Q1 2022 Codex DNA Inc Earnings Call

May 10, 2022

Good afternoon, ladies and gentlemen, and welcome to the Quarter 1 2022 Codex DNA Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press Start, then 0, on your touchstone telephone. I would no like to turn a conference over to your host, Richard Leppke, Director of Investor Relations.

Good afternoon, ladies and gentlemen, and welcome to the quarter. One 2022 codecs DNA incorporated earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance during.

The conference. Please press Star then zero on your Touchtone telephone I would now like to turn the conference over to your host Richard Lucky Director of Investor Relations.

Thank you.

Thank you, Faith. Good afternoon and thanks for joining us for CodexDNA's first quarter 2022 earnings call. With me on the call today are Todd Nelson, our Chief Executive Officer.

Good afternoon, and thanks for joining us for codec Cna's first quarter 2022 earnings call with me on the call today are Todd Nelson, Our Chief Executive Officer, and Jennifer Mcneeley, Our Chief Financial Officer, Our first quarter press release is available now on the investors section of our website.

and Jennifer McNeely, our Chief Financial Officer. Our first quarter press release is available now on the investor section of our website. If you'd like to be added to the company's distribution list, please send an email to IR at codexDNA.com.

You'd like to be added to the Companys distribution list. Please send an email to IR at codex DNA Dot com.

Before we begin, I'd like to inform you that certain statements we make during this call will be forward-looking.

Before we begin I would like to inform you that certain statements. We make during this call will be forward looking these statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied such factors include those referenced in the safe Harbor statement included in our earnings release and in our filings with the.

These statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Such factors include those referenced in the Safe Harbor statement included in our earnings release and in our filings with the SEC.

SEC.

This conference call contains time sensitive information and is accurate only as of the live broadcast on May 10, 2022. Finally any percentage changes we discussed will be on a year over year basis, unless otherwise noted with that I would like to turn the call over to Todd <unk> CEO .

This conference call contains time-sensitive information and is accurate only as of the live broadcast on May 10, 2022. Finally, any percentage changes we discuss will be on a year-over-year basis unless otherwise noted. With that, I'd like to turn the call over to Todd, CodexDNA's CEO .

Okay.

Thanks, Rich, and good afternoon, everyone. Thank you for joining us today. We're pleased to discuss our financial results for the first quarter of 2022. To start, I'd like to talk about our first quarter highlights and commercial results.

Thanks, Rich and good afternoon, everyone. Thank you for joining US today, we're pleased to discuss our financial results for the first quarter of 2022 to.

To start I'd like to talk about our first quarter highlights and commercial results.

We are off to a very strong start to the year across our entire product portfolio. We continue to strengthen our business and see robust demand for our products.

For the first quarter, we grew revenue by 142% compared to the prior year period. And excluding the inorganic contributions from Eaton Bio, growth was 82%.

For the first quarter, we grew revenue by 142% compared to the prior year period.

And excluding the inorganic contributions from Eaton buyer growth was 82%.

Revenue during the period was driven in part by our highest number of quarterly placements of our biography $32 50 instruments strong growth in <unk> consumable kits and Biopharma services and increased partnership revenue related to our agreement with Pfizer.

Revenue during the period was driven in part by our highest number of quarterly placements of our BioXP 3250 instruments, strong growth in BioXP consumable kits and bio foundry services, and increased partnership revenue related to our agreement with Pfizer.

As a reminder, our go-to-market strategy can be broken down into three distinct categories. First, our BioXP Automation Platforms and Portfolio of Consumable Products, including Gibson Assembly kits and a growing catalog of synthetic genomes, which are all sold globally through both direct and distributed sales channels.

As a reminder, our go to market strategy can be broken down into three distinct categories first our biopsy automation platforms and portfolio of consumable products, including Gibson Assembly kits and a growing catalog of synthetic genomes, which are also globally through both direct and distributed sales channels.

Second, our BioFoundry services, which now includes parts of Eaton Bioscience and leverages those same direct and distributed channels to provide customers with BIOXP-enabled services and solutions. And third, value-creating partnerships which build on our technology portfolio, intellectual property and technical capabilities to support customer needs while giving us access to substantial end-user market economics.

Second our bio foundry services, which now includes parts of Eaton Bioscience and Leverages, the same direct and distributor channels to provide customers with bio XP enabled services and solutions.

Third value, creating partnerships, which build on our technology portfolio intellectual property and technical capabilities to support customer needs, while giving us access to substantial end user market economics.

We executed in all these areas in the first quarter, and I'll touch on each one.

We executed in all of these areas in the first quarter and I'll touch on each one.

We expect these strategies to drive long-term sustainable growth and to create maximum value for our customers and our shareholders.

We expect these strategies to drive long term sustainable growth and to create maximum value for our customers and our shareholders.

Yes.

Our BioXD automation platforms are headlined by our BioXP3250 system, which is a fully automated push button platform for the rapid synthesis of DNA and mRNA.

Our biopsy automation platforms are headlined by our <unk> <unk> system, which is a fully automated push-button platform for the rapid synthesis of DNA and mrna.

Certain drug discovery activities that previously took months can now be completed using the biopsy system in just a week or so, and what previously took days can now be done in just hours.

Certain drug discovery activities that previously took months can now be completed using the biopsy system in just a week or so and what previously took days can now be done and just hours.

Industry, leading quality combined with enhanced speed accuracy and scale can lead to vast productivity improvements.

Industry leading quality combined with enhanced speed, accuracy and scale can lead to vast productivity improvements.

In our last earnings call, we discussed the headwinds we experienced in the fourth quarter of 2021 related to the emergence of the omicron variant.

In our last earnings call, we discussed the headwinds we experienced in the fourth quarter of 2021 related to the emergence of the Omicron variant. This affected our ability to meet with certain customers on site and to ship, place, and install our BioXC3250 instrument.

This affected our ability to meet with certain customers on site and a ship place and install our biopsy $32 50 instruments.

This resulted in fewer shipments than we had anticipated as we closed out 2021.

However, the.

The COVID-related commercial disruption subsided in the first quarter which contributed to a record quarter of shipments as some of the delayed instruments from the prior period were able to be delivered.

The COVID-19 related commercial disruption subsided in the first quarter, which contributed to a record quarter of shipments as some of the delayed instruments from the prior period, we're able to be delivered.

Therefore, while we had our largest.

Therefore, while we had our largest number of instruments placed, we expect this to normalize in the second quarter. Overall, we had an excellent quarter

Number of instruments placed we expect this to normalize in the second quarter.

Overall, we had an excellent quarter of commercial execution.

Our customers continue to recognize the benefits of the BIOXP platforms. As a reminder, we ended 2021 with nearly 200 instruments in our install base and are off to an outstanding start to 2022.

Our customers continue to recognize the benefits of the <unk> platforms.

As a reminder, we ended 2021 with nearly 200 instruments in our install base and are off to an outstanding start to 2022.

We believe we are still in the early stages of product adoption for our <unk> hundred $32 50 instrument and the demand remains strong.

We believe we are still in the early stages of product adoption for our BIOX P3250 instrument and the demand remains strong.

Within our portfolio of consumable products, BioXD kits experience a solid quarter of growth compared to the prior year period. This was driven by Gene Fragments, Cloning, and our recently launched mRNA product offering. Over time, we intend to expand our install base of instruments and launch additional kits to meet the needs of our customers, which will fuel a consistent and profitable razor razor blade business model.

Over time, we intend to expand our installed base of instruments and launch additional kits to meet the needs of our customers, which will fuel our consistent and profitable razor razorblade business model.

On a related note, we anticipate that consumable kit gross margins will improve significantly as we ramp up our internal oligo synthesis capabilities in 2023.

On a related note, we anticipate that consumable kit gross margins will improve significantly as we ramp up our internal autosynthesis capabilities in 2023.

This will provide us with a path to sustainable profitability in the future.

Moving on our codex DNA viral foundry services experienced robust revenue growth in line with our year over year organic growth rate.

Moving on, our Codex DNA BioFoundry services experience robust revenue growth in line with our year-over-year organic growth rate. This was driven by strong demand for customer genome orders and variant libraries, and we expect demand in this area to continue to grow rapidly.

This was driven by strong demand for customer genome orders and variant libraries, and we expect demand in this area to continue to grow rapidly.

As a reminder, our Biopharma services organization Leverages, our best in class <unk> automation platforms to provide customers with custom solutions quick turnaround and excellent quality.

As a reminder, our BioFoundry Services Organization leverages our best-in-class BioXP automation platforms to provide customers with custom solutions, quick turnaround, and excellent quality.

