Q4 2020 Berkeley Lights Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Berkeley Lights fourth quarter 2020 earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session. The ask a question during the session you will need the press star one on your telephone.
If you require any further assistance please press star zero.
It is now my pleasure to introduce Carrie Mendivil Investor Relations.
Thank you.
Earlier today, Berkeley lights released financial results for the quarter and year ended December 31 2020.
If you have not received the news release for it.
The added for the company's distribution list. Please send me an E mail.
Dr at Berkeley lights Dot com.
For we begin I'd like to remind you that management will make statements. During this call that are forward looking statements within the meaning of federal Securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated additional information regarding these risks and uncertainties appears in the section entitled forward looking statements in the press release.
Correctly like the issued today for a more complete list and description. Please see the risk factors section of the company's final prospectus filed with the SEC on November 19, 2020, the company's quarterly report on form 10-Q for the quarter ended September 30 of 2020 and in its other filings with the Securities and Exchange Commission.
Except as required by law, Berkeley lights disclaims any intention or obligation to update or revise any financial projections or forward looking statements for them because of new information future events or otherwise.
The conference call contains time sensitive information and is accurate only as of the live broadcast February 25, 2021 that I'd like to turn the call over to Eric hubs correctly like Chief Executive Officer, Eric.
Thanks, Carrie and thank you everyone for joining us this afternoon.
Joining me today is Sean Hope, our Chief Financial Officer, and Kirkwood, Our Vice President of business development.
As we announced in early February Charles moving on for Virtu lights at the end of April to pursue opportunities with earlier stage companies on behalf of the lights team I want to thank Sean for his leadership and his many contributions to the company over the past five years, especially as we're taking us public last year.
Purple officially transitioned into the role of Chief Financial Officer on March 15th on.
On the call today, Kurt will provide the financial details on both the fourth quarter and full year 2020.
And then at the end of the call Sean will join us for Q&A.
There is no doubt 2020 was an incredibly challenging year, but I am so proud of the brick lights team for their continued efforts, especially in the presence of COVID-19 restrictions to drive the installations and adoption of our industry leading platform.
The finished the year strong with fourth quarter revenue growing 31% year over year to $21 7 million and ended the year with an installed base of 75 platforms up 56% for the end of 2019.
For those on the call of new to bridge lights, we are a leading digital cell biology company focused on accelerating the rapid development and commercialization of biotherapeutics and other cell based products, we envision a future where sales are a scalable and sustainable way to manufacture the products that we need to live a long and healthy lives.
On the <unk> platform is the key to enabling this by providing precise rapid discovery of functional validation of biology.
Our goal is to become the industry standard across the cell based product value chain.
Now the markets that can be addressed by some of these products are very large and we are initially focusing on three markets antibody therapeutics cell therapy and synthetic biology.
Collectively these markets accounted for estimated end market sales of $148 billion in 2019 and are projected to grow to over 250 billion over the next for years. We believe these markets represent an estimated addressable market opportunity of $23 billion to Berkeley lights.
In 2020, we continued to deliver on our commitment to drive innovation by releasing six new workflows, bringing the total number of commercial work close to eight. This included the most recent auto cell line development to point of workflow that provides even higher access to relative biodiversity and further enables complex polyfunctional assays.
With this new workflow, we were able to start taking of share of the capacity expansion occurring in the seal the CMO market segment.
For the fourth quarter, one of our customers received the first and the approval by the FDA for an antibody therapeutic developed using our auto cell line development workflow on the Beacon.
What this means is that our highly replicable standardized automated cell line development workflow with the associated automated data capture including our industry, leading monoclonality received the stamp of approval for the creation of modest level of cell lines. We believe this will further shorten cycle times on the overall approval process for all customers and drive incremental demand for auto.
The seal the workflow products.
During the year. We also released two workflows for antibody discovery auto parts of the discovery to point out at three point of view, which drove demand across all three geographic segments, especially in Asia, which was the fastest growing region of the year.
As we look ahead of 2021, there are three key tier ones that are driving growth across our markets.
The first demand for cell based products is growing.
The complexity of cell based products is increasing for price more precise multi functional assays with the highest resolution.
And third there are new therapeutic modalities, including multi specific antibodies and cell and gene therapies, using DNA for mrna therapeutics, which require precise functional validation.
As a result of these tail wins the number of customers is growing with many smaller biotech companies chasing specific drug targets with EBIT shorter drug development times.
This is creating rapid growth of the number of <unk> customers that we serve and provides us with the opportunity to offer different access models for our technology and attract new customers onto the Berkeley lights platform.
While this market grows it continues to be constrained by the manufacturer ability of novel therapeutic products and modalities.
