Q3 2022 Ginkgo Bioworks Holdings Inc Earnings Call
As a reminder, during the presentation today, we will be making forward looking statements, which involve risks and uncertainties. Please refer to our filings with the securities and Exchange Commission to learn more about these risks and uncertainties.
As usual, we'll follow our standard agenda for these call providing an update on our financial progress. While also taking time to dig deeper on our strategic priorities will end with a Q&A session and I will take questions from analysts investors and the public you can submit those questions as usual to us in advance on Twitter with the hashtag ginkgo results or by E mail at Investor that Ginkgo bio.
<unk> Dot com.
Alright over to you Jason.
Good morning.
I'll start with this slide because our mission drives much of our long term strategy I can go and even many of the day to day decisions in the company. So very simply we want to make apologies her to engineer. It can go and we do that by scaling our platform for programming cells. So.
What does that look like right. So we work with our customers to define what they want to develop in other words the spec for the cell they want to engineer and this is a key idea. We are operating our platform is at the <unk> service to enable our customers to develop and products for consumers right and so our platform consists of two assets are foundry.
And our code base, our foundry is an automated lab. The key idea here is we're able to turn what is typically an underutilized fixed cost investment for most companies in other words the.
We're a physical R&D labs that our customers might have in their facilities into what's now for the customer of variable cost available to them as a service and that attribute is particularly attractive to our customers in a more challenging economic backdrop, especially small companies might not even need to build these facilities in the first place and so being able to turn that on and off.
R&D spending is the benefit our customers also benefit from the scale economics that we can generate as we invest in our platform.
Our code base is a learning asset it accumulates as we run more experiments and includes physical strains data and various tools for programming cells. We can reuse these learnings in incremental programs, which in turn increases the probability of program's success and reduces program cost for customers.
I know some potential customers may be listening right now as well as you follow our new program announcements and the new capabilities that we're building both organically and through acquisitions and we do have.
Four acquisitions that closed just this quarter. Please do reach out we'd love to work with you and again, we do operate as a service business very easy to get on the platform, we'd love to get you on the platform Okay.
Before I turn over the call to Mark to discuss our financials I do want to highlight a few recent.
Highlights of the company. So we continue to focus on attracting new programs to the platform and I'll talk more about why that metric is so important to us a bit later, we are pleased to add 15, new programs in the third quarter and I, specifically want to highlight our Merck collaboration announcement.
We continue to see really strong momentum in the pharma and biotech vertical. So here, we were able to leverage our fungal strains and other expertise to win an enzyme development projects with a blue chip pharma customer with up to $144 million in milestone payments in Biosecurity, we executed well as the school year started and as Youll see we want our one.
Again, increasing our financial guidance for this business.
More importantly, we continue to see real traction across our long term strategic initiatives I'll have more to say on that topic later in the call as well finally youll see at the bottom of the slide that we closed four acquisitions in the month of October I'd like to give a special call out to the ginkgo team and also to the new team members that worked with US closely at the acquired companies. This is an enormous.
Lift for a company ginkgo size and the process went amazingly well.
Importantly, we were able to close the <unk> transaction more quickly than we initially anticipated and ill discuss why I think that presents a real strategic advantage for us we completed the Bayer acquisition strengthening our capabilities in the AG biologics vertical and also announced two smaller transactions circle areas, which has a circular RNA and promoter screening platform that will help <unk>.
Our work in cell and gene therapy, and <unk>, a longtime partner of ours that has.
Our screening platform that will drive.
Drive adaptive laboratory evolution. These technologies, both deepen and broaden our capabilities and we're excited to welcome. These teams to go I'll note that I think our recent M&A activity demonstrates our ability to play offense in the current market environment, while still thoughtfully managing our cash balance a multiyear runway that's something you've heard me talk about before and I consider strategically important.
To the company to maintain that.
Okay. So we won't be able to do a deep dive on our biopharma work this quarter, but I do want to call out. Some recent results. We shared at the society for immunotherapy of Cancer Conference last week, just here in Boston as we got a great reception from Biopharma companies. They are about the data and so the ability of our car T cell and this is.
You are familiar with this this is a type of immunotherapy for cancer to be able to persist post administration in a patient and continue to kill tumor cells is in part driven by the signaling domains of the car and so what we did here was we built a 10000 member car Library and you can you can see the library design on the left side of the poster here and we introduced that lie.
Prairie into primary human T cells to look for combinations of signaling domains that would improve on this challenge of T cell exhaustion, because it's sort of a big challenge just generally in the field and we tested these by serially challenging the car T cells, both hematological and solid tumors and saw some nice results, including a number of designs that outperform.
Canonical car signaling domain designs, such as PVC in 2008, and head to head comparisons in our assays and you can see that data in the center panel. So we're very happy to dive in on this more deeply with folks that are interested this is an internal work we've been doing it ginkgo that was really meant to showcase the muscles. We've been building over the last four years as we <unk>.
Spanned at our foundry capabilities into mammalian cell engineering, so again, it's not us developing a new therapeutic of our own but really a chance to show to customers. What the platform is capable of and I found out when we announced this we showed at city, we encounter a bunch of folks who are just sort of surprise if I could go on the engineered microbes and fungi, which is not the case again, we've been we've been.
Building this infrastructure out the last four years, so expect me to be a bit of a broken record coming up on the applications of the platform in cell and gene therapy as I wanted to get the word out to customers. I think there is a lot of great business for us there.
So it's a great time to talk to US. If you are a biopharma company everything you see here is all available as a service today to accelerate your drug development efforts and also be sharing more detail on all of our Biopharma platform capabilities at the JP Morgan Conference later this year or early next year. So that's a quick overview of our recent highlights and with that I'm going to hand, it off to mark to walk through our third.
Quarter financial performance, Thanks, Jason our third quarter financial results reflect solid execution in both our cell programming and bio security businesses total revenue in the third quarter of 2022 was $66 million, representing a decline of 14% compared to the third quarter of 2021, primarily because we had a lump sum equity milestone.
Foundry revenue in Q3 of last year.
Discussed in the past quarterly Lumpiness is inherent in foundry revenue and you'll see that when you look at the past six quarters sequentially.
That said, we're very pleased with how total revenues lending on a year to date basis.
I'll begin with a discussion of our cell programming business. We added 15, new store programs to the foundry platform in the third quarter of 2022.
As a reminder, our new cell program count is an important long term value driver and Jason will talk more about why that is a bit later in this call.
