Twist Bioscience Corporation

Welcome to Twist Bioscience Fiscal 2021 Second Quarter Financial Results Conference 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 will need to press the Start and the 1 key on your touch-tone telephone. Please be advised that today's conference is being recorded. I would now like to turn the conference call over to Jim Thorburn, Chief Financial Officer.

Thank you, Operator. Good afternoon, everyone. I'd like to thank all of you for joining us today for TWIST Bioscience conference call to review our fiscal 2021 second quarter financial results and business progress. We did issue our financial results earlier this afternoon, which is available at our website at www.twistbioscience.com. With me on today's call is Dr. Emily LaProst, CEO and co-founder of TWIST. Emily will begin with a review of our recent progress and twist businesses. I will report on our financial and operational performance. And Emily will discuss our upcoming milestones and direction. We will then open the call for questions. As a reminder, this call is being recorded. The audio portion will be archived in the Investors section of our website and will be available for two weeks. During today's presentation, we will make forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements generally relate to the future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results in financial periods are subject to risks and certainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we cannot at this time predict the full extent of the impact of the COVID pandemic and any resulting business or economic impact. We disclaim any obligation to update any forward-looking statements, except as required by law. With that, I will now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily LaProste.

Thank you, Jim, and good afternoon, everyone. During the second quarter of fiscal 2021, we reported strong revenue and robust order growth with progress across all four areas of our business, Symbio, NGS, BioPharma, and data storage. While we remain in the middle of the pandemic and the landscape is evolving, we see customers returning to the lab after receiving vaccinations and incredible excitement around new applications of SynBio and genomic technologies, including drug discovery, gene editing, liquid biopsy, and minimal residual disease, or MRB. We grew revenue to $31.2 million for the quarter, an increase of 62% over the second quarter of 2020, with trends coming from both Symbio and NGS across multiple industries. Of note, no single customer accounted for a significant percentage of our revenue, indicating broad and diversified trends. In addition, we reported 41.7 million dollars in orders, an increase of 69% over the second quarter of fiscal 2020, a strong signal for the remainder of fiscal 2021. Now, I'd like to dive into the details of our four business segments. Beginning with Synthetic Biology, we reported $12.9 million in revenue, with orders coming in very strong at over $20 million for the quarter, as we continue to expand our footprint in the market. Across the Symbol business, we are diversifying our customer base and product mix, We see more customers ordering Oligo pools for gene editing, an increase in revenue for clonology gene fragments, and DNA threats, as well as happy customers for early access IGGs. We booked revenue of $2.4 million for Ginkgo in the second quarter, returning to a more regular cadence for their business. Ginkgo continues to be an important customer for Twist, and we have one year remaining on our contractors. As we continue to grow and diversify our business, we expect that we'll account for less than 10% of our revenues at some point in the near future, not because they're ordering less, but simply because our revenue from the broad base of customers continues to increase quickly. In fact, year to date, they only account for about 6% of our revenue. To support our growth, we are ramping our efforts to make our Factory of the Future in Portland Oregon operational in 2022. As the Factor of the Future comes online next year, we believe it will allow us to tap into customers who need their synthetic DNA products very quickly and important next avenue to convert DNA makers into DNA buyers. In addition, to further support our rapid growth, we exercise our right of first refusal to approximately double the Portland facility. made to plan for space approximately 18 to 24 months in advance. And this additional square footage provides us with optionality to build out manufacturing space for product lines, including DNA data storage or other emerging applications of our synthetic DNA technology platform. Looking at the competitive landscape, we are trying to do success in driving synthesis at scale. We are seeing other potential entrants. And some of you have asked about enzymatic synthesis companies specifically. And while enzymatic synthesis holds much promise for less expensive and longer beans, there is still a long way to go to make this technology commercially scalable. That said, we do believe that it is a matter of if, not when. So let me address what I believe an enzymatic company needs in order to be successful in our market segments of gene synthesis and NGR. For gene synthesis and NGS, the method must be high-quality and able to make long pieces of DNA beginning with low-cost building blocks and error rates that are significantly lower than phosphorylated chemistry. There needs to be a high speed of incorporation of bases and no sequence-specific error modes. To be truly green, there should be no organic solvents in the production of building blocks or their assemblies. It is critical that but the method incorporates quality control and even more importantly, biosecurity screening of all sequences. Indeed, the customer should be able to get a final DNA needed without needing to do the onerous QC themselves. This is a tall order. That's because gene synthesis requires delivering the perfect DNA. And so high cost, low quality DNA just won't get it. For the near term, we believe that classic phosphorylated chemistry remains the sole method of scalable DNA synthesis for the applications that we serve. Turning to Genomics and targeted MDS, we reported $17 million in revenue and $18.6 million in order for the quarter. We continue to work with