Q2 2021 Codex DNA Inc Earnings Call
Welcome to the second quarter 2021 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone if you require any further assistance. Please.
Press Star Zero.
I would now like to hand, the conference over to your first speaker today.
Jennifer Mcneely Chief Financial Officer. Thank you. Please go ahead.
Thank you Paul This afternoon Codex DNA released its financial results for the second quarter ended June 32021.
You have not received the news release or if you'd like to be added to the Companys distribution list. Please send an email to IR codex DNA Joy.
Joining me today from Codex G&A are Todd Nelson, our Chief Executive Officer, and Dan Gibson, Our Chief Technology Officer.
Before we begin I would like to remind you that management will make statements. During this call that are forward looking statements within the meaning of the federal Securities laws. These statements involve material risks and uncertainties that can cause actual results or events to materially differ from those anticipated additional information.
Information regarding these risks and uncertainties appear in the section entitled forward looking statements in the press release, we issued today.
For a more complete list and description. Please see the risk factors section of the company's quarterly report on form 10-Q for the quarter ended June 32021, and in other filings with the Securities and Exchange Commission, except by required by law, we disclaim any intention or obligation to update or revise any financial projections or forward looking statements, whether because of new inform.
Nation future events or otherwise this.
This conference call contains time sensitive information and is accurate only as of the live broadcast August 10, 2021 with that I'd like to turn the call over to Todd.
Thanks, Jennifer.
Thank you all for joining us this afternoon I'm very pleased to welcome you to our first earnings call as a public company and to review our results for the second quarter of 2021.
During the second quarter Codex DNA took a big step forward in the evolution of our business. We successfully closed an IPO strengthen the diversity of our leadership team and board of directors enabled new downstream mrna applications expanded our customer base and grew revenue 76% year over year.
We continue to be well positioned to build on this foundation scalar global operations and empower more customers with the ability to rapidly create sustainable synthetic biology solutions to help advance precision medicine biologics drug discovery vaccine development genome editing in both cell and gene therapy.
I'd like to take a moment and express my sincere thanks to our amazing team for their hard work and dedication leading up to our IPO in June in which we raised approximately $123 million in gross proceeds.
All of the incredible progress we've made is truly a testament to their collective efforts.
I would also like to thank all of our investors for their continued support.
We look forward to developing meaningful long term relationships and working with you to grow the company together with that in mind, Let me give you a sense of what's driving us a codex DNA.
Our mission is to apply breakthroughs in automation solutions for synthesizing DNA and RNA and proteins to allow sciences to program and print synthetic biology, creating sustainable health care and technology solutions for some of humanity's biggest challenges.
Our team has been innovating in the synthetic biology industry for years and has driven many of the industry's most significant scientific achievements, including the invention of Gibson Assembly methods, which has now been cited in more than 6000 scientific publications.
We're excited to drive the next revolution synthetic biology, the first revolution focused on the reading or sequencing of DNA molecules decades of investment in this area has led to the opportunity to write or print DNA debentures, which will allow for the rapid translation of DNA into novel products. We believe the next revolution will be driven by synthetic biology.
Locations that rapidly right, our ricoh DNA, allowing customers worldwide to develop sustainable technology solutions and bring critical products to market faster.
We've developed an innovative solution to unlock this writing revolution that is purpose built to meet pressing needs for fast and accurate DNA, writing technologies that drive significant improvements in productivity.
Our <unk> automation platform has the potential to unlock this DNA, writing revolution, giving us access to large market opportunities by bringing this technology to the bench top.
The award winning <unk> system is disrupting an industry by providing a careful fully automated push-button system for the rapid synthesis of both DNA and mrna certain.
Certain drug discovery activities that previously took months can now be completed using the biopsy system and just a week or so and what previously took days can now be done in hours.
Industry, leading quality combined with enhanced speed accuracy and scale can resolve in vast improvements to productivity. This allows scientists to write or print functional grade DNA and mrna with the push of a button, enabling rapid iteration of synthetic biology products.
Scientists around the world are able to accelerate the design build test paradigm for faster development of novel high value products for precision medicine.