We supported a total of 85 active programs in the third quarter of 2022 across 43 customers on our foundry platform.
Represents substantial growth and diversification programs relative to the 54 active programs across 27 customers in the third quarter of 2021, we continue to see strong growth coming from pharma and biotech industry and the food and AG industry segments in particular.
Foundry revenue was $25 million in the quarter down 29% compared to the third quarter of 2021 as mentioned the third quarter of 2022 did not include any large milestone payments, while third quarter of 2021 battery revenue benefited from downstream value share revenue related to the achievement of an equity milestone for Kronos.
Now turning to bio security are concentric offering continued to perform well in the third quarter of 2022 generating $42 million of revenue in the quarter security revenue consists primarily of product and service revenue from our end to end Covid monitoring services with the largest current driver being catered to.
<unk> testing Biosecurity is performing ahead of our expectations as Covid monitoring services are proving to have some level of durability of schools reopen and resume testing in late Q3 and other entities such as the CDC are extending contracts. We are also encouraged to see government investments being made in longer term biosecurity.
Infrastructure.
Bio security and gross margin was 41% in the third quarter and approximately five percentage point increase from the prior quarter performance.
Sequential increase in gross margin percentage was driven in part by favorable revenue mix.
And now I will provide more commentary on the rest of the P&L, where noted these figures exclude stock based compensation expense, which is shown separately.
R&D expense, excluding stock based comp increased from $53 million in the third quarter of 2000 $21 million to $73 million.
Quarter of 2022, R&D expense related to the foundry increased as expected year over year, driven by expansion of foundry capacity and increased breadth of capabilities to support both current and future collaborations.
G&A expense, excluding stock based comp grew to $59 million in the third quarter of 2022 compared to $29 million in third quarter of 2021, as we invested in business development and all other G&A functions to support the growth of new customers and programs as well as a higher level of foundry <unk>.
<unk>, our bio security offering and public company requirements. We also incurred approximately $12 million in transaction and integration costs related primarily to the four transactions we closed in October .
In this environment, we are very focused on containing operating expense increases to areas that are customer facing and that drive growth such as business development and initiatives that will drive foundry productivity. In Q4, you will also see the opex impact of the two large acquisitions, we just closed.
We will of course report out on the inorganic impact in detail. When we report our Q4 results, but it is a high level outline you will see firstly, you run rate opex related to the Bayer transaction, which we expect would be largely offset by.
Revenue from our new collaboration with Bayer.
Secondly, new run rate Opex related to the divergent transaction, which is largely just a pull forward of spend we would've incurred organically in 2023, and 2024 to build these capabilities and thirdly significant onetime transaction costs and near term integration costs, particularly related to the <unk>.
Acquisition as Jason will discuss later, we closed <unk> with a significant cash balance which significantly mitigates the above spend.
Net loss. It is important to note that our net loss includes a number of non cash income and ore expenses as detailed more fully in our financial statements because of these noncash and other nonrecurring items, we look to adjusted EBITDA is a more indicative measure of our profitability.
Adjusted EBITDA in the quarter was negative $70 million compared to negative $18 million in the comparable prior year period, a full reconciliation of adjusted EBITDA is provided in the appendix to this presentation and in our earnings release, adjusted EBITDA declined year over year due to the decline in revenue and increase in operating expenses.
<unk>.
And finally capex in the third quarter of 2000 $20 million to $30 million, reflecting foundry capacity and capability investments. We do expect an increase in capex in Q4 relative to prior quarters as we complete certain projects, including our <unk> seven facility, but in general we are applying the same.
<unk> Capex investments as we are to Opex increases.
One final comment on stock based comp expense as a reminder, we provided extensive disclosure in our Q4 2021 earnings release relating to the GAAP accounting for the modification of restricted stock units issued prior to becoming a public company substantially all of the $563 million.
Comp expense in the third quarter related to this ongoing wind down and we now expect significantly smaller amounts to be booked in the fourth quarter and in 2023 and beyond related to this wind down.
Now I'd like to provide some commentary on our refined outlook for the full year of 2022, we expect to add an incremental 16 to 21, new cell programs in the fourth quarter for a total of 55% to 64.
For full year 2022. This guidance reflects very robust growth as we are almost doubling our new program additions year over year. Despite a challenging economic climates, Jason will further discuss our thinking in providing a range on new programs later in the call, but we are encouraged by both the depth and quality of our sales pipeline.
We are increasing our full year guidance for total revenue by 35% to $40 million over our prior outlook to a new range of 462 $480 million.
We are revising our foundry revenue outlook to be in a range of $150 million to $170 million for full year 2022.
When we provided our initial full year 2022 guidance in March we explained that the range was in part dependent on the timing of downstream value share and that we would update you all as we learn more now that we're closer to year end, we have a better sense of the potential timing of certain specific events. Our previous guidance included revenue in 2022.
From several discrete milestone payments three of which we have not yet earned the low end of our new guidance range assumes that we received one of those remaining milestone payments in 2022 with the remainder anticipated in 2023.
And of the new guidance range assumes that we receive all three remaining milestone payments in 2022.
While this reflects our best estimate at this time there is still some risk with respect to the achievements of any one or all three milestones. However, based on our significant technical progress.
To date, we remain highly confident that we will achieve them in the relatively near term the guidance revision exemplifies the lumpiness that can arise from downstream values your timing at a company of our size.
Now on Biosecurity based on our strong performance in the quarter. We now expect bio security revenue to be at least $310 million for full year 2022, an increase of $50 million from our prior outlook.
As was the case throughout 2021 in the first half of 2022, there still remains significant uncertainty in the bio security market in general, although we saw an increase in testing volumes at the beginning of the fiscal school year relative to similar levels visibility into near term volumes remains quite limited.
We are seeing traction in our broader bio security efforts, including passive monitoring and international programs.
<unk> remains a nation business and is not yet a meaningful contributor to our guidance.
In summary, then we are pleased with our overall progress we are executing on what is now a diverse portfolio of 85 programs on the boundary platform Biosecurity and continues to perform very well and the Companys total cash position of over $1 3 billion remained strong.
Now Jason back to you.
Thanks, Mark I wanted to follow up on with a quick comment on our revised guidance as we get towards the end of the year, we have a much better idea of the timing on binary events like program launches and milestone payments compared to when we guide in March and I try to predict the whole year in front of us. So just as we've been updating on the bio security side. If we've had solid reasons to update you all we want to pass up.
On that information on the cell engineering side, as well and as I've said before this is part of establishing our trust with you all.
