Q1 2023 Telesis Bio Inc Earnings Call

Speaker 1: Welcome to the Telesys Bio's first quarter of the 2023 Earnings Conference call. At this time, all participants are on a listen-only mode. After the speakers presentations, there will be a question and answer session.

Speaker 1: To ask a question at that time, please press star 11 on your telephone. Please be advised today's call is being recorded. I would now like to turn the call over to Jen Carroll, telebiosis, vice president of investor relations. Please go ahead.

Speaker 1: Thank you. Good afternoon and thanks for joining us for Telus Aspio's first quarter 2023 earnings call. With me on the call today are Telus Aspio founder and chief executive officer, Todd Nelson, president and chief operating officer, Eric Esser and Deci Goodrich, senior vice president of corporate development.

Speaker 1: Our first quarter 2023 financial results press release is now available on the investors section of our website. Before we begin, I would like to inform you that certain statements we make during the call will be forward-looking statements that involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied.

Speaker 1: Any percentage changes we discuss will be on a year-over-year basis unless otherwise noted. And with that, I will hand the call over to our CEO , Todd Nelson, and we can get started.

Speaker 2: Thanks, Jen. Welcome, everyone. Thank you for joining today's call. We're very pleased with our company's execution this quarter, and we thank our team for their continued focus on smart growth. As you will see in this quarter's results, we continue to grow both our revenue and install base. We delivered three BioXP kits to the market under the new Select brand.

Speaker 2: and kept a steady hand on our operating expenses. Throughout the remainder of the year, we will continue to make strategic and measured investments to drive long-term, sustainable growth by expanding our BioXP customer base and our customers' ability to more broadly use our products and services in their research and development efforts.

Speaker 2: We will also stay laser focused on watching operating expenses. We move towards a time where we can become a profitable company.

Speaker 2: Also, note during the quarter, we successfully moved into our new headquarters. It's exciting to have so much of our team together in one location. In our new headquarters, we have a space and in-house talent to do many of the things that we plan to do related to improvements in our supply chain, quality, and our gross margins, which we'll cover in more detail toward the end of today's call.

Speaker 2: sensor company began. Our vision has been to provide researchers with the tools to build biology and their laboratory without any constraints. Our products unique ability to rapidly create novel synthetic biology products such as long pieces of DNA, mRNA, and eventually proteins at the bench top allows us to continue to address.

Speaker 2: large unmet needs in our targeted markets and workflows. As a reminder, the Q1 BioXP select kit launches were a significant strategic achievement that add to the value proposition offered by our DeNovo gene synthesis kits because at its first time that scientists can use their own DNA as a starting point in experiments on our BioXP systems.

Speaker 2: By doing so, we now have the ability to offer our customers a complete solution for many DNA and RNA-CIN bioapplications.

Speaker 2: We believe these MakeDistock Kids will allow our current and future customers to use their biogas-p systems more frequently, thus driving up recurring revenue growth rates.

Speaker 2: These kits should help us to unlock the remainder of the SIN bio-tam of approximately $2.6 billion, which is estimated to be growing at a rate of 27%.

Speaker 2: Now, moving on to our first quarter results. Our detailed financial results to the first quarter included in today's press release. Total revenue for the first quarter was $6.3 million, representing growth 12% over last year's same period. Notably, our core biogs p-revenue, which consists of instruments and kits through a 28.5

Speaker 2: year, reflecting positive midshift in revenue from recently launched products, including the BioXP-9600 system, as well as new kits for mRNA long fragment builds and cell-free DNA scale-up.

Speaker 2: Operating expenses were approximately 14.5 million for the first quarter of 2023 compared to 15.6 million for the same period in the prior year. This decrease is primarily the result of prudent cost-cutting decisions made about a year ago in the second quarter.

Speaker 2: to focus the team on our most profitable and near-term opportunities. Net loss was $11.1 million for the first quarter compared to $13.2 million in the same period the prior year. Net loss per share was $0.37 for the first quarter of 2023 compared to $0.45 cents for the corresponding prior period.

Speaker 2: Cash and cash equivalents were 32.2 million as of March 31, 2023.

Speaker 2: On our earnings column, March, we shared our expectation that revenue will be back in weighted in the second half of the year, reflecting the timing of the launch of multiple new bio-expecits in the continued commercial ramp of our recently launched 96 hundred system.

Speaker 2: Against that backdrop, I'd like to acknowledge the broader economic impact we're seeing within our space.

