that pipeline looking of those anchor accounts as we look ahead in clinical, and what does that scale-up from pilot to production look like in practice? Well, look, we have a lot of inbound interest from those labs for specifically rare disease and oncology. Our strategy is an LDT enablement strategy. There's a number of the providers that are currently validating our technology, adopting it, typically as a reflex test versus existing short-read diagnostic tests. But as they see the diagnostic yield take up and as they generate clinical evidence to support that diagnostic yield can move from 30% to maybe 60% in some cases, then there is an opportunity to broaden the adoption and make this a frontline test. We are really in that uptake phase now, and this is where you see the sort of revenue growth coming from. It's exciting. When you win one of those clinical workflows, what badger are you typically taking? Are you displacing another sequencing platform or consolidating several existing assays? I'm just curious how that process looks from your vantage point. Well, it depends on end markets. Yeah. Sometimes we replace existing tests. Mostly in some of these rare disease and oncology applications, typically, we come in as a reflex test. So it's on top of what is already existing, but then may push down. We're not the only one active in that market. It's usually a competitive situation, but we've seen good win rates. Great. More broadly, I think across the market, biopharma seems to be picking up across my coverage, across the space as well. 25% growth there. You called that out as likely being the largest contributor out to 2030. 20 biopharma customers actively evaluating technology today. Once a customer validates Oxford Nanopore in a QC workflow, how quickly does that translate into a scaling revenue base for you? Yeah. Initially, you see it in clinical trial volume, which is obviously not as much as commercial. But as you go through commercial approval, then it depends on the ramp-up of the therapy, right? Yeah. Or the vaccine. Typically, you see a first-year moderate take-up, but as the therapy gets accepted, prescribed, and then ultimately commercialized, that really gives you the full scope of the target patient population. In a personalized vaccine space, it's typically patient populations, 10,000 - 20,000, 30,000, 50,000. Each batch is a patient. Each batch is a test. That's where you see the full-scale impact. But it takes time before that ramps up. That doesn't mean there's no revenues before that. Yeah. As one indication gets approved, other indications are being explored through other clinical trials, which obviously then also generates more volume. Yeah, just on that. Once a biopharma customer is onboarded for one molecule, how much easier is it for them to then expand across additional molecules or workflows or sites? Maybe just talk through that scale-up from the initial to additional. Yeah. For the same molecule and other indications,- Yeah. -it first translates into clinical trial volume. But then for other molecules, absolutely. As the pharma companies get more familiar with the technology, has done all the validation in terms of the quality management system we use, the documentation we provide. There's a lot of the validation that doesn't need to be repeated. Yeah. Only the validation that is specific to the molecule needs to then be. That's where the new data need to be generated. But obviously, once you're in with one, it gets a lot more easy to be part of the QC workflow for the other molecules in the pipeline. Yeah, that makes sense. And you were pretty explicit quantifying some of those research headwinds during the first half, the roll-off of quite a few of those large contracts. Outside of those roll-offs, could you maybe deconstruct some of the market trends you're seeing? We're hearing of some stabilization in academia in the U.S. specifically, but maybe given your vantage point across the globe, what are you seeing there? Sure. Well, generally speaking, the research market has been really good for us. We've seen good growth, mid-single digit in the first half this year. But historically, it's been a good growth driver for the company. These applied markets are going to accelerate our growth rates, definitely. In the U.S., we have indeed seen some pressures on NIH. Is that stabilizing? It's not getting worse. Yeah. I have the impression. Europe has been good for us. Looking forward, research markets will remain important for us, but it will be a smaller part of our revenues. Yeah. Today it's about 2/3 of our revenues. We expect by 2030, it's probably going to be closer to 40%. Yeah. Is there anything you can do? Let's assume the research environment funding is still poor out to the year 2030. Is there anything you can do internally to drive more uptake of the instruments, of the consumables? We've had some companies targeting the better-funded labs within the U.S. But I'm curious whether you think there's anything you can do specifically to grow differently from the traditional funding we see in that market. Yeah. I think one of the things that plays to our advantage here is the fact that if you want to get up and running on sequencing, we are the most adopt- Accessible. Accessible. Thank you. Good word. Price point, essentially, for people to kind of start on. So people can buy a MinION for $5,000 with five flow cells and get going. They can buy a GridION for $58,000. A P2i, which is a fantastic device for $80,000 versus competitive products. Yeah. This