Q3 2022 Codex DNA Inc Earnings Call
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Yeah.
Good day, and thank you for standing by.
Welcome to the Q3 2022 telesis Bio earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is right.
Please be advised that today's conference is being recorded I would now like to turn the call over to your speaker today CEO Todd Nelson. Please go ahead.
Thank you good afternoon, and thanks for joining us for <unk> third.
Third quarter 2020 earnings call.
With me on the call today are Chief operating Officer, Eric answer, then Gibson, cofounder and CTO and our VP finance.
Our third quarter press release is available now on the investors section of the website.
Before we begin I'd like to inform you that certain statements we make certain forward looking statements involve known and unknown.
Certainties.
Sure.
Right.
These factors include those referenced in the Safe Harbor statement included in our earnings release.
Sarah it's.
This conference call contains time sensitive information and is accurate only as of July .
On November eight 2022, finally, eight percentage changes, we discussed will be on a year over year basis, unless otherwise noted that we can get started.
<unk> mission is to inspire and empower scientific breakthroughs across life Sciences, and translational research applications.
Our automated on demand multi omics biology solutions enables scientists to streamline and standardize both building and testing a DNA and MRV, allowing us to address large unmet needs in our target markets.
Customers and collaborators include Premier academic research institutions rapidly growing biotech companies at all.
25, Biopharma companies, our systems are utilized by academic and industry scientists worldwide various discovery activities ranging from the discovery of novel infectious disease vaccines.
Developing precision immunotherapies for cancer and antibody.
To the creation of engineered meat substitute sustainable.
Agricultural products.
Our biopsy automation solutions allows scientists to synthesize assembled DNA mrna.
Most of the button.
Allowing our customers to a critical products to the market an unprecedented amount of time.
We believe that our strong financial momentum will support long term initiatives.
And now I'll turn to a discussion.
Turning to discussions, we recently reported financial results and corporate update.
I'd like to review highlights from the third quarter and for the first nine months of 2022.
In the third quarter of 2022, we grew total revenue by nearly 140% compared to the prior period, excluding contributions from Eaton Bioscience acquired in Q4 of last year overall growth.
Third quarter was 83%.
For the nine months period, ending September 32022, total growth, excluding <unk> was 69%.
We sold 13 biopsy units during the third quarter, bringing the number of units sold during the first nine months of 2022 to 47 years.
Instrument revenue was up 28% and 37% respectively for the third quarter and nine month periods ending September 30.
We also experienced a record quarter for biopsy kit sales.
Which has continued its strong growth trajectory posting 69% growth over the prior period was 58% for the first nine months of the year compared to the same.
Period in 2021, and we're very pleased with the initial market uptake of our recently launched by <unk> 600.
Collaborations royalties and other revenue grew 224% for the third fiscal quarter and a 170%.
First nine months of the year respectively.
Gross margin improved significantly during the third quarter from 41, 7% in Q3 2021 to 54, 8% with Q3 of 2022 for the first nine months of 2022 gross margin improved from 42, 9% to 59%.
Margin expansion for the third quarter as compared to the same period, a year ago was largely driven by positive mix shift to higher margin products, including the biopsy might be 600 mrna at a lower cost of DNA.
Sure.
Our vision has never felt more achievable, we made significant progress developing new innovative applications for existing biopsy system that drives sales of on market products and we are developing paradigm shifting fusion technology.
These innovations have the potential to fundamentally transform our industry and at the same time physician tells us buyers search significantly larger and broader addressable markets in.
Inherent in this business our path towards improving our gross and operating margin, becoming a profitable company in the second half of 2024 and delivering value to our stakeholders.
Over to Brent to review, our financials and updated 2000 towards the two financial guidance.
Thank you Todd detailed financial results for the third quarter were included in today's press release, and my remarks today I'm going to walk through our income statement touch on a few key financial metrics.
Finish with our updated financial guidance for 2022, Telesis buyout is well capitalized with cash and short term investments of $49 9 million as of September 32022.
Revenue was $6 7 million for the third quarter, 2022, which was 140% increase in total revenue from $2 8 million for the same period in the prior year.
Strong growth was driven by a record quarter for bio XP kit revenue totaling approximately 884000 up 69% year over year and solid contributions from Eaton sequencing services and all ago production revenue, which totaled $1 6 million.
Royalties and other revenue also grew due to revenue related to the Pfizer collaboration agreement organic growth for the core business net of <unk> contribution was 83% for the first nine months period the growth for the first of all with 83% and for the first nine months period the growth was 69%.
Gross margin for the third quarter was 54, 8% compared to 41, 7% for the same period in the prior year.
Increase of 13, 1% or 1310 basis points was primarily driven by collaboration and licensing revenue improved product margins, resulting from price increases and increasing contributions from higher margin products, such as mrna and the launch of the <unk> hundred 9600 for the first nine months of 2022.
Gross margins were 59% compared to 42, 9% for the prior year period.
Operating.
Expenses were $14 9 million for the third quarter compared to $10 6 million for the same period in the prior year.
This increase was driven by head count expansion, 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 operating expenses for the first nine months of 2022 totaled $47 8 million compared to $26 7 million for the same period in the prior year.
