Codex DNA, Inc.

Thank you for standing by, and welcome to the fourth quarter 2021 Codex G&A 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 this session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference to our Director of Investor Relations, Richard Lepke. The floor is yours.

Thank you, Carmen. Good afternoon, and thanks for joining us for CodexDNA's fourth quarter 2021 earnings call. With me on the call today are Todd Nelson, our chief executive officer, Dan Gibson, our chief technology officer, and Jennifer McNeely, our chief financial officer. Our fourth quarter press release is available now on the investor section of our website. If you'd like to be added to the company's distribution list, please send an email to ir.codexdna.com. Before we begin, I'd like to inform you that certain statements we make during the call will be forward-looking, including statements regarding financial guidance, market opportunity, ability to penetrate the market and sign new collaboration and partnership agreements, research and development efforts, including the timing of launch of our products, expectations of our Pfizer collaboration, and expectations for growth. These statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied. More information about these potential risk factors can be found in our annual report on Form 10-K, which we anticipate filing after market close today, and in our other filings with the SEC. This conference call contains time-sensitive information and is accurate only as of the live broadcast on March 22, 2022. 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.

Thank you, Rich, and good afternoon, everyone. We're pleased to share our financial results and business performance for 2021, which was a defining year for CodexDNA and our first year as a publicly traded company. Against the backdrop of the global pandemic, we reported record fourth quarter and full year revenue, 3.1 and 11 million respectively, representing strong growth rates at 59% and 68% for these periods. We took a number of critical steps during the fourth quarter to lay the foundation for the next phase of our growth. We signed an important early access collaboration and licensing agreement with Pfizer. This agreement contains several development and commercial milestones that, if achieved, will generate significant high-margin revenue for the company. We continued to make outstanding progress in our innovative Sola enzymatic DNA synthesis program, which I will expand on in a moment. We closed on the highly strategic acquisition of Eaton, which supports the launch of our internal oligosynthesis platform in the fourth quarter of 2022. And finally, during the quarter, we added more than 20 new members to the broader organization, in critical areas of commercial operations and research and development that will position us to scale our organization to meet future anticipated demand for our products, services, and technology partnerships. Since we are marking the end of a very productive year, I thought it would be helpful to provide a status report on the company as a whole and expand on how these recent achievements enable us to accomplish our financial objectives in 2021 and how they will position us to be an even stronger company going forward In December, we announced a very exciting and financially significant early access collaboration and licensing agreement with Pfizer. This agreement is centered around our leading next-generation solar enzymatic DNA synthesis technology, which Pfizer plans to use in its workflows for the development of mRNA-based vaccines and biotherapies. Pfizer has the option to exclusively license our solar technology for two therapeutic indications and has broad, non-exclusive access to the technology for any other mRNA-based vaccines or therapeutic indications. This strategic partnership is a strong validation of our cutting-edge SOLA platform, and over the next few years, we believe the results of this collaboration can potentially accelerate the time to market for several of Pfizer's vaccines and therapeutics, while providing us with access through royalties to very large and rapidly growing end markets, including vaccines and biologics. As a market leader in the mRNA space, Pfizer is an ideal partner to help us realize the potential of our SOLA and BioXP automation platforms. We are extremely excited about the potential impact of this agreement for both parties. For investors, we think it's important to understand the key financial terms of the deal, which I will touch on briefly before moving on to describe the longer-term strategic importance as it relates to our go-to-market strategies and the progress we've made with our innovative technology platforms. The financial terms of the agreement include an upfront payment of $8 million, which we have received, along with success-based technical milestone payments of $10 million that could be earned over the next two to three years. Jennifer will expand on the timing of the expected revenue recognition of these payments when she discusses 2022 financial guidance later on the call. Additionally, we are eligible to receive payments resulting from the successful achievement of clinical development and commercial milestones For the two exclusive indications, the clinical development milestones can total up to $55 million, and the commercial milestones can total up to $180 million per product. Similarly, for non-exclusive applications, the clinical development milestones can total as much as $35 million, and the commercial