To alleviate these constraints we are developing workflows that move the functional validation of manufacturing parameters early into the process, giving customers higher predictability of manufacturing yield of throughput.
We're also enabling new manufacturing approaches with much higher throughput.
Sure.
Each and every biologic modality, whether it's antibodies and cell therapies gene therapies, and every gene sequence discover where cell line. The engineered requires functional validation, which we believe can be optimally performed on the <unk> platform on.
Our customers are looking to accelerate their capability to discover develop at the manufacturer cell based products and we believe to do this all roads ultimately lead to Berkeley lights.
To benefit from these market tailwind, we continue to focus our growth strategy on two key areas first we are driving the core business in existing and adjacent markets and second we're leveraging our technology to expand into new addressable markets.
Starting with the core business, we recently announced the next generation antibody discovery workflow auto class of the discovery for point out which will be the industry's first fully integrated antibody discovery workflow from target to functional molecule.
Today, the Big Challenge of antibody discovery is finding rare antibodies it gets difficult targets, such as <unk> and ion channels GBS.
<unk> constitute the largest family of proteins targeted by FDA approved drugs, resulting in near the 200 billion in annual sales.
Antibodies against GPC, our targets have great therapeutic potential in a variety of diseases, including cancer inflammatory disorders, neurological and metabolic diseases, but they have been extremely hard to hit targets, which is why there is only one FDA approved antibody to date. The challenge here is funding of rare antibody, which is like searching for a needle in a haystack.
In this regard the auto class B discovery for point out of the game changer. The further increases access to biodiversity and screens against multiple highly sensitive cell based assays, thereby increasing the probability of success in finding rare antibodies effective against these hard to hit targets. So effectively we are helping customers find that needle in the haystack.
Okay.
In fact in the comparative campaign between Hybridoma Beacon, one customer was able to increase their yields by a factor of 10, the more difficult the target the more distinct the gain that was achieved we are excited about the potential value of this workflow will provide to customers and expect the launch it by the middle of 2021.
We are also executing on our strategy to enter the rapidly growing cell therapy manufacturing market and expect a meaningful amount of R&D investment towards the development of of cell therapy manufacturing system.
<unk> is designed to be the first fully integrated closed loop GMP in a box manufacturing solution, which integrates unit operations of manufacturing as well as embedded analytics for in process of final QC to streamline development.
When our characterization capabilities are combined in the manufacturing platform, we will provide the industry with the greatest opportunity to dramatically accelerate the deployment of cellular therapies.
In the fourth quarter, we reached an important milestone and completed the development of the first Alpha unit, we successfully demonstrated assays on the beacon that of ready to transfer onto the alpha units. The C. Tms platform will support both centralized and distributed manufacturing models.
We also continued to leverage our technology to access new markets through business development partnerships and we are excited to announce that we just signed a collaboration agreement with the global leader in the CD of most space to make stable cell lines for viral vector manufacturing and the rapidly growing cell and gene therapy markets.
Generating stable cell lines is hard this is because the stable integration of the DNA required to produce these viral vectors is of very rare event today.
Today conventional screening processes are limited to tens of cell lines and typically require at least six months to complete.
As a result, the industry has been utilizing transient cell lines to make these viral vectors the.
This process requires cell lines to be constantly developed making viral vector manufacturing very expenses and less predictable as compared to stable cell lines used for antibody therapeutics.
Through this new partnership our goal is to make stable cell line for viral vector manufacturing as accessible to the world as they currently are for antibody therapeutics.
In this collaboration we will leverage the capabilities of our platform on existing cell line development workflow to rapidly validate multi functional parameters spaces have very high throughput so rather than tens of cell lines over six months, we will be screening thousands of cell lines in less than a week.
We expect this partnership and more like it to have a meaningful impact on our growth trajectory over the coming years. This non exclusive collaboration has the multiyear revenue opportunity of up to $17 million.
Expand our total addressable market and perhaps even most importantly as of new viral vector workflow, which we hope will become the standard to make stable viral vector cell lines in the future.
We are seeing many of these new opportunities and our ability to execute on these partnerships and generate new workflows is enabled by our <unk>.
Therefore, we are expanding the bio foundry and business development teams to capture these new opportunities. We are also expanding our biopharma capabilities into the APAC and EMEA regions.
In the fourth quarter, we launched the first lab in APAC and are planning to go live with the second lap in the EMEA by the end of the second quarter.
These labs are essentially many biopharma reis and will enable us to demonstrate our technology to future customers accelerate customer training and engage in these new market opportunities globally.
To execute on our ambitious vision, we are scaling the organization to achieve our growth objectives. In early February we announced the expansion of our senior leadership team with Pete let a joining of chief Human Resource Officer.
In the Healy joining in a newly created customer facing role of Chief product Officer, and Kurt who is transitioning to CFO on March.