In addition to being a catalyst for growth our bio foundry services team helps to expand our customer reach build strong customer relationships and demonstrate the value of our <unk> XP instrumentation, and the codex DNA team scientific expertise, which ultimately drives product sales.

In addition to being a catalyst for growth, our BioFoundry Services team helps to expand our customer reach, build strong customer relationships, and demonstrate the value of a BioXP instrumentation and the CodexDNA team's scientific expertise, which ultimately drives product sales.

Therefore, services enable us to provide more solutions to a broader customer base and offers a key customer funnel into our product business.

Therefore services enable us to provide more solutions to a broader customer base and offers a key customer funnel into our product business.

Within services, Eaton Bio performed solidly in the quarter and contributed approximately $1.4 million of revenue, which is ahead of our internal forecast.

Within services eaten by outperformed solidly in the quarter and contributed approximately $1 $4 million of revenue.

It was ahead of our internal forecast.

We saw a very strong demand for sequencing services in the quarter, resulting in higher than expected performance.

We saw very strong demand for sequencing services in the quarter, resulting in higher than expected performance.

As a reminder, we have allocated a significant amount of Eaton's resources and manufacturing capacity in the near term towards our own internal raw material supply to invest in oligo production and R&D efforts to support the Pfizer collaboration.

As a reminder, we have allocated a significant amount of eaton's resources and manufacturing capacity in the near term towards our own internal raw material supply to invest in all of our production and R&D efforts to support the Pfizer collaboration.

Starting in the fourth quarter of 2022, we believe Eaton can begin scaling up the production of oligos, which should reduce our raw material costs within several product lines and provide significant accretion to gross margins as we ramp up production into 2023.

Starting in the fourth quarter of 2022, we believe Eaton can begin scaling up their production of all of those which should reduce our raw material costs within several product lines and provide significant accretion to gross margins as we ramp up production into 2023.

Towards the end of the year, we intend to complete the integration of Eaton's operations into by our foundry services and we believe Eaton's legacy business will grow steadily as a part of this combined service organization.

Toward the end of the year, we intend to complete the integration of Eaton's operations into BioFoundry Services, and we believe Eaton's legacy business will grow steadily as a part of this combined service organization.

Moving.

Moving on now to partnerships, I'm pleased to report that we're off to a very strong start in our collaboration agreement with Pfizer. While we can't get into the specifics at this point, our progress from a technical development perspective related to our solar EDS technology has been outstanding.

On now to partnerships I'm pleased to report that we're off to a very strong start and our collaboration agreement with Pfizer.

While we can't get into the specifics at this point our progress from a technical development perspective related to our solar Eds technology has been outstanding.

For example, we are successfully synthesize key target genes of interest using solar eds workflow.

For example, we have successfully synthesized key target genes of interest using SOLA-EDS workflow and have made progress developing new protocols for rapid, high-fidelity synthesis of target genes.

Progress developing new protocols for rapid high fidelity synthesis of target genes.

It's very early days, but we're very encouraged by the data and the results we're seeing so far, and we will provide updates as we progress further toward our joint objective.

Very early days, but we're very encouraged by the data and the results. We're seeing so far and we will provide updates as we progress further towards our joint objectives.

As we discussed in our prior call, our business development and leadership teams continue to cultivate partnerships with potential partners and we intend to establish additional agreements with both new and existing customers over time.

As we discussed on our prior calls our business development and leadership teams continue to cultivate partnerships with potential partners and we intend to establish additional agreements with both new and existing customers over time.

More specifically, we aimed to pursue value added partnerships that can leverage our differentiated intellectual property portfolio and proprietary technologies. This includes all of our technology categories, such as <unk> automation solutions for DNA mrna and protein synthesis, and our <unk> platform for the efficient and large scale cloning and <unk>.

More specifically, we aim to pursue value-added partnerships that can leverage our differentiated intellectual property portfolio and proprietary technologies. This includes all of our technology categories such as BioXP Automation Solutions for DNA, mRNA, and protein synthesis, and our VMAX platform for the efficient and large-scale cloning and scale-up of DNA.

Taylor of DNA.

Before I turn the call over to Jennifer to discuss the financials I want to touch on the progress within our R&D programs and organizational updates.

Before I turn the call over to Jennifer to discuss the financials, I want to touch on the progress within our R&D programs and organizational updates.

Yes.

We recently showcased our innovative solar eds technology and automated bench top <unk> systems Thats in bio beta is built with biology Global conference and in our first R&D Investor Webinar in March.

We recently showcased our innovative SOLA EDS technology and automated benchtop bioxp systems at SynBioBeta's Built with Biology Global Conference and in our first R&D Investor webinar in March.

SOLA is a proprietary enzymatic synthesis platform based on DNA ligation and amplification approaches that is used to build oligos from a make-to-stock universal library of short DNA building blocks.

Solar is a proprietary enzymatic synthesis platform based on DNA litigation and amplification approaches that is used to build all of those from a make to stock Universal Library of short DNA building blocks we.

We believe that this approach is the ideal solution for synthesis of longer fragments of DNA, mRNA, and protein at the benchtop due to its advantages in fidelity, buildability, scalability, and cost.

We believe that this approach is the ideal solution for synthesis of longer fragments of DNA mrna and protein at the bench top due to its advantages and fidelity build ability scalability and cost.

We expect our approach to building oligos using SOLA in the BioXp system will result in higher quality and more cost-effective products compared with other enzymatic DNA synthesis approaches.

We expect our approach to building oligos using solar and the biopsy system will result in higher quality and more cost effective products compared with other enzymatic DNA synthesis approaches.

During the first quarter, we advanced our solar development programs.

During the first quarter, we advance our solo development programs. We continue to reliably generate high-fidelity DNA oligos of 20 to 100 base pairs at the benchtop.

We continue to reliably generate high fidelity DNA Oligos, a 20 to 100 base pairs at the bench top.

As a part of an internal development project solar generated all goes we're efficiently assembled into full length Sars Covid two spike protein gene.

As a part of an internal development project, solar-generated oligos were efficiently assembled into full-length SARS-CoV-2 spike protein genes, which is approximately 3.9 kb in length, and the company's longest gene ever assembled enzymatically.

As approximately $3 nine kv and link in the Companys longest jean ever assembled enzymatically.

This achievement further validates our belief that this technology is the leading approach for building high fidelity longer segments of DNA using enzymatic DNA synthesis technology.

This achievement further validates our belief that this technology is the leading approach for building high fidelity, longer segments of DNA using enzymatic DNA synthesis technology.

At the built with Biology Global Conference. We also showcased the <unk> 9600 potential customers.

At the Built with Biology Global Conference, we also showcased the BIOXP 9600 to potential customers.

The 9600 is designed to have approximately three times. The capacity is the current <unk> hundred $32 50 system, making it an ideal solution for higher throughput customer segments within biotech and pharma.

The 9600 is designed to have approximately three times the capacity as the current BIOXP3250 system, making it an ideal solution for higher-throughput customer segments within biotech and pharma.

We are pleased to report that the Vioxx T9600 is on track for a full commercial launch in the fourth quarter of 2022.

We are pleased to report that the biopsy 9600 is on track for a full commercial launch in the fourth quarter of 2022.

And finally during the fourth where during the first quarter of this year, we recruited and hired key positions across the organization. These new hires will enable us to scale to meet future anticipated demand for our products services and technology partnerships.

And finally, during the first quarter of this year, we recruited and hired key positions across the organization. These new hires will enable us to scale to meet future anticipated demand for our products, services, and technology partnerships.

And with that, I'll pass the call over to Jennifer to review her financial.

And with that I'll pass the call over to Jennifer to review our financials.

Thank you Todd and good afternoon, everyone.

Thank you, Todd, and good afternoon, everyone. Detailed financial results of the current quarter were included in today's press release.

<unk> financial results for the current quarter.

In today's press release.

In my remarks today, I will briefly review our financial results.

My remarks today I will briefly review our financial results.

Codex DNA is well capitalized with cash and short-term investment of $76.8 million as of March 31st, 2020.

Fedex DNA is well capitalized with cash and short term investments.

$6 $8 million.

As of March 31st.

2022.

Revenue was $5.6 million for the first quarter of 2022, which was a 142% increase in total revenue from $2.3 million for the same period in the prior year.

Revenue was $5 6 million for the first quarter 2022, which was 842% increase in total revenue from $2 3 million for the same period in the prior year.

This strong growth was driven by BiosPK's biofoundry services and contributions from Eaton Revenue, which was about $1.4 million. Royalties and other revenue also grew due to revenue related to the Pfizer collaboration agreement.

