Berkeley Lights, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Berkeley Light second quarter 2021 earnings call. At this time, all participants are on 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 need to press star 1 on your telephone. If you require any further assistance, please press star then 0. I would now like to turn the call over to your host, Carrie Mendeville, Investor Relations. You may begin.

Thank you. Earlier today, Berkeley Light released financial results for the quarter ended June 30, 2021. If you have not received this news release, or if you'd like to be added to the company's distribution list, please send an email to ir at berkeleylights.com. Joining me today from Berkeley Lights are Eric Hobbs, Chief Executive Officer, and Kurt Wood, Chief Financial Officer. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties, that could cause actual results or events to materially differ from those anticipated. For more information, please refer to the risks, uncertainties, and other factors discussed in our SEC filings. Except as required by law, Berkeley Lights disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast August 11th, 2021. With that, I'd like to turn the call over to Eric.

Thanks, Carrie, and thank you, everyone, for joining us this morning. Today, we are going to provide an update on our progress against our stated strategic objectives, as well as an overview of our second quarter 2021 financial results. Berkeley Lights continued to make important progress during the second quarter, and I'm very encouraged by the increasing demand and enthusiasm for our platforms. Our team members across the globe continue to execute on our strategic initiatives, and we are better positioned than ever to find the biology that cures disease. Starting with our second quarter results, we generated $19.3 million in revenue, bringing our year-to-date revenue to $38 million, a 56% increase over the first half of 2020. We successfully launched our new tech access subscription offering tailored to the specific capacity needs of antibody discovery and cell line development customers. We released Opto Plasma B Discovery 4.0 on schedule. Customers are now finding 10 times the hits at a tenth of the lead time and a tenth of the cost per validated sequence. This quarter, we also officially announced our partnership with Thermo Fisher Scientific in AAV, which successfully progressed into phase two of the project. And this morning, we announced a partnership with Bayer for high throughput functional screening to significantly accelerate their pipeline for agricultural product discovery and development. This partnership, along with the Thermo Fisher partnership, highlights the progress on our business development efforts. Collectively, these two non-exclusive partnerships represent a revenue opportunity of more than $30 million with the potential for additional long-term revenue related to the future milestones and commercialization of products. At Berkeley Lights, our mission is to find the biology that cures disease. This starts with therapeutics for people, but our impact goes way beyond that. Our technology can help find cures for diseases in plants, animals, and also provides a scalable and sustainable path for life on this planet. To achieve this, we are providing the most advanced highest throughput, functional characterization platform on the market today as a means to find the best biology. To understand the full potential of our platform, it is helpful to place Berkeley Lights in the context of the three main pillars that are the key to unlocking the full potential of biology. The first pillar is sequencing, which enables us to read biology. Sequencing gives us the fundamental code of life. Today, sequencing is a huge industry. And although the ability to read sequences is extremely important, sequences without correlated function have limited value. The next pillar is gene editing, which allows us to write to biology. Here we attempt to reprogram biology by changing the genes in the cell and modifying its code. Gene editing is another massive industry. And today there is the potential to edit vast numbers of cells. But without understanding which edit creates the needed product, there is also little value here. And the third and final pillar is functional characterization. This is where sequences and edits come to life and gain true meaning. Today, functional characterization is fragmented, highly manual, and lacks standardization. At the same time, there is an ever-growing mountain of sequence data and a near-infinite rate at which gene-edited cells can be made. This has created an enormous backlog of required functional characterization. The complexity in that backlog is growing exponentially, requiring higher resolution and polyfunctional readouts. Current manual processes simply won't scale. Berkeley Lab's goal is to consolidate and standardize functional characterization. We are bringing the first biological supercomputing platform to market, providing automated high-throughput, high-resolution screening, access to rare precious samples, polyfunctional resolution on live biology, the export of an optimal live biology, and digitization of multi-parametric data. To translate the multi-billion dollar opportunity that functional characterization represents, Berkeley Lights must run a high-volume platform business, establish high-value service businesses leveraging Berkeley Lights BioFoundry, and generate revenue from Berkeley Lights-owned biological assets. The Bayer deal is another step into offering high throughput functional screening services at Berkeley Lights. This truly is digital cell biology, where we receive DNA sequences from our customers, express the proteins encoded in the DNA, and screen each DNA sequence in a massively parallel fashion for the desired function. The service business gives Berkeley Lights full access to data, which is critical to our strategy. Digitization of multi-parametric data at a large scale linking function to sequence, is critical to enabling the future of in silico design of biology. The service business is a prerequisite towards our ability to create Berkeley Light's own biological assets. It is here where Berkeley Light's will run its own targets and partners targets with the goal to participate in downstream revenues such as milestones and or royalties. The Thermo Fisher partnership is yet another example of deeper value capture through our technology. The successful completion of this partnership will transform how viral vectors are developed and manufactured at industrial scale, allowing gene therapies to move from orphan diseases to mainstream therapies. As previously announced, the viral vector workflows developed in this partnership will only be available through a subscription model. I would like to spend a little time to talk about high throughput functional screening on the Berkulites platform. As sequencing and gene editing capabilities mature, there is an increasingly large library of unvalidated sequences, which require high-resolution functional readouts at scale. Typically, functional readouts are performed scanning many live cell candidates against one common target. We have developed a nanopen-based cell-free expression solution, which allows direct expression of DNA into proteins against thousands of targets simultaneously for functional readouts. This provides one to two orders of magnitude improvement in speed and throughput while significantly reducing cost when compared to currently available methods. We will offer our high-throughput functional screening services only via our BioFoundry. We believe access to these services will accelerate the design-build test cycles for our customers, further reducing the time to find biology that cures disease. We expect that as cell-free expression continues to evolve, it will find many applications in many markets. With that, I will now turn the call over to Kurt for more detail on our financials.

