Codex DNA, Inc.

Good day, and thank you for standing by. Welcome to the Q3 2022 Telesys Bio Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephones. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to turn the call over to your speaker today, CEO Todd Nelson. Please go ahead.

Thank you. Good afternoon, and thanks for joining us for Telesys Bio's third quarter 2022 earnings call. With me on the call today are Chief Operating Officer Eric Esser, Dan Gibson, Co-Founder and CTO, and our VP of Finance, Brent Tunder. Our third quarter press release is available now on the Investors section of our website. Before we begin, I'd like to inform you that certain statements we make during the call before we're looking, these statements involve known and unknown risks and certainties that may cause actual results of different materials and those expressed in reply. 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 8, 2022. Finally, any percentage changes we discuss will be on a year-over-year basis unless otherwise noted. And with that, we can get started. At Telesys Bio, our mission is to inspire and empower scientific breakthroughs across life sciences and translational research applications. Our automated, on-demand, multi-elmic and synthetic biology solutions enable scientists to streamline and standardize both building and testing of DNA and mRNA, allowing us to address large unmet needs in our targeted markets. Our customers and collaborators include premier academic research institutions, rapidly growing biotech companies, and nearly all of the top 25 biopharma companies. Our systems are utilized by academics, and industry scientists worldwide in various discovery activities, ranging from the discovery of novel infectious disease vaccines, developing precision immunotherapies for cancer and antibody therapeutics, to the creation of engineered meat substitutes and sustainable cellular agricultural products. Our BioXP automation solutions allow scientists to synthesize and assemble DNA and mRNA with the push of a button. allowing our customers to bring critical products to the market in an unprecedented amount of time. We believe that our strong financial momentum will support the long-term mission of the company. And with that, I'll turn the discussion to a recently reported financial results and corporate update. To start, I'd like to review highlights from the third quarter into the first nine months of 2022. In the third quarter of 2022, we grew total revenue by nearly 140% compared to the prior year period. including contributions from Eaton Bioscience acquired in Q4 of last year, overall growth in the third quarter was 83%. For the nine-month period ending September 30, 2022, total growth excluding Eaton was 69%. We sold 13 bios fee units during the third quarter, bringing the number of units sold during the first nine months of 2022 to 47 units. Instrument revenue was up 28% and 37% respectively for the third quarter nine-month period ending September 30. We also experienced a record quarter for BIOPSP kit sales, which has continued a strong growth trajectory, posting 69% growth over the prior period and 58% for the first nine months of the year compared to the same period in 2021. And we're very pleased with the initial market uptake of the recently launched BIOPSP 9600 kit. Collaborations, royalties, and other revenue grew 224% for the third fiscal quarter and 170% for the first nine months of the year, respectively. Gross margin improved significantly during the third quarter from 41.7% in Q3 of 2021 to 54.8% in Q3 of 2022. For the first nine months of 2022, gross margin improved from 42.9% to 50.9%. Margin expansion Third quarter, as compared to the same period a year ago, was largely driven by a positive next shift to higher margin products, including the Biospeed 9600, mRNA, and lower cost of DNA raw materials. Our vision has never felt more achievable. We've made significant progress developing new, innovative applications for existing Biospeed systems that drive sales of on-market products, and we are developing paradigm-shifting future technologies. These innovations have the potential to fundamentally transform our industry, and at the same time, position Telus' bio to serve significantly larger and broader addressable markets. Inherent in this vision is our path towards improving our growth and operating margin, becoming a profitable company in the second half of 2024, and delivering value to our stakeholders. With that, I'll pass the call to Brent to review our financials and updated 2022 financial guidance.

Thank you, Todd. Detailed financial results for the third quarter were included in today's press release. In my remarks today, I'm going to walk through our income statement, touch on a few key financial metrics, and finish with our updated financial guidance for 2022. Telesys Bio is well capitalized with cash and short-term investments of $49.9 million as of September 30, 2022. Revenue was $6.7 million for the third quarter of 2022, which was a 140% increase in total revenue from $2.8 million for the same period in the prior year. This strong growth was driven by a record quarter for BioXP kit revenue, totaling approximately $884,000, up 69% year-over-year, and solid contributions from Eaton Sequencing Services and Oligo production revenue, which totaled $1.6 million. Royalties and other revenue also grew due to revenue related to the Pfizer collaboration agreement.