Launch of the public company all of that said the team is aggressive and we're motivated to hit the high end of the ranges, we provided and I do think we have some space to pull that off.
So we've spoken to you a couple of times about why we're so excited to be acquiring zymogen as well as in the Bayer Biologics group, but the Bayer deal close around when we expected while the zymogen deal close much earlier than expected and I wanted to explain why I think that early close is such a big deal strategically.
I also want to talk about program additions both to highlight the impact on scaling our platform, but also as a reminder of the significant value potential from downstream economics on those programs I think sometimes that gets lost so I want to highlight it finally I wanted to update you on our progress in bio security as it expands beyond K 12, cobot monitoring as we're seeing really encourage.
<unk> designs there.
Let's dive in alright.
So as you might remember we had expected zymogen to close in Q1 2023, but instead, we closed last month.
The faster timeline here means that zymogen, Brian and more cash.
And we can get to work right away on the potential upside opportunities. So at closing of Diamond is coming in with over $100 million in cash even after paying all of the transaction related expenses, including severance bonus acceleration advisor fees and insurance Premia.
So you can think of that as a truly net cash number as we've previously discussed there are a couple of discrete items that represent potential upside to our base case, while we arent going to continue zymogen products independently in other words not going to invest.
It really to try to commercialize those ourselves and we don't expect revenue from this portfolio of certain more advanced products such as there.
Functional barriers in three D printing programs are attracting inbound interest now and we will continue to explore strategic alternatives to sell or partner those assets. Additionally.
Additionally, we've talked about <unk> real estate footprint, which was a significant area of due diligence for us as we evaluated the transaction, we do have more real estate in emeryville than we need right now and we're working to consolidate our footprint down substantially.
Positive outcome in these efforts could drive material upside to our cash flow forecast and I'll note.
We are already in advanced negotiations to sublease one of these properties starting next year, which is really great to say I want to spend a minute.
Here on this topic of sort of team fit because I was really excited about how amazing it is.
Zymogen team was for our near term goals that can go when I gave I kickoff presentation. So that team out in Emeryville, a few weeks back as a quick reminder, the biggest difference between.
The two companies between Alzheimer's and then ginkgo were approaching the World Wars Zymogen was going out with a product business model and giggle as I mentioned and had a <unk> services business model, but underneath we really both building strong horizontal technology platforms and this is a huge deal for how valuable this team and technology can be to enabling gave us 2023 goals.
Happened very quickly because there is a ton of cultural overlap between the teams and I was feeling that energy when I was out in emeryville and interacting with the teams. There is really exciting so it's already been amazing to see how proactive the former zymogen folks have been in finding ways to support the programs and technical plans that are ongoing at kimco I've seen material contributions.
From those teams already and this is just barely getting started versus last month, it's really a huge win to have them onboard so quickly and now oriented against our services business model I can go and bringing zymogen team and technology expertise to our customers.
Other than just being applied to internal projects.
A really big deal to have this happening now instead of next year.
And I'm thrilled about it so.
So it's also important to point out that zymogen undertook significant standalone restructuring efforts prior to closing so to put these changes into context zymogen had over 750 folks in spring of 2021 ended last year with over 500 employees. So as you think about the Opex, we're taking on and compare it to zymogen historical Opex.
I do think it's important to understand just how much design and cost structure has changed since then you can cataract categorize the folks who ultimately joined the ginkgo.
Team in three main buckets. The first is the automation and software team, which will become deeply integrated with kimco, helping drive our core platform development.
Foundry and codebase, both that we mentioned earlier.
The second bucket comprises <unk> remaining product teams right because the folks that we're leveraging that platform to pursue products at zymogen will focus these teams towards the type of R&D partnerships with customers that you typically see ginkgo enter into and we're already seeing traction there. The ultimate size of this team will depend on the outcome of the strategic alternatives for some of the assets.
Ultimately, we will fit into those program objectives for next year.
Finally, a number of G&A folks joined Witten with the acquisition and will help us ensure a smooth transition as we integrate the companies, but ultimately will be we expect over time that our combined G&A will scale down at the level of integration of the companies increases. So the bottom line. This is a really transformational acquisition for us It can go and where.
Thrilled to have the talented former zymogen team onboard so quickly it's really it's really exciting.
<unk>.
You have to be working with that team. Okay. So next I want to talk about the importance of program additions as a metric because I think sometimes folks can solely focus on near term foundry feeds for programs and missed the bigger value, we hope to see from downstream value share in our customers' products alright, so rather than sort of three parts. So first of all I'll talk a little bit about <unk>.
How we sell these new programs. Okay. So program additions is a critical performance metric for ginkgo and our management team internally here is very very focused on it we're expecting to grow new programs by almost 80% year over year in 2022. So from the 31 Mark mentioned, we had last year to this range of 55 to 60.
This year.
This is an awesome accomplishment by the team I want to say that but as I mentioned earlier I'd like to see us get to the high side of that range.
Giggle folks listening in other words to get to the 60 programs as that is a real value driver for the company I know folks are closely watching on the analyst side kind of the biotech R&D spend outlook in other words, how much of a biotech companies spending on their R&D efforts in this market.
That could mean for 2023 during this earning season, while we don't plan to provide any guidance today on 2023, I do want to make a couple of comments on our program outlook. So the first is we are in the very very early innings of tapping our addressable customer base I think all right. So many customers and for example.
<unk>, a really hearing about us for the first time in our meetings with them over the last six months for example at the <unk> meeting I mentioned earlier, you have folks who are again just.
Turning I think others who've been working in mammalian cells. So in my opinion, we're sort of more insulated from total R&D budget, because it's not like we've penetrated heavily and so as that market moves we move with it.
Really what's more important is how does how does ginkgo sales pipeline look right and what is and from my perspective, the customer demand. There remains very strong and I feel really good about our pipeline heading into 2023, we're not seeing any deceleration there as we exited the year.
We are continuing to evolve how we sell our services. So as an example, one of the things we're hoping to do is to have a sub segment of our offerings be increasingly standardized from the customer perspective in other words more standard milestones at cost structure standard IP terms and timelines and the hope is this can start to speed our sales cycle. So in other words reduce.
Slightly cycles and sort of months of negotiating around some of these details.
And then importantly on the back side also lead to more efficient utilization of our platform in other words certain programs or we can get higher leverage from our automation and our foundry. It's great to do more of these so a good example of this is in the enzyme space and earlier in the call I highlighted our new Merck collaboration that's exactly the sort of more standardized offering I wanted to do more of.
