Q3 2020 Twist Bioscience Corp Earnings Call
Welcome to twist Bio sciences fiscal 2023rd quarter financial results Conference call.
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I'd now like to turn the conference call origin, Thorburn, Chief Financial Officer.
Thank you operator.
Good afternoon, everyone I'd like to thank you all for joining us today for Twinspires Science Conference call to review, our fiscal 2023rd quarter's financial results and business progress.
We did issue our financial was results earlier today and they're available at our website at Www Dot twist by a science dot com.
With me on todays call as Dr. emulate the process CEO and co founder twist.
Finally, we'll begin with their view of recent progress and twist businesses I will report on our financial and operational performance and then really.
I will discuss our upcoming milestones and direction.
We will then open the call up for questions and as a reminder, this call is being recorded.
Audio portion will be archived on investor section of our website and will be available for one week.
During today's presentation, we will make forward looking statements within the meaning of the federal Securities laws forward looking statements jerre relate to future events or future financial or operating performance.
Our expectations and beliefs regarding these matters may not materialize.
Actual results in financial periods are subject to risks and uncertainties.
Cause actual results to differ materially from those projected.
These risks, including those set forth in the press.
And we see significant progress fall Biopharma vertical with our first took 10 from a partnership.
Several upcoming companies embracing L antibody discovery platform.
Turning to specific reserves softened by you.
We reported revenues of $11.8 million with 2.8 in the loss of that coming from Kimco.
What a large portion of Cenveo revenue stream comes from customers in the industrial chemical FICC, though we see an increasing opportunity with healthcare customers.
We have focused on adding products for this market I'm beginning to see the results.
In April.
We launched and expansion of our clinical genes, which offer both larger preparations of DNA.
So it is early days of the launch the revenue stream is growing.
Even more importantly, we see companion orders for jeans coming with these bookings.
Generally speaking for every dollar of larger DNA, perhaps or.
Requires automation of levels we processes.
As whereas the customization of ordering in equal.
And our team made investments in infrastructure to support these for the Cline as it allows us to become more of a one stop shop for all sensitive DNA products.
As we expected.
Our gross margin decreased this quarter as you'll hear from Jim largely resulting from this infrastructure investment.
We believe that these investments was worthwhile to increase the stickiness of forging business by offering a more comprehensive offering.
As well as providing upside to attract new customers who require this feature.
And can now move their business to twist.
We expect that revenue we ran over the course of the next 12 to 24 months, becoming accretive both the top and bottom line.
Overall by orders remained strong at $14.9 million as we're beginning to see academic customers as well as European groups returning to the laboratories.
As we announced last quarter.
I'd to service to our customers to shop and hold for those who wanted to design DNA, while the shuttle in place at this time the vast majority of those orders have been shipped to their respective labs.
We continue to evaluate different market opportunities to pursue DNA maker.
Ansible growth in the long term the market such as customers that need a few genes at the time rather than massive audience.
We remain on track to launch auction already gene fragrance towards the end of the calendar year to begin to that this market opportunity.
Moving to generics and targeted NCS, we reported revenue of 9.1 million barrels for the quarter.
This includes revenue from our infectious disease products for respiratory diseases as well as could be 19.
And we continue to see consistent demand for synergistic barrel controls.
We currently have seven southgobi to controls, including one with the six wonderful gene mutation.
Which is now the domain and form of soft due to worldwide.
We've also launched 15 additional control for a wide range of respiratory diseases.
During the quarter, we also launched a twist respiratory virus research panel to detect in a single asset.
Most common respiratory diseases with symptoms similar to Southgobi too.
This includes several corona viruses in fans as Brian overseas RSV and pneumonia.
As we think it with the challenges ahead, we believe it will be critical to differentiate between disease outbreaks, even the CNTC of respiratory symptoms.
Our panel will help researchers with Adler until mean monitoring and surveillance testing, while while also providing insight into full sequencing formation to track various evolution and strain origin.
Even as revenue for Ngs continues to increase our orders in this area has been done slightly for the last two quarters sequentially.
We are facing something near term headwinds.
As a few key customers activity their operations solely to running PCR based test for coffee 19.
In addition, our field application specialists, who help our customers use our products correctly and efficiently.
Not able to be on site.
Later, this well, making other arrangements for specialist to support our customers in light of the ongoing pandemic.
We believe the fundamentals of our business and market.
Gee I run their business in the near term.
Which negatively impacts our order volumes in Ngs.
We absolutely believe this is a temporary situation as routine diagnostic and ongoing civilians abilities will remain critically important for global health.