Biologics drug discovery vaccines, and therapeutics genome editing and both cell and gene therapy, our technology is being applied towards developments in medicine as well as food supply sustainability as is the case for citrus Greening disease grant awarded to us by the US Department of Agriculture.
Now a few words on our second quarter results.
In the second quarter, we responded to customer demand with a number of biopsies synthetic workflow enhancements.
We launched the first mrna kit for <unk> system. This product line is the first of 3 mrna kits and a full product line.
It's designed to enable the rapidly growing market for mrna vaccine development and RNA based therapeutics.
We also launched longer gene fragrant building capabilities for overnight production of air corrected de Novo synthetic genomes as long as 7.2 <unk> in length.
Such improvement in the size dramatically expands the menu of applications that can be studying such as antibody engineering metabolic engineering.
<unk> construction targeted gene variant analysis and more.
In July we signed a licensing and supply agreement with Trialing Biotechnologies, which is part of <unk> life Sciences for its industry, leading clean cap technology, we plan to integrate the mrna capping technology into our suite of automated mrna synthesis kits for the <unk> system as well as within our bio foundry services offering customers will now have the option to generate up to <unk>.
<unk> biologically active mrna constructs at a yield of at least 10 micrograms. Each all from fully de Novo synthesize an error correct genes in a single automated run.
These combined technologies increased a fraction of translational active mrna during transcription, which simplifies and shortens the mrna manufacturing process and results in higher levels of protein production together. The technologies are expected to increase productivity and yields for mrna synthesis workflows potentially opening the doors for a broader range of downstream therapeutic <unk>.
<unk> applications.
We also strengthened our leadership team with 3 key additions to the board of directors during the second quarter, there, Jamie Knox time Kristine singles.
And Andrew Jackson, Jamie is the former corporate Vice President of sales and marketing group and the director of worldwide marketing at Intel Corporation and currently serves on the board of several leading biomedical and technology companies.
Jamie serves as the chair of our corporate governance, and nominating Committee and is a member of our compensation Committee.
Christine is the former executive Vice President and Chief Financial Officer at Bio Rad laboratories shipped.
She previously held executive positions at Autodesk, the Cooper companies and the test systems.
Christine serves as the chair of our audit Committee Andrew.
Andrew as a director of North Palm Ventures, which is a science medical and technology focused venture capital firm that was founded in 2018.
She is also a member of the board of directors of other emerging growth companies, including current health Nano view.
Our tabi Biosciences.
And others Andrew serves as a member of the compensation Committee and the corporate governance and nominating Committee, we welcome them all to the codex DNA team and with that I will pass the call back over to Jennifer to review our financials.
Thank you Todd detailed financial results for the current quarter were included in today's press release I will briefly review our results on this call.
DNA as well capitalized with cash and investments of $1.23 $8 million as of June 32021.
Revenue was $2.9 million for the second quarter 2021, 76% increase from $1.6 million for the same period in the prior year.
This growth was related to new product introductions and growth in royalties in collaboration research program revenue.
Cost of revenue for the second quarter of 2021, with $1.9 million compared to <unk>.
<unk> 6 million for the same period in the prior year. The increase of $1.3 million was primarily driven by increased standard cost related to increase in unit sales and higher raw material costs associated with reagent sales and by our foundry services.
Operating expenses were $8.5 million for the second quarter 2021, compared to $4.3 million for the same period in the prior year. This.
This increase was driven by head count expansion across our business, primarily focused in our commercial and research and development organizations as we ramp up our sales and marketing efforts and product development efforts as well as additional expenses related to operating as a public company.
Lots with $9.2 million for the second quarter 2021, compared to $4.1 million in the same period in the prior year.
Net loss per share was $1.6 for the second quarter 2021, compared to <unk> 82 for the corresponding prior year period.
And with that I will now turn the call back over to Todd.
Okay.
Thanks, John for before closing I want to thank everyone Codex DNA for all their efforts this past quarter, it's been amazing to see how well they've executed and I could not be more proud to be part of the team.
We remain grateful to our investors for their support and look forward to working with you to bring a great company and synthetic biology and sustainable solutions to our plan, we're confident about our future opportunities ahead and with that we will now open the call up for questions.