<unk>.
This year and next year, Okay. So that's how we're selling programs.
Okay. Now every time, we add a new program I wanted to talk about how it adds both near term and then on the next slide long term value for <unk>. So first in the near term. We got this virtuous cycle, where each new program adds learnings to our code base, right, which is that sort of data and intellectual property and so on that we get reuse rights for as we do these projects with our customers.
And that can help make future programs easier, okay because of what we've learned from our past ones.
And importantly, it can also drive operational improvement in our foundry right. Again. This is very similar to things like a chip fab or a chemical plant is the place gets bigger the unit economics improve and so physical scaling lowers our unit cost and increases as we increase our outlet so as we add new programs.
As a whole the foundry cobalt the platform gets better which makes it easier to attract future customers. So that's one of the reasons, we're sort of maniacal on driving the team to add new programs. As we think it's fundamentally what makes the platform improve which makes our lives easier in the future.
And then lastly, we generate upfront R&D fees from new programs and that cash helps to derisk. The resources, we devote to serve our customers. While we were building that code base in foundry scale and so we spoke last quarter about our flexibility in structuring program. So we can sort of adjust it up at the tight market, maybe we would want to have more upfront cost coverage and the new programs. It's a nice knob that we can.
Turned biopharma highlight even from a near term perspective, it's only one of the one of the sources of value. We got when we sign up a new program.
Finally, I want to mention that when a new program is also tied to a new customer like for example, Merck or <unk> are recent new customer deals, where we haven't been working with them before that have that extra value right. Because we have an approach where we can expand by an inside sales with these customers in the future. It's not often not a won and done here. So good examples of this.
As our expansion over the years with gip it on in there and this land and expand activity as an easier sales cycle than onboarding a customer in the first place because we have a chance to build that relationship and thats part of how we plan to build bigger program growth numbers in future years, Okay. Finally, and most importantly, I want to remind folks of the <unk>.
<unk> downstream optionality created by the increase in our new program additions again from 31 last year to over 55 that were aiming for this year and then the robust growth. We anticipate again next year each new program brings an opportunity to share in the value of our customers' products in the form of royalties or equity or milestone payments. So.
We get asked all the time I think eagle vertically integrate into final products. The Tam for end products in biotech is huge and we would keep more of the economics, obviously for sharing them with our partners and our view is that we do get a piece of that downstream exposure by sharing in this value with our customers while diversify.
Turning away from individual product rights, Okay, and importantly, it also means we get to build a much much bigger platform than you could if you were just pursuing your own products and the rapid growth in new programs create many more shots on goal and increasingly diversified exposure to end markets and products I mean at this point, we are in a pretty broad range of different.
And product markets from fragrances to gene therapy, right, and so I think that type of breadth.
Does that help diversify our risk importantly, downstream value share carries essentially 100% incremental margins and we believe has the opportunity to be the ultimately the most valuable part of our business. It is all it is on a much longer time scaling the realization the near term foundry fees and this is one of the reasons I think people forget about are.
Sort of push it to the side and I'm sympathetic to the challenge of modeling the exact timing and amounts of downstream value share, especially because these aren't our products and so I think we are often constrained by our customers and how much information we can share publicly with you all even about what targets. We're going after right. Remember this is essentially the R&D and product development.
Pipeline at our customers, that's something that folks are rightly very protective of their.
They're taking competitively with <unk>.
Their competitors in their market. So however, we're very confident in the upside generated by having this many shots on goal and the Tam across it that a biology products.
We will ultimately be large so so now that we're getting to a larger number of programs that can go however, what I'd like to do is a better job of quantifying downstream value potential publicly. So for example, when we sign up at the 15 deal this quarter, how much value put it yield for ginkgo into long run right. If we were successful technically and our customers were six.
Commercially what could it be worse, right and you'll still need to discount that protect nickel and commercial success right like things like you would for a therapeutic drug pipeline as an example, but I do think it will help folks to better understand the long term value of program.
And if you in some cases you can see the specific numbers already right. So for example on the slide here. We highlighted a few recent deals where we have been able to publicly announce specific potential milestones like the $144 million in the Merck deal or $115 million in biogen or the $200 million per product for selecta, right, but when customers don't want to share the spin.
<unk> X, which is often I do think we can still work to share more aggregate regulated information with you now that the number of programs is getting large enough I think though that it wouldnt disclose anything specific about a single customers projects. So we'll work to do more of that in the future.
Okay.
I want to wrap up with some thoughts on Biosecurity.
Palpable momentum in this space.
This fall alone we saw several important white house initiatives prioritizing bio security. The U S. Government is clearly focused on it and ginkgo is very aligned with these priorities and is ready to help lead the future of this industry.
So how do you get in your head, but what would be the components of our long term bio security infrastructure globally. So our first formal offerings spurred by Covid was building a collection platform. So this is the infrastructure layer between specific collection activities.
And local labs that will run the lateral analytics on the samples that are collected okay. So cobot monitoring remains an important part of our business, but we're focused on helping drive more widespread surveillance and monitoring of biological risk in general So even our collection platform alone is now much broader than our pooled COVID-19 testing offer and that was largely what was deployed in schools.
But now includes also port of entry testing wastewater testing and other.
Passive or proactive measures for monitoring to that end. We've recently added several important modules to our platform, including our acquisition of the epidemiological data asset backed us the CDC recently started including data from our airports program and their various tracker and we recently hosted the director of IR box at Ginkgo for AR.
First conference to announce the success of <unk> and our program I wanted to just give a little more detail on this one because I think it's sort of indicative of what I think the direction by securities headed in so, but if you don't know it as sort of the intelligence communities version of Dark alright. So they launch a program. We launched this program with six or seven performers started several years ago before that.
And as I mentioned actually before Google has been involved in Biosecurity pre pandemic.
Not at near our current scale and that's again, because we think it's an important complement to the technology is being built out here around programming cells. It's one of the ways, we develop our platform of care.
Work to reduce the malicious uses of this technology.
The goal of the program is to detect.
This IR program is to detect if a sequence of DNA was genetically engineered so imagine some white powder shows up at the Capitol building or a new viral variant shows up at JFK Airport in a screening program and the question is.
Was this something that was deliberately engineered or is it naturally occurring come up from nature or was it.
Deliberately engineering labs. So in the program. We were we were given challenge samples of either engineered or non engineered organisms, we were blinded to which ones. They were at our technology had to make a call on which it was and I'm happy to report that we were one of the top performers.
