Codex DNA, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Quarter 3, 2021 Codex DNA Incorporated Earnings Conference Call. At this time, all participants' lines are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star zero on your touchtone telephone. I would now like to turn the conference over to your host, Mr. Richard Lapke. Sir, please go ahead.

Thank you, Mel. Good afternoon, and thanks for joining us for CodexDNA's third quarter 2021 earnings call. With me today on the call are Todd Nelson, our Chief Executive Officer, Dan Gibson, our Chief Technology Officer, and Jennifer McNeely, our Chief Financial Officer. Our third quarter press release is available now on the investor section of our website. If you have not received the news release, or if you'd like to be added to the company's distribution list, please send an email to ir at codex.dna.com. Before we begin, I would like to inform you that certain statements we make during this call will be forward-looking. These statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Such factors include those referenced in the Safe Harbor Statement included in our earnings release and in our filings with the SEC. This conference call contains time-sensitive information and is accurate only as of the live broadcast on November 9, 2021. Finally, any percentage changes we discuss will be on a year-over-year basis unless otherwise noted. With that, I'd like to turn the call over to Todd, CodexDNA's CEO.

Thanks, Rich, and good afternoon, everyone. We're pleased to share our financial results in business performance for the third quarter of 2021. We had another solid quarter in terms of our financial results with product revenue growth 70% and royalty revenue growth 73%. Notably, BioXP franchise revenue comprised of instrument and reagent sales were particularly strong drivers of record sales for both BioXP instruments and kits in the quarter. Sales of BioXP kits more than doubled driven by strong contributions from recently launched applications for DNA focusing on variant libraries and longer, more complex builds. This past quarter was also a transformational quarter from a strategic perspective, as we made tremendous progress in our R&D pipeline, business development, and commercial execution. These three areas will help write the next chapter of CodexDNA's sustainable growth story. Before we get into the financial results, I want to provide some perspective on where CodexDNA is headed over the longer term and discuss progress within our R&D pipeline. For those of you who are new to our story, our mission is to apply breakthroughs and automation solutions for synthesizing DNA, mRNA, and proteins to allow scientists to both program and then subsequently print biology, creating novel healthcare and technology solutions for some of humanity's biggest challenges. To achieve this mission, we are developing the world's first line of synthetic biology automation platforms and applications that we believe will enable researchers worldwide to build biology with the push of a button at the benchtop. Our vision has never felt more achievable, as I reflect on the progress made by our R&D teams, who are not only focused on developing new and innovative applications for existing BioXP systems to drive sales of on-market products, but also on developing paradigm-shifting future technologies. These innovations have the potential to fundamentally transform our industry and at the same time position CodexDNA to serve significantly larger and broader addressable markets. The future of our automated family of BioXP systems and consumable kits is focused on the development of truly novel desktop printing architectures that use a proprietary form of enzymatic DNA synthesis, or EDS. Unlike traditional DNA synthesis methods, Enzymatic platforms do not require the use of toxic chemicals during the DNA synthesis process. While traditional desktop methods for the synthesis of DNA have been in existence for decades, the need to perform these processes using sustainable, scalable, and cost-effective solutions has revealed a multibillion-dollar opportunity that we believe we can tap into with the use of automation solutions and applications that enable desktop printing of DNA, mRNA, and proteins. we refer to our EDS platform as SOLA, which stands for Short Oligo-Ligation Assembly. SOLA is a patent-pending DNA ligation and amplification approach developed by our internal team at CodexDNA. SOLA uses a DNA ligation and amplification process to generate synthetic oligos from a make-to-stock universal library of very short DNA building blocks. We believe that this proprietary approach is the only solution currently being developed that is suitable for the synthesis of longer fragments of DNA, mRNA, and protein, and which may result in higher quality and reliability compared with other EDS approaches. Additionally, because of our proprietary manufacturing process for SOLA, we believe there's a significant cost advantage over potential competing technologies such as TDT-based chemistries. We have achieved important milestones related to the development of SOLA technology and significantly advanced