Okay.
As a reminder to ask a question you will need to press star 1 on your telephone again that the star 1 on your telephone. However, if your question has been answered and you wish to withdraw from the queue press the pound key or the hash key please standby, while we compile the Q&A roster.
Your first question is from Paul Knight with Keybanc. Your line is open.
Hey, Todd could you I missed the first second or so this your opening comments, but.
What we're our placements in the quarter.
For Ya.
Yeah.
Yeah, Paul I think we havent been breaking the biotech replacements out on a quarterly basis.
If youll recall, we stated previously that we had about 162 systems.
That were placed.
Through the first quarter and I believe we said replaced 13 in the first quarter. So.
We'll be reporting out Paul on cumulative placements at the end of the year, but not on an inter quarter basis.
Okay and could.
Could you talk to the.
I know the kit level on the <unk> side of the business is going to be an increasing part of the business flow. What are you seeing on pull through qualitatively.
Yes, so as we've said before there is a handful of customers.
We're pleased to say our purchasing kits for <unk> systems that approach or if not exceed the current cost of capital for the system. So there is a handful of <unk>.
Customers that are doing that I think that the way we look at the business given the size that it's at now we certainly see utilization going up for sure.
We're happy about that and I think that commenting just generally on utilization rates would be difficult for us but.
We continue to place systems, and we continue to.
Launch innovative products on their own utilization is certainly going up.
And then lastly.
You announced the trailing deal in July when will the capping technology be available commercially.
That's currently scheduled call for fourth quarter launch.
Okay.
And then lastly on the service side any change in tone or level of business on bio foundry.
The bio foundry business, just like the product side of the business is small.
Small numbers for us at this point, we're very pleased with the direction that both segments of the business are headed.
And I think we're well positioned to answer questions our customers have either on the product side or on the services side. So really no change in the tenor of the services business, we continue to execute.
Okay. Thank you.
Yes. Thank you.
Your next question is from the line of Brandon Couillard with Jefferies. Your line is open.
Hey, Thanks, good afternoon.
Maybe just starting with the first new.
Small scale mrna kit that you launched in April any metrics, you can kind of share about uptake or interest in that kit maybe percent of installed base that might be using it that you can share with us.
Yes, Brandon Thanks for the question.
Think it's early days the launch of the kit happened on time and at spec.
Yes at the end of April and as you May recall Thats, just a 5 prime it's in Arca cap III.
<unk> enzymatic tailing and then we did announce the clean cap technology, which has a.
A significant share of the downstream market so.
I think rather than giving you the system uptake details early on in the launch I would say that we're in the midst of the commercial launch we're pleased with the direction that its going.
We're looking forward to the fourth quarter launch of a clean cap technology, which will give us access to a significantly larger.
Segment of the mrna workflow market and then to answer your question. The kits that we launch irrespective of what they do if it's mrna or DNA everything is backwards integrated into the entirety of the existing installed base. So we've already got a very good list of customers that were.
Working with and we're seeing mrna orders.
Currently.
Got you okay.
And maybe secondly, shifting gears it'd be great. If you could just touch on how the commercial channel activation efforts are going.
U S.
Market, how those are coming along.
Yes, so outside the U S. We've got a direct channel in predominantly in Western Europe as we've discussed before we're continuing to hire there.
Recently put in place a.
Our regional manager there that came over from another company has a good deal of experience I think we're pretty well staffed in our direct channel in Europe.
We believe I believe I have currently about 40 distributors and our O U S channels.
And that channel is continuing to be activated and we've seen a number of systems come through that as we discussed previously so I think our channels are up and going we're.
We're going to continue to hire we've got I think a full funnel of opportunities on the <unk> side around the globe and a significant portion of those will come from channel.
Next year as we extend our reach throughout the globe.
Yeah.
Okay, and then maybe 1 for Jen could you just touch on the gross margin weakness in the quarter. What exactly are the standard cost that went up I think $1 million and.
Yes.
Any guidance on how we should think about that metric in the second half or should we assume maybe some of these.
Higher cost maybe with you for a little while.
Sure sure that's better cost or just.