This strong growth driven by SDK foundry services and contribution from <unk> revenue, which was about $1 4 million royalties and other revenue also grew due to revenue related to the Pfizer collaboration agreement.

Gross margin for the first quarter was 49.3% compared to 5% for the same period and a priority.

Gross margin for the first quarter was 49, 3% compared to 3% for same period in the prior year.

The decrease was primarily driven by higher raw material costs associated with sales of reagents and bio-foundry services, increased shipping and logistics and increased personnel and departmental expenses as we are investing to support future growth.

The decrease was primarily driven by higher raw material costs associated with Castleberry, Joseph Andre Sir increased shipping and let the effects and increased personnel and departmental expenses as we are investing to support future aircraft.

It is worth noting that our gross margin improved significantly, sequentially, compared to our fourth quarter, reflecting the contribution of the size or milestone payment amortization and improved product margin.

It is worth noting that our gross margin improved significantly sequentially compared to our fourth quarter, reflecting the contribution of the Pfizer milestone payment amortization and improved product margins.

Operating expenses were $15 6 million for the first quarter compared to $7 6 million for the same period in the prior year.

Operating expenses were $15.6 million for the first quarter compared to $7.6 million for the same period in the prior year.

The increase was driven by headcount expansion across our businesses, primarily in our commercial R&D and GNA organizations.

The increase was driven by head count expansion across our business.

Primarily in our commercial R&D and G&A organization.

The increased personnel expense relates to sales and marketing efforts, increased product development efforts, and hiring of new leadership and professional support staff.

Personnel expenses.

<unk> expense related to the sales and marketing effort.

<unk> product development efforts and hiring of new leadership and professional sports.

Other expense increases included professional services, R&D material costs, and facility and insurance costs.

Other expense increases included professional services, R&D material cost and facility and insurance com.

Net loss was $13.2 million for the first quarter compared to $7.4 million in the same period in the prior year. Net loss per share was $0.45 for the first quarter compared to a net loss of $1.43 for the corresponding prior year.

Net loss of $13 $2 million for the first quarter compared to $7 $4 million in the same period in the prior year net loss per share was 40% for the first quarter compared to a net loss of $1 43 for the corresponding prior year period.

And with that, I will now turn the call back over to Bob.

And with that I will now turn the call back.

Yes.

Thanks, Jennifer. Before opening the call for questions, let me conclude by saying that we are pleased with our performance through the first quarter of 2022. We are encouraged by continued strong commercial execution and the progress within our R&D pipeline.

Thanks, Jennifer before opening the call for questions. Let me conclude by saying that we're pleased with our performance for the first quarter of 2022, and we are encouraged by continued strong commercial execution and the progress within our R&D pipeline.

We are focused on executing against our near-term commercial goals, launching new products, furthering new and existing partnerships, growing market share, improving profit margins, and investing for future success. We continue to invest in talent, technology, and processes to drive long-term sustainable growth. And with that, I'll ask the operator to open the call for questions. Thank you.

We are focused on executing against our near term commercial goals launching new products, furthering new and existing partnerships growing market share improving profit margins and investing for future success. We continue to invest in talent technology and processes to drive long term sustainable growth and with that I'll ask the operator.

To open the call for questions. Thank you.

Thank you, Sir ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Ladies and gentlemen, if you have a question at this time, please press the star then the number one key on your touchstone telephone. If your question has been answered or you wish to remove yourself in the queue, please press the star.

Your first question comes from the line of Brandon Collard from Jeffries. Your line is open.

Your first question comes from the line of Brandon Couillard from Jefferies. Your line is open.

Hey, Thanks, good afternoon.

In terms of the record biodefeat placements in the first quarter, each inch you're going to quantify the total gross number of installs and how many came from the lead for key orders and these mostly being placed at new or existing customers and any color you want to share in terms of U.S. versus OUS channels.

In terms of the record box placements in the first quarter EBIT, you're willing to quantify the total gross number of installs and how many came from delayed <unk> orders and this is mostly.

The place at new or existing customers any color you'd be willing to share in terms of U S versus O U S channels.

Yeah, hi Brandon, thanks for the question. I guess the additional color that I would add is we saw really strong growth in North America and Channel and across all regions, but predominantly North America.

Yes.

Hi, Brandon Thanks for the question.

I guess the additional color that I would add is we saw really strong growth in North America, and channel and across all regions, but predominantly North America.

On the earlier part of your question about kind of the mix in the quarter, I'd say a small percentage of the overall installs came over from the fourth quarter, so just a couple to a few. And the color on the demographics of the customers really hasn't changed. We're still seeing adoption mostly by new customers. We are on occasion seeing existing customers or a couple of systems, but primarily new customers.

On the earlier part of your question about kind of the mix in the quarter I would say.

A small percentage of the overall installs came over from the fourth quarter. So just a.

A couple to a few.

And the color on the.

The demographics of the customers really hasnt changed were still seeing.

Adoption, mostly by new customers, we are an occasion seeing existing customers order a couple of systems, but.

Primarily new customers.

just a couple to a few went over. So we really had a strong quarter in and of itself in the first quarter. It was augmented slightly by a couple of instruments, you know, sliding into the first quarter due to the COVID issues that we saw in the channels in the fourth quarter. So really strong quarter.

Just a couple to a few went over so we really had a strong quarter in and of itself in the first quarter. It was augmented slightly by a couple of instruments.

Sliding into the first quarter due to the.

Covid issues that we saw on the channels in the fourth quarter, so really strong quarter.

mostly new customers for sure, and strong performance, but North America really stood out as growing well, and that makes sense because we invested a lot, as you know, into North American channel and commercial operations a couple of quarters ago. So that's really, I think, starting to bear some fruit, and it's been a successful place for us.

Mostly new customers for sure and strong performance, but North America really stood out is growing well and that makes sense, because we invested a lot.

As you know into North American channel and commercial operations, a couple of quarters ago. So.

So that's really I think starting to bear some fruit.

It's been a successful place for us.

Gotcha. And in terms of the BioXP 9600 launch timeline, Winston, if you'd begun sort of commercial detailing for that, and you started to build an order funnel for that system yet, and have you solidified the expected ASP for that instrument?

Got you and in terms of the <unk> 9600 launch timeline.

What's going to be begun sort of commercial detailing for that and you're starting to build in the order funnel for that system yet.

<unk>.

Solidified the expected ASP.

For that instrument.

So, again, good question. We're on track for the launch in the fourth quarter. I'd have to check with the team here. I think we're nearly done with beta testing. Everything seems to be going well, so we feel comfortable that we're going to remain on track. We're, of course, doing pricing studies right now, and we should conclude with those and have pricing soon. But,

So again good question, we are on track for the launch in the fourth quarter.

I'd have to check with the team here I think we are nearly done with beta testing everything seems to be going well. So we feel comfortable that we're going to remain on track. We're of course doing pricing studies right now and.

Would conclude with those and have pricing soon but.

We'll be launching with fragment and cloning capabilities. Other kits will come online after that, so we'll launch in the fourth quarter with

We'll be launching with.

<unk> fragment and cloning capabilities other kids will come online after that so we'll launch in the fourth quarter with gene fragments synthesis capabilities up to one eight <unk>, which is consistent with one of the kits available on the $32 50, It will have three times the throughput.

gene-fragment synthesis capabilities up to 1.8 kB, which is consistent with one of the kits available on the 3250. It'll have three times the throughput.

And we'll be able to clone about, not about, but 96 genes into any one of four vectors and then we'll launch subsequent kits on that later on. So working on pricing, but everything's on track.

And we will be able to clone.

<unk> not about but 96 genes into any one of the four vectors and then we'll launch subsequent kits on that later on so working on pricing, but everything is on track.

Okay.

Okay. Jennifer, I didn't hear you speak to guidance for the year. So we assume that you're reaffirming the prior revenue and installation guidance that you talked about on the 4Q call.

Jennifer I didn't hear you speak to guidance for the year should we assume that you're reaffirming the prior revenue and installation guidance did you talked about on the <unk> call.

Yes. Thanks for the question. So we did give our annual guidance on our Q4 call and it is our practice to give annual guidance rather than quarterly guidance.

Yeah, thanks for the question. So we did give our annual guidance on the Q4 call, and it is our practice to give annual guidance rather than quarterly guidance.

Sure, understanding like you're not giving necessarily to keep guidance, but should we, you know, assume that kind of that full year out like you talked about before is still impact.

Sure understand.

Given necessarily to key guidance, but should we assume that kind of that full year outlook you talked about before is still intact.