And we're seeing a lot of interest in this sort of technology in both the U S and internationally Dr. David Markowitz XI RF as program manager for this program noted on a recent press conference that they have had robust demand for all of the platforms from partners not just in the United States, but in the usual partner countries that the U S intelligence community works with.
So this is the vision we've had the biosecurity is really distinct from diagnostics or therapeutics, so products like <unk>. So we call that sort of thing like a radar.
Engineered biology are a great example of a pure play bio security product, okay. Its not a diagnostic tool right diagnostic tools don't need to know if a piece of DNA has been engineered or not it's a pure play bio security product.
Expect to see more of those.
Okay.
The government is increasingly prioritizing bio security and Biodefense last quarter, we announced a new contract with the CDC to expand our traveler based COVID-19 genomics surveillance program at certain U S airports and since then the bite administration has issued an executive order on the bio economy and national buyer and a national Biodefense plan, both I was.
Fortunately to be asked to speak at the summit about <unk> at the White House in September .
The last 10 years and engaging with the U S government on both bio security answer that biology. This is by far the most progress I have seen for the field. It is a really exciting time, not just for <unk>, but for everyone in synthetic biology, and bio security wild.
Wildlife Security is clearly important in the U S. The reality of the biology does not respect orders what is ultimately needed is global bio security infrastructure and we are beginning to see that traction in the second half of the year. So far ginkgo has publicly announced that we signed Mou with the government in Saudi Arabia in Rwanda.
We're able to draw on our experience and help them collect and analyze data at ports of entry for the CDC in the U S and hope to expand that activity internationally.
No.
Australia was a nice place to and I think because.
Our strategy and activities there really illustrate how we think about carrying I think al So biology effects all of us and specifically related to bio security infectious diseases. As I said do not respect borders we think individuals deserve the most sophisticated surveillance and monitoring tools available to protect themselves and their families from pathogens and we think that can happen by working with public.
With institutions around the world and every country, we should invest in the world. We all want to see exist I've said.
This many times and that is one from my perspective that would have a heck of a lot less infectious disease.
I hope, we're working towards that and I'm happy to take your questions. Thank you.
Thanks, Nathan let's switch over to Q&A in a few moments and as usual I'll start with a question from the public and just reminding the analysts on the line and then if you'd like to ask a question. Please raise your hand, and you and I will call on you and open up your line I think all in will be back in a moment.
Great and welcome back everybody. So as usual I'll start with a question from Alex though and this one is from Twitter.
Christa.
Jason going into Q4 and 2023, how is the next era of new programs and which sector are you seeing an interest then and also any update on how the agriculture pipeline, that's looking with the Bayer deal complete yet.
Yes, so I talked about this a little earlier, but I'm really excited about the momentum we're seeing in Biopharma in particular and again just to highlight it.
We've been building out infrastructure now for several years and the fruits of that are starting to pay off in mammalian cell engineering in particular.
To show some nice results around building large car library as well as a very interesting result on.
AAV vectors for gene therapy caps at work and so on and so we are finally kind of getting those engagements and I think the fact that we did this.
Deals with large biopharma is with Merck and with Novo Nordisk and last year also helped to kind of validate.
We've been around the block with with folks with that sort of a high bar for working with an R&D partner in past and so that helped us with new customers. There too. So I'm really really excited to push more in that direction in 2023.
In ad.
The asset team is just a unique asset in the space frankly.
I think we are.
Yes, we just haven't had it.
Like literally.
Grated with us until last month, and so I'm excited to get out in the market have that team, that's really been working and AG biologicals.
Yes.
Some folks effort pushing 20 years out in the market talking to folks come out with new ideas engagement Big AG in small AG companies.
Optimistic about it but it's an asset we've just brought and so we'll see how it goes in 2003.
Okay. Thanks, Jason.
Taylor I'll call on you next but I know that.
To give you time to prepare Laurence Alexander from Jefferies.
I wasn't able to join the call that that went into our inbox.
Asking about bio security and specifically what kind.
Run rate.
Take care.
Step up our level.
And kind of staffing.
Supported by our security and more broadly.
Yeah. So I think one of the things that's nice about how we built out and I talked a little bit of all the different parts of the bio security kind of infrastructure, but on that collection.
And sort of like.
Group monitoring testing that we built out for schools, and we leverage some of which at the airports.
Is that that is done with local laboratories doing the sort of COVID-19 or other now.
Disease screening and running those tasks and so we have the ability to kind of ramp that well down and if things were to grow substantially up.
Quite easily without having to make major investments, it's a little different if we're looking at some of the international work. So we're going to build out similar infrastructure you want to work with labs locally in those countries, but I do think we would if we had a big program.
All but one of those countries, we're going to likely need to have some investment of folks on the ground there to complement those local labs, but we wouldn't we didn't need to build out sort of big capital.
Investment in infrastructure in those other sites, we really are counting on.
Laboratories and country to do that.
Okay.
Alright.
Okay, Caroline and go ahead and run while you'll be next.
Hey, guys. Thank you Anna Maria Thanks for the heads up there.
As I tried to do some mental math.
Alright, so it looks like you're calling for about $70 million in foundry revenues in the fourth quarter Jason.
Notice that the pharma budget flush is not really a major dynamic for you at this stage can you just sort of like talk to whats driving your confidence in that number.
Then.
Mark if you can help us quantify the size of that first milestone that you've baked into the low end of the guide I think that will help get us.
We have a better sense of that quarter over quarter increase in the base relative to the 25 million here in the third quarter and what exactly are we expecting for barrier in the in the fourth quarter as well.
Yes.
Just for a minute on the general R&D topic, and then I'll hand to Mark a little bit to speak to the specific numbers for this quarter are the upcoming quarters.
When it comes to the larger R&D spend again, the point I was just making as well.
We're so early in terms of penetration that like something like the remainder of the year is not really dependent on like macro effects in R&D, it's very much dependent on the specifics of the current programs. We have in our pipeline and then even if I look to next year and I think about how many programs can we bring in and so on that's also very specific.
Our sales pipeline looks like right.
And right now both of those.
A good amount of.
Visibility into what will happen just because we're getting near the end of the year and then.
For next year that I have good visibility into our sales pipeline.
You know you never know over time, obviously, if things tightened up dramatically, but I still think we're really far from moving kind of what those macro trends and the R&D spending, but mark do you want to speak a bit.
We came into the numbers.