Non allocated cost and gross margins were down this quarter as a result of switching our primary suppliers.
Well, we're in we experienced less favorable pricing on certain raw materials until our volumes increase.
We anticipate that our cost of goods will decrease as volume increases.
Temporary situation.
Got you okay. Thank you.
Thank you.
And your last question is from Doug Schenkel with Cowen Your line is open.
Hi, Good afternoon. This is Kyle on for Doug Thanks for taking the questions.
So over the past year and a half <unk> had increasing success in placing instruments in biopharma accounts that are higher volume users.
We were wondering if you could just share any cohort analysis on how much more customers, who recently adopted instruments.
Like over the past few quarters are utilizing their instruments.
Sure Kyle this is Todd let me.
I'll take that 1 so let me first state as I said before we've got predominantly in that group of customers you'd be talking about we have.
As customers 15 of the top 25 pharma accounts and as we mentioned earlier on in the call. We've got a handful of customers that are putting the cost of in reagents equivalent to the cost of capital.
Through those systems, so customers do ramp up to.
What we would call higher utilization rates.
Our rates and we're continuing to see that.
So the answer to your question is that it depends.
The what we strive to do is to get customers to order sooner rather than later.
But every customer has its own rate of ramp so for sure.
Dominantly.
Our installed base continues to be really focused on.
The biotech segment for the workflows that we've talked about but the rate that a customer can ramp up really depends where they are on their projects.
How many systems, they buy and whatnot. So it's hard to really give you like an answer as to specifically the rate of engagement for any 1 customer because it's small numbers now, but we are seeing customers engage engage quickly place orders.
And it's not typically just an order for 1 of our products its orders for multiple products. So rapid engagement and then utilization is ramping up and then again, we do have customers that are putting the cost capital through the system.
Thank you and as a follow up could you share maybe a high level road map for the automated mrna synthesis kits.
What modules could we expect in the next year or so.
Yeah.
Yes. This is Dan Gibson I can take this 1 so we have 2 additional mrna bio XP kits that will be launching within the next.
6 months. So early 2022, the first is what we call rapid.
Scale mrna synthesis and so this would enable customers they already have their cloned.
Construct they can generate messenger RNA from those at 50 to 100 microgram.
Quantities and also.
That would enable them to use their own custom clothing.
<unk>. In addition, we have another mrna kit, which we call large scale mrna synthesis.
Which leverages de Novo synthesis up 272 <unk>.
And also allowing those customers to clone those larger construction to there.
<unk> vectors as well also up to 50 to 100 micrograms quantities.
And Kyle this is Todd let me just add and kind of give you some of the broader context of the 3 products because with those 3 products. We think we've got very very good coverage of the discovery market for mrna and the first 1 that we launched and we're active.
Commercially selling now.
Arc of cap and it has enzymatic <unk>.
Pollyanna tailing and so thats, a great discovery tool and that builds up to 1.8 kb. So thats a great tool for protein engineering entomology for biologics with shorter sequences like for <unk> and things like that.
As Dan mentioned in the second 1 the air corrected genes are already placed into the vectors Thats just a very rapid.
Synthesis market and that 1 the poly a tail will already be in the vector and then the third 1 really gets us.
To leverage the core competencies of the organization, where we can we can we launched the build big capability up to 7 <unk>.
Ed.
Jean Assembly and synthesis and Thats really important for the vaccine development market. So we're starting out in biologics protein engineering.
And then with a third launch really getting into the ability to build androgens like we've done for Covid.
Flu vaccines and things like that so.
We plan on having the.
Clean cap technology integrated into each 1 of those also so we think we've got very good coverage.
Have a very large rapidly growing market with all 3 of those product launches battle as Dan mentioned launched.
<unk> 1.
And will be launched in the first half of 2022.
That's great. Thank you again for taking the questions.
Thank you.
And that concludes the question and answer session.
I will now turn the call back to you.
Jennifer Macdonald for closing remarks.
Thank you Paul and thank you all for participating on our call today. Please follow up with US if you have additional questions. Thank.
Thank you.
This concludes today's conference call. Thank you for joining you may now disconnect have a great day stay safe and well.
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