Kurt? Thanks, Eric. Revenue for the three months ended June 30th, 2021 increased 82% year over year to $19.3 million with $13 million coming from product revenue and $6.3 million from service revenue. We received orders for three tech access subscriptions within the quarter. Under the tech access model, we do not recognize the revenue upfront and instead we'll recognize the subscription revenue over the subscription period, meaning a trade-off of near-term revenue for more rapid platform adoption and the ability to build backlog and predictable recurring revenue. Our tech access subscription offering is designed to increase our served available market opportunity and drive incremental platform placements. Many smaller biotech customers run lower campaign volumes and want to run their own biology. Our tech access subscription provides a financially attractive path for these customers to run antibody discovery and or CLD workflows on the BLI platform. It's a renewing one-year commitment inclusive of the platform, software, consumables, service, and support, which provides a compelling ROI with a lower upfront cash commitment for the customer. We added seven platforms to our installed base during the second quarter to end with 92 platforms in the field. Further breaking down Q2, and looking at our three revenue streams. Direct platform sales totaled $11.4 million in the second quarter of 2021, increasing 51% over the prior year period. Recurring revenues totaled $3.9 million in the second quarter of 2021, up 35% from $2.9 million versus the second quarter of 2020. Our year-to-date pull-through per instrument remains on track with our historical experience. Revenue from joint development agreements and partnerships was $3.9 million in the second quarter of 2021, compared to $100,000 in the second quarter of 2020, and up 26% sequentially versus Q1. The sequential increase was the result of a full quarter of activity from our viral vector partnership with Thermo Fisher Scientific. With the recent signing of the Bayer partnership, revenue from joint development agreements and partnerships will increase as a percent of total revenues in the second half of 2021. Gross profit for the second quarter of 2021 was $12.7 million compared to $7 million in the prior year. Gross margin for the second quarter of 2021 was 66%, in line with the prior year period. As we have discussed in previous calls, our gross margin is negatively impacted by the cumulative impact of the Ginkgo workflow buy-downs. Excluding the Ginkgo impact, gross margins for the second quarter would have been approximately 72%, in line with our long-term target of approximately 70%. Total operating expenses for the second quarter of 2021 were $30.6 million, inclusive of $5.6 million of stock-based compensation, compared to $19.1 million in the second quarter of 2020. The increase of $11.5 million was driven by an increase in stock-based compensation, G&A-related expenses as we transitioned to become a public company, and continued investment in our R&D and sales and marketing teams. Net loss for Q2 was $18.2 million compared to a loss of $12.4 million for the second quarter of 2020. All net loss numbers are inclusive of stock-based compensation. Regarding capital and liquidity, during the second quarter, we completed a refinancing of our $20 million debt facility. Under the terms of the new agreement, we extended the non-amortization period by up to 36 months, with final maturity extended to 2025. The interest rate was lowered by approximately 250 basis points to 4.17%. In addition, we added a revolving credit facility that provides access to $10 million of additional liquidity. As of June 30th, we had a cash balance of $215.1 million and available liquidity of $225.1 million, inclusive of the undrawn revolver. Turning to our outlook for 2021, we continue to expect revenue to be in the range of $90 to $100 million, representing growth between 40 and 56% over the prior year. As contemplated in this guidance range, we do expect a meaningful uptick in Q4 driven by normal seasonality as well as increases from our growing business development activity. With that, we will now open it up to questions. Operator?

Ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touch-tone telephone. If your question has been answered and you wish to move yourself from the queue, please press the pound key. Our first question comes from Doug Shankle with Count.

Good morning, and thank you for taking my questions. My first is on the subscription model. At a high but important level, I'm just wondering if the subscription model program is impacting the funnel the way you anticipated, and maybe building off of that, what is the typical profile of the subscription model customer? I ask because part of the intent here is not just to lower barriers to entry here, but sort of by extension to potentially move you into some customer adjacencies that you weren't having as much traction with historically. So I guess beyond just getting an update on whether the funnel is tracking the way you would hope, it would be interesting to hear what are the phenotypes of those customers that are moving forward with Berkeley Lights and Beacon with this financial structure.

Hey, Doug, this is Kurt. Maybe I'll take this and then Eric, you can chime in with it. Appreciate the question. As we launched this, it was really geared towards that smaller customer that had lower campaign utilization rates than what the Beacon had capacity for. So we've tailored this to folks that need to run between five and 10 campaigns a year, which obviously is significantly less than what the beacon is capable of. And the intent there was to attract that customer, um, you know, to the Berkeley lights platform that otherwise would have, you know, went to an alternative solution, whether that's been a CRO or to build out the lab space that they needed to do it manually in house with that. So the design here was to price an all in package that included the tool, the software, the service, and the consumables, and a very simple price per campaign, you know, easy to sell, goes through an OpEx budget versus a CapEx budget type of a model. Now, obviously, when we launched that, and as we mentioned on the call last quarter, you know, there will be, if you look at it in the extremes where you've got some folks who clearly will, you know, the subscription makes 100% economic sense, and then on the high throughput customer's such as your high-throughput CDMOs, et cetera, where buying a beacon on a CapEx model makes sense. There's a certain amount of folks that will fall in the intersection of those two circles, but we believe that's a relatively small percentage, 25% or less, of the total customer base that will convert over from a CapEx sale into a subscription base. And that's essentially what we saw in the initial launch here and kind of what our pipeline is looking like. as we see what's in the funnel today. So it is attracting a new customer to us that we otherwise weren't able to get and increasing our serviceable available market. The other thing to note here is, which we didn't mention on the call, but those three tech access subscriptions that we took orders for in Q2 were not included in the seven unit placements. All three of those units have shipped earlier in Q3. for this quarter. So it's tracking to what we thought and the phenotype specifically to your question is that smaller customer of the utilization who wants to run their own biology. And we just provided a compelling reason for that. And it's tracking as expected.

That's great. And if I could just ask one more and then I'll let others hop in. The total revenue number was about what we were expecting, but the components were a little bit different. Recurring revenue specifically was a little lower than we expected, and I think it was down sequentially, acknowledging that I'm in transit, so I'm not scrubbing the model in front of me. So I apologize if I have that part wrong, but I know relative to what we were looking for, you were a little bit light. That can always just be a function of our model, but I want to make sure that there's nothing to unpack there in terms of pacing or any surprises that you're seeing in terms of customers. Thank you.