Their collective experience and track record in high growth organizations will be invaluable as we continue to advance our strategic objectives.
We are executing aggressively to accelerate the use of cell based products and I'm confident that with these key additions the executive team is well positioned to lead Berkeley lights into the next chapter of growth for success.
With that I will now turn the call over to Kirk for more detail on our financials Kurt.
Thanks, Eric total revenue for 2020 increased by 13% to $64 $3 million over 2019 in large part to the strong demand for our workflows across all core market segments, and antibody therapeutics cell therapy and synthetic biology.
On a quarterly basis revenue for the three months ended December 31, 2020 was $21 $7 million with $17 $7 million coming from product revenue and $4 million coming from service revenue for.
Fourth quarter revenue increased 31% over the fourth quarter of 2019, driven by new system placements and increased recurring revenue from the growing installed base.
Looking at our three revenue streams direct platform sales totaled $44 $7 million on 2020, and $15 3 million in the fourth quarter of 2020, increasing by 14% and 39% respectively over the prior year periods.
In both cases growth was largely driven by strong demand and antibody therapeutics.
Revenue from joint development agreements and partnerships was $5 $8 million in 2020 compared to $9 $6 million in 2019, and the fourth quarter of 2020. This revenue stream generated $1 6 million compared to $2 $6 million in the prior year period as.
As we look forward, we expect this revenue stream to grow as we recognize revenue for the viral vector of collaboration as well as additional future collaborations.
Recurring revenue was $13 $9 million in 2020, representing 22% of our total revenue.
This compares to 2019 recurring revenue of $8 million and 14% of total revenue.
The increase in total dollars as well as the overall percent contribution to total revenue as a result of our growing installed base, we expect the stable and predictable revenue stream to further grow as we continue to drive adoption of our technology.
Recurring revenue increased $1 $8 million in the fourth quarter of 2020 to $4 8 million compared to the fourth quarter of 2019.
Growing 59% year over year.
During the year, we placed 27 platforms nine of which were placed in the fourth quarter. We continued to expand our customer base with 18 placements coming from new customers and nine being repeat orders.
This brought our installed base of 75 systems at yearend, a 56% increase over 2019.
Gross profit for 2020 was $44 6 million compared to $43 $5 million on the prior year.
Gross profit for the fourth quarter, 2020 was $14 8 million compared to $12 $4 million in the fourth quarter of 2019.
Gross margin for 2020 was 69% compared to 77% in the prior year gross.
Gross margin for the fourth quarter of 2020 was 68% compared to 75% in the prior year period.
Both the full year and quarterly gross margin declines were driven by the substantial completion of two higher margin collaborations during 2020 as well as the revenue reductions associated with the buy down rights for two ginkgo workflows. As a reminder, our 2020 gross margin includes the costs associated with the buy down.
Of Ginkgo workflows. This buy down of allows us to accelerate the commercialization of these workflows and is consistent with the strategy Eric outlined earlier.
Total operating expenses in 2020 were $84 9 million, including $10 $6 million of stock based compensation compared to $60 million on 2019 inclusive of $3 8 million of stock based compensation.
The increase of $24 $9 million was driven by $9 2 million of G&A expense as we transitioned to a public company $6 $9 million of stock based compensation expense for.
$5 $3 million of R&D, and $3 $5 million of sales and marketing.
Fourth quarter 2020, operating expenses for $26 6 million.
Compared to $15 7 million in the fourth quarter of 2019, and including $5 $7 million and $1 million of stock based compensation respectively. The.
The increase was driven by $4 $7 million of additional stock based compensation expense $3 $9 million increase in G&A of $1 $3 million of R&D and $1 million of additional sales and marketing expense.
Net loss for 2020 was $41 $6 million compared to a loss of $18 3 million in 2019.
Net loss for the fourth quarter of 2020 was $12 1 million compared to a loss of $3 5 million for the prior year period.
All net loss numbers are inclusive of stock based compensation.
We ended the year with a strong balance sheet, consisting of $233 million in cash and cash equivalents.
Now turning our outlook to 2021, we expect revenue to be in the range of $90 million to $100 million representing.
Representing growth between 40% and 56% over the prior year, we expect revenues for 2021 to be more heavily weighted to the back half of the year as more business development collaborations and partnerships come on line coupled with the normal seasonality, we typically experience in the fourth quarter.
With that I'll turn the call back over to Eric for closing comments.
Thanks Kurt.
Overall I am so proud of our team and what they were able to achieve in what turned out to be an incredibly challenging year amidst the global pandemic. We continued to deliver throughout 2020 and ended the year strong in the fourth quarter, but even more important than our commercial success. During the year. We continued to build a strong foundation and existing of new markets that will position.