We have not provided change to that outlook at this time, yeah. Yeah, this is Rich. I mean, clearly, we're off to an outstanding start to the year. You know, our goal and our aim always is to meet or achieve our guidance. But, you know, our practice typically is, you know, we'll provide annual guidance. You know, we're only one quarter through the year. We don't want to get too far ahead of ourselves here, but we're feeling good about the year.

We have not provided a change to that outlook at this time, yes, yes. This is rich I mean, clearly we're off to an outstanding start to the year.

Our goal and our aim always to meet or exceed our guidance, but our practice typically is yes, we will provide annual guidance only one quarter through the year and don't get too far ahead of ourselves here, but we're feeling good about the year.

Got you okay. Thank you.

Thank you your next.

Your next question comes from the line of Paul Knight from KeyBank. Your line is open.

Your next question comes from the line of Paul Knight from Keybanc. Your line is open.

Hi.

I call it on the 3.9 KB

Todd on the $3 nine Kb.

sequence data that you're producing. Could you talk, is that the level of consistency do you want, how much

Sequence data that you are producing could you talk is that the level of consistency do you want.

How much.

What's the the sequence size you ultimately are targeting if you could talk about that?

Whats the sequent size you ultimately you're targeting if you could talk about that.

Sequence performance.

Yeah, Hi Paul, thanks for the question. So we presented this data twice now, which is great. We presented to a standing room only audience at the symbiobeta conference.

Yes, Hi, Paul Thanks for the question. So we presented this data twice now which is great. We presented to a standing room only audience at this and bio Beta conference.

regarding solar dance, not here, I apologize, but let me go ahead and answer the question in his stead. So 3.9 KB is the longest gene we've ever synthesized, and to the best of our knowledge, it's the longest

Regarding solar dance not here I apologize, but let me go ahead and answer the question in his stead. So three nine Kb is the longest gene we've ever synthesize into the best of our knowledge, it's the longest.

gene that's ever been synthesized using enzymatic DNA synthesis now. As you know, the company has a history of building entire genomes, so we can enzymatically assemble entire genomes or millions of base pairs, but when it comes to one contiguous piece of DNA, that's the longest we've been able to synthesize, and we did that from oligos that we were able to build using the solar-based process.

That's ever been synthesized using antiemetic DNA synthesis now as you know the company has a history of building entire genomes. So we can enzymatically assemble entire genomes or millions of base pairs going on when it comes to one contiguous piece of DNA thats. The longest we've been able to synthesize and we did that from.

All of those that were able to build using the solar based process. So.

So, we feel very comfortable about that. We are experiencing about a 50-fold improvement in fidelity using our process relative to other enzymatic DNA synthesis technologies and feel good about where we're at.

So we feel very comfortable about that.

Are experiencing about a 50 fold improvement in fidelity.

Using our process relative to other enzymatic DNA synthesis technologies and feel good about where we're at.

The second part of your question is why, you know, where's the sweet spot and, you know, really the market in our view is migrating to longer, more complex bills. And that's being driven by just the demand for longer sequences as a result of a couple of segments like vaccine development, whether it's infectious disease.

The second part of your question is why Where's the sweet spot and really the market in our view is migrating to longer more complex build and thats being driven by.

Just the demand for longer sequences as a result of a couple of segments like vaccine development, whether it's infectious disease.

or personalized medicine, those genes, as an example, the spike protein or flu genes are multiple KB in length, so the necessity to build genes using enzymatic synthesis

Personalized medicine those genes as an example, the spike protein or <unk> are multiple kv in length. So the necessity to build genes using enzymatic synthesis at the bench top is going to require a long build capabilities I think we are squarely.

at the benchtop is going to require long build capabilities. I think we're squarely within that targeted amount and so certainly for any human protein, you know, it'll be smaller than that and we're very comfortable with that as you get into viral antigens.

Within that targeted amount.

So certainly for any human protein.

It'll be smaller than that and we're very comfortable with that as you get into viral antigens.

You know, we're up there in the multiple KB length, so we think we've got a path forward.

We're up there in the multiple kv length. So we think we've got a path forward.

And you would mention you're going to increase head count. I think even in Q1, where are you with that progress?

And you had mentioned you're going to increase head count I think even in Q1, where are you with that progress.

With the number of head count we added we have we have we've made a number of key hires in Q1 and currently we have approximately 250 U S employees and about a dozen internationally.

the number of headcount we added? We made the number of key hires in Q1 and currently we have approximately 250 U.S. employees and about a dozen internationally.

Okay, and you began the Pfizer milestone in Q1, is that right?

Okay and.

You began the visor milestone in Q1 is that right.

Yeah, that was the first full quarter of recognizing that milestone.

Yes that was the first full quarter.

Recognizing that.

Millstone.

It was a full quarter, sorry, Jennifer. Yeah, that was the first full quarter of recognizing that. OK.

It was a full quarter, sorry, Jennifer yes.

Yes that was the first full quarter of recognizing that.

Okay. Thank you.

Thanks, Paul.

Your next question comes from the line of Steven Ma from Cowan. Your line is open. Hi, congrats on the question.

Your next question comes from the line of Steven <unk> from Cowen Your line is open.

Hi, congrats on the quarter and thanks for taking the questions.

As Jason.

So maybe just to follow up on Paul's question, on the Pfizer upfront payment, can you give us a sense of the cadence of the timing of the rest of the upfront payments?

So maybe just to follow up on Paul's question.

On the Pfizer.

Upfront payments can you give us a sense of the cadence of the timing.

The rest of the upfront payments.

Sure.

Sure, so we received in January an $8 million upfront payment. That payment is being recognized on a straight line basis over a two to three year period. And we are also eligible for future near-term milestones totaling up to $10 million.

Yes, so we received in.

January and $8 million upfront payment.

And that payment is being recognized on a straight line basis over.

Two to three year period.

And we are also eligible for future near term milestones totaling up to $10 million.

Okay based on those.

And those will be recognized as completed? Correct. Okay.

Those will be recognized as completed.

Correct.

Okay got it.

Okay.

Thanks for that and then.

I wanted to talk about the 9600 launch, looks like that's scheduled for Q4, but are there any lingering supply chain issues that could potentially impact the launch timing or are you guys feeling pretty good about that?

I wanted to talk about the 9600 launch it looks like that's scheduled for Q4, but are there any lingering supply chain issues that could potentially impact.

The launch timing or are you guys feeling pretty good about that.

We feel very good about the launch timing now and we have secured supply chain requirements. So we've procured all of the parts in the bill of materials for our pilot in MR1 runs. So to the best of our knowledge based on our forecast, we will have sufficient materials in finished goods.

We feel very good about the launch timing now and we have secured.

Supply chain requirement, so we've <unk>.

Broker to all of the parts and the bill of materials for our pilot and MLR. One runs so to the best of our knowledge based on our forecast.

We will have sufficient materials and finished goods.

Okay, perfect and then.

And then you guys talked about the ETIN internal oligosupply impacting gross margins in 2023, given lower cost of raw materials. But can you give us a sense for the potential of the gross margin impact?

You guys talked about.

The Eaton internal all ago supply impacting gross margins gross margins in 2000, I'm sorry in 2023.

Given lower cost.

Raw materials, but can you give us a sense for that.

<unk> the gross margin impact.

So, this is Todd. I'll take the first part of that question and hand it over to Jennifer and we can follow up. So, at a high level, we plan on launching internal synthesis capabilities. This is DMT synthesis, not entomatic. So, our first chemistry will be DMT, then a launch very late in the year started creating a gross margin then and then throughout the course of 2023, we intend to ramp that up.

So this is Todd I'll take the first part of that question and then hand, it over to Jennifer and we can follow up.

At a high level, we plan on launching internal synthesis capabilities. This is DMT synthesis.

<unk>. So our first chemistry will be DMT that will launch very late in the year started creating gross margin.

And then throughout the course of 2023, we intend to ramp that up.

So I'll hand it over to Rich and Jen to kind of answer the second part of the question.

I'll hand, it over to rich and Jen to kind of ask or answer the second part of the question.

Yeah, this is Rich. It's a good question. You know, we haven't provided margin guidance next year. You know, at this point in the year, we haven't really built up the budget. But, you know, if you think about where oligos play into our commercial products, you know, because they go into every kit, all the consumables there.

Yes. This is rich it's a good question, we haven't provided margin guidance next year at this point in the year, we haven't really built up the budget, but if you think about where all of those play into our commercial products. They go into every cat all the consumables. There. So the strategy makes sense right you got to lower those raw material costs and that helps.

So, you know, the strategy makes sense, right? You got to lower those raw material costs, and that helps, you know, to create a...