is considerably lower price point for the CapEx upfront. And the consumables as well, given the fact that you can de-batch and you can kind of more flexibility on our platform, we think that plays into our strengths. So actually, we just continue to go as we are. Absolutely, we have different funding models that are available for customers. So if they're in the U.S. or Europe, we have specific third parties that can offer financing to companies as well, as every big company- Yeah -kind of does. There's always a discussion to be had on reagent rental approaches and things like that as well. It feels like if you have the innovative products out there, customers are- Yeah. -waiting to find the budget for them because they don't want to- No. -themselves fall behind. I mean, exactly right. Where does research dollars get pointed to? Is it to do the same experiment again, or is it to try and unlock new biology? It is unlock new biology, and that is where we believe we offer a considerable advantage here because of the long-read nature of the platform and the fact we look at DNA and RNA directly, which means we see all modifications. Yeah. As we look out to the 2030 revenue ambition, what are the key assumptions there around customer mix, utilization, and account expansion? Just given, again, the volatility we have seen in some of these end markets, how are you thinking about that for the next few years? Yeah. We have been pretty prudent here. Well, you expect us to say that, but we have been in terms of what we are expecting on utilization, actually. Because we know we can do better here. Historically, if you look at all the numbers we have printed, we have actually talked to quite considerable utilization growth year-on-year. We are not assuming that continues. We are really just looking at further adoption of the platform and those specific things within biopharma as well. In terms of pricing, we have been pretty prudent here as well. On the PromethION Flow Cell, we are assuming that actually price declines because our cost per genome will come down over time. It just continues to go in that same trend. The difference is we can see specific end markets, target applications, which are quite high value, actually, that we have a real right to win, and we are just going to focus on those areas and not play in the same spaces where the other players are. Yeah. Francis, one of the clearer messages from the strategy update was the need to translate differentiated technology into a more market-led product roadmap. What changes in practice in terms of how you allocate R&D, decide what gets built, and just as importantly, what are you now prepared to stop or perhaps deprioritize? Sure. One of the things we did as we characterized these end markets and prioritized them, we did a gap analysis of the customer needs and requirements in each of those target applications and where we are now. What product enhancements, software workflow enhancements we would need to do in order to win and claim our fair share of that market. That is going to inform our product roadmap, our priorities in R&D, our go-to-market structure, and we expect refinement in all of these. In terms of the current activities in R&D, it is a long tail of activities that are currently happening. Our strategy historically has been driven by what is scientifically possible versus where we can create customer value. There is an opportunity to truly reset and create more operational discipline, create a clear link between how we invest in R&D, how we align our resources versus the business and the customers we are serving. When you speak with those customers today, what do you think the biggest product constraint is? Is it reliability, workflow simplicity, bioinformatics? Just where do you see the biggest adoption unlock being in the years to come? Yeah. Look, the dependability and the robustness of our technology is not a theme anymore. It's not what I'm hearing from customers. It's enhancements around the workflow. It is, in specific segments, some gaps around bioinformatics. Yeah. It is also about generating the evidence and the data to substantiate our claims. To be clearer in our value proposition, to be clear in terms of showing the data that supports the claims we're making in terms of how long-read is valuable, stressing the so what of what methylation can bring in terms of biological insights, structural variants, what questions it helps answer, et cetera. It's a multitude of things, but they are tweaks, they are enhancements. They are not huge showstoppers. Clearly the good news is we don't need to develop any new platforms or anything. Yeah. The technology is there. I thought the bioinformatics angle is interesting, and I guess software more broadly. Do you see that as just a way of removing friction and driving consumable usage, or is that bioinformatics itself perhaps a revenue driver in isolation? It could be. It depends on target segments- Yeah -and markets. In some target segments, in biopharma in particular, the expectation is really to start from sample to answer and to report, and that includes more than just the sequencing. It includes the sample preparation, it includes the library preparation, and the bioinformatics workflow all in one. That is not necessarily the case in clinical applications. It depends really in terms of what use case you talk about. But software as a revenue generator is certainly an opportunity for us going forward. It is somewhat linked to that, but I have been spending a lot of time with