As for success in the coming years.
Looking ahead, I am more bullish than ever about the opportunities in front of us the demand for cell based products is growing rapidly and as these markets grow our technology will become the critical component to accelerate the commercialization of these products I am confident that we are well positioned to execute our strategy to transform the market for cell based products in the coming years and.
With that we'll now open it up to questions operator.
Thank you and as a reminder to ask a question you will need the press star one on your telephone to withdraw your question press the pound key.
First question comes from the line of Tycho Peterson with JP Morgan.
Hi, This is giuliano for Tycho. Thanks for taking the question I wanted to start with the viral vector of new workflow.
Can you talk about does that have of play into into vaccines or is that more tailored for for gene therapy, and how should we think about the addressable market and the number of marquee customers you can have outside of that.
And you mentioned the 17 million deal size, how should we think about that because on the new cadence.
It does thanks for the question.
Just a reminder for everybody on the line as part of our of core part of our strategy is to leverage our technology to access new markets through business development partnerships and of course, we're excited to announce this this new collaboration with the global leader in the senior most space.
The stable cell lines as hard in particular in this particular case, we're talking about generating stable cell lines for for viral vectors in the cell and gene therapy space.
And so and they're hard it's hard to do this because conventional screening processes really limited to tens of tens of cell lines over six months period and through this this new partnership our goal is to make stable. So on survival of vector manufacturing as accessible to the world as they currently are for <unk> therapeutics.
As we move forward as we move forward in this in this partnership we send the $70 million deal as you described which of course.
A certain part of that is a fixed or locked in payments that will occur over the first the first couple of periods and then there is additional upside as we go into the future. When you think about the overall market that is suitable in this in this particular space.
<unk> in general globally of really working to provide these the cell lines the stable cell lines, but also right.
Right now currently they are being provided the viral vectors of being provided via the of transient trend itself and so we believe that with the stable cell line production will be able to take additional market for the transients held the line market as well.
And the way you for color on.
Oh go ahead.
Please go ahead.
Yes. Your second part of the question is about the $17 million how much to put in for this year, we've obviously baked that into our.
Guidance. It can vary obviously, depending upon how much work gets completed in which timeframe, but I think it's safe to say there is probably 25% of that total would hit in 2021.
Got it very helpful.
And then the second question regarding the 2021 guidance, obviously very strong in the bus.
Our deal model could you discuss what's driving the upside on guidance is that mainly that the partnership or or what do you think the number of new workflows that you've launched over the course of 2020, which is also kind of.
Accelerate the momentum of the penetrating to the customers who were maybe previously holding now waiting for the Wedbush Com.
Could you also touch upon your ASP instrument asps the expectations for 2021 of what.
Yes, I'll, let <unk> take the second half of the question I'll just at the.
At the front part of the question, which was 2020 was of great year for Us and as you mentioned, we delivered six workflows, which brings our total released workflows up to eight and placing 27 tools for the 56% increase in our installed base. So we finished we finished 2020 strong with the strong Q4 of $21 7 million, which enabled us to close the year out of 60.
For <unk> three.
And what we're feeling in the market as we feel multiple tailwind or both of our direction.
And so as these tail winds are blowing it's really helping us.
Aligning with our with our strategy to expand not only the current and adjacent markets and the antibody discovery of cell line development, our sym bio, but also in but also the in cell therapy and also in the viral vector space and so there are additional market expanding deals in the pipeline and this is why we're really moving.
For the 2021 of our guidance was laid out the curve do you want to provide clarity on on the back end of that question regards to the Asps.
I think when we look at it asps are relatively stable year over year. The way we look at our business is more of a portfolio approach. So as we get some of these high value business development deals coming into play will.
We will manage that for the long term model that we have communicated previously with expectations of long term gross margin from the 70% range.
Got it.
Lastly for me you mentioned that you completed the Alpha unit for our cell therapy manufacturing system in the fourth quarter, how should we think about the time line for you to start placing data systems with customers.
Yes, it's a fantastic question is as you mentioned and we discussed previously range. We have completed the the alpha prototype.
We are integrating we are integrating additional assays for the beacon and transitioning onto the system.
I think how we should think about it is this is a multiyear project and as we move forward in this multi year projects, which what's the timeline is heavily dependent on of course, the regulatory aspects right.
As we as we engage in partnerships I believe that timeline can be brought it pretty significantly.
But we continue to see cell therapies as.
As one of the most exciting and emerging modalities.
And so we're going to continue to push forward in the in the TTS the development process to engage more deeply in the cell therapy market.
Alright, thanks, guys and congrats on the progress.
Thank you.
Thank you and our net.
Question comes from the line of day in areas with Stifel.