Yes, so I'd say, there's a bridge into the low end of the guidance range of $1 50, which would imply Q4 revenue and $60 million just to make it a little bit easier. So.
Speaking about half of that 60.
We would expect to come from downstream value share.
And most of that downstream village share is coming from the discrete event that we mentioned.
And the portion of the <unk>. The other half of the 60 would then be foundry services and there is a.
Components of their revenue in that.
It's not a bathroom component there is a component of their revenue in that and the way to think about it is you can look at the Q3 number of 25, right and just sort of assume.
We'll get about that same amount of money at a foundry services give or take and then you've got the Bayer acquisition on top of that.
Got it that's actually Super helpful. Thank you.
And then Jason.
Jason back to you on your comments on the pipeline is there any color you can provide in terms of the new versus existing customer mix what percent of those do you sort of like consider Clinton so locked in through 'twenty three.
And as we think about sort of what you're hearing from other life science Pierre's comments around folks being increasingly selective about where to place their bets or perhaps taking longer in terms of the sales cycle.
I know you mentioned standardizing your contract structures as sort of compressing that your own sales cycle, but any color you can share on that dynamic would be helpful.
Yeah happy to yes, so just in terms of sort of inside outside sales.
Don't have any sort of specific numbers to disclose there for next year.
I would say I'll just point out.
We have more customers.
On the platform that we did at this at the start of 'twenty two.
So our ability to do inside sales has improved right. So that's the thing I'm very excited about because it does yes.
Part of what we're negotiating at the IP terms and yes. There is a lot to how we engage with customers that we've already gotten through once somebody is on the platform and then that is really more of a discussion with our R&D team Brian are they interested.
And a new area and so on but a lot of the commercial got some negotiation has been done. So inside sales is just faster right. There, it's a little more of like a customer appetite thing.
When it comes to selling externally.
We are cautiously optimistic that we can like I mentioned, the Merck deal and like the kind of work we're doing in enzymes, we can make that more standardized.
We'll also helped us by the way in terms of the capacity out of the foundry as well right. If we can make.
The work we're doing more standard allows us also to do more of that work and so because you've got we've got to solve both sides, we need to bolt and we want to increase our demand next year be able to bring in more programs. Obviously, we've grown our sales team, but like just generally making that have less friction. But then we also want to make sure as we're scaling our infrastructure can support all of those additional programs and so the standardization helps on.
On both sides of that.
Got it very helpful. Thank you guys appreciate the time.
Thanks, Dave.
And for a lot of that is set to open your line got it and then not backfill. The next can you hear me okay.
Terrific. Good afternoon, guys. Thanks, so much for taking our questions. So adjacent is terrific to hear that you're.
Planned to report an aggregate value on the collective set of new projects on boarded and so wanted to ask now that the XI imaging and they are acquisitions that closed in balancing. The fact that you can really specifically highlighted biopharma a lot. This quarter can you give us a sense for the balance of stratification of projects, So AG bio versus consumer versus pharma.
Going into 2023, and again because <unk> spent so much time, commenting on Biopharma is this specifically a space that you see providing the highest present value per project onboard. It went in the aggregate number you plan to report.
Yeah, Okay. So let me unpack a bit of that one point I think we should have that split of.
<unk> ongoing program as in the slides, so I don't want get the numbers wrong, but.
You've got to find that there in terms of what we're currently working on.
The.
And then the second part of your question was around the.
Remind me it was the same.
The balance of projects stratification and also the relative value.
Right right. Okay. So the challenge with what would we like to do on the downstream value share. So so the first point is we would like people to know that it exists. Okay. Alright, So thats part of what we're doing here because we're signing up lots and lots of programs. These programs have they could add between a six month on a two year timeline right. So thats the time for us to harvest back that absolute dollar share as always we're always going to have more of an <unk>.
None of us right.
Is this kind of the nature of the business and so one of the reasons, we want to talk about it as just for like awareness right. So the next question is how do you value it right and so I think the trick when it comes to looking at different markets is if you were to look at the expected value.
Then get to factor in.
The likelihood of success the time to market and so if you look at something like a food or let's say, a fragrance or our materials product a regulatory for example dramatically less risky compared to a therapeutic product.
Right now, but then the value also different right.
So.
We're not going to try to do that.
Again, we're not able to break out individual products I'm not going to be able to say Wow. This one we think has an expected value of this based on what we think is the likelihood of success on regulatory or anything like that.
I would like to get to and again, we haven't done this yet but it would just be to communicate what's the potential right. Just so people have a sense of a ballpark of that I would like to get there and I think part of the reason we couldnt do before was the number of programs was smaller than it was a little bit dicey, what would be kind of sharing but now as we're getting more I think aggregate numbers are more doable, but I.
It won't be able to give you.
Here's my expected value on this.
And I don't have the information from our even at a customer level, it's tough it would be a swing, but I certainly its hard for me to communicate it to you.
Terrific Thats really helpful and even just the aggregate numbers certainly will be helpful going forward. So we'll do our best.
That's all from us today.
Thanks, Rob.
Alright, and thanks, Dave Thank you align and.
Phoenix.
Great can you guys hear me now.
Great.
And thanks for taking my questions.
Maybe just.
First first part and I have a follow up just mark just want to confirm based on your comments. It sounds like there wasn't any fair revenue recognized in the third quarter.
Given your comments about the base to base from Q3 to Q4, so I just want to confirm that.
Okay, Great and then.
Secondly, I don't know, maybe Fiona Murray or others.
Just the M&A just given the volume of M&A that you've done.
What has been the sort of the strategy and sort of institutionalizing the integration of those companies because it's obviously a lot to do at one time, but just would love to hear how you're thinking about that integration to make sure that it goes fairly smooth. It. Yes. This is definitely where I'm spending my time I can speak to that.
I think overall integration is going really well.
And as Jason mentioned really excited to be able to get at an earlier start with Diamond 10, and one thing that's important to understand is that most of the transactions that we've done are really quite quite small companies that do fit nicely within our existing teams that it's actually much less of that whole company integration effort and much more of a team that is kind of getting integrated into India.
The foundry into even a portion of our foundry and so those tend to go pretty quickly.
Bayer enzyme rinsing cleansing that same week was obviously a big lift for the team.
I'll reiterate what I've told the team and certainly a lot like a thank you to all of them.
All of our Biomarkers that are listening.
But they are also quite quite different businesses and we're very grateful to have zymogen team.
That's all support team there that is helping us integrate those assets.