Yeah, good question. You're spot on. It did decline sequentially quarter over quarter, $3.9 million this quarter versus $4.4 in Q1. Obviously, we saw there's always a seasonality aspect where we see a year-end budget consumption from customers in the fourth quarter. We saw a little bit of that kind of trickle into Q1 as well. We also had a customer place a fairly large order in Q1 as well. But the bottom line is when we look at it, you know, over a 12-month period, it's very much on track to what we set historically.

Okay, thank you again.

Our next question comes from Brian Weinstein with Bullion Blair.

Hey, guys. Good morning. Thanks for taking the questions. Starting on the Bayer deal, can you just give us a little bit more on specifically how the technology is going to be used and just a little bit more on the kind of terms of the deal here in terms of the duration and maybe some of the downstream opportunities that are there. I think you mentioned that the two business development deals that you did are $30 million in total. Just not sure over what period that is and how we should be thinking about that. So a little bit more on kind of you know, specifically how the tech's gonna be used here and then anything that you can give us on kind of, you know, how to think about that 30 million.

Yeah, certainly. Morning, Brian. How are y'all doing here? Right, as we discussed in the prepared remarks, right, We see high-throughput functional screening as a huge opportunity, and to translate that into multibillion-dollar revenues annually, there were three things that we needed to do. The first is, of course, to run a high-volume platform business. The second is to establish high-value services business, which leverage our biofoundry. The third is to generate revenue from biological assets. And so the Bayer deal is another step to achieving these goals. First, in regards to our platform, it expands our platform into the ag market. And so not only does this increase our TAM, which I think we all love, but it also, these partnerships, they always expand our capabilities. So again, as we expand our capabilities, that expands the value of our platform, that helps drive, of course, our high volume platform business. So that really helps us with that first goal and objective. You know, second, what the Bayer deal does is it sets a foundation for future high-throughput functional screening services, which is, you know, in this partnership, they send us stuff, we execute and run, right, high-throughput functional screening, and then we send them information back. And so that helps us on our second goal. And then third, you know, this non-exclusive partnership provides this near-term multi-year revenue opportunity, followed by additional service revenue and back-end milestone payments. And so although the deal is a multi-year deal, and Brian, I can't give you details because the terms, of course, we're not disclosing at this time, but it is multi-year on the deal side. It also gives us access to the back-end milestone payment opportunities, which is important for our third goal. So all three goals that help us achieve this multi-billion dollar revenue are potential in the future are tied into the Bayer deal. And it's not just the Bayer deal. If we talk about the Thermo deal as well, both of these deals really expand our market opportunities, but they help us achieve our mission by not only doing things like accelerating, selling gene therapy products into the clinic, but also helping our customers drive world-class innovations and standards in sustainability for farmers, consumers, and the environment. So what I'm most excited about is that, you know, in our mission, you know, to find a biology that cures disease, this pushes us beyond just therapeutics for human, but into, you know, working in the agriculture space as we move into the future.

That's great. I appreciate the answer on that. And then one, just on the guidance here, the 90 to 100, so you did roughly 38 million, I think, in the first half. So to the midpoint of the guidance. It is a decent step up in the second half, and you've got this changing model a little bit going on here. So can you just give us some thoughts on the confidence and your ability to hit that guidance and how we should be thinking about things like that tech access model and as these new customers come online, you know, what that's going to bring in terms of the revenue and just how you're thinking about the broader mix within the different categories that's sort of built into that guidance.

Yeah, perfect. You know, appreciate the question. You know, I think first on, you know, the first half versus second half split that you talked about, if you were to look historically over the last couple years, you know, it's been relatively that same profile. first half and second half. I will say that this year we expect Q4 to be a slightly higher percentage than what it may have been, and that's primarily a function as you ramp up on some of these business development deals like the bear that we talked about, as well as getting the tech access more rolled out and you get more kind of on that recurring revenue base on there. So that's kind of what we're anticipating at this moment. going in, and that's all contemplated in our range of 90 to 100. And then, you know, as we talked about in the last call, you know, clearly as we launched the tech access, and I responded a little bit to Doug's question, you know, there are a few customers that will be at the intersection of, you know, where it makes, you know, 100% sense to do a subscription financially from their sense versus, you know, a CapEx model. There's a few that fall kind of in the middle where those two circles intersect. And in those cases, you know, you'll do a tradeoff where they might opt for, you know, instead of a CapEx sale subscription. And therefore, the more subscription we do, as we talked about in the last call, you know, the closer to the lower end of the range we'll be. And, you know, that program's off to a good start with getting three contracts signed in the first, you know, few months of that being launched.