Great.

you know, a much more profitable, recurring revenue stream with our consumable kids and it's a key important part of our strategy. So as Todd said, you know, we do expect much more of an impact in 2023 and it will ramp up throughout the year.

A much more profitable recurring revenue stream with our consumable cats and it's a key important part of our strategy. So as Todd said, we do expect much more of an impact in 2023, and it will ramp up throughout the year.

Sure.

Great, thanks. And last question, you know, given the strength of the services business, do you ever get customers switching over from becoming a services customer to an instrument buyer?

Okay, great. Thanks, and last question.

Given the strength of the services.

Do you ever get customers switching over from becoming from a services customer to an instrument buyer.

Yeah, that happens all the time as a matter of fact, you know, we're first to market with

Yeah that happens all the time as a matter of fact.

We were first to market with.

you know, a new technology and a new instrument and a new approach which gives researchers

A new technology.

And a new instrument and a new approach, which gives researchers and scientists worldwide the ability to better control their workflow have IP at the bench top and.

and scientists worldwide, the ability to better control their workflow, have IP at the benchtop.

and whatnot. And so we're first to market with that. Sometimes customers want to do a proof of principle. We call them a POP.

And whatnot and so we're first to market with that sometimes customers want to do a proof of principle, we call them a pop so they will come in and.

So they will come in and want to make sure that the instrument works for their workflow. So we oftentimes use that as a way to convert customers to the instrument and that happens all the time. So it's a great tool for us to bring leads in, whether they're MQLs or SQLs, and transition them over to a product format.

To make sure that the instrument works for <unk>.

Their workflow so we oftentimes use that.

As a way to convert customers too.

The instrument and that happens all the time, so it's a great tool for us to bring leads in whether they're <unk> or SQL and transition them over to a product format.

There are customers, again to your question, that have been with us in services for quite some period of time that are happy with the services.

There are customers again to your question that have been with US in services for quite some period of time that are happy with the services and then eventually end up purchasing an instrument because of the value proposition or a change in their program. So we certainly do see that transition we see a healthy transition from.

and then eventually end up purchasing an instrument because of the value proposition or a change in their program. So, we certainly do see that transition. We see a healthy transition from services to products, and, you know, we also offer through our services things that you can't do on the BIOXP, so we're trying to answer and address a larger segment of the market, but we certainly do see customers converting over to products. Okay. Thank you.

From services to products and we also offer through our services things that you can't do on the biopsy. So we're trying to answer and address a larger segment of the market, but we certainly do see customers.

Customers converting over to products.

Okay, great. Thanks, a lot. Thank you.

Yes.

I am showing no further questions at this time I would like to turn the conference back to Richard Lucky for closing remarks.

I am showing them further questions at this time. We'd like to turn the conference back to Richard Lucky for the closing remarks.

Thank you, Faith. With that, we'd like to thank you all for attending. Operator, we will now conclude the call. Thank you.

Thank you Dave.

With that we'd like to thank you all for attending operator, we will now conclude the call. Thank you.

Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.

Ladies and gentlemen, this includes today's conference. Thank you for your participation. Have a wonderful day. You may all disconnect.

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Good afternoon, ladies and gentlemen, and welcome to the Quarter 1 2022 Codex DNA Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then 0 on your touchstone telephone. I would now like to turn a conference over to your host, Richard Leppke, Director of Investor Relations.

The conference. Please press Star then zero on your Touchtone telephone I would now like to turn the conference over to your host Richard Lucky Director of Investor Relations.

Thank you, Pate. Good afternoon and thanks for joining us for CodexDNA's first quarter 2022 earnings call. With me on the call today are Todd Nelson, our Chief Executive Officer.

Thank you.

Good afternoon, and thanks for joining us for codecs Dnas first quarter 2022 earnings call with me on the call today are Todd Nelson, Our Chief Executive Officer, and Jennifer Mcneeley, Our Chief Financial Officer, Our first quarter press release is available now on the investors section of our website.

You'd like to be added to the Companys distribution list. Please send an email to IR at codex DNA Dot com.

Before we begin, I'd like to inform you that certain statements we make during this call will be forward-looking.

SEC.

This conference call contains time-sensitive information and is accurate only as of the live broadcast on May 10th, 2022. Finally, any percentage changes we discuss will be on a year-over-year basis, unless otherwise noted. With that, I'd like to turn the call over to Todd, CodexDNA's CEO .

This conference call contains time sensitive information and is accurate only as of the live broadcast on May 10 2022.

Finally, any percentage changes, we discussed will be on a year over year basis, unless otherwise noted with that I would like to turn the call over to Todd Codex DNA CEO .

Okay.

Thanks, Rich and good afternoon, everyone. Thank you for joining US today, we're pleased to discuss our financial results for the first quarter of 2022 to.

To start I'd like to talk about our first quarter highlights and commercial results.

We are off to a very strong start to the year across our entire product portfolio. We continue to strengthen our business and see robust demand for our products.

For the first quarter, we grew revenue by 142% compared to the prior year period. And excluding the inorganic contributions from EatonBio, growth was 82%.

For the first quarter, we grew revenue by 142% compared to the prior year period.

And excluding the inorganic contributions from Eaton vial growth was 82%.

Revenue during the period was driven in part by our highest number of quarterly placements of our BioXP 3250 instruments, strong growth in BioXP consumable kits and BioFoundry services, and increased partnership revenue related to our agreement with Pfizer.

Revenue during the period was driven in part by our highest number of quarterly placements of our biopsy $32 50 instruments strong growth in <unk> consumable kits and Biopharma services and increased partnership revenue related to our agreement with Pfizer.

Second our Biopharma services, which now includes parts of Eaton Bioscience and Leverages, the same direct and distributor channels to provide customers with <unk> enabled services and solutions.

We executed in all these areas in the first quarter, and I'll touch on each one.

We executed in all of these areas in the first quarter and I'll touch on each one.

We expect these strategies to drive long-term sustainable growth and to create maximum value for our customers and our shareholders.

We expect these strategies to drive long term sustainable growth and to create maximum value for our customers and our shareholders.

Our BioXD automation platforms are headlined by our BioXP3250 system, which is a fully automated push button platform for the rapid synthesis of DNA and mRNA.

Yes.

Our biopsy automation platforms are headlined by our <unk> 32 feet 50 system, which is a fully automated push-button platform for the rapid synthesis of DNA and mrna.

Certain drug discovery activities that previously took months can now be completed using the biopsy system in just a week or so. And what previously took days can now be done in just hours.

Certain drug discovery activities that previously took months can now be completed using the biopsy system in just a week or so and what previously took days can have you done and just hours.

Industry leading quality combined with enhanced speed, accuracy and scale can lead to vast productivity improvements.

Industry, leading quality combined with enhanced speed accuracy and scale can lead to vast productivity improvements.

In our last earnings call, we discussed the headwinds we've experienced in the fourth quarter of 2021 related to the emergence of the Omicron variant. This affected our ability to meet with certain customers on-site and to ship, place, and install our BioXp3250 instruments.

In our last earnings call, we discussed the headwinds we experienced in the fourth quarter of 2021 related to the emergence of the omicron variant.

This affected our ability to meet with certain customers on site and a ship place and install our biopsy $32 50 instruments.

This resulted in fewer shipments than we had anticipated as we closed out 2021.

However.

The COVID-related commercial disruption subsided in the first quarter, which contributed to a record quarter of shipments as some of the delayed instruments from the prior period were able to be delivered.

Therefore, while we had our largest number of instruments placed, we expect this to normalize in the second quarter. Overall, we had an excellent quarter of performance.

Therefore, while we had our largest.

Number of instruments placed we expect this to normalize in the second quarter.

Overall, we had an excellent quarter of commercial execution.

Our customers continue to recognize the benefits of the biopsy platforms. As a reminder, we ended 2021 with nearly 200 instruments in our installed base and are off to an outstanding start to 2022.

Our customers continue to recognize the benefits of the <unk> platforms.

As a reminder, we ended 2021 with nearly 200 instruments in our install base and are off to an outstanding start to 2022.

We believe we're still in the early stages of product adoption for our BioXP3250 instrument and the demand remains strong.

We believe we're still in the early stages of product adoption for our <unk> $32 50 instrument and the demand remains strong.

Within our portfolio of consumable products, BioXT kits experience a solid quarter of growth compared to the prior year period. This was driven by gene fragments, cloning, and our recently launched mRNA product offering. Over time, we intend to expand our install base of instruments and launch additional kits to meet the needs of our customers, which will fuel a consistent and profitable razor razor blade business model.