Speaker 2: I'd like to note that we have seen some scale back in demand from customers who are reducing spend to conserve capital and longer capital purchasing cycles due to macroeconomic caution. We expect that to continue in the first half of the year, but anticipate improvement in the second half as biotech and form of budgets are released. We remain confident in the vitality of our end markets.

Speaker 2: and our core franchise pipeline remains healthy. Moving on to our product pipeline update. Our product launches are on track. During Q1, we launched three Bio-XT kits under our new Select brand.

Speaker 2: These new products not only allow us to offer a complete symbiot customer solution for DNA and mRNA applications, it has the advantage of allowing researchers to the first time to start with their own DNA to perform automated downstream workflows.

Speaker 2: In February , we launched the BioXP select mRNA synthesis kit, which allows customers to synthesize mRNA in just hours using DNA that they bring to the system. This new kit will enable greater flexibility for our customers, empowering them to streamline and accelerate discovery workflows in mRNA therapeutics, vaccines, and precision medicine.

Speaker 2: With this new kit, customers can automate and accelerate their research and ensure high quality and consistency and generate transaction-ready mRNA with the push of a button. And in March, we delivered the BioXP Select DNA Cloning and Amplification Kit and the BioXP Select Plasma Damification Kit, which enable our customers to start experiments with their own Plasma.

Speaker 2: or linear DNA fragments and perform automated cell-free DNA amplification and scale up. We believe this can accelerate discovery, particularly in antibody and protein engineering, as well as within cellular immunotherapy workflows.

Speaker 2: As a reminder, we anticipate launching several additional biogsp kits and two new biogsp systems before the end of the year. The first system we anticipate launching is focused on next-gen sequencing library prep, which gives us access to an additional 10 of $1.6 billion growing 25%.

Speaker 2: This launch remains on track for Q3. The second system uses our proprietary solar and thematic DNA synthesis reagents, and we will target our early efforts within the CRISPR market, enabling for the first time, same day turnaround for these important reagents. This too is a new market for us and represents a new opportunity of greater than $1.5 billion growing at 25%.

Speaker 2: We remain enthusiastic about the future growth, which will be driven in part by our continued focus on expanding the portfolio of applications and workflows enabled on our bi-OXD system.

Speaker 2: Moving on to gross margin. During the quarter, our team achieved important milestones which set us up to successfully expand gross margin throughout the year. As a reminder, we have a three-point plan for achieving these targets. Number one, there will be contributions from a favorable mix of higher margin products like the 9600 and the select kits. Number two, we have insourcing initiatives related to raw materials manufacturing. And number three, we will be integrating our instrument manufacturing for both the 3250 and 9600 instruments.

Speaker 2: and began commercial delivery of biocs to be kids incorporating these all dose.

Speaker 2: We are confident that we remain on a path to internally produce efficient all of those volumes by the end of 2023 to substantially replace our existing supply from outside vendors while also improving quality and cost of goods. We are also on track to internalize the production of both the 3259600 BiOLXP instruments. We anticipate shipping our first internally manufactured BiOLXP system in the third quarter of this year.

Speaker 2: goals, launching new products, improving our profit margins, controlling our costs, and furthering new and existing partnerships. And with that, I will ask the operator to open the call for questions. Thank you.

Speaker 2: Thank you. Our first question comes from a line of Brandon Kuljart of Jeffries, Yelana Thopen. Thanks. This was met on for Brandon Todd. Be curious to get a bit more caller on how one Q tracked first in turn expectations. I think you noted customers taking a bit longer on purchase orders, more sluggish budget releases and something that will improve in the second half. What gives you confidence and ability that things get better in the second half there and then just to clarify, is the over $45 million target from last quarter still the goal for this year? Thanks.

Speaker 2: Yeah, man, thanks for the question. Which regards to the first part of the question, you know, how can I repeal about the first quarter? We, by way of review, had provided annual guidance. We had mentioned that the year would be back in weighted and, you know, likely that the back in weighting would be back in weighted towards the fourth quarter. So that's...

Speaker 2: currently getting people on board and ready to go. We're continuing with the ramp and the launch and the building of the funnel for the 9600. So I feel confident at this point that there is no need for us to change guidance, and we won't be doing that. We will, I think, keep a close watch on the macroeconomic environment, the trends therein.

Speaker 2: Yeah, we haven't typically split it out. So probably not likely to do it here, but I think that what we said is that, you know, we'll generally provide annual guidance on those things. So I think it's possible to kind of back you way into what those numbers might be, but I don't think we said we're going to ever do that. And we haven't provided the mix. The reason for that is that the 9600 just launched in the fourth quarter. And as the funnel builds, it can be a little bit lumpy. So it's very difficult for us to have the requisite amount of visibility, provide specific guidance on products between the two as they ramp up. Okay, thanks. And last one for me sounds like you guys made some progress on the internal made.