Okay. Thank you, guys.

Our next question comes from Tejas Levant with Morgan Stanley.

Hey, guys. Good morning. So just a couple of quick follow-ups for me. On the Bayer deal, Eric, I just wanted to get a sense of can you walk us through the evaluation process in terms of what's the status quo in terms of trade design, what are the approaches that Bayer was using originally, and how did that stack up versus the beacon? I know you mentioned sort of massively high throughput, but if you can perhaps put some numbers around it or perhaps some timelines. like you've done with the other workflows, that would be super helpful.

In the Bayer deal, of course, a lot of the terms are not able to be disclosed. Here's what I can tell you. Historically, we had been in discussions with Bayer and showed them capabilities that were actually quite interesting in terms of culturing lettuce cells and other plant cells on the platform to perform trait discovery. We developed a new capability, internal tuberculites, that allowed us to enable a much higher throughput functional screen. And what we said in the prepared remarks was, you know, this is one to two orders of magnitude improvement. And so in our previous work, you know, in antibody discovery, we were looking at workflows where you're pulling cells from animals and evaluating the cells to produce antibodies against that particular target. And in the ag space, there's a different need. The need there is to screen many different variants of bioactives against a particular target. And so it flips the problem on its head. And so the scientists, whether they're biologists and technologists, they're uber creative. And so they came up with a way to do this. We went back and shared it with Bayer. And Bayer said, hey, this looks too good to be true. And we said, okay, well, give us the challenge. And so they created, it was like nine technology gates that we had to get through. in order to move forward and do this deal. And we completed it in nine weeks. And they were very satisfied with our progress and doing things that they didn't think were possible previously. And so that was by the context by which we signed this deal. And so not only am I excited about the additional capabilities that were developed through the beginning parts and the challenges always that are provided in emerging industries, but also really looking forward to working with Bayer on moving the technology and the innovative capabilities of Berkeley Lights into the ag space so that we can help them to accelerate the trade discovery to create that scalable and sustainable future leveraging cell-based products.

Got it. Super helpful. And then a couple of quick ones in the new subscription model for me. Eric, are you seeing any impact on Lightning sort of traction or given the subscription model now available, I mean, for these, you know, lower throughput, lower capacity customers? And then one for Kurt on subscription, the tech access units that you mentioned, are these subscription units or are these sort of a third bucket essentially?

All right, so I'll jump in on the lightning question, and then, Kurt, you can jump in on the subscription question. On the lightning side of things, this quarter we had some excellent work done by a major medical university. And the interesting thing that you'll find out is that when you're working on cell therapies, in particular for pediatric cancer patients, It's a very precious set of cells that you get for the patient. Sometimes there's only thousands, tens of thousands of cells. And our customers are previously having to make trade-offs in regards, not our customers, but in general, outside of Berkeley Lights, our customers are having to make trade-offs in terms of what analyses they perform. on these very precious samples. They can do, of the five analyses they can do, they can do one, because all of those analyses, whether it's a facts-based or a well-played-based, and they're terminal, they destroy the cells in that process. But what we're finding is that even with this very, very small number of cells, our customers can perform things like cytokine secretion, T-cell cytotoxicity analyses. They can capture the TCRs. They can do proliferation. They can look at serial cell killing. And so what we're learning is that there is extreme value in using very small cell samples or by profiling very small cell samples with the Lightning platform. And so, the seminal work sets the foundation for what will be QAQC activities and cell therapies and are critical to CTMS. So, I'm happy to see the progress there this quarter. Kurt, did you want to jump in now on the second question, which was subscription?