Within our portfolio of consumable products biopsy kits experienced a solid quarter of growth compared to the prior year period. This was driven by gene fragments cloning and our recently launched mrna product offerings over time, we intend to expand our installed base of instruments and launch additional kits to meet the needs of our customers which will fuel.

Consistent and profitable razor razorblade business model.

On a related note, we anticipate that consumable kit gross margins will improve significantly as we ramp up our internal algosynthesis capabilities in 2023.

On a related note, we anticipate the consumable kit gross margins will improve significantly as we ramp up our internal alagoas synthesis capabilities in 2023.

This will provide us with the path to sustainable profitability in the future.

This will provide us with a path to sustainable profitability in the future.

Moving on, our Codex DNA BioFoundry services experienced robust revenue growth in line with our year-over-year organic growth rate. This was driven by strong demand for customer genome orders and variant libraries, and we expect demand in this area to continue to grow rapidly.

Moving on our codecs DNA bio foundry services experienced robust revenue growth in line with our year over year organic growth rate.

This was driven by strong demand for customer genome orders and variant libraries, and we expect demand in this area to continue to grow rapidly.

As a reminder, our BioFoundry Services Organization leverages our best-in-class BioXP automation platforms to provide customers with custom solutions, quick turnaround, and excellent quality.

As a reminder, our Biopharma services organization Leverages, our best in class biopsy automation platforms to provide customers with custom solutions quick turnaround and excellent quality.

Therefore, services enable us to provide more solutions to a broader customer base and offers a key customer funnel into our product business.

Therefore services enable us to provide more solutions to a broader customer base and offers a key customer funnel into our product business.

Within services, Eaton Bio performed solidly in the quarter and contributed approximately 1.4 million of revenue, which was ahead of our internal forecasts. We saw a very strong demand for sequencing services in the quarter, resulting in higher than expected performance.

Within services.

<unk> performed solidly in the quarter and contributed approximately $1 4 million of revenue, which was ahead of our internal forecast.

We saw very strong demand for sequencing services in the quarter, resulting in higher than expected performance.

Starting in the fourth quarter of 2022, we believe Eaton can begin scaling up their production of Oligos, which should reduce our raw material costs within several product lines and provide significant accretion to gross margins as we ramp up production into 2023.

Towards the end of the year, we intend to complete the integration of Eaton's operations into Biopharma services, and we believe Eaton's legacy business will grow steadily as a part of this combined service organization.

Yes.

Moving on now to partnerships I'm pleased to report that we're off to a very strong start and our collaboration agreement with Pfizer.

While we can't get into the specifics at this point our progress from a technical development perspective related to our solar eds technology.

<unk> has been outstanding.

For example, we have successfully synthesized key target genes of interest using solar EDS workflow, and we've made progress developing new protocols for rapid high fidelity synthesis of target genes.

For example, we are successfully synthesize key target genes of interest using solar eds workflow.

Good progress developing new protocols for rapid high fidelity synthesis of target genes.

It's very early days, but we're very encouraged by the data and the results we're seeing so far and we will provide updates as we progress further toward our joint objective.

It's very early days, but we're very encouraged by the data and the results. We're seeing so far and we will provide updates as we progress further towards our joint objectives.

More specifically, we aim to pursue value-added partnerships that can leverage our differentiated intellectual property portfolio and proprietary technologies. This includes all of our technology categories, such as BioXP Automation Solutions for DNA, mRNA, and protein synthesis, and our VMAX platform for the efficient and large-scale cloning and scale-up of DNA.

Caleb DNA.

Before I turn the call over to Jennifer to discuss the financials, I want to touch on the progress within our R&D programs and organizational updates.

Before I turn the call over to Jennifer to discuss the financials I want to touch on the progress within our R&D programs and organizational updates.

Yes.

We recently showcased our innovative SOLA EDS technology and automated benchtop bioXP systems at SINBioBeta's Built with Biology Global Conference in our first R&D investor webinar in March.

SOLA is a proprietary enzymatic synthesis platform based on DNA ligation and amplification approaches that is used to build oligos from the make-to-stock universal library of short DNA building blocks.

Solar is a proprietary enzymatic synthesis platform based on DNA litigation and amplification approaches that is used to build all it goes from a make to stock Universal library of short DNA building blocks.

We believe that this approach is the ideal solution for synthesis of longer fragments of DNA, mRNA, and protein at the benchtop due to its advantages in fidelity, buildability, scalability, and cost.

We believe that this approach is the ideal solution for synthesis of longer fragments of DNA mrna and protein at the bench top due to its advantages and fidelity build ability scalability and cost.

We expect our approach to building oligos using Sola and the BioXp system will result in higher quality and more cost-effective products compared with other enzymatic DNA synthesis approaches.

We expect our approach to building oligos using solar and the biopsy system will result in higher quality and more cost effective products compared with other enzymatic DNA synthesis approaches.

During the first quarter, we advance our solo development programs. We continue to reliably generate high-fidelity DNA oligos of 20 to 100 base pairs at the benchtop.

During the first quarter, we advanced our solar development programs.

We continue to reliably generate high fidelity DNA Oligos, a 20 to 100 base pairs at the bench top.

As a part of an internal development project solar generated oligos are efficiently assembled into full length Sars Covid two spike protein James.

As approximately $3 nine kb in length in the Companys longest jean ever assembled enzymatically.

This achievement further validates our belief that this technology is the leading approach for building high-fidelity, longer segments of DNA using enzymatic DNA synthesis technology.

This achievement further validates our belief that this technology is the leading approach for building high fidelity longer segments of DNA using enzymatic DNA synthesis technology.

At the Built with Biology Global Conference, we also showcased the BioXP 9600 to potential customers.

At the built with Biology Global Conference. We also showcase the <unk> 9600 potential customers.

The 9600 is designed to have approximately three times the capacity as the current BIOX-T3250 system, making it an ideal solution for higher throughput customer segments within biotech and forma.

We are pleased to report that the Vioxx T9600 is on track for a full commercial launch in the fourth quarter of 2022.

We are pleased to report that the biopsy 9600 is on track for a full commercial launch in the fourth quarter of 2022.

And finally during the fourth were during the first quarter of this year, we recruited and hired key positions across the organization. These new hires will enable us to scale to meet future anticipated demand for our products services and technology partnerships.

And with that, I'll pass the call over to Jennifer to review our financial

And with that I'll pass the call over to Jennifer to review our financials.

Thank you, Todd. And good afternoon, everyone. Detailed financial results of the current quarter were included in today's press release.

Thank you Pat and good afternoon, everyone.

<unk> financial results for the current quarter were included in today's press release.

In my remarks today, I will briefly review our financial results.

Codex DNA is well-capitalized with cash and short-term investments of $76.8 million as of March 31, 2020.

Fedex DNA is well capitalized with cash and short term investments.

$6 8 million.

As of March 31st.

2022.

Revenue was $5.6 million for the first quarter of 2022, which was a 142% increase in total revenue from $2.3 million for the same period in the prior year.

Revenue with five 6 million for the first quarter 'twenty. Thank you, which was 842% increase in total revenue from $2 3 million for the same period in the prior year.

This strong growth was driven by biopsy kits, biopoundry services, and contributions from Eaton Revenue, which was about $1.4 million. Ruralties and other revenue also grew due to revenue related to the Pfizer collaboration agreement.

Strong growth driven by <unk> <unk>.

Services and contribution from ink revenue, which was about $1 4 million royalties and other revenue also grew due to revenue related to the Pfizer collaboration agreement.

Gross margin for the first quarter was 49.3% compared to 56% for the same period in the prior year.

Gross.

For the first quarter was 49, 3% compared to 56% for the same period in the prior year.

The decrease was primarily driven by higher raw material costs associated with Castleberry, Joseph Andre Sir increased shipping and logistics and increased personnel and departmental expenses as we are investing to support future aircraft.

It is worth noting that our gross margin improved significantly sequentially compared to our fourth quarter, reflecting the contribution of the size of milestone payment amortization and improved product market.

It is worth noting that our gross margin improved significantly sequentially compared to our fourth quarter, reflecting the contribution of milestone payment amortization and improved product margins.

Operating expenses were $15.6 million for the first quarter compared to $7.6 million for the same period in the prior year.

Operating expenses were $15 $6 million for the first quarter compared to seven 6 million for the same period in the prior year.

The increase was driven by headcount expansion across our businesses, primarily in our commercial R&D and G&A organizations.

The increase was driven by head count expansion across our business.

Primarily in our commercial R&D and G&A organization.

The increased personal expenses—expense relates to sales and marketing efforts, increased product development efforts, and hiring of new leadership in professional sports staff.