investors working out who the AI winners and losers are in the life science tool space. It feels like there is consensus that the data generators are the ones that have the advantage, and you have the instruments to generate that data. So how are you thinking about that AI work stream in the future, and how important could that be as a potential tailwind for the business? Yeah, it's a really interesting question, and we believe in the sequencing industry we generate the richest data, including long reads, but also methylation, structural variants, et cetera. You have to believe that if you use agentic AI, you've got to base it on the richest data. We're really excited about the potential of what that could bring for us. As a first step, we look forward to the results of the UK Biobank, who are now currently processing 50,000 samples based on our data. Those data will come out at the end of this year and will be a great use case to see what biological insights can be generated from that data. Hopefully that will be a sign of more to come and perhaps an opportunity to look at the other 450,000 samples in the database and to see that as a use case for further database building, then ultimately exploiting that with agentic AI models. It's exciting. Outside of just the new demand vector, what are you doing internally with AI to make Oxford Nanopore smarter? Well, AI and machine learning has been a big component for us in terms of base calling. That's a key capability in our technology. That's a core capability, I would say. We are looking also at what else we can do in terms of improving the quality of our data, how we let that inform our decision-making in a richer manner. We have hired a new Chief Information Officer who started with us three months ago, so really in the process of exploiting that potential. Amazing. Nick, just on the gross margin, I think H1, 62.2%, quite a few moving pieces it seems within that. Just perhaps for those newer to the story, do you mind unpacking that gross margin? Is approximately 62% the right base or is there already kind of a higher underlying exit rate, I think, more broadly within the business? Yeah, of course. Gross margin was up around 400 basis points from the prior year in the same period. This has been driven by last year we took a 330 basis point write-off related to inventory essentially, which essentially exited that, and we pointed people to it at the time and said the kind of CM3 margin was more like 61%. We have seen product mix impact here, and that's to that earlier point about more device sales versus consumables. So you've seen that mix impact come through on the gross margin. As we kind of look forward, we expect that to normalize. We've historically seen currency headwinds as well, but now the dollar's kind of stabilized. We're starting to see that stabilize as well. But we are seeing underlying improvements. Now, over the last few years, we've seen quite considerable improvements in the gross margin from changing the pricing model, selling devices rather than looking at just place them with customers. As we look further forward, to answer your question, I think it's fair to say that 62%, we are aiming to do better than it. So when we kind of exit the year and where we should be thinking about this going in the future is further increases. This is going to be driven by recycling of the PromethION Flow Cell, where we're already making inroads and actually have the process working in certain instances. For anybody who's new to the story, on our consumable item, the flow cell itself, one of the most expensive pieces is the wafer, the chip that's on it. As part of the ESG push, we do get the chips back from the vast majority of the customers, particularly on the PromethION, and we are recycling them to essentially strip it all down, clean the wafer, and then use it again. Now, on the MinION, we are successful with this process, and it's already driven our margins on the MinION to quite high levels. PromethION, we're just starting that process, and we've got some percentage, low percentage of all flow cells have now been recycled that are going out. We're working through the process for how it works from different suppliers of that wafer to make sure the customers can't even notice the difference. We think we have got a path here for this. When we do, we could see a circa 10 percentage points increase in the margin for the PromethION range alone, that is our biggest revenue line overall. Yeah. I think the 62% we are at today, but actually the trajectory that we are seeing for it is positive. As we continue to increase the number of recycled chips with PromethION, you could think about expansion of that gross margin overall. Rounding off, we put in the slides for the recent results. We are around 75% on our consumables gross margin today. We were around 63% a few years ago. We have delivered quite a meaningful increase. As we look out over the next couple of years, getting over 80% is absolutely possible. Great. One point I am just trying to understand and reconcile is that the clinical and biopharma is the mix shift that you want. I think customer mix, though, is 160 basis points gross margin headwind in H1. Why strategically is that better mix initially dilutive, and then when can we start to see that ramp more meaningfully take place? Yeah. It was customer and product. Yeah. Essentially, it's that product piece. Yeah. Essentially that you've got to focus on rather than the customer. To answer this square on as well, for the biopharma