Telesis Bio, Inc.

Good day and thank you for standing by. Welcome to the Q2 2023 Telesesis BioEarnings Conference Call. At this time, all participants are in 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 telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to turn the conference over to your speaker today, Jen Carroll, Vice President, Investor Relations.

Thank you, and thank you for joining us for Telesys Bio's second quarter 2023 earnings call. With me on the call today are Telesys Bio founder and Chief Executive Officer, Todd Nelson, and our President and Chief Operating Officer, Eric Esser. Our second quarter 2023 financial results press release is now available on the Investor 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. Such factors include those referenced in the Safe Harbor Statement included in our earnings release and in our filings with the FCC. This conference call contains time-sensitive information and is accurate only as of the live broadcast on August 10, 2023. Finally, 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.

Thanks, Jen. Welcome, everyone, and thanks for joining today's call home. We're pleased with the progress the company is making in this challenging environment, and I want to highlight that this is the fourth consecutive quarter that we've successfully reduced or maintained our operating expenses while growing revenue on a year-over-year basis. As you'll see in this quarter's results, we continue making progress with our strategic collaborations, grew both our revenue and install base, delivered new BioXP kits to the market, secured additional financing, and strengthened the board of directors through the addition of Paul Meister, former chairman of Thermo Fisher. I'm also pleased to announce that during the second quarter, we achieved another technical milestone in our research collaboration with Pfizer, something that further validates SOLA, our enzymatic DNA synthesis platform. We remain encouraged by the progress we have made and look forward to continuing to validate this platform with our partner. SOLA remains a disruptive technology that will drive production of integrated workflows to the bench shop and will continue to accelerate discovery timelines for our customers through the ability to deliver on-demand gene synthesis, mRNA, and eventually protein synthesis products with unprecedented speed and accuracy. Customer adoption of our newly launched products remains encouraging. Moving forward, we intend to increasingly focus our efforts on maximizing the commercial impact of our differentiated workflow solutions based on our mRNA, cell-free DNA scale-up, and long-build bioXP DNA kits. We have a highly compelling offering at the benchtop for these solutions, which will catalyze further adoption of our products into our targeted workflows for antibody discovery, pathway engineering, precision medicine, and mRNA vaccine discovery. Now, moving on to our second quarter financial results. Our detailed financial results for the second quarter are included in today's press release. During the quarter, our total revenue grew at 53% despite continued macroeconomic headwinds that impacted our product revenue results. While we saw solid revenue growth of 36% in our instrument business and our overall product revenue increased year-over-year by 14%, our BioXP kit revenue was down 16% during the quarter against a very tough comp in 2022. We know that for the first half of 2023, the BioXP kit growth is greater than 10%, and we anticipate that this rate will accelerate in the end of the year with new product launches. Revenue for the first half of 2023 was $15 million, an increase of 33% from the $11.3 million in the prior period. Gross margins came in at 65.8% for the second quarter and compared to 48% for the same period in the prior year and were 61.5% for the first half of 2023 as compared to 48.6% in the prior period of 2022. Strong contributors to this continued expansion include collaboration milestones, but also reflect positive mix shift in revenue from recently launched products within our growing BioXP portfolio and our efforts to vertically integrate reagent and instrument manufacturing. Operating expenses for the quarter of $13.7 million for the second quarter, 2023, were down 20% as compared to $17.2 million for the same period in the prior year. This, to be curious, primarily is a result of ongoing cost-cutting efforts, including a reduction in force during the current quarter that was intended to focus the team on our most profitable and near-term revenue opportunities. And operating expenses for the first half were down 14% to $28.1 million compared to $32.8 million for the same period in 2022. Total net loss of $8.3 million reflects a decrease of 44% compared to $14.8 million in the same period in the prior year, and net loss per share was $0.28 for the second quarter of 2023 compared to $0.50 for the corresponding prior year period. The corresponding net loss for the first half of 2023 was $19.4 million compared to a net loss of $28 million for the same period in 2022, representing a 30% decrease. cash cash equivalents restricted cash and short-term investments were 47.5 million as of june 30 2023 and with that i'll move on to provide a brief update on our product development and commercial status during q2 we accomplished several important product development initiatives including the on-time launch of three new bio xp kits bringing our total offering to 12 kits across both the 3250 and 9600 systems Of note, we completed the first commercial shipment of our BioXP Select DNA cloning kit, which enables an on-demand and automated benchtop assembly of DNA fragments via our own proprietary Gibson assembly method, or GoldenGate assembly, beginning from the customer's existing linear DNA. This product launch broadens our appeal to customers that have used GoldenGate cloning methods in their workflows, and by doing so, TELUS's Bio customers are now able to perform automated cloning at the benchtop for the two most commonly used cloning methodologies. And these kits are now available on both the 3250 and 9600 systems. Second, we launched our proprietary BioXP NGS library prep kit for plasma sequencing, which enables on-demand and automated library preparation of plasma DNA for use in next-gen sequencing applications. This kit represents a major milestone in the evolution of the BioXP system and now provides customers with a more complete solution across many synthetic biology and genomics workflows. And third, we introduced the long fragment kits on the 9600 system. With this launch, customers are now able to build 96 high-fidelity genes of up to 7.5 KB in a single, fully automated overnight run. This is a key advancement in DNA synthesis automation for longer genes, and we're pleased with the initial product launch numbers, which are being driven by adoption by customers for rapid mRNA template synthesis in precision medicine and vaccine discovery. The team here at Telesys remains focused on delivering an expanded range of differentiated products that enable researchers to optimize and accelerate discovery through push-button automation of complex molecular biology at the benchtop. We remain in the early stages of adoption in our targeted workflows and expect growth to accelerate as we move deeper into these workflows where we have disruptive technology in differentiated products that will serve to increase the value proposition of the BioXP platform. Moving on to gross margin, which continues to expand. Gross margins continue to expand as a result of mixed shift to higher margin products like the 9600 system, mRNA kits, long fragment builds, and a suite of select kits for the BioXP. We briefly mentioned a few minutes ago that we anticipate gross margins will continue to improve as we complete the vertical integration of oligo manufacturing with commitment to substantially offset our existing external supply by the end of 2023. This, when combined with our initiative to likewise vertically integrate the manufacturing activities related to the BIOXB instruments, should accrete to gross margin with full year effect of these three initiatives taking place in 2024. And finally, a brief comment on the status of our base cost structure. As mentioned earlier in the call, we are pleased with the progress the company is making in this challenging environment, and I want to highlight again that this is the fourth consecutive quarter we have successfully reduced or maintained operating expenses, while growing revenue on a year-over-year basis. As such, we continue to remain confident that our path to profitability, estimated to be the end of 2024, remains on track. In closing, I want to share that our team is very experienced operationally, strong strategically, and that we remain focused on achieving near-term commercial goals furthering new and existing partnerships, controlling costs, launching new products, and improving profit margins. And with that, I'll ask the operator to open the call for questions. Thank you.