They are in some ways, it's much harder because it was a carve out and so we've had to rebuild as much support infrastructure everything from procurement to HR.
In that organization and but the good news there is that we've been working on that transaction for a much longer time and that close process, there took longer and given candidly the complexity and so we went in we went into that with a lot of us.
Groundwork already covered so certainly a lot of certainly a lot of work.
Integrations are going well and I would say it will probably and probably be awhile before we do something.
And so that the team does have the opportunity to add.
Yes.
Running more sustainably going forward.
Thanks, guys color thing I'd add I don't know if I would say.
I do think we now have built a muscle that's going to enable it enable us to do integrations much more easily in the future.
And so we won't be afraid to flex that if an opportunity comes along.
Got it and then Jason one for you kind of high level, but just you talked about learnings in the platform, but I'm just curious.
How have you learned when youre signing on new customers have you learned what helps achieve success in realizing that downstream value, meaning can you help accelerate the realization of downstream value by applying what you've learned from past programs, whether they'd be successes or failures. I mean do you want to have a lot of shots on goal, but you wanted to improve the accuracy of those shocks and does that inform how you toggle.
The upfront fees for maybe programs that you might not feel has as great of a downstream.
Value success, others, and how have you kind of modified that over time over the course of this year.
Great Yes so.
Short answer is yes, the codebase and makes it more feasible for us to succeed a downstream value share no. We don't try to be overly clever.
How to structure the deals and so let me unpack each of them. So we break our platform into two pieces the foundry physical infrastructure automation reduce costs of lab work with scale and then the code is just sort of what youre talking about.
The data and learnings from previous projects that.
Essentially save you work in the lab right like the perfect project as you come and you ask for something that I have so much learning about that I design, one cell and I hand, it to you right.
It is very fast it requires no costs and what you're really banking on as all my previous knowledge that is extremely high margin project for me you're thrilled about it you get results quickly. So absolutely. So that is the direction, we want to take things now in terms of how we price to customers.
Much more about what is of interest to the customer today right because my my Prime driver an unbroken record about this program counts right I want more programs on the platform I think it's what validates our entire business model of being a platform company during services across all these different markets that is shown in new customers in particular, signing up but really new programs on the platform.
Broadly and so so I don't I want to make that as easy as possible. So they have a certain customer who has got a lot of sensitivity to a royalty and less sensitivity to fees by right of its the reverse also fine right and I want to make sure. We have the margin of safety as a company to allow me to have that flexibility and then I want to report out our cash balance that's important to us we're careful with it.
I want to have that so that I can ultimately make it as easy as possible for customers to come on the platform does that makes sense I could imagine maybe some day, we really had better malls, but I'm not I'm not trying to handicap that risk I'm really focused on just getting customers on platform.
Got it thanks for the color I appreciate it.
Okay.
Thank you Matt.
Steve opens youre in line and not only in you'll be next.
Yes.
And yet.
Alright, we may have we may have lost Steve will come back to you Steve.
Matt can you hear me I'm sorry, yes.
Sorry about that.
So one follow up question on Matt's question about deal structuring.
That was entirely my thought.
When you back out.
Sorry about that I'm hearing you right now.
Yes.
Yes.
Can you hear me now yeah, Okay, just a follow up.
Question on Matt's question about about the deal structuring.
I know you guys different levers for you to pull but given.
Given the macro environment are you are you seeing or are you expecting a slowing of upfront R&D licensing or foundry fees.
Going forward and having them, having a deal structure would be more backend weighted and and did that impact. The Q3 foundry revenues or was that year over year decline, primarily due to the kronos milestone realized in third quarter 2021, yes.
The year over year decline is definitely the kronos milestone.
And then I'd say generally a lot of foundry fee ramping has to do with kind of getting program started in sort of less spend at the at the beginning is part of it.
Remind me the beginning of your question one more time.
<unk>.
The lever of being more backend weighted versus upfront weighted given the macro environment.
Yeah.
And so far it's not been like that it tends a lot more to do with like the type of company, we're dealing with more than anything right.
Bigger bigger pharma companies prefer to pay more upfront and less on the backend smaller startups that are more cost sensitive prefer the reverse alright, I think thats still probably the dominant thing we see rather than some bigger macro issue and I could even see it in a more flush environment that trend more or less staying the same.
So and then again like I said for now I'm, mostly focused on getting people on the platform, we end up with a decent mix I do want to bring in.
It's been like I said earlier like getting these kind of blue chip Biopharma is on the platform in the last year is helping US then sell into that category same goes for the start ups by the way right. If we don't bring in yes. It has been great and the sort of industrial biotech sector folks like <unk> and bulk coming on the platform that people.
People look at earlier companies look at their sort of leaders who've been around the block on the startup side that helps us bring other news earlier stage companies on so so so I think these folks I want to have a spread but it's more for kind of sales purposes.
Rather than some sort of macro driver.
Okay got it thanks for that color and one on zymogen now that that's closed and I'm not sure. If you finalize your strategy, but you know as I imaging had a rack automation offering that they were selling into third party labs is it going to be something ginkgo is going to continue to sell or is it divergent automation capabilities just can be integrated in.
The foundry.
So a lot will be integrated into the foundry, that's really the big strategic reason.
That we're excited about bringing that on I talked about.
During the call earlier that I think that getting the library in team and infrastructure are pointed at 2023, Ginkgo R&D service targets.
That's what I'm, most excited about particularly given how quickly this all happened.
That said they had a.
A good pipeline of folks that we're talking to and so I do think there's some interesting things there and we're going to be exploring that.
Coming quarters.
Okay got it and then last one for me on bio security, giving given the risk of other respiratory viruses coming back to this upcoming flu season.
Security or are you guys currently doing combination tests, such covered with RSV Covid was flu, a and b et cetera.
I don't know, what we've announced publicly.
Do you Annemarie.
I think we might have to get back to you.
Okay understood alright, thanks for the questions.
Okay Alright.
Alright, hopefully I'll I'll leave it at that time that O&M and opening your line.
To be able to take that.
But I would say that that is absolutely what we want to have happen right from our standpoint.
All of these things we're building out in that infrastructure like collections at airports.
Why isn't that a great place to look for Blue variance every year, we have to figure out what the new flu variant is going to be where do you think it shows up first right not in hospitals sales at the airports burst right. So if you want to add a few weeks to being able to predict <unk> collect where people are collecting international area. Like this is a.
Anyway, I'm a broker.