Net loss was $12 3 million or <unk> 42 per share and $40 3 million or $1 37 per share for the third quarter and first nine months of 2022, respectively.
This compares to a net loss of $9 8 million or <unk> 34 per share and $26 5 million or $1 83 per share in the same period in the prior year respectively.
Now I'd like to briefly cover our updated financial guidance for 2020 to do.
Due to our continued strong results in 2022, we are again raising full year revenue guidance accordingly.
As a reminder, during our Q2 earnings call, we increased our guidance revenue to $22 million to $24 million for 2022 based on our third quarter results. We are further increasing our revenue guidance to 23 million to $25 million.
And with that I will now turn the call back over to Todd.
Thanks, Brent catalysis is executing against the plan that will allow us to achieve profitability. During 2024, let me take a few moments now to walk you through the high level landscape for that plan on.
On revenue growth.
<unk>.
I'd remind investors that we've grown the business to four year compound annual growth rate of 48% and a robust series of new biopsy product launches that should generate significant continued revenue growth in the next couple of years as an example.
I'll answer the biopsy 9600 system brings with it significant revenue potential stemming from higher instrument asps higher.
Higher buyers to keep utilization rates and an ability to extend into adjacent market.
Additionally, we plan to launch the first in a series of biopsy DTC benchmark instruments that will allow for the same day turnaround.
Christopher Guide Rnas and all of those four gene synthesis on a single integrated device.
Moreover, in the first quarter of 2023, and we plan to launch a new series of modular kit for rapid cell free DNA, scaleup and mrna synthesis, where customers can use their own DNA and the starting point is new product offering will allow customers to use the system at their convenience and provided they have on hand or make to stock.
Modular kit, taking emphasis in every day and multiple times a week. The results of this product launches that we will be able to rapidly go after the largest part of the customer base with requires full desires to start with your own DNA. The advantage to Telus is filed we believe we will see increased velocity and placements with inventory increased.
Utilization of coal and wood chips for de Novo gene synthesis, and strong potential adoption of the modular chip that at higher gross margins.
And we remain on track to launch internal all of the synthesis capability that will allow us to offset a portion of our raw materials purchases. All told we believe gross margin in the next 18 to 24 months should trend upwards to between high <unk> to low to mid <unk>.
On cash.
Currently we estimate that by the end of the year, we will have a cash position of approximately $40 million.
Additional debt capacity and over the next 12 to 18 month period, but potential to earn through the achievement of technical and licensing milestones and additional 31.
In conclusion, let me say that we're pleased with our overall third quarter and first nine months results and that we remain encouraged by continued strong commercial execution progress.
Pipeline, we are focused on executing against our near term commercial goals launching new products further in new and existing partnerships growing market share improving profit margins and decreasing costs, which.
Continue to invest in talent technology and processes to drive long term sustainable growth and a path toward profitability with that I will ask the operator to open the call for questions. Thank you.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press Star One line on your telephone and wait for your name to be announced please standby, while we compile the Q&A roster.
Okay. Our first call comes from the line of.
Brandon Korea from Jefferies.
Hey, Brandon.
Hey, Thanks, good afternoon guys.
Hi.
Todd.
Elaborate a little bit more on just kind of how youre seeing the order book develop for the new 9600 system, maybe the mix of new and existing users and then how many of the <unk> systems that you placed in the third quarter were comprised of the new 9600 units.
Yeah, Brandon Thanks for the question will probably bounce around the room, a little bit here on the answer what I would say to start is that we're very pleased with the initial market uptake to 9600, it seems to fit very well with customers. We did a lot of DLC on that so for higher throughput customers.
Seems to resonate.
Very well.
In the third quarter.
We shipped 13 instruments, we had a bit of a mix shift as we launched early in the 9600 and that accounts for about three years to four systems.
So we're really happy with that I would say looking forward into the fourth quarter.
The book of business builds for the instruments I think that we're very comfortable.
The 9600 is going to continue to ramp.
We're happy with that and then I'll hand, it over to Eric to answer the rest of the course.
Yes, I think the other part of the question was how many of the orders that we have for 96 hundreds on the books right now come from or have come from existing customers versus new customers and I think thats close to a 50 50 ratio I don't have the exact data in front of me right now, it's a little bit less than 60%.
Visiting customers.
The rescue customers.
Yes, so Brandon we're happy with that because they think.
It's a new system and so obviously you would think well.
Lot of it would be upgrades I think we're really happy with the exposure and adoption within your customer segment, a lot of customers I think you've been waiting.
For higher throughput solution, we've now brought that to the market and looking forward into 2023.
These forward looking but I think we're really excited and seller customers about the ability to open up that particular system to open modular chips.
That answer your question.
Yes, yes, that's helpful.
In terms of the revenue guide.
As you see the increase at the midpoint of about $1 billion is still a pilot fairly wide range for the fourth quarter.
Any directional.
All are on that and to the degree to which your fourth quarter estimates changed at all or is this just.
And the update FERC that year to date.
Performance.
I think.
Brandon.
I think the answer to that is you're right.
We increased the guidance.