milestones can total up to $60 million per product. They're also uniquely entitled to receive escalating royalties based on net sales of products. We believe this is a transformative partnership for CodexDNA and importantly offers the potential to accelerate the time to market for new and innovative mRNA vaccines and therapeutics, while at the same time providing us with significant financial returns through access to rapidly growing end markets for biologics and vaccines. As mentioned briefly during my earlier remarks, should we successfully execute on the terms set out in this agreement, and Pfizer successfully develops and commercializes only two of the licensed products, the resulting milestone payments and royalties could total more than $500 million. The magnitude of the financial terms of this partnership speaks to the immense value of our SOLA EDS technology and the potential benefits we can provide to partners such as Pfizer. As an example, on Pfizer's recent fourth quarter 2021 earnings call, management estimated that approximately a third of the development time for an mRNA flu vaccine as related to the front-end mRNA production process, and they describe how our solar technology has the potential to reduce that process from approximately a month to a matter of days, resulting in a one-third reduction in the amount of time to get a new vaccine to market. We believe this improvement to the development process could allow Pfizer to stay ahead of future infectious disease variants select optimal strains closer to the start of the flu season, and potentially improve the efficacy of new vaccines. Moving forward, this deal also paves the way to new important strategic opportunities related to our go-to-market strategy. We aim to continue to vigorously pursue additional value-added partnerships that can leverage our strong intellectual property portfolio and proprietary technologies. This includes all of our product and technology categories, such as the Biospeed Automation Solution, for DNA, mRNA, and protein synthesis, and our VMAX platform for the efficient and large-scale cloning and scale-up of DNA. Our business development and leadership teams continue to cultivate relationships with potential partners, and we intend to establish additional agreements with both new and existing customers. Our go-to-market strategy can be broken down into three distinct categories. our BioXP automation platforms and portfolio of consumable products, including Gibson assembly kits and an increasing catalog of synthetic genomes, which are all sold globally through both direct and distributed sales channels. Second, our BioFoundry services, which now includes part of Eaton Bioscience and leverages those same direct and distributed channels to provide customers with BioXP-enabled services and solutions. Third, value-creating partnerships, which build on our technology portfolio, intellectual property, and technical capabilities to support customer needs while giving us access to substantial in-market economics. We continue to execute in all three areas to drive long-term sustainable growth and create maximum value for our customers and our shareholders. As a reminder, our mission is to apply breakthroughs and automation solutions for synthesizing DNA and mRNA and proteins to allow scientists to both program and write biology that creates novel healthcare technology solutions for some of humanity's biggest challenges. This is all made possible thanks to the incredible work being done by our R&D teams who are developing paradigm shifting future platforms such as our SOLA EDS technology. SOLA is a proprietary enzymatic synthesis platform based on a DNA ligation and amplification approach that is used to build oligos from made-to-stock universal libraries. of short DNA building blocks. We believe that this approach is the ideal solution for the synthesis of longer fragments of DNA, mRNA, and protein at the bench top due to its advantages in fidelity, buildability, scalability, and cost. We expect our approach to building oligos using SOLO will result in higher quality products compared with other enzymatic DNA synthesis approaches. Additionally, because of our proprietary manufacturing process, we believe there are significant cost and quality advantages over potential competing technologies, such as terminal deoxynucleotidal transferase, or TDT-based chemistries. During the fourth quarter, we advanced our solar development program. We can now reliably and economically generate high-fidelity DNA oligos of 20 to 100 base pairs at the benchtop. Importantly, we subsequently demonstrated these oligos can then be efficiently assembled using our BioXP instrumentation into full-length synthetic genes and mRNA templates of up to approximately 3.9 kb, or 3,900 nucleotides in length. We believe our technology is the leading approach for building high-fidelity, longer segments of DNA using enzymatic DNA synthesis technology. In the fourth quarter, we also successfully built proteins starting from DNA oligos generated using our SOLA technology and BioXP instrumentation. This new development is an exciting achievement that has the potential to open up new addressable markets, such as cell-free protein expression, for SOLA and our BioXID automated solutions. I'm extremely confident in our future, given the talent within our R&D organization and throughout our entire company. We recently announced that we'll be sponsoring an R&D Investor Day on March 29th, which will be focused on SOLA and enzymatic DNA synthesis. We encourage you