Good afternoon, guys. Thanks for the questions Eric maybe just a couple of on sort of the business development process for the customers that are on the service side <unk> and <unk> I am curious whether as you go to pitch the beacon if youre finding that there are sort of particular economic cases that they look for another one.
Is there something about pricing or a payback period that sort of has the light go off when it comes their own ability to make money on any commonality there that youre seeing.
Yeah, Dan It's a great question, absolutely I think the best case studies and cell line development, where we're finding is that our customers are able to recover of based on the based on the additional value that precise provided by very rapid turnaround and cell line development that we are able to provide significant value in certain cases, our customers are.
Saying that the return on investment is less than five engagements.
<unk> engagements that they pay the system back and this was before Dan. This is before our first customer approval of an IND in Q4.
So our customers are really <unk>.
Accessing value from from the very high throughput that we provide with these automated systems.
Okay, that's great.
And then maybe just if you look at the sales funnel where are the application areas, where it feels like customers are sort of on boarding concept, but maybe waiting for some externally validated data emerge I'm just trying to understand where you are kind of you are at the verge of a tipping point once spoke sort of look around and see that someone else is doing it.
And having some success.
Yeah, and I think I think we're.
We're either there or passing that I mean, we provided a guidance range of $90 million to $100 million because it's predicated on a on a current sales our sales funnel as well as historical and anticipated converted the reason as we said in the prepared remarks before the full year of Q4, we saw strong growth, particularly in particularly if we say for antibody disk.
In the Asia Pacific region, but also sell on development as I mentioned with the the IND approval of that continued to go up so we continue to innovate and our customers are looking forward for the release of these new workflows, such as auto parts of the discussion.
Covering for <unk>, which will create the new gold standard for the molecule discovery.
And also a cell line development with the with the idea of approvals. So we continue to see growth in our sales pipeline to support our guidance.
Alright, maybe last one if I could just on the placement trajectory. It seems like Biopharma has been a pretty good place right now, but you do have.
Covid and the mixed still and there are some questions. So in terms of just.
Cadence across the quarters on the placements is there anything you would kind of point us to in terms of back half of the year front. After the year dynamics that are that are noteworthy.
Well Dan.
Regards skus of the discussion of whether it's pharma or for.
<unk> or <unk>, we continue the seems the about the expansion of happening in the market.
And our customers are not slowing down at all of whether it's the farmer of the CDO customers. So the typical particular seasonality that we see I think it is in order.
The other than that Sean for occurred anything to add on.
Of course.
Yes, I think this year in particular you've got.
As we ramp of our business development team and we make the investments there those deals materialize youll see more of our.
The high value collaborations there be skewed towards the second half from a revenue recognition standpoint.
And Sean anything to add on the seasonal performance historical stuff like that.
No I was just kind of kind of I think add to what Curt was alluding to a bit.
We absolutely plan to grow the the placement number year over year I think what you also see is.
Just like to say the deal we just.
We just articulated on the earnings script Youll start to see in.
And the expansion of sort of on our high value sort of partnership revenue stream as well and some of those deals Dan would be in lieu of placements right. So we capture a bit more value.
Doing a partnership of high value of partnership approach that of placement. So I think I think youll see of placements continue to grow but I also think you will see.
The business development line the partnership revenue growth.
The year over year significantly as well.
Yeah, Okay. Thanks very much.
Thank you and.
And our next question comes from the line of Doug Schenkel with Cowen.
Hi, This is taboo nambi on for Doug Schenkel.
So to begin the following up on <unk> question on the CD EMS system net.
All of us.
For both centralized and decentralized manufacturing does this mean it will also be compatible to allogeneic T cell therapies and Ken already approved therapies are the ones in clinical trials also use of your technology.
Would it have to be at the R&D stage.
Yeah. So let me I'll handle both questions I'll first start with allo versus vicious autologous, what we see in the market is of course of the approvals of the of the autologous cell therapies.
So our automated system, we believe our automated system, coupled with our Beacon system was so cell therapy development 1.1 of two point of workflows are the most rapid way to accelerate the development of whether it's the <unk> for allogeneic cell therapies, the cell therapy manufacturing system is tailored more towards it.
August cell therapies, but also will work for allogeneic cell therapies.
There is often of common misconception in terms of just the the number of cell therapies that can be manufactured of the volume of cell therapies that can be manufactured from an autologous or for for an allogeneic.
Our overall portfolio, but in any case it certainly is more more tailored towards the autologous right now in regard to the approvals in seltzer in the cell therapy space.
You talked about whether its IND stage of VLA stage. It certainly the design stage because of the process.
As a key part of the product and so working and engaging with the clinical cancer centers as a core part of our overall strategy as we move forward and into the next point of engagement.
And our overall strategy for Cts.
So then already approved T cell therapies and car T therapies, the missed opportunity at this point in time.