So 24 is in the midpoint of our new guidance.
We remain comfortable with kind of that midpoint guidance number.
For revenue our estimates for Q.
Q4 internally Havent changed I think we're pleased with commercial execution provided we can operationally ship against the purchase orders that we received for the 96, hundreds I think where we're comfortable with our estimates.
I don't.
I don't I don't want to tell you I think we'll be at the high end of the range I think we're comfortable with the mid point.
Okay, and then the gross margins improved quite a bit in the third quarter you talked about over the next I think 12 months, Todd maybe gross margins being in that mid <unk>.
$50 $60 range, you're kind of touching.
The ballpark already here in the third quarter.
Should we expect that to step down for some reason in the fourth and then.
Maybe help us think about that.
The magnitude of benefit that you'll get as you begin to move some of Eaton's Aldo production for your own in house raw material.
The magnitude of potential tailwind from that transition.
Yeah, I think Eric and I will probably go back and forth.
On this one.
Yes.
What I would say on the gross margin front you can have in here too, but I think on the gross margin for the third quarter, we had you'll see in our financials, we had a little more cash flow.
In collaborations, which I think helped.
The margin accretion. We also sold 9600 for the first time, which come with higher margins and Asps.
And our product mix is shifting from.
While it's growing very well to get some assembly kits for de Novo gene synthesis.
Our product mix is shifting towards higher margin NPI for mrna long fragment builds Andrew.
Rapid and products. So the combination of the ensuing business with 96, hundreds more proprietary kits coming out and the accretion to gross margin as a result of I think it was an acceleration.
The visor.
Okay.
Yes, correct.
Going forward brand and I would say our goal of course and it has been since.
No.
We started to get the product margins into that range that we discussed and we think we've got a realistic plan to get there to discuss the magnitude.
The basically margin recapture.
Hand, it over to Eric.
Don't think we have prepared comment on the number of basis points of accretion, but I think in general it will be pretty significant because it's our largest single raw material.
Acquisition.
Yes, that's right.
We are in the process of turning on that capability.
Is happening this quarter it will scale as we head into next year and through the year, So certainly a tailwind.
It will be significant for us relative to the overall margin.
And its one of I think a number of the factors.
That will help us in the gross margin area next year.
End of the year, along with the other items that Todd.
Todd mentioned, so we're heavily focused on gross margin.
I think the trend will continue in Q4 and into next year and we will continue to see expansion in gross margin and again, just a bit of a bump in the third quarter because of.
The amortization of a little bit more cash than the Pfizer milestone.
Okay. That's helpful and lastly, just.
Update on supply chain status right now you're encountering any.
<unk> shortages.
Ken or anything that.
Mike.
Yes.
Sure.
Hurdle as far as kind of shifting again to 9600 order book near term many.
If you are seeing on the supply chain front.
To call out, yes, I'll hand that over there, yes, Brandon no. We don't have any significant issues right now on supply chain I think.
Unbalanced broadly speaking things.
That's a bit in that regard we don't have <unk>.
<unk> is about the supply chain around the 9600 will be able to.
Fill the orders that we get.
Okay. Thank you.
Thanks, Brian .
Our next question comes from the line of Paul.
Paul Knight of Keybanc. Please go ahead.
The Harrison.
Hey, guys. This is on for Paul.
I was wondering given the 9600 placements in the quarter.
Were those the placements that you were expecting for the full year.
And I guess, what I'm trying to get at is do you expect to see some placements in the fourth quarter as well or are you going to be pulling.
30 to 50 orders from <unk> into <unk>.
No I think what we had said.
Is that we anticipated so the launch was early with scheduled for fourth quarter, we launched it.
In September and we got three or four.
Instruments shipped out in a short period of time.
During the third quarter.
You can expect that we will be receiving and shipping.
Against.
Orders for the 90, 604th quarter I believe in our last call.
We said that we anticipated we would sell during the course of the year a follow on that launch in the mid to high single digit numbers biopsy systems, we remain comfortable with that.
96.
Okay got it and then I think you've mentioned.
Pfizer milestones equaling up to about $30 million in FY 'twenty three I was wondering if you could kind of get an update on your progress there and what's possible.
Possible.
Are likely in FY 'twenty.
Yes, let me let me.
Gift Center and most recently around the time we have.
Got access to about $30 million in potential milestones technical and otherwise over the next 12 to 18 months spin.
Specifically for the 2023 period, where working near achieved three or four more technical milestones that.
That program continues to impress we're very excited about that we remain I think first to market with the large validated.
Effort around and genetic DNA synthesis, we're super pleased with that I can hand, it opens at the end.
So if he can he can tell you a little bit about enthusiasm around that program, but.
Three or four milestones in 2023, and I think that totals around.
Temporary loss.
Yes. This is Dan so exactly a top side, we continue to make tremendous progress around our Solon medic DNA synthesis solution.
Pat.
A lot of success building the target genes.
Advisor and we just continue to improve our.
Reliability and fidelity and how quickly it takes to go from a sequence to those genes using the process, but the program is going.
Extremely well.
Great. Thank you guys.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Thank you. Thank you.
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