Yeah, Dages. The subscriptions that we did for Tech Access, it's only offered as a one-year subscription. And that's the, you know, they can choose between five or ten campaigns that they want to run. Obviously, two different pricing models for that with a one-year renewing subscription model for that. So those three that we mentioned fell under that tech access subscription model.

Got it. Very helpful. And then one final one for me on the guide, Kirk. Are you seeing any impact from COVID in July here? I mean, particularly in terms of customer site access issues on new installs?

You know, again, COVID, it's hard to see what's COVID-related versus what's normal now. But, you know, we are, you know, with the emergence of Delta variant, we haven't yet seen restrictions to access to get the tools, you know, in play. You know, I think we're still monitoring, you know, if with this new Delta variant, if there's going to be any type of, you know, customs delays or anything on that front. But so far, we haven't run into, you know, any issues, and we still continue to reiterate that. that will place at least 45 units this year. Perfect. What we said last quarter, we don't see risk in that as we stand here today. Got it.

Thanks, guys. Our next question comes from Julia Quinn with JP Morgan.

Hi, good morning. First off, just a couple follow-up on the partnership revenue. I know you said $30 million for the two deals with Thermo and Bayer. What's the timeframe that we should be thinking about for those $30 million deals? And then specifically, you know, during a quarter, how much milestone payments do you guys receive and how much do you guys embed in your current guidance for the second half?

Yeah, Eric, maybe I can take that and then you can, you know, add color. You know, our hands are somewhat tied. You know, the financial, you know, portions of the agreement, you know, are under confidential agreements that we can't disclose. But what I would say is if you remember what we talked about with, you know, Thermo Fisher Scientific, it was a new gene therapy segment. So you can look at our queue and see how much is rolling through on that segment. And that will give you an idea for what the thermo aspect is. But it's, you know, multiple quarters of each that deal. And what we like about these type of business development deals, obviously they're good margin for us, but they're also similar to the subscription, a nice stable recurring revenue base for us. And it established deep roots partnerships with each of those customers for longer term relationships as well. In terms of milestones, they're different for each deal there, obviously. But typically, the first couple of deals have a little bit less milestones. And then the latter part would have more. So in the near term, I'd say there's very little of the milestone. It's more of an upside. We typically prefer milestones in lieu of longer-term royalties just because of the greater certainty of getting those over a shorter period of time. But as we look into... this year, where the projects are, we're not embedding the milestones in there. They'll be a little bit later out than 2021.

Got it. That's helpful. And then regarding the subscription versus CapEx mix, obviously, you know, 30% subscription that you see this quarter. Just wondering what kind of mix you are expecting for the second half and going forward. I know you previously mentioned that you'll probably see expect to see a higher uptick in subscription mix in 4Q once it's got more time on the market. Should we be thinking about maybe it can reach a 50-50 mix or what was the right ballpark to think about?

We're not giving the mix between the two right now. It's still relatively new. It's been out for just about a quarter. We think we made good progress with getting three orders placed in Q2 and then obviously shipped in Q3. We'll continue to give you updates throughout the this year on bookings that we do there and, you know, provide you color that materializes. But, you know, our guidance range of greater than 45 obviously includes what we think is going to be placed on the subscription tech access model as well.

Gotcha. And then maybe on a higher level, you know, taking a step back, I was wondering how you guys are comparing kind of, you know, the pros and cons of the subscription model versus a center of excellence model or biofoundry service model. And just, you know, in the long term, how should we think about the distribution of your potential customers across these different monetization models, right? The current way I'm thinking about it is you probably have partnership model for, you know, the high volume or marquee customers, subscription model for kind of, you know, the low volume users, and then, you know, capital placement for those in the middle. Is that the right way to think about it? And, you know, based on your current customer funnel and conversations, where are you seeing the greatest appetite in terms of the different models? I'm particularly interested about kind of, you know, the partnership versus capital sale model. Like, do you see one significantly increasing versus the other in the long term?