And our record on this but having visibility into infectious disease post COVID-19 globally. It feels like a no brainer.
We are collectively to expose and certainly in the U S. It would be crazy not to do it in my opinion, and I think youre seeing that with the executive order and things like that there's awareness of this so I am I am.
Paul that we will end up having that sort of monitoring way more pervasive than we did pre COVID-19.
Sorry, I didn't mean to interrupt.
Yeah.
Go ahead, Matt.
Yeah. Thanks. This is <unk> on for Matt Larry from William Blair just.
Just a quick one for me as you integrate the <unk> deal in particular, but also the Bay area deal can you give us any color on what your cash burn profile is going to look like going forward. I know you mentioned that the XI emerging capital structure and it's very different than it was a year ago, but any information you can give on that would be great.
Yeah, Mark do you want to comment.
Yes, yes so.
In Q4.
What youll see with the sort of combined effect of XI imaging.
Bayer.
Is just directionally speaking.
Around number of call it $50 million of additional Opex that includes DNA. So that's noncash obviously that also includes a bunch of transition costs like the G&A support for example that will eventually phase out during the course of 2023, and so that cash burn decreases that number does not include.
One time costs related to the acquisition and some of that was paid.
Closing some of that will be paid during the course of Q4 or even a little bit beyond that.
The cash that we inherit closing Brazilian region.
<unk> is able to very significantly mitigate all of this.
And on the Bayer side, the cash that we get from the revenue collaboration also very significantly mitigates the burn that we inherit.
Bayer side of things.
Such.
That's sort of the profile that you are looking at.
Great. Thank you.
Okay, Thanks, Alan and I think cleansing.
Microsoft can be hedging.
Yeah.
Great can you hear me.
Alright terrific.
So I do want to ask about the foundry services revenue I think you were operating at around 21% to $26 million per quarter.
This quarter came in a lot lower.
So how should we think about revenue per program and maybe walk through some of the drivers there and recognizing.
Recognizing that the macro certainly it's pretty tough I'm not sure we are.
We heard why the.
Services revenue was down in the quarter.
So yes, so mark let me clarify why are you, saying services revenue was down it was 25% which is consistent with what you've been seeing over the past few quarters.
<unk> revenue ex milestones.
Yes, which was approximately $25 million this quarter, because we didn't have any.
Material milestones land in this particular quarter.
Okay understood.
Your question is all good about revenue per program I can speak to that but Marc yes, yes, yes. The revenue. So yes. So the revenue per program. So the foundry services revenue. This quarter is approximately $25 million and that does not include any major milestone. So it is about in line with what we've seen in the prior quarters.
The revenue per program.
<unk> is down as you pointed out and that's largely because we added 15, new programs in the quarter, but we see almost no revenue contribution from those 15 programs in the current quarter. So it will take some time for those programs to ramp up so you're just seeing the math there work out in a way that the revenue per program looks lower and Thats just because.
It was our largest ever new program, Ed for a quarter and almost no top line contribution in the quarter from that.
So does that so yeah. So mark does that answer the core of your question. Yes, Yes. That's helpful. And then I know you've received this question a few times Tonight.
Questions about the uncertainties related to our life Sciences funding.
Can you just give us a sense for you.
Obviously, you do have some larger pharma companies in your portfolio as customers, but just give us a sense for some of the more emerging companies what youre seeing in terms of funding dynamics and how should that factor into how we think about new program wins in 2023.
Yes so.
Yeah, So what I would say there.
And I think we're again little bit broken record I think we're early penetration on that right now we don't have that all that many.
Small biopharma is on the platform today right. We have a few that we've talked about like for like that and others, but.
So I think in large part it's still more of a.
It does get you'll have relevant infrastructure for you.
Yes, we can do deals versus like a like a macro slowdown if we already had relationships with many small biopharma is right. It's just it's just an area that is one of the later markets. We're again going to move into so we have a little more installation there.
Just kind of the nature of it from my standpoint, so so so I don't again I.
Based on our sales pipeline I don't feel like a bit like a big threat from that shift for ginkgo in particular and that doesn't mean that that is not happening in the wider market and I do want to add one piece of color to just what Mark said about the program revenue.
Keep in mind with like like I said earlier with the code base a perfect deal forgetting that would be I do almost no work.
And I'll give you what you want right because I've learned enough that I'm actually saving lab work for a given project now you might then come to me and asked for a more sophisticated project, that's what I'm expecting as I get better at doing what was hard two years ago becomes easy you are suddenly going to ask me for something more valuable to you that's harder right in that that follows. The same trend you would have seen with like compute right.
When compute less expensive at all like this was a hard project, but then it gets cheaper and it's easy but people come up with new things to do with compute we expect kind of a similar drive for people to keep asking is difficult things, but easy programs.
Should actually start to take less effort and if we're in for the fees part of it means less piece right now ill get the downstream value share with higher probability Andrew the programs faster that's all make more on the downstream, but there'll be an interesting dynamic.
As we try to actually standardizing make programs simpler for customers, where it could drive.
Fee revenue down, but hopefully expected value of downstream value share up or certainly at least over a window of time drive it up. So we will we will aggressively try to make that happen. So I don't want to just highlight that that's an interesting.
And that makes the program the fees per program kind of.
Just to provide some extra thoughts.
Does that does that makes sense.
Does it does thank you and then just last one for me on Zymogen.
Obviously, you are looking to rationalize real estate.
And exploring strategic alternatives on the product side.
Other sort of key strategic initiatives and milestones should we think about that business.
Through the next 12 months and how can we think about that as a.
Maybe a transition year or do you think there are opportunities that are significant.
Yeah.
It's such a great fit.
And then.
If I were to call listening today I think the team there can plug right back and what we're trying to pull off at <unk> in 2023 for our targets like that.
It's just.
They think like we do.
Historically I can go as thought and its a cultural fit so actually I'm actually pretty bullish that that a lot of our contributions will come quite quick.
On the Xyrem inside there are again, there are they sort of longer cycle things, maybe we can have certain product assets, we'd like to partner or sell or things like that that's fine but.
My expectation is they help us hit our numbers program numbers.
And scaling targets so yes.
It's great it's really nice.
I'm thrilled to have that team coming on.
Great. That's it for me thank you.
And thank you all I don't see any other questions on the line.
So maybe Jason I don't know if you have any closing not just to wrap up the night and then I'll, let Doug.
Hey.
No I think.
Good.
Good coverage or anything I appreciate all the good questions and thanks, everyone for spending the time with us.
Okay.