our program during the third quarter. I'm pleased to announce that we can now reliably and reproducibly print high-fidelity short DNA oligos of between 20 and 100 base pairs in length. These oligos can then be efficiently assembled using our Gibson assembly reagents into synthetic genes and mRNA templates of up to approximately 2 kB in length. Additional technical achievements include building biologically active guide RNAs for CRISPR-Cas9 genome editing and the production of PCR primers. These milestones demonstrate the viability of our technology and exceptional capabilities of our R&D organization are a testament to the strength and dedication of our team. The eventual goal of this exciting technology is to build what we describe as the BioXP digital to biological converter, or DVC system. By utilizing our solar technology, our DVC system has massive potential to disrupt existing vaccine and biologics discovery and development workflows by dramatically decreasing the amount of time it takes to print DNA, mRNA, or proteins. In the future, the system's unique design will allow CodexDNA customers to begin their experiments with a digital DNA sequence instead of physical pieces of DNA such as oligonucleotides. The DBC system is designed to take binary DNA sequence data and produce synthetic genes or convert those genes automatically into mRNA or protein at the benchtop. We believe the DVC system will enable a sequence in, biologics out paradigm that can potentially replace a significant portion of traditional centralized DNA manufacturing processes. Depending on the application, our DVC workflow may be carried out in a matter of hours or days, which would represent a massive improvement compared to current approaches, which currently may take weeks to months. The impact of this technology is profound, both from a commercial and an ESG perspective. It has the potential to significantly reduce the development times for both infectious disease and cancer vaccines and therapeutics, while also significantly reducing the waste and benefiting the environment. Imagine the power of a system that can take a digital sequence corresponding to a piece of DNA and sustainably print that DNA or its corresponding mRNA or protein anywhere in the world with the push of a button. We believe the solar-powered DBC instrument will have potential to dramatically expand CodexDNA's market opportunity, allowing us to tap into a potential multibillion-dollar market for global printing of biology. The global market opportunity for synthesized DNA oligos and reagents alone is estimated to be at about $1.9 billion today, with the potential to expand to around $4 billion by 2026, driven by the growth of new therapeutic applications and increased focus on personalized medicine. We are pleased to report that we are on track with our development of our DVC system, which is enabled by the assembly and integration of the BioXP 9600, a higher throughput synthetic biology automation platform, and the solar-powered BioXP oligoprinter systems. The BioXP 9600 builds on the foundational technology underlying the current BioXP 3250 and has an advanced motion control system which allows for higher processing speeds and greater reliability. It is designed to include additional reagent capacity and consumables that enable as much as three times as many DNA, mRNA, and proteins to be generated with each run while retaining all of the functionalities of the current BioXP 3250 system. The BioXP 9600 is currently scheduled for beta release during the first half of 2022 with the full commercial launch of the system in the third quarter of next year. Our solar-powered oligo printer instruments, which are on track for commercial launch in 2023, can be sold as a standalone benchtop instrument or can be integrated into the 9600 installed base to make possible our vision of on-demand printing of desktop biology. We are also pleased with the progress in the development of our mRNA and protein product lines. We estimate that we will be able to launch our CleanCap mRNA product during the fourth quarter, which will give us access to an additional customer segment for mRNA synthesis. The CleanCap technology is expected to increase productivity and yields for mRNA synthesis workflows while providing us with access to an additional segment of the market not using the ARCA capping technologies contained in our initial product release. We also remain on track to commercialize two additional mRNA kits for the BioXP in the first half of 2022. These kits will focus on longer mRNA synthesis capabilities of up to 7KB transcripts and increased yields, which positions our mRNA franchise to support additional workflows such as vaccine development, which typically require larger builds. When taken together, we believe our suite of three BioXC mRNA kits will cover a significant portion of the small-scale rapid synthesis market for mRNA, and we believe we are uniquely positioned with the BioXC 3250 to benefit from strong fundamental drivers from the adoption of synthetic mRNA. Switching gears, I'd like to touch base on our business development efforts. Today, we announced that we've agreed