piece, absolutely, that mix shift is going to be beneficial to our gross margin. Particularly as the majority of the customers in the QC pipeline are on the MinION product, using the GridION Q. The margins are substantially higher. We will see that be a benefit to margin over time. On the clinical piece, this is an area where we see greater competition in certain segments. Against the other long-read player out there, we do see some price competition at times, and that means that the margin isn't as high as we'd like today. But we have advancements coming through from a product perspective, which will mean that we can do more samples per flow cell. Our pricing is all per sample, so essentially we can see the benefit coming through, and that will drive margins over time. But in the here and now, we want that adoption into those areas as well. The consumables, I think 75% gross margin today, you have that potentially above 80%, I think, longer term. Devices and services, roughly 34%, with potential around 40%. 34% with potential around 40%. Which of those two margin journeys do you think is harder from here? What specifically has to change operationally to reach those levels? I think it is harder on the devices and services piece, because as we kind of flagged as well, we are living in a world where compute costs and memory costs are kind of going up quite a bit. Yep. Now we are completing development on the products to essentially take out cost. We are going to see those benefits offset by headwinds in the next year. So expect device margins to stay broadly flat, actually, for next year. The difference will be on services where we are scaling. For awareness in the room, this is not where we are sequencing for customers. This is actually where we have fixed contracts for enhanced support plans and things like that for customers, where we are seeing we could do better in terms of the number of customers, percentage of customers that are signed up. As that scales, we will see the margin improve significantly. Given the tighter product and market focus, how should we be thinking about the shape of R&D investment from here? I think innovation has obviously fueled the success you have had to date. So how are you thinking about that trade-off between those two factors? Mm-hmm. Yeah. We feel that R&D at the current level is where it needs to be sustained for the foreseeable future, two to three years or so. We have opportunity to reprioritize, to make a clearer link between what we have in terms of target product profiles and how our R&D resources line up behind that. Going forward, 2028 and beyond, there is an opportunity to, as we scale the business further, to probably increase that spend a little again, but then we probably would need to do that on a basis of where we have installed more operational discipline and clearer prioritization. That is now phase one, and we feel pretty comfortable that what we need to achieve in order to win in those target applications, we can do that within the current levels of spend. And then just on the path to adjusted EBITDA breakeven in 2027, a big inflection point for any company there. How much of that plan is within your control through gross margin and cost actions, and how much depends on sustaining that revenue growth in perhaps the mid-teens? So we absolutely do need to continue to grow. Yeah. As the numbers suggest, at the top line, we've guided the market already for next year, the mid-teens. If we deliver the mid-teens growth that we believe is absolutely possible, gross margin expansion above the 62% we've guided to this year, a few hundred basis points, and costs remaining disciplined on costs. In the first half of this year, everybody was seeing adjusted OpEx costs were down 7% overall. We've guided the market to - 2% to 0% for this year, which we feel very comfortable with. As we look into next year, if we can, as Francis has said, we've got opportunities to take out non-headcount-related expenditure, particularly around logistics and IT costs, and we've got focused programs of work that are going on there. That will allow us to invest in other areas. We'll reprioritize internally about what we're doing, costs remaining broadly flat, and essentially, we'll do one of those magic things that a company does and turn profitable. Good stuff. In the last minute and a half, question for you both, what do you think is most underappreciated about the Oxford Nanopore story when you spend time with us, when you spend time with investors? Yeah, I think the story for a long time has been around long-read versus short-read, has been around accuracy, has been around maturity of the technology. I think all of that is behind us now. We see at least our customers telling us they want us to succeed. They want us to be successful. They do not want us to give them a reason not to validate our technology. I feel really excited about that. Great. Nick, anything to add? Yeah, I completely agree, and I think it is the fact that this is a sensing platform. I think we often get put next to other sequencing companies far too often, actually, when the ability for this to be a true sensing platform to see other things that those platforms cannot see and those technologies cannot see. We are seeing it ourselves now with the mRNA opportunities, where I think we are playing in a different park than those guys, actually. I am not sure the investment community necessarily appreciates that yet. Amazing. Francis, Nick, thank you so much. Thank you. Thank you very much.