Yes, unless unless the unless the customer wishes to wishes to of course rework or go back through certain levels of the clinical trial, then I would not anticipate they would move to the first of all let's see Tms.
But we are you kind of capture things in phase, one and phase III.
Okay. Okay. That's helpful.
And one last one for Don.
The antibody discovery work so for point on.
Is it targeting on the new Eni customers, then it's not simple.
The workflows are pretty automated and modular would you also be able to market. It to your previous question was just as of now please.
Yes, it's a great question antibody discovery for Plano.
As we move forward to redevelop our positive details of the discovery workflows right. We continue to engage with the early adopters and innovators who were the first the joined.
The first two first of all of the preferred platform for antibody discovery antibody discovery for point of it really pushes us into the broader market because of it and it's not only for its the only for new customers, but absolutely is the applicable to existing customers.
When you engage in the Berkeley lights platform, we provide we provide updates as the function of time that just continue to make the platform more and more value for our customers and so in this case with the a software update.
The purchase of a new kit at the chips reagents etcetera.
Who is on antibody discovery, one out of two point of our three point out can upgrade to the for.
The for point of workflow has an increased recurring revenue based on the value that we provide with this additional work flow. So we see conversion of we see there are several.
Existing customers, who are already running antibody discovery for <unk>.
And kind of a prototype mode.
Who will receive the for the full workflow hasnt release it in the in the mid of 2021.
Okay got it thank you so much.
Thank you and our next question comes from the line of pay Josh <unk> with Morgan Stanley.
Hey, guys. Thanks for taking the time for the questions. This is actually Adam on for <unk>, just wanted to circle back to the new.
Viral vector of collaboration.
With the CMO partner I understand the value of that it brings to your company with the extended.
I guess applications in the market and the additional opportunity to develop workflows, but I guess the question I had was.
The stabilized so that you guys are manufacturing with the CMO is this kind of ultimately be proprietary to your partner or is it something that you guys plan on marketing for the end users of other cdos and would there be a revenue sharing aspects of that included in the partnership and I guess, maybe this is a little too early on to ask for it should there be any.
The milestones or kind of a list that we should be looking for here.
So part of our strategy in general is to is to find really the problems in attractive markets delivered sales of these products and then engage with the industry leading partner to create a solution and for US that solution comes in the form of workflow. So in the case here, we are creating a workflow that will help our.
<unk> rapidly generating stable cell lines for viral vector production.
And as you may have mentioned.
These these collaborations these collaborations are not not only to provide that to the collaborative the collaborative partner because this is a non exclusive deal by which we will generate this workflow provide that work flow to that collaboration partner, but then we have the ability to market to market. The solution of the workflow to other two of the CD modes in other markets.
Participants and so these collaborations and at the very standard thing for all of our collaboration is actually.
That in addition to the value of that they bring in the short term. The open up these new markets that lead to recurring revenues as a function of time into the future now on regards to the aggregate the business model at the end of at the tail end of this collaboration there is a transition into a subscription with the with this particular customer as we worked through the milestones. So there is.
Locked in some level of future downstream revenues, but there are other economics.
The other participants.
<unk>.
Maybe subject to you that the early movers or not.
Got it so the focus is still on the workflow and the market expansion opportunity and there won't be any sort of revenue sharing associated with the stabilized so and thats ultimately developed got it.
The royalty on the backend of if Thats, what Youre asking yes, okay got it yeah that was the question.
Just to get dive into a little more detail on your on nine units placed this quarter can you provide some sort of color on the I guess the end market mix and maybe the Geo mix and then with that all beacons of placements did you have any subscription placements and how did the how was.
Lightning and the so-called jurisdiction book in this quarter.
Yes, Sean since this is a Q4 do you want to take this.
Yeah, absolutely. So we did we did have a subscription placement.
We can talk a bit more about that.
And a bit.
As we drill down sort of into the mix of I guess, we can start with market segment.
The majority of our placements were in the antibody therapeutics, although we did have a placement in both cell therapy and <unk> as well.
So hopefully that gives you some some color on on Q4 in terms of the market market share of segment mix.
When we talk about customer segments fairly evenly split between Biopharma and CRO <unk> and then we had multiple placements into the into the academic.
Segment as well.
Geographically the zone.
All of America.
Graphically Asia Pacific led the year, Sean do you want to provide color on Q4.
Yes, so about let's see looking at the next year about a third of about a third went to Asia, we did see actually some some progress.
And growth in Europe.
It was very encouraging so, but the majority of our Asia and Americas in Q4.
We're actually providing the detail on splits.
Got it thank you very much.
Thank you and our next question comes from the line of Brian Weinstein with William Blair.
Hey, guys. Thanks for taking the question good afternoon.