Yeah, so it's a great question, Julia. And in regards, so let's talk high level, right? When we think about the biology markets, it starts in an R&D space, it moves in then to a discovery development space, and then moves back out into clinical trials, manufacturing, et cetera. If we think about that continuum for a moment, at the upfront side, there is a very large market, a very high volume business associated with the R&D efforts in academic institutions and translational centers around the world. There's a very high volume there. Then you get into discovery and development, which represents a funnel. You start with a lot of candidates that come in, they get whittled down, whittled down, whittled down, until you find the one, and then you enter into these clinical trials where you start scaling up volume. in terms of manufacturing and quality control, and then back into the end. And for Berkeley Light, as we look at it, and that ties back into kind of the three items that I mentioned in the prepared remarks and I referred to in terms of there is a very large multi-billion dollars per year revenue opportunity in hyper-functional screening that exists in a high-volume platform business in the early stage of that pipeline that I talked about, a very high-value service business that exists in the middle, and then it comes back to a high-volume platform business in manufacturing and QA, QC, right? And so we see all three components the high-volume platform business, the high-value service business, which then generates revenue, which leads to revenue for Berkeley Lights, for biological assets that Berkeley Lights has some level of ownership in, all are critically important. Now, the question is, what is the transition, and how do you go as a function of time? And of course, as you've seen through the history of Berkeley Lights, we started in the platform business. The platform business really, through these R&D partnerships, we're able to understand the reach and develop the meaningful workflows and applications that can execute on our platform, that it further increases the value of our platform and the reach of our platform into the R&D activities and into discovery and development and into manufacturing and all of these different markets. And I think, you know, I think a standard question, well, which one is most important? Well, they're all important at different time points. And right now, building up the workflow platform capabilities and partnering with additional customers in the R&D space are critically important. And those lead to the downstream revenue. So all of this folds into our overall strategy. in regards to how we see things. I think what you can see right now, what is the market saying in regards to the value of Berkeley Light's platform? With the Thermo deal and the Bear deal, I think you're seeing an increasing appetite for the level of capabilities that Berkeley Light can perform that other platforms just can't perform. And so as we continue to further develop our business development team, you know, we'll see more of these partnerships, which will add, you know, additional TAM and SAM to our overall opportunity, which will lead to that future multibillion-dollar revenue opportunity. Does that help provide some color to the question, Julia?

Yeah, very helpful. Thank you.

And, Julia, I would say kind of our go-to market strategy when you look at a capital sales you know, program a, you know, a subscription type program. And then now what we're announcing here is that high throughput functional screening service business, you know, they're all key pillars of it. And I think that service business is pretty exciting is what we're doing is we're innovating, you know, new things with customers and we're having that roll through what we describe as our bio foundry where we have access to the data and everything else. And then ultimately, as we've always said, you know, there will be some workflows that we deem so valuable that we've created that that we will only offer as a service or only offer as a subscription because it's the best way for us to monetize, you know, the value of the workflow that comes off of that. You just simply can't do that in a CapEx sale. So I think when you look at, you know, the data that comes off that as well as our ability to, you know, control a greater portion of the economics, you know, form the value that we're creating on that, the service business is a great foothold into that. And we're pretty excited with that and Couldn't be more excited to be working with Bayer on this as well.

Got it. Thanks for all the comments, sir.

Our next question comes from Martin Saro with VTIG.

Hey, guys. Thanks so much for taking the question. You know, I had a chance to speak with one of your customers on the cell line development side, and I'm curious if you can just comment about the cell line development 2.1 workflow and Anyway, one of the customers indicated that their workflow went from about three months or more to about one week using your platform. Can you just speak to how the new workflow is going and maybe just talk about whether or not this is sort of indicative of other customers you're working with?

Yeah, Mark, I'll jump in here. Thanks for the question and great to talk to you again. In the subline development market, this is pretty typical, the three months to one week. And so, you know, where really the savings are is that, you know, leveraging the microfluidic capabilities with our assays. But actually, you know, there's additional savings in there that have to do with the cloning and clonality that we provide. So the cell line development 2.0 and 2.1 continue to move forward. Our customers continue to leverage them and and transition, you know, everybody's, most of our customers have transitioned to from cell line development 1.0 to 2.0 at this time.