an increasing number of customers, adapting our technology into their products, with several key customer wins. We announced three new customers specific to APEC, A geography we believe holds untapped potential for MGS solutions. We launched our MGS methylation detection system in February to detect varied methylation patterns that play a key role in many biological processes, including cancer. This world offers customers a complete workflow solution that can be quickly customized for their specific needs. It includes near-end line-by-lap sample preparation together with our packet analysis system for a robust end-to-end workflow. Already, we are hearing positive results from customers. We are committed to developing the most robust, flexible solutions for our customers to ensure that they can run samples they want with the greatest uniformity. In addition to our partnerships with NAB for our methodization system, We announced a collaboration with Watchmaker Genomics, an innovative company applying advanced enzyme engineering to new applications of genomics. By having different partners for laboratory preparation, we can create tailor-made solutions for our customers for a wide array of applications, while at the same time mitigating supply chain dependencies. Second quarter, together with Biosha, we received emergency use authorization from the FDA for our SARS-CoV-2 next-generation sequencing assay. Our assay has the ability to analyze the entire RNA viral sequence of SARS-CoV-2 to determine the presence or absence of the virus, as well as a researchers-only report that analyzes the sequence to detect genetic variants and lineages of SARS-CoV-2. While we are 15 months into the pandemic, we believe SARS-CoV-2 will remain with us for some time. As new variants continue to accumulate, we believe that it would be very important to enable our customers to routinely sequence clinical samples and track variants as they emerge. Importantly, TWIST as an organization learned a great deal by applying for and receiving the authorization, validating our creative management system, and building relationships with the FDA that will guide product development across our businesses. We also launched several new synthetic RNA controls for new variants of COVID, first identified in Brazil and South Africa. Revenue from controls, while not material, has been consistent, and so many customers coming to twist to buy controls return to buy additional products. Often, our NGS custom panels, so this is a great source of new customer force. For biopharma, We reported $2.6 million in order and $1.3 million in revenue. Revenue only includes a portion of the upfront or license fees associated with our partnerships, as we recognize revenue over the course of each project. We announced partnerships with Stanford's Innovative Medicines Accelerator, as well as KeoEye Curing and Pure Biologics, and we now have 21 partners, many of whom have multiple programs ongoing at Twist. Currently, we are advancing 25 active programs, 17 of which have milestones and royalties associated with them. An additional nine programs are complete and now in the hands of our customers. We published our first peer-reviewed paper on Twist Generated Compounds for QMP1R this quarter, a significant accomplishment for the bioformatting As many of you may know, GLP-1R is a hard-to-go target, and we identified our compound from our GPCR library, and this was the first internal target we had then to demonstrate proof of concept for a bioinformal vertical. The publication details our positive preclinical results for a panel of 13 high-affinity GLP-1R targeting antagonist antibodies generated from our GPCR library. as well as an agonist antibody, TB59-2. These data demonstrate the power of our antibody libraries to generate potent antibodies in a wide range of clinical indications. For Hedera 2a, our top leads have been tested in a humanized tumor model. We found that our antibodies increased T-cell proliferation in the tumor, and as a result, tumor volume decreased. We are eager to see a TWIS compound meet clinical trials and are pursuing many paths forward. We are working with multiple partners in multiple programs as well as selecting our own antibodies to advance through a preclinical release stage for out-licensing. We have many shots on goal. During the quarter, we exercised our options to purchase all rights to our GPCR library and TWIS antibody optimization software. both developed in collaboration with Distributed Bio. We began working with Distributed Bio back in 2016, before Twilist Biopharma existed. We now make four to five libraries each month using our silicon-based platform, and have created a robust library of libraries to benefit both our partners and our internal NWD discovery efforts. Moving to data storage, We continue to make solid progress on our engineering roadmap, driving towards $100 per terabyte. We shared last quarter that we had the one-micron chip in hand. This quarter, our team was able to synthesize 200 base oligonucleotides in 300-millimeter wells on this one-micron chip. This is a significant engineering accomplishment and further de-risks our approach to DNA data storage. While there is still more work to do on the 1-micron chip, this is truly an exciting attempt and we remain encouraged and engaged in the continued drive for increased density. The DNA Data Storage Alliance is now 29 members strong, and soon we'll be releasing a white paper on the state of DNA data storage as well as opportunities ahead. As we talk to potential users of data storage, several factors are clear. First, is a growing appreciation for an alternative method of storage. Second, initially DNA will be used as a supplemental data storage system to augment current storage capabilities. Working through the alliance, we will ensure that all IT leaders, not just the visionary ones, are ready to conduct pilot studies when the solution is available. And third, we found that cultural preservation including TV and movie production archives, and industrial data storage required for regulatory reasons will be the first applications of DNA data storage. This is a very large market, and many other opportunities quickly will be followed. At this time, I'd like to turn the call over to Jim to review our financial results for the quarter.