Just sticking on the theme of the call here with the viral vector deal here can you talk just a little bit more just about the proof point of.
Of what this is for kind of the broader strategy here of a partnership model and really as we think about which customers are more amenable to this as youre going out and kind of hunting hunting. These things I mean, it's obviously.
Economically beneficial to you so I'm just curious.
You think that you have the biggest opportunity there and then longer term how do you guys think about.
The mix here evolving over time as a result of these types of deals as we think kind of long term between.
Recurring revenue partnership and capital of our system sales, how should we be thinking about that.
Several years out.
Thanks.
Yes, Brian that's a great question, great to hear of it.
This is all part of our strategy and as we talked about in Q3 and into Q4, we really going to make the investment into the business development team. So we invested in the business development team, which we're very rapidly filled up our business development pipeline.
And the business development pipeline of course feeds into into a part of our biomarker that we call the innovation lab and in the innovation lab and go run some of some some experiments to see.
What's the level of impact from Covid and some of these markets and so in particular for the viral vector verdict of went through the posture. We had a customer who showed showed showed extreme interest in engaging with us to solve this particular problem. We were able to go into our Biopharma and show not only can we could we measure things like maximum cap the tighter but also we can understand.
And see if the captains that are being generated right. We're probably had properly packaged DNA and so being able to do both of those things and it gives us a leg up on the chip because of the lag up to to move from something like tens of cell lines of six months to over thousands of cell lines.
Under a week and so and so what we do as we continue to invest into our Biopharma to develop these workflows now as we work through these partnerships and generate these workflows, we deliver the workflows to the field right. After the field and in regards to well who is the customer who are really benefit the <unk> of course will benefit, but as we move ups.
Stream right I think there is an opportunity to displace the transient cell lines that are being made to the end use today with stable line, which I think will.
Just maybe be better for starting into clinical trials in these things and so.
What happens is the work flow goes out of the market, Brian and then it becomes a revenue stream for us.
And that revenue stream can come in multiple ways. It can be tool placements via capex sales. It can be subscriptions as we've as we've discussed previously so so how you should think about our businesses as we engage the earliest engagement happens in the business development pipeline, which then leads to a workflow. So we have some level of revenue in the business development pipeline, which leads to recur.
<unk> revenues through the release of the workflow and then we have a revenue stream in a market and so as we look out multiple years youll see stocking up of multiple revenue streams and the proof points are in our in our business business right now right. We first really sell on development.
A large portion of our business and we released the antibody discovery, which very rapidly caught up for the same level of revenues of cell line development.
And then we have synthetic biology, which is the revenue stream through the genco of collaboration and so.
And then for the bar cell therapy development, which is which we released workflows at the end of the second half of last year and so in the future you will expect to see the viral vector workflows and additional other workflows that will come through our pipeline Brian does that answer your question in terms of how you think you should think about these like stacking up second half recovery.
Revenue streams, yes.
It doesn't mean, we'll be sort of additional thinking about it and for all of our company if needed.
That was the good answer I appreciate it thank you.
Thanks, Sean.
Yes, just start one of the one if we could just talk a little bit more on just on the modeling question. So if we think about the full year, but you've talked to kind of second half weighting, but is there any additional color that you can give us on on sort of pacing here just on the revenue per year most.
Most of the way through kind of Q1 here, how should we be thinking about that but then also spending and how.
We should be kind of layering in.
The incremental spending here throughout the year, considering that you guys have significant opportunities here how are you.
How are you thinking about that kind of playing out throughout.
Throughout the year.
Yeah.
Yeah, Let me, let me jump into this one of them going to hand, it off the curve and I'm going to answer the second part of the question first kind of.
Brian which is which is jumping on it which is we see multiple opportunities in the business development pipeline.
And since we are entering what it looks like to be a target rich environment, we're going to invest to develop workflows to achieve to create those workflows for those particular market segments and that will require a level of investment but.
This point of what I'll do is I'll hand, this off the rest of the question off the Curt for him to fill in the.
Victoriously fit of split on what the spending on the site.
Yes, Brian as Sean mentioned earlier on on an answer to a question as we typically have seasonality of that stronger in the fourth quarter, you'll continue to see that this year and some of the business development activities as I alluded to earlier will be more backend loaded, but I think the the quarterly profile that you saw in 2019 of our 2020 will be <unk>.
To what you see in 2021 here going into the second part of your question in terms of the expense function. We do expect a step up in the Opex as early as in Q1, we talked about we got the bio foundries going up the investments we're doing in business development and then the investments we're doing in <unk>.
Not only for the bio foundries for additional <unk> development and <unk>.
But also for the development collaborations that we're doing with BD and I think that step up in overall opex is probably in the mid single digit millions in the first half and then.