Clearly, we continue to see interest from just consumer testing companies.
Moving from Smith micro repairs test to Ngs This test.
On Monday.
Ancestry and uncertain exciting new ancestry health offering.
That brings the power of LNG is there is health information closer to the consumer.
This product includes our Ngs target enrichment platform and is an exciting validation of the value and benefit we bring to consumer health.
Importantly.
We remain responsive to market demands adapting our platform for covenant in research, while maintaining our focus on all of our current and future customer needs.
Turning to our vertical market opportunities, we announced a partnership with Takeda flexes between biopharmas appropriate the rephasing scale ever.
We we worked together for the discovery validation and optimization of antibody impacted as pipeline for oncology rare disease neuroscience and gastroenterology.
This is a significant partnership for twist Biopharma as.
Yes.
For the treatment of say use the disease in Dougs and kits.
This is a huge market opportunities.
And we announced the collaboration with systemic bio and emerging preclinical stage company developing by specific antibodies that enable control activation of the immune system to fight cancer.
And we have the year, we said, we will complete five to 10 partnerships.
Year to date, we have in place nine revenue generating partnerships.
Switch six out of milestones and royalties, including included in the terms.
Please note that we have not disclose of all of these agreements to date.
Focusing on internal development last week, we launched two new southgobi to enter the panels design for researches only.
And available through our ecommerce possible.
One panel includes 32 competitive antibodies against itself could be too is once by protein.
Second panel includes 48 comprehensive antibodies against vision is to wrestle with us going to banks winter human cells.
Each panel contains human antibodies that Vanwees Pico Rivera tuna Mirage units.
To the target.
And maybe use who for the development of diagnostic test vaccines or therapeutics antibodies.
We may we made these antibody panels available to the wider fantasy committee, none therefore to expedite and extend the scope of our antibody therapeutics to air combat the globally impact of could be 19.
In addition were further characterize and tested many of these antibodies.
And have LNG side more than 30 meltdown neutralizing in she's overall testing.
We also have live virus nutrition asset in process at three different sites and operating results.
Taken together, our progress in securing partnerships and RFP discovery of antibodies in response could be 19.
What about Biofire team for future success.
Our results going from South Korea to sequence to competition competitive antibodies and now to digital Vera securitization characterization.
Validated the speed and accuracy of our platform opening those two additional partners and growth for this business area.
We continue to demonstrate that our cutting edge approach adds value.
For small and large companies alike.
We bring something unique to antibody discovery that is generating a milestone and royalty stream for future.
More broadly.
Evaluating different targets that could benefit from our internal is Korean optimization.
In view of Outlicensing, all spinning out future assets.
I will move to data storage.
Last year, we reported that we were pursuing the fabrication of our first silicon chip specifically for that the storage.
As we shared before it takes 18 months for the design build cycles on a chip in the semiconductor industry.
Well, we did not expect to have an update on DNA that as storage.
We recently made some important technical breakthroughs that we believe will facilitate shoot further misery main miniaturization sorry of Silicon technology.
And overall, we remain on track with the internal goals, we have set for ourselves.
Finally in June we completed a follow on financing of focus of our common stock, adding more than 170 endurance our balance sheet.
We appreciate.
Committed and supportive investors, who should overwhelming demand for stuff.
At this time I'd like to turn the cargo to Jim to review, our financial results for the quarter.
Alright, Thank you Emily.
As I highlighted we had a very strong quarter I'd like to thank our employees for delivering again in a challenging environment are no question. Some of the key highlights for the quarter revenue was 21.2 million.
Sequential growth of 10%.
Our next ASIL, 50% year over year.
Over the 24.7 million and orders.
Slightly increase and this challenging environment.
Or send buyer and Ngs revenue grew sequentially.
Gecko business doing well with 2.89 on revenue in the quarter and year to date Gingko revenues, there just under 9 million 8.9 million.
Our results for the quarter also highlights the strength of our platform as our non gecko business scales and 15.3 million.
Revenue in quarter, two to 18.4 million.
Strong growth in both Ngs and sent by all as well as revenue from our core is 19 related products and interest and our antibodies.
We're demonstrating the capability of our silicon based DNA sentences platform to tap into new revenue opportunities.
And we'll continue to build our customer base during the third quarter results.
Represents year on year growth and prosperity, 6% and is terrific outcome based on the uncertain environment.
I quickly touching symbio arson buyer product orders defined as genes libraries, and all of your goals or 14.9 million for the quarter include gingko orders of 3.1.
Our gene business is doing extremely well with orders a 12.3 million showing strength in EMEA and the vast markets primarily from industrial biotech academic and the farmer segments.