to acquire Eaton Bioscience, a privately held provider of synthetic biology products and services based in San Diego. We expect the deal to close within the next 60 days. We're excited to welcome the Eaton employees to our team. We think the deal is an excellent strategic fit. We believe it will accelerate our long-term growth rates, provide opportunities to expand our profit margins, and support our enzymatic DNA synthesis product development program. Overall, this deal makes us a fundamentally stronger company for several reasons. First, we believe there are synergies from a customer acquisition perspective, as Eaton serves a very similar end-user market with its products and services. Therefore, the deal immediately enhances our commercial footprint and reach by giving us access to Eaton's extensive customer base into which we intend to introduce the BioXP product line. Second, Eaton's DNA sequencing and oligosynthesis offerings are highly complementary to our commercial platforms and have the potential to expand our BioXP customer reach and build stronger customer relationships while at the same time demonstrating the value of our BioXP platform and the Codex DNA team's scientific expertise. Not only will these expanded commercial offerings enable us to provide more solutions to a broader customer base, but they also enhance the potential customer funnel into our product business. Third, there are several strategic benefits to this acquisition associated with the production of oligos, which is an important raw material for our business. In the near term, the addition of Eaton gives us greater control over oligos supply and quality by supplementing our current procurement efforts. The acquisition provides an opportunity to improve our already industry-leading customer turnaround times by reducing procurement wait times. In the longer term, we believe Eaton, through the deployment of its proprietary oligosynthesis platform, can scale up to contribute a meaningful portion of our oligosupply in the future. Those efforts will further enhance the acquisition benefits while also reducing our oligosynthesis costs, potentially providing significant accretion to gross margins. It's important to note that this production ramp-up will require some time, development efforts, and capital investment. We expect to be able to begin ramping up in the fourth quarter of 2022. And finally, we believe that our combined technical expertise can potentially accelerate some of our research and development areas in the area of enzymatic DNA synthesis. We expect Eaton's oligosynthesis capabilities to benefit our solar-powered BioXP oligoprinter system developments with longer-term potential to supply us with some of the materials needed for EDS. Overall, we believe the acquisition is the right thing to do for the company and our shareholders due to these clear strategic advantages. We are potentially expanding our commercial offerings, securing a portion of our oligosupply, reducing raw material costs, and accelerating our growth strategy. Moving on, Jennifer will review our full financial results, but before she does, I'd like to discuss our commercial execution in the third quarter. We had a record quarter for BioXP. Our award-winning BioXP system is a fully automated push-button platform for the rapid synthesis of both DNA and mRNA. Certain drug discovery activities that previously took months can now be completed using the BioXP system in just a week or so, and what previously took days can now literally be done in hours. Industry-leading quality combined with enhanced speed, accuracy, and scale can result in vast improvements to productivity. Our customers recognize these benefits, and demand remains very strong. Overall, we believe that we're in the early innings of the product lifecycle for a BioXP 3250 instrument. We also had a record quarter for BioXP kit revenue driven by strong results for revenue associated with recently launched products to BioXP. We also expanded our customer base across geographic regions and responded to customer demand with the release of our full-length synthetic genome for the highly infectious Delta variant of the SARS-CoV-2 virus. Synthetic genomes can be used by researchers to generate breakthrough therapies and vaccines and to develop new diagnostics to help detect, contain, and slow the spread of highly transmissible variants in the COVID pandemic. This release not only proves our technical capabilities and scientific expertise in the complex genome synthesis area, but also demonstrates our commitment to building and providing innovative synthetic tools that accelerate virus research and simplify the discovery and development processes to make a positive impact on our world. Finally, we continue to strengthen our leadership team with key hiring throughout the organization, including ETH. Legal Officer Rob Cutler. Rob was the former General Counsel and Secretary at Synthetic Genomics. We will continue to hire in key roles to support accelerated growth, particularly in our commercial organization in the coming quarters. With that, I'll pass the call over to Jennifer to review our financial results.