That probably is consistent and then some head count growth.
From that step function kind of going out into the second third and fourth quarter.
That answer your question.
Yeah. It does.
Appreciate it thank you.
Thanks, Matt Thank you.
And our next question comes from the line of Paul Knight with Keybanc.
Hey, Eric could you talk to the 75 placements out there how many customers or.
I have multiple units installed in our existing customers ordering of greater amount of additional units and also are those customers buying on other platforms. Besides beacon.
So of the.
The 75 units, we absolutely do see customers with multiple units our customers typically they'll buy they'll hear about the brake lights began the impact that our workflows are having in the market. They will pick up the first weekend.
And then and then within a couple of months they realize how valuable it is and it will pick up the second and third we have one customer who has up to five <unk> at this point in time I can reverse the overall total number of customers I would hand that off to either current or Sean Sean do you want to jump in and then courtesy of the details.
Yeah, absolutely. So just to go to I think another part of that question was the sort.
On the mix between new and existing customers of that 75, you know nearly.
Nearly 3% for actually existing customers, adding to their fleet.
Paul when we think about our customer base I mean, we have over 70 customers in total.
But obviously there is there is a handful that are the <unk>.
Collaboration partnership type of it wouldn't necessarily have a unit.
Theres customers under subscription as well.
But that should give you a flavor of the of the mix of new versus existing customers in the in the growth of the customer base over time.
And the structure of your partnerships is the milestone payments and then the purchase of unit.
How do you how do you structure one of those.
None of those deals.
Yes, so what I'm going to do is I'm gonna parts of the business development question off the Kirkwood Kurt Yes.
Earlier earlier on in the life of Berkeley Lights, we were doing more milestone based and we found that really didn't work well for us for the customer because as you can.
Tell when Youre working with biology things change and you want to be nimble.
We've moved more to what we would consider an R&D capacity type model, where they we worked with customers and they get a certain amount of time from our bio foundry and it allows us to be a little bit more nimble and for the customer too.
Respond to what they are seeing from the work flow and change the milestones without there being well you can't do that because contractually obligated to deliver of certain milestone and thats been really well received from the customer base as well and we believe it leads to faster learning cycles for our us as well as the customer and so that's.
More of the model, we're doing now and so.
The viral vector deal for example, as Eric mentioned, we're working on.
Delivering of workflow.
It's capacity driven from our bio foundry and then at the backend of the successful completion of that we have of continuing of the relationship with a potential subscription of the tool.
I'll keep going so thats more of the model we're applying to now now obviously these each deal will have a little bit of.
Nuances to it to go there, but that's what seems to be working really well for us on the customer and how we've evolved over time and it's allowed US I think the increase the pipeline of deal activity.
If you have of success. If you have success on the viral vector of workflow.
How long would you do you think it would take for that to be commercially available product for the broader market.
Yes, so what are the things about about how we're running the business development deals as we do as I described Paul we do run.
Early kind of prototype runs on the sale of a 45 of the yields and.
And so we've made some we have some preliminary results of Joe we can we can measure of the things we need to measure <unk>.
<unk> on our platform capability, it's one of the strength of the Berkeley lights actually that we have of possible. We try for new software code on creating new assay and then to the <unk>.
All of our workflow pretty readily and so I do believe that with new the way that we're investing into the biopharma in the innovation lab, we're going to be able to accelerate the rate of which we can't get these workflows to market and I think thats, a really important thing to consider so in this particular case, where it would have taken several years to get to work for lots of market I think youre looking on the order of.
12 to 18 months to have something available.
And then lastly, do you think that Youre of the data youre developing on machine learning in effect.
Widening the mode or is your imaging technology of database rising in value and could you just talk to that.
Yes, absolutely as part of antibody discovery for point, Oh, we released for with all time peak, which is which is a.
Cloud based software, which takes the phenotypic data for the brake lights Beacon and then compares it to the sequencing data that comes off the sequences because we of barcode we of barcode. The sequencing that comes off the platform and we believe the combination of those two of bringing the phenotypic or functional data together with the sequencing data is of critical.
Component to accelerate machine learning in the future. We believe there is significant value in that and the more that we run in our Biopharma relating our innovation lab, we will continue to build databases that are useful to us.
So and that also already paid off in another way and antibody discovery for point out when we import the sales into the tool we actually use that we use.
Deep learning algorithm to Penn the cells dependent cells out of the happiest secreting cells into the nano pens, which we which we figured out using some some some of the data that we had from running on different collaborations and so I do believe that the.
The database and deep learning algorithms that can be generated based on this based on this data.
The multi parameter data will take functional data is going to be critical for accelerating the rate at which we can help our customers discover develop and commercialize some of these products in the future.
Thank you.
Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
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