Hi quickly covering biopharma, our biopharma bookings were 1.1 million for the quarter, which brings.
Our year to date bookings to 2.6 million.
The third quarter or they are more successful in terms of bookings and formalizing our antibody development partnerships.
At the beginning of the fiscal year, we outline to secure between five and 10 partnerships as Alan noted.
We are tracking do exactly that.
During the quarter, we signed three new antibody discovery partnerships.
And expanding agreement with the current customer as Alan mentioned, Reynosa, and total 90 agreements with six generating milestones and royalties.
In general our antibody development partnerships required twists and provide rapid.
On demand high affinity antibodies based on one or more targets provided by the customer.
These agreements.
Three elements to the program.
One as we license and we also utilize our library of libraries, which is a panel synthetic antibody face display libraries derived only from sequences that exists in the human body.
Two will also work to discover validate and optimize new antibody candidates.
And srini the customer pays twist technology licensing fees and increasingly received project milestones.
As for completion.
Quarter.
I'd like to note that our year to date bookings are approximately 30 million for Ngls.
Our pipeline of opportunities continues to scale, we've seen an increasing number of customers as well as increased engagement with current and potential customers.
Regardless or 620 customers in the third quarter.
From 253 customer accounts in the previous quarter.
So in the quarter, we saw more opportunities with a higher number of lower volume purchase orders.
Another positive as our pipeline of a larger ngs opportunities continues to scale.
Tracking a 132.
Opportunities progressing through the pilot.
Validation.
The option phases with four seven adopting up from 43.
As highlighted we've seen a robust growth in our funnel.
Our year to date Ngs bookings as mentioned, our Sir over 30 million was roughly 24 million.
Im going to spend the revenue will pick up in line with a customer activities or expect to see additional opportunities will Smith micro rate conversion to ngs plus an overseas.
As well as new product introductions.
Now, let me quickly cover the geographies overall geography, pars gratefully third quarter, and most regions were flat with previous quarters versus.
Well incredible based on the environment.
EMEA did well with orders flat.
Will ngs was there.
We saw orders really flatter million and American orders were just under 15 million. So overall, a great geographic performance.
As we highlighted on all our other calls we provide orders not directly translates into revenue for the following quarter, but more to provide a train length for each product group.
No progressing onto revenue.
You are more revenue digital's quarters, three revenue was 21.2 million up sequentially from 19.3 million.
Which fell from approximately 88000 in quarter two.
83000 importance free.
This highlights we had a very strong quarter with non gingko customer base as revenues scale of approximately 30% sequentially from 5.2 million to 6.8 million.
As I noted earlier, we're seeing the benefit of launching our DNA prep products and approximately 50% over June revenue in quarter three months from longer genes.
Wins over one point 8-K b.
Quickly touching biopharma revenue for the quarter was zero point Threemillion and reflects the timing our antibody optimization projects constraints in terms of global expansion.
Revenue from Americas in quarter, three was approximately $13.6 million as compared to 12.1 million previous quarter.
Revenue of 6.4 and as compared to 6.2.
And the APAC revenue actually scale to 1.2 from 0.9 million in Q2, highlighting recovery in eight bank.
In terms of segment revenue healthcare was strong for the quarter with revenue of 8.6 million up from 5.8 million quarter to IP sequential growth of approximately 40%.
Academic revenue declined modestly to 4.6 million from 5.5 million, reflecting the impact covered industrial chemicals was flat at some point sevenmillion with strong non game cool customer contribution.
Now moving to the downturn PNM gross margins, our gross margin for the third quarters, 22%.
Which was impacted by our scale up of our DNA, perhaps for colonial genes.
This resulted in an observer capacity.
We're very encouraged by the initial market response, and we'll continue to scale unutilized capacity.
We believe this will be a very important investments for future growth as we've been able to go after a larger share of final wallet for their platform.
Covered shelter in place compensation was 0.9 million.
In the cost of revenues and the June quarter, and when when normalized for the shelter in place compensation, our gross margin will be approximately 26.4%.
Depreciation and stock based comp and cost of revenue was 0.9 million in quarter three.
In terms of our operating expense.
R&D was 10.4 million compared to 10.6 million quarter too.
Good quarter, three R&D spend reflects 1.5 million offset R&D expenses for the IR.
Grant funds received from the June quarter.
The non dilutive funding you've been talking about previously.
Ross R&D spend in quarter, three was 11.9 million versus 10.6 million after year back the IARPA.
And primarily due to the sequential increase investment in our antibody and ngs product activity as well 0.3 million shelter in place compensation.