Personnel expenses.

Expense relate to sales and marketing effort.

<unk> product development effort and hiring of new leadership and professional sports.

Other expense increases included professional services, R&D material costs, and facility and insurance costs.

Other expense increases included professional services R&D material cost and facility cost.

net loss was $13.2 million for the first quarter compared to $7.4 million in the same period in the prior year. Net loss per share was $0.45 for the first quarter compared to a net loss of $1.43 for the corresponding prior year.

Net loss of $13 $2 million for the first quarter compared to $7 $4 million in the same period in the prior year net loss per share was <unk> 40 for the first quarter compared to a net loss of $1 43 for the corresponding prior year period.

And with that, I will now turn the call back over to you.

With that I will now turn the call back.

Yes.

On the call for questions. Thank you.

Thank you, Sir ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone answer. Your question has been answered or you wish to remove yourself in the queue. Please press the county.

Your first question comes from the line of Brandon Collard from Jeffries. Your line is open.

Your first question comes from the line of Brandon Couillard from Jefferies. Your line is open.

Hey, Thanks, good afternoon.

In terms of the record biotech speed placements in the first quarter, each inch you're going to quantify the total gross number of installs and how many came from delayed 4Q orders and there's mostly being placed at new or existing customers and any color you want to share in terms of US versus OUS channels.

Todd in terms of the record biopsy placements in the first quarter if.

Are you willing to quantify the total gross number of installs and how many came from delayed <unk> orders and this is mostly.

Being placed at new or existing customers any color you'd be willing to share in terms of U S versus O U S channels.

Yeah, hi, Brandon. Thanks for the question. I guess the additional color that I would add is we saw really strong growth in North America and Channel and across all regions, but predominantly North America.

Yes.

Hi, Brian and thanks for the question.

I guess the additional color that I would add is we saw really strong growth in North America, and channel and across all regions, but predominantly North America.

On the earlier part of your question about kind of the mix in the quarter, I'd say, you know, a small percentage of the overall installs came over from the fourth quarter, so just, you know, a couple to a few. And the color on the, you know, the demographics of the customers really hasn't changed. We're still seeing adoption mostly by new customers. We are, on occasion, seeing existing customers order a couple of systems, but primarily new customers

On the earlier part of your question about kind of the mix in the quarter I would say.

A small percentage of the overall installs came over from the fourth quarter. So just a.

A couple to a few.

And the color on the.

The demographics of the customers really hasnt changed were still seeing.

Adoption, mostly by new customers and we are on occasion seeing existing customers order a couple of systems, but.

Primarily new customers.

just a couple to a few went over so we really had a strong quarter in and of itself in the first quarter it was augmented slightly by a couple of instruments, you know, sliding into the first quarter due to the COVID issues that we saw on the channels in the fourth quarter. So really strong quarter.

Just a couple to a few went over so we really had a strong quarter in and of itself in the first quarter. It was augmented slightly by a couple of instruments.

Sliding into the first quarter due to the.

Covid issues that we saw on the channels in the fourth quarter, so really strong quarter.

Mostly new customers for sure and strong performance, but North America really stood out is growing well and that makes sense, because we invested a lot.

As you know into North American channel and commercial operations, a couple of quarters ago. So.

So that's really I think starting to bear some fruit.

It's been a successful place for us.

Gotcha. And in terms of the BioXP 9600 launch timeline, what's going to be begun, sort of commercial detailing for that? And you started to build an order funnel for that system yet, and have you solidified the expected ASP for that instrument?

Got you and in terms of the <unk> 9600 launch timeline.

What's going to be begun sort of commercial detailing for that and you're starting to build in the order funnel for that system yet.

Sure.

Solidified the expected ASP.

For that instrument.

So again, good question. We're on track for the launch in the fourth quarter. I'd have to check with the team here. I think we're nearly done with beta testing. Everything seems to be going well, so we feel comfortable that we're gonna remain on track, or of course, you know, doing pricing studies right now. And we should conclude with those and have pricing soon. But,

So again good question, we are on track for the launch in the fourth quarter.

I'd have to check with the team here I think we are nearly done with beta testing everything seems to be going well. So we feel comfortable that we're going to remain on track. We are of course doing pricing studies right now and.

Would conclude with those and have pricing soon but.

We'll be launching with fragment and cloning capabilities. Other kits will come online after that, so we'll launch in the fourth quarter with

We'll be launching with.

gene fragment synthesis capabilities up to 1.8 KB, which is consistent with one of the kits available on the 3250. It'll have three times the throughput.

And we'll be able to clone about, not about, but 96 genes into any one of four vectors and then we'll launch subsequent kits on that later on. So working on pricing, but everything's on track.

And we will be able to clone.

They're not about but 96 genes into any one of the four vectors and then we'll launch subsequent kits on that later on so working on pricing, but everything is on track.

Okay. Jennifer, I didn't hear you speak to guidance for the year, so we assume that you're affirming the prior revenue and installation guidance that you talked about on the 4Q call.

Okay.

Jennifer I didn't hear you speak to guidance for the year should we assume that you're reaffirming the prior revenue and installation guidance did you talked about on the <unk> call.

Yeah, thanks for the question, so we did give our annual guidance on the Q4 call, and it is our practice to give annual guidance rather than quarterly guidance.

Yes. Thanks for the question. So we did give our annual guidance on our Q4 call and it is our practice to give annual guidance rather than quarterly guidance.

Sure, understanding like you're not giving necessarily to keep guidance, but should we, you know, assume that kind of that full year out like you talked about before is still intact.

Sure understand.

Given necessarily to key guidance, but should we assume that kind of that full year outlook you talked about before is still intact.

We have not provided change to that outlook at this time, yeah. Yeah, and this is Rich. I mean, clearly we're off to an outstanding start to the year. You know, our goal and our aim always is to meet or exceed our guidance. But, you know, our practice typically is, you know, we'll provide annual guidance. You know, we're only one quarter through the year. You know, don't want to get too far ahead of ourselves here, but we're feeling good about the year.

We have not provided a change to that outlook at this time, yes, yes. This is <unk>.

I mean, clearly we're off to an outstanding start to the year.

Our goal and our aim always to meet or exceed our guidance, but our practice typically is yes, we will provide annual guidance only one quarter through the year and don't want to get too far ahead of ourselves here, but we're feeling good about the year.

Got you okay. Thank you.

Thank you your next.

Your next question comes from the line of Paul Knight from KeyBank. Your line is open.

Your next question comes from the line of Paul Knight from Keybanc. Your line is open.

Yes.

I caught on the 3.9 KB.

Hi.

Todd on the $3 nine Kb.

sequence data that you're producing. Could you talk, is that the level of consistency do you want, how much

Sequence data that you are producing could you talk is that the level of consistency do you want.

How much.

What's the sequence size you ultimately are targeting? If you could talk about that.

Whats the sequent size you ultimately you're targeting if you could talk about that.

<unk> performance.

Hi Paul, thanks for the question. So we presented this data twice now, which is great. We presented it to a standing room only audience at the Symbiobeta conference.

Yes, Hi, Paul Thanks for the question. So we presented this data twice now which is great. We presented to a standing room only audience at those and bio Beta conference.

regarding solar dance not here, I apologize, but let me go ahead and answer the question in his stead. So 3.9 KB is the longest gene we've ever synthesized, and to the best of our knowledge, it's the longest

gene that's ever been synthesized using enzymatic DNA synthesis. Now, as you know, the company has a history of building entire genomes, so we can enzymatically assemble entire genomes or millions of base pairs. But when it comes to one contiguous piece of DNA, that's the longest we've been able to synthesize. And we did that from oligos that we were able to build using the SOLA-based process.

Gene that's ever been synthesized using antiemetic DNA synthesis now as you know the company has a history of building entire genomes. So we can enzymatically assemble entire genomes or millions of base pairs going on when it comes to one contiguous piece of DNA thats. The longest we've been able to synthesize and we did that from all.

All of those that were able to build using the solid based process. So.

So we feel very comfortable about that. We are experiencing about a 50-fold improvement in fidelity using our process relative to other enzymatic DNA synthesis technologies and feel good about where we're at.

So we feel very comfortable about that.

We are experiencing about a 50 fold improvement in fidelity.

Using our process relative to other enzymatic DNA synthesis technologies and feel good about where we're at.

The second part of your question is why, you know, where's the sweet spot and, you know, really the market in our view is migrating to longer, more complex bills and that's being driven by just the demand for longer sequences as a result of a couple of segments like vaccine development, whether it's infectious disease.