Speaker 2: make from outside vendors. That will have its major impact in 2024. And the same thing for the instruments, we are on track to launch those in the third order. And again, the full benefit of that will be in 2024. I'll hand it over to Eric Essert to actually answer the question.

Speaker 2: on the accretion to gross margin. Yeah, thanks, Todd. Hi, Matt. So we would anticipate, I think we said this last time as well, several hundred basis points of improvement to gross margin as a result of both of those insourcing initiatives. And again, we would start to see that in 2024. So that's our estimate right now.

Speaker 2: And just as a reminder, Matt, I think we got it to 55 to 59% for blended gross margins in 2023. So Eric's comment should accrete to that number.

Speaker 1: Super. Thank you. Thank you. One moment, please. Our next question comes from the line of Chad Wiatrowski of Cowen. Your line is open.

Speaker 3: Hey guys, Chad Whitehouse again for Steve Ma.

Speaker 3: I appreciate the ongoing headwinds. I think that's been expected from immersion biotech and small pharma. But do you have any comments on what you're seeing from large pharma in terms of cap excellence?

Speaker 2: So I think what we, yeah, HAB, it's Todd. Thank you for the question. You know, our comment on the macroeconomic.

Speaker 2: observations for us. I think as everyone knows, we've got significant exposure to pharma biotech as a customer base. It's larger than 50% of our current customer base and within that we have significant exposure to small biotech companies.

Speaker 2: So we're watching that very closely. Your question was around large pharma, and I can say that with specificity, we haven't seen a tremendous reduction in large pharma as far as the sequencing of discovery orders and things like that. That being said, I think is everyone.

Speaker 3: And there's another one for me on the kits and the pipeline of products being launched this year. How do you manage, you reference building out the commercial team. But how do you manage our D-SPAN and sales and marketing spend in the midst of getting all these pipeline products out?

Speaker 2: Yeah, Chad, a good question. And I think it's an appropriate one given where we're at and we're trying to get profitable and what not. So I'll take the first part of that. I'll hand it over to Eric because he'll have some details. So, you know, at the highest level what we've done is is prudently look at what we're building. Now it may sound like a lot, right? They would say we're going to launch 11 kids and we've launched three.

Speaker 2: But what I want to remind investors of is this is a very scalable platform from an operating perspective inside the organization. So we're effectively doing technology integration and not the NOVO development for many of these kids. And because we have two systems that will run the same kids, it's easier to launch more kids across the system. So it might sound like a lot.

Speaker 2: that were confident that we can get that done. And I think the evidence of that is that we're on track so far this year and we launched three of those kits. So it's a scalable operation, and I'll hand it over to Eric to maybe go through some of the details. Yeah, thanks Todd, hi Chad. I think as you know, we made some adjustments last year to our progress we were focused.

Speaker 2: work done that's in front of us for the year. I think we guided it at a high level that obviously we're being prudent with our spend and with our total OPEX and that remains true. And so we're not ramping resources and we don't need to add additional development resources in order to do the work that's in front of us for this year. So I think we got what we need. Appreciate the extra color. I'm looking forward to the rest of the year. Thanks, guys.

Speaker 4: Thanks, chat.

Speaker 5: Thank you. One moment, please. Our next question comes from the line of Harrison Schrage. Of key, your line is open.

Speaker 2: Yeah, Harrison, happy to help you out there. So first on Pfizer, thanks for asking. That collaboration is a large one for this company, as you know, and in buy-a-bucks terms, what we've talked about before is it being over $500 million in potential value for the company over the next few years. The hard dollars associated with that I think we've discussed previously, but just to review that, there was an $8 million upfront fee that's been amortized over the course of the last couple of years, and the milestones, specifically what you asked about, we are on track there and anticipate meeting an additional milestone or two this year.

Speaker 2: And so we met one. I'll just remind you of that in the fourth quarter of 2022. And I think we're on track to we are on track. That's my knowledge right now to meet the other milestone that's right in front of it. So those are all on track.

Speaker 2: Yeah, I don't, so you can kind of back your way into that. And I know it, so what I would say is that of the 28.5% growth, it was greater than 50% of that. So we saw greater than 50% growth in the bi-octophe kits year on year. Okay, that's really helpful. And then the last one, you mentioned the 9600 solar platform launch. I believe you previously mentioned that was targeted for third quarter, is that still on track for the third quarter? So Harrison, that's been, that's on track for the fourth quarter and we communicated that out.