Terrific. And I guess I didn't hear you guys talk about your development work, specifically in SynBio and your work with Ginkgo. Can you just talk about workflow development there, you know, in yeast and bacteria, specifically E. coli? Are you still on track to deliver workflows to Ginkgo likely later this year?

Yeah, so we're still on track. We're still on track, and the tech teams are, of course, in contact and working on how do we transfer, you know, workflows developed here to workflows developed there. We continue to make great progress with the Ginkgo team. And it's a great partnership. And in this world, we're super happy to be working with one of the most innovative and forward-looking companies in bio and eco bioworks. And we're happy to leverage our high-throughput functional screening to help them not only accelerate their overall throughput, but reduce the overall cost to do these screenings, which were developed in antibody therapeutics markets, but moving the basic capability into the SYN biospace.

Okay. Okay. And maybe a clarification question, Eric. Did I hear that the viral vector deal is only available on a subscription model? So I guess, can you just maybe help us think about what workflows are available subscription only versus through taking of a beacon or lightning?

Sure. Yeah, so it's a bit of a transition. As we start to understand, and Kurt alluded to this earlier, is we're understanding the value we create. There's a significant value in creating a stable cell line for viral vector manufacturing. And that workflow, I can't sell a beacon for a high enough price to actually capture the value that's created. And so the business model is that this will therefore only be available through subscriptions. And there will be other workflows which will only be available in our BioFoundry. And so as we continue to add high-value capabilities, we will limit access to some of these things, whether it's just BioFoundry or just subscription, and that's how we'll take those to market.

Excellent. And then maybe last one for me, I guess another clarification question. you know, this is the first time you've done a deal with a company in the ag sector. Obviously, I'm talking about Bayer. Can you talk about whether or not that consists of capital placements of either the Beacon or the Lightning, or if that is also sort of in a subscription model? And then, you know, so I think you already answered my question on Thermo. Sounds like that is on the subscription model. But I think it would be helpful. I know this question has been asked, but As we think about your business over the next year or two, how should we think about the mix between subscription model versus capital placements and workflows?

Yeah, I think when we – Oh, go ahead. Go ahead, Eric.

Okay, on the platform places versus service question, this is an R&D service engagement, meaning that Bear will send us stuff, we will perform the high throughput functional screening here, and we will send them information and stuff back. So that is on the service side of things. And, Kurt, you were going to jump in on the other side of the question.

I was going to say the same thing. They're not going to have beacons running at their location. They're going to be utilizing our biofoundry, and we're providing the service that Eric described there.

Okay. Thanks, guys. Congrats on the quarter.

Thank you. Our next question comes from Paul Knight with KeyBank.

Hey, guys, could you talk where you are with your business development team? I know the goal was to add this year, but could you frame that up, please?

Yeah, we're obviously not disclosing, you know, the exact number in each segment, but we've more than doubled that team in size. And you can see we've made some, you know, tremendous progress in terms of, you know, in this year signing, you know, Thermo and signing Bear. And you can see that in the business development and partnership line. where that's went from about $100,000 in Q2 of last year to $3.9 million in Q2 of this year.

And I guess, you know, you expect to be done with that, what, mid-year?

You know, we look at, you know, when you say done with, you know, in terms of, you know, growing the team or, you know, I think... We're always looking for talent, and to the extent that we bring more people on and we can cultivate new business and new partnerships, and then there's the partnership alliance thereafter, we'll continue to add as the pipeline would see fit there. I think we'll always be looking for good talent at that standpoint, but the team's reaching the critical mass, if that's what you're asking. The installed base is what right now? We're at 92 at the end of and that does not include the three subscriptions that we took orders for but had not yet shipped until earlier this quarter in Q3.

And it doesn't seem like any units are coming offline at customer locations.

That's correct. We're seeing, you know, customers are utilizing the tools, and, you know, they have not decommissioned them.

Yeah, kind of historical paces of pull-through. Is that correct, Eric? Correct. Okay, thank you.

Thank you. And I'm not showing any further questions at this time. I'd like to turn the call back over to our host.

Okay. Appreciate everybody for joining the call, and we'll talk to you next quarter at this time. Thank you.

Thanks so much.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.