SJ costs for the quarter, we're trying to 2.5 million versus declined from 27.2 million important to.
Reflecting a reduction in legal litigation expense.
We did continue to invest in our commercial organization and the increased to 161 heads up sequentially by 16, as we position ourselves for growth and Fytwenty one.
Our net loss for the quarter was 20.2 million, which include stock based compensation of 4.1 million and depreciation of 1.7 million.
In summary, we ended the quarter was 311.8 million in cash and equivalents under invested about 8 million year to date and Capex.
During the quarter, we proved out the power of platform, we launched our DNA prep products, we launch which allowed us to capture more gene business our ngs.
Pipeline continues to grow and received our first IR for funding.
Our Biopharma investment is starting to pay off as we close more partnerships and responded to the pandemic by reducing controls and infectious disease panels.
We invested in expanding our organizational capabilities and supporting our employees through the pandemic challenge by providing additional compensation and PPD, which positions us to scale.
To date, increasing revenue Fortinet prep suffering as.
Currently using snap batteries.
Can be 90.
As with the civil although the area.
And at the so it's.
We continue to execute on our agreements Ryan.
On a state continued development cycle to drive the course of DNA that the storage Don through technology advancement.
It has been exceptionally busy and productive quarter across all areas of our business.
Consistent with last quarter.
Well not providing financial guidance for the rest of the fiscal year huge unpredictable impact both positive and negative.
Green Global could be 19 global pandemic on our results of operations.
We anticipate continued growth.
As we do not anticipate dramatic increases or decreases in revenue.
The results of could be 19 for fiscal year fourth quarter.
Could be 19 remains the societal challenge worldwide.
Particularly in the United States, which we've delivered solid growth in all areas of our business.
A twist the majority of foundries are entering the fifth month working from home and continue to demonstrate of a high level of commitment and productivity to drive the business for them.
Fall employees that are working in the labs, we began weekly could be 19 testing to ensure the safety of foundries and the continued supply of DNA products to our customers.
These are difficult times.
I am proud of our team continues and brands the challenges with great and innovative solutions together with made incredible stride and I know this is just beginning.
With that.
Several of the cultural question.
Operator.
As a reminder to ask a question you will need to press star one on your telephone.
To withdraw your question perhaps.
Ngs Kostelecky.
The one would hope photo fostered an odd keep thinking about just right.
I'm showing on you know you your first question.
Well well I'm very excited with the launch of the interest Street health products, and we had probably previously said that.
Ancestry was one of the true.
My career to Ngs conversion, that's we've had so from.
But we believe that Oh platform.
Because any small unit from Densified 60000 times.
And so.
Our probes niche committee or through an advantage.
At low dose of coverage for a rare disease.
Or you will need 30 accomplishments them.
If you actually sequence it though we are.
Even more often advantage so.
So our view is that there is that the deeper the sequencing the more the more beneficial our platform is and so some of the some of the company's that that.
Gene tracks and report every quarter on.
Progress from pilot to production some of those are liquid biopsy company and.
And we think that.
They are switching to us thanks to the uniformity that to provide which turns into a lower cost per sample for them.
Okay got it and one last one what are the product launch for the rest of the of the sites identity.
So for the rest of the.
Fiscal year, so for the rest of the calendar year, we took that with the work.
Cleaner ready gene treatment.
For Symbio.
And and.
I don't think we've.
Disclosed.
Any pro claunch yet.
For NGL.
Great. Thank you Dave.
Next year.
Thank you. Our next question comes from Catherine shopping with Baird. Your line is now.
Hey, guys. This is actually Tom on for Kathryn I was just wondering if you could speak to any particular revenue trends throughout the quarter.
If things sort of where or slower in April and then ramp throughout the year and then any insight into July would be appreciated just sort of given.
I'm going to summarize some of the regional flare ups, we've seen at least here in the states. So just curious if you guys had seen anything or any sort of you know pauses in some of them all and momentum.
[noise] now in fact I.
I mean, our revenue trends actually during the quarter fairly consistent.
They in terms of any forward looking statements cap can make that but just highlight that our bookings 24.7 was another good quarter.
Yes, and bio business I just to repeat some of the comments made their labor symbio visit doing well.
There's a lot of positives on the Biopharma site main particularly boots are we.
Number of new partnerships, we're seeing a lot of interest and there are discovery platform.
And we continue to scale, our customer base I think was most encouraging for myself tracking the numbers the number of larger opportunities we're seeing in Ngls.