to join us for this exciting webinar. Looking at the rest of our technology pipeline, we're pleased to report that we are on track with the early development of our advanced automation platform referred to as the BioXP Digital to Biological Converter, or DBC system. This system is enabled by the assembly and integration of the upcoming BioXP 9600, our higher throughput synthetic biology automation platform, and the SOLUS synthesis technology on our BioXP oligoprinter. The BioXP 9600 is designed to have approximately three times the throughput compared to the BIOXP of 2022. Our solo-enabled BIOXP oligo printer is on track for commercial launch in 2023. The instrument will be sold as a standalone benchtop instrument, or it can be integrated into the 9600 install base to make possible our vision of the DVC, enabling the on-demand printing of desktop biology. We are also pleased with the BIOXP kit development. We launched our second small-scale mRNA kit for the BioXP, this time featuring industry-leading clean cap technology. This product will give us access to additional customer segments for mRNA synthesis and positions us as an ideal small-scale rapid synthesis platform that we envision being adopted within the REO screening markets. We intend to continue to round out our mRNA product line commercialization of a rapid-scale mRNA kit launching in the second half of 2022. This kit, prior to being made available on BioXP automation platform, will be released through our BioFoundry services group. This format of mRNA will support both the synthesis of higher quantities and longer fragments of mRNA and positions our franchise as a leading potential supplier of high-growth workflows, such as vaccine development, that typically require larger builds. We believe that our BioXP mRNA synthesis kits, including the ARCA and CleanCap capping technologies, will cover a significant portion of the market for the rapid synthesis of mRNA. And finally, we expect to launch our Biotics v Protein Synthesis Kit in the second half of 2022. We anticipate that this kit will enable broad adoption for the small-scale production of research-grade proteins for several workflows, especially those for biologics discovery and development. Switching gears now, I'd like to touch on our recent acquisition of Eaton. We closed on the transaction in late November and we are excited to have Eaton employees as part of our team. During our third quarter call, we discussed why we believe the deal is an excellent strategic fit. By way of review, we believe Eaton is positioned to help us accomplish the following objectives. Eaton will support our strategic collaborations, such as the Pfizer partnership, increase our customer reach, providing us with access to large customer base within the academic research market, expand our commercial offerings to include oligo and DNA sequencing services, secure a portion of our raw material supply, and finally, provide the opportunities to significantly improve our gross profit margins over time. Eaton has important technical expertise that can potentially accelerate some of our R&D efforts associated with the SOLA EDS programs and provides critical support for our Pfizer partnership. Notably, Eaton will play a crucial role moving forward as we execute our obligations under our agreement with Pfizer, and it helps to de-risk our future R&D and collaboration efforts. Overall, we're thrilled to have closed this acquisition in the fourth quarter and firmly believe this deal was the right thing to do for the company and our shareholders due to these clear synergies. Moving on, Jennifer will expand on our full financial results and provide guidance for 2022. But before she does, I would like to briefly discuss our commercial results in the fourth quarter. We had another solid quarter with overall growth at 59% compared to the prior year period. However, like many companies in our sector, we did experience headwinds in the quarter related to the emergence of COVID-19 Omicron variant. The impact of Omicron affected our ability to meet with certain customers onsite and to ship, place, and install BioXP instruments. This resulted in fewer shipments than we had anticipated During the past few months, we also had many employees out with COVID-19, which affected a broad array of operating functions. Now, that being said, we do believe the worst of the COVID-related commercial disruptions are behind us, and the fundamental drivers of our demand projections for our BioXP3250 system remain intact. Our customer funnel is very promising as we enter 2022. Our customers continue to recognize the benefits of the BioXP platforms, and the demand outlook remains strong. We ended 2021 with nearly 200 instruments in our installed base, which means we placed approximately 50 instruments for the full year. Overall, we believe we're in the very early stages of product adoption for our BIOXP3250 instrument. Finally, we continue to respond to customer demand with the release of a full-length synthetic genome for the highly infectious Omicron 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. The release of this full-length genome continues to serve as validation of our technical capabilities and scientific expertise in complex DNA synthesis and assembly and demonstrates our commitment to providing innovative products that accelerate research and simplify the discovery and development processes that make a positive impact on our world. With that, I will pass the call over to Jennifer to review our financials and discuss 2022 guidance.