The second part of your question is why whereas the sweet spot and really the market in our view is migrating to longer more complex build and thats being driven by.

Just the demand for longer sequences as a result of a couple of segments like vaccine development, whether it's infectious disease.

or personalized medicine, those genes, as an example, the spike protein or flu genes are multiple cavein lengths, so the necessity to build genes using enzymatic synthesis

Personalized medicine those genes as an example, the spike protein or <unk> are multiple kv and link so the necessity to build genes using enzymatic synthesis at the bench top is going to require a long build capabilities I think we are squarely.

at the benchtop is going to require long build capabilities. I think we're squarely within that targeted amount. And so certainly for any human protein, you know, it'll be smaller than that and we're very comfortable with that as you get into viral antigens.

Within that targeted amount.

So certainly for any human protein.

It'll be smaller than that and we're very comfortable with that as you get into viral antigens.

You know, we're up there in the multiple kb length, so we think we've got a path forward.

We're up there in the multiple kv length. So we think we've got a path forward.

And you would mention you're going to increase headcount. I think even in Q1, where are you with that progress?

Yes.

And you had mentioned you're going to increase head count I think even in Q1, where are you with that progress.

Okay.

the number of headcount we added? We made a number of key hires in Q1 and currently we have approximately 250 U.S. employees and about a dozen internationally.

With the number of head count we added we have we have we made a number of key hires in Q1 and currently we have approximately 250 U S employees at about a dozen internationally.

Okay, and you began the visor milestone in Q1, is that right?

Okay, and you began the biser milestone in Q1 is that right.

Yeah, that was the first full quarter of recognizing that milestone.

Yes that was the first full quarter.

Recognizing that.

Milestone.

It was a full quarter. Sorry Jennifer. Yeah, that was the first full quarter of recognizing that okay.

It was a full quarter, sorry, Jennifer yes.

Yes that was the first full quarter of recognizing that.

Okay. Thank you.

Thanks, Paul.

Your next question comes from the line of Steven Ma from Cowan. Your line is open. Hi, congrats on the question.

Your next question comes from the line of Steven <unk> from Cowen Your line is open.

Hi, congrats on the quarter and thanks for taking the questions.

As Dave Okay.

So maybe just to follow up on Paul's question, on the Pfizer up-front payment, can you give us a sense of the cadence of the timing of the rest of the up-front payment?

So maybe just to follow up on Paul's question.

On the Pfizer.

Upfront payments can you give us a sense of the cadence of the timing.

The rest of the upfront payments.

Sure. So we received in January an $8 million upfront payment. That payment is being recognized on a straight line basis over a two to three-year period. And we are also eligible for future near-term milestones totaling up to $10 million.

Sure.

Yes, so we received in.

January and $8 million upfront payment.

And that payment is being recognized on a straight line basis over.

Two to three year period.

And we are also eligible for future near term milestones totaling up to $10 million.

And those will be recognized as completed? Correct.

Okay based on those.

Those will be recognized as completed.

Correct.

Okay got it.

Okay.

Thanks for that and then.

I'm going to talk about the 9600 launch, looks like that's scheduled for Q4, but are there any lingering supply chain issues that could potentially impact the launch timing or are you guys feeling pretty good about that?

I wanted to talk about the 9600 launch it looks like that's scheduled for Q4, but are there any lingering supply chain issues that could potentially impact.

The launch timing or are you guys feeling pretty good about that.

We feel very good about the launch timing now, and we have secured supply chain requirements. So we've procured all of the parts in the bill of materials for our pilot and MR1 runs. So to the best of our knowledge, based on our forecast, we will have sufficient materials in finished goods.

We feel very good about the launch timing now and we have secured.

Supply chain requirement so we've.

Broker to all of the parts and the bill of materials for our pilot and MLR. One runs so to the best of our knowledge based on our forecast.

We will have sufficient materials and finished goods.

Okay, perfect and then.

And then you guys talked about the Eaton internal oligosupply impacting gross margins in 2023 given lower cost of raw materials. But can you give us a sense for the potential of the gross margin impact?

You guys talked about.

The Eaton internal all ago supply impacting gross margins gross margins in 20, sorry in 2023.

Given lower cost.

Raw materials, but can you give us a sense for that.

<unk> the gross margin impact.

So, this is Todd. I'll take the first part of that question and hand it over to Jennifer, and we can follow up. So, at a high level, we plan on launching internal synthesis capabilities. This is DMT synthesis, not enzymatic. So, our first chemistry will be DMT. That will launch very late in the year. Start accreting to gross margin then, and then throughout the course of 2023, we intend to ramp that up.

So this is Todd I'll take the first part of that question and then hand, it over to Jennifer and we can follow up.

At a high level, we plan on launching internal synthesis capabilities. This is DMT synthesis.

Antibiotics. So our first chemistry will be DMT that will launch very late in the year started creating gross margin.

And then throughout the course of 2023, we intend to ramp that up.

So I'll hand it over to Rich and Jen to kind of answer the second part of the question.

I'll hand, it over to rich and Jen to kind of ask or answer the second part of the question.

Yeah, this is rich. It's a good question. You know, we haven't provided margin guidance next year. You know, at this point in the year, we haven't really built up the budget. But, you know, if you think about where all the goes play into our commercial products, you know, because they go into every kit, all the consumables there.

Yes. This is rich it's a good question, we haven't provided margin guidance next year at this point in here, we haven't really built up the budget, but if you think about where oligos play into our commercial products could they go onto every cat all the consumables. There. So the strategy makes sense right you got to lower those raw material costs and that helps.

So, you know, the strategy makes sense, right? You got to lower those raw material costs, and that helps, you know, to create a...

a much more profitable recurring revenue stream with our consumable kids and it's a key important part of our strategy. So as Todd said, we do expect much more of an impact in 2023 and it will ramp up throughout the year.

Great.

Great, thanks. And last question, you know, given the strength of the services business, do you ever get customers switching over from a services customer to an instrument buyer?

Yes.

Okay, great. Thanks, and last question.

Given the strength of the services.

Do you ever get customers switching over from becoming from a services customer to an instrument buyer.

Yeah, that happens all the time. As a matter of fact, we're first to market with...

Yeah that happens all the time as a matter of fact.

We're first to market with.

you know, a new technology and a new instrument and a new approach which gives researchers

A new technology.

And a new instrument and a new approach, which gives researchers and scientists worldwide the ability to better control their workflow have IP at the bench top and.

and scientists worldwide, the ability to better control their workflow, have IP at the benchtop.

and whatnot. And so we're first to market with that. Sometimes customers want to do a proof of principle. We call them a POP.

And whatnot and so we're first to market with that sometimes customers want to do a proof of principle, we call them a pop so they will come in and.

So they will come in and want to make sure that the instrument works for their workflow. So we oftentimes use that as a way to convert customers to the instrument and that happens all the time.

To make sure that the instrument works for <unk>.

Their workflow so we oftentimes use that.

As a way to convert customers too.

The instrument and that happens all the time, so it's a great tool for us to bring leads in whether they are <unk> or SQL and transition them over to a product format.

So it's a great tool for us to bring leads in, whether they're MQLs or SQLs and transition them over to a product format.

There are customers, again, to your question that have been with us in services for quite some period of time that are happy with the services.

There are customers again to your question that have been with US in services for quite some period of time that are happy with the services and then eventually ended up purchasing an instrument because of the value proposition or a change in their program. So we certainly do see that transition we see a healthy transition.

And then eventually end up purchasing an instrument because of the value proposition or a change in their program. So, we certainly do see that transition. We see a healthy transition from services to products and, you know, we also offer through our services things that you can't do on the BIOXP. So, we're trying to answer and address a larger segment of the market, but we certainly do see customers converting over to products. Okay.

From services to products and we also offer through our services things that you can't do on the biopsy. So we're trying to answer and address our largest segment of the market, but we certainly do see customer.

Customers converting over to products.

Okay, great. Thanks, a lot. Thank you.

Yes.

Okay.

I am showing them further questions at this time. We'd like to turn the conference back to Richard Lucky for the closing remarks.

I am showing no further questions at this time I would like to turn the conference back to Richard Lucky for the closing remarks.

Thank you, Faith. With that, we'd like to thank you all for attending. Operator, we will now conclude the call. Thank you.

Thank you Dave.

We'd like to thank you all for attending operator, we will now conclude the call. Thank you.

Ladies and gentlemen, this includes today's conference. Thank you for your participation. Have a wonderful day. You may all disconnect.

Ladies and gentlemen. This concludes today's conference. Thank you for your participation have a wonderful day you may all disconnect.

Q1 2022 Codex DNA Inc Earnings Call

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