And that that continues to be a really good strong sign a the DNA, perhaps we launched during the quarter had had a positive impact in terms of attracting more gene business, we're offering a broader portfolio for customers and offering a one stop shop alone I wish it makes it easier for for for.
For their supply chain management, and a good and were terrific partner to work with.
Great. That's a that's appreciated color pivoting to the Biopharmas side of things you know if I if I look back on the original guidance.
You guys provided I mean, five to 10 finer partnerships you guys are already at the high end through that I think you had spoken too.
A million in revenue on the for your guide you guys have clip that as well I mean, just sorry, if I if I think to where are you guys were thinking coming into the year I mean, what's driving the outperformance is it just the platform validation is that a you know the revenue side is it just more of the upfront. A then you guys were expecting I just love to get some color on sort of way or city.
Relative to those initial expectations.
No. Thank you for for the question.
So.
We well when we said linguistics and when we said the guidance we.
Well into the beginning of the yeah and this year was a transition year from last year being a year, where we gather the data.
And he's here, where we tune those data set into an early early business success. So we add some view into into the funnel.
And ER and.
The fact that we are towards the high end shows that the we've been quite successful at closing that channel and yes for the screen Dawn around could read that's really shine a light.
On on the power for by both from a platform.
And and well we're quite pleased with that.
Great and one more if I can send again you know we had seen that gingko had received some funding through an NIH program to develop.
Okay, and we always worked closely with our friends at Gingko.
Great partnership, but we don't disclose the actual details of what we're actually working on.
Understood. Thanks for the color guys.
Yes.
Thank you.
Our next question comes from loot Sagar with Evercore ISI. Your line is now open.
Hey, guys how are you.
Good and yearling regular here.
Our is also here.
So if you could.
Borrowers.
Aaron is going to be diluted with the genetic material of the human host and so.
Thousands of thereafter location, we would therefore you have to do some kind of 100 enrichment when you pull out the virus material away from the human for that you focus.
On on on the Union.
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And.
So we pride products for that and you have to do elaborate front and then you have to capture.
In terms of.
Once we're pulling helps you to do is if you have.
A thousand sample.
Interviewing a toggling library prep and then the talent capture.
Q2, dental hundreds under the time it limits the number of library prep, meaning type it in steps that you have.
Two.
So long answer to you your question, but the answer it.
Going into the squish.
Protocol.
Okay.
The entrance as to the genetic material, so whether it's one frontal or under contract that have been pool.
The protocol was the same so our political.
I would say compatible from the 1.82 frontal going in.
That being said.
We point out that.
We have a little bit of advantage over all though.
So for the current because our capture itself is good so Ian.
Even if you don't through the central upfront as to the capture.
For the quarter, where you can mix the threat.
Labrys together into one capture and we will enable us to up to 16 play so capturing.
We can coolers bird.
It's actually quite simple futures blenders rental index right 50 milligram that goes into into the critical.
The difficulties that.
The work flow is easy.
Then you have to be covered with later if you have one positive.
As to the can really play there.
Okay, all right that's great.
And then on the bio pharma side.
You guys has been.
In reporting.
Yes.
And.
So as you know some of those do they take time so.
We will probably.
Said as much as were able to two slid at this point today.
That's fair Fair fair enough fair enough.
And then lastly here, we're talking about the margin dynamics in X. shelter in place payments of 20.
26% gross margin is that kind of the pace, we should expect.
Going forward in Fourq you Jim.
Yes, so the answer the non-GAAP gross margins Gen, 6.4%, obviously not going to.
Give any hard forecasts projections three step back we continue to scale the business as we scale the business and leverage our fixed cost.
We were impacted last quarter by shelter in place.
And also we have some inefficiencies as we launched or DNA product business.
Our view is as we scale the business leveraging fixed cost I continue to to launch.
And particularly Ngs and.
And Bioproducts.
We're still targeting 50% to 60%.
Gross margin and future.
This year. After this year I think our average gross margin year to date.
Non-GAAP is about 26%.
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As a frame of reference.
Okay. That's helpful Thats, a tough for me thanks.
Yes.
Thank you I'm not showing any further questions at this time I would now like to turn the call back over to Dr and Winkle Proust for any closing remarks.
Thank you operator, and thank you all for joining us today.
As we move into the final quarter of fiscal year, we look forward to keeping you apprised of our program.
We continue to realize the powerful silicon based technology platform to ride the future through since the beginning in Green was held and the sustainability of the planet.
Please pick ill take good care of yourself.
Save so trade extends and.
Thank you.
Ladies and gentlemen, this concludes today's conference call.
Thank you for participating you may now disconnect.
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