This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk10: Welcome to TWIS Biosciences Fiscal 2021 Third 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 at that time, please press star then 1 on your touchtone telephone. As a reminder, today's conference call is being recorded. I will now turn the conference over to Angela Bidding, SVP of Corporate Affairs.
spk01: Thank you, Valerie. Good morning, everyone. I would like to thank all of you for joining us today for Twist Bioscience's conference call to review our fiscal 2021 third quarter financial results and business progress. We did issue our financial results release this morning, which is available at our website at www.twistbioscience.com. With me on today's call are Dr. Emily LaPruce, CEO and co-founder of Twist, and Jim Thorburn, CFO of Twist. Emily will begin with a review of our recent progress on TWIS businesses, Jim will report on our financial and operational performance, and Emily will come back to discuss our upcoming milestones and direction. We'll then open a call for questions. As a reminder, this call is being recorded. The audio portion will be archived in the investor section of our website and will be available for two weeks. During today's presentation, we will be making forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements generally relate to 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 uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in our press release we issued earlier today, as well as those more fully described in our financials and 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-19 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'll now turn the call over to Chief Executive Officer and Co-Founder, Emily Leproust.
spk06: Thank you, Angela, and good morning, everyone. We continued our positive momentum into the third quarter of fiscal 2021, reporting increased revenue across our businesses and solid orders moving into our final quarter of the year. We remain focused on expanding our customer base and driving increased revenue day by day across these businesses while advancing our DNA data storage commercialization plans. We reported record revenue of $35 million for the quarter, an increase of 65% year-over-year. For the second quarter in a row, we have no single customer accounting for a significant percentage of our revenue. This again indicates broad and diversified strength across our businesses. And we reported $39.1 million in orders. This is an increase of 58% over the third quarter of fiscal 2020, a strong signal for the remainder of fiscal 2021, particularly as of sorry, fiscal fourth quarter covers the seven months which are slower for European customers. Zooming out a bit to put into context both our current results and our future opportunities, we continue to believe in the promise of synthetic biology. The ecosystem of companies working on diverse applications of SynBio provides not only validation of the industry today, but also offers incredible opportunity for the future. There will be setbacks within the industry, and not every application of Symbio will work or resonate with customers. However, wherever the science and the commercial applications go, Twist provides a sensitive DNA for the research, discovery, and development, as well as even production. Essentially, we provide the picks and shovels for our customers who are bidding for gold. Whether or not they find gold, we sell the tools that enable their success. There will always be a market for the picks and shovels. Specifically for healthcare, we feel rich opportunities. At every stage of the healthcare system, from diagnosis to treatment to surveillance and prevention, SynBio has a role to play. New tests are available for a wide range of inherited diseases. We can use gene drives to eliminate mosquito-borne illnesses like malaria and dengue, and gene editing can be used to treat specific diseases. Comprehensively, We can use sensitive DNA to read a particular cancer mutation and then write DNA to deliver a personalized treatment. And this is just the tip of the iceberg of what is possible by combining sensitive biology with technology to improve healthcare. In addition to healthcare, we see our growing customer base pursuing unique applications in a wide variety of industries, including materials, chemicals, food, farming, and more. With a vision eight years ago when we funded the company that Synthetic DNA will change the world, drive new industries, and disrupt the existing market. We are delivering on the promise by building a robust and dynamic business with solid revenue growth quarter over quarter. Now, to drive into our results for the third quarter, starting within Bayou, we reported record revenue of $14.3 million with orders coming in at $15.7 million. We shipped 107,000 genes in a quarter as we continue to expand our customer base. We are actively preparing for the opening of our Factory of the Future with early production expected in mid-Canada 2022. As the Factory of the Future comes online next year, we believe it will allow us to tap into new customers who need their synthetic DNA products very quickly. An important next avenue to convert DNA makers into DNA buyers. Turning to genomics and targeted NGS, we reported $18.7 million in revenue. Orders were $18.6 million for the quarter. We closed our acquisition of iGenomics, bringing multiplex library preparation tools for NGX workflow into our folder. We believe this acquisition will accelerate conversion from SNP Macquarie to Twist plus sequencing. We're working to Twistify the product and expect to relaunch it before the end of the calendar year. In addition, we launched the SNP Diversity Panel, the Regeneron-designed product that leverages TWIS-based in-class DNA synthesis platform to cover over a million SNPs. It can be used alone or to augment our larger exam panel. This is an important panel for TWIS as it provides researchers an ethnicity-neutral goal standard rather than a typical bias of 80% Western European coverage. We have taken multiple steps to mitigate the supply chain risk we discussed last quarter, including the introduction of our enzymatic fermentation 2.0 kit. This is an all-in-one solution designed to maximize accuracy and efficiency in laboratory construction and amplification, and a nice addition to our portfolio. We launched four new positive synthetic RNA controls for new variants of COVID, including Delta and Kappa. It is important to continuously evolve this product line in tandem with new strains. We see that our sales for controls are relatively constant over time, though sales of the controls introduced early in the pandemic have been replaced by the new controls for the latest variants. Importantly, the emerging variants and escalating cases worldwide remind us that COVID remains a public health crisis. This is likely to be the case for quite some time. we will need to learn to live with COVID, which requires both diagnostic tools and effective therapeutics that addresses a wide range of variants. The surge of variants, the lack of worldwide vaccination, and a school-age population that is not eligible for vaccines makes surveillance a very important tool to monitor spread and evolution of the virus. So by a farmer, we reported $4.8 million in orders and $2 million in revenue. This was a great quarter for BioPharma. We saw a continuing increase in repeat business with many of our long-standing partners. As a reminder, our BioPharma revenue only includes a portion of the upfront or licenses associated with our partnerships, as we recognize revenue over the course of each project. In addition, orders directly convert one-to-one into revenue, most often in the following few quarters, depending on the timeline of the project. Milestones and royalties represent additional potential financial upside and are not calculated in orders or revenue. During the quarter, we find several new partners for our TWiST antibody optimization solution that utilizes fully human antibody sequences. These collaborations showcase our capabilities to improve the quality of a particular molecule. As we expand our data package with additional examples of our success interest in this particular platform for both humanization and affinity maturation. We do not typically get milestones or royalties for these collaborations, and yet we believe they are critically important as an entry to larger partnerships with key pharma and biotech companies. I am very glad to report that we now have 31 partners and 43 active programs, 26 of which have milestones and royalties associated with them. In addition, 19 programs are complete and now in the hands of our partners. In addition to the partner programs, we continue to advance our internal compounds, generating additional preclinical data. Concurrently, we continue to pursue many avenues to expedite the path for twist antibodies to reach the clinic. Moving to data storage, we continue to make solid progress as we drive towards commercialization working with a proof-of-principle chip at one-micron pitch. We are building an integrated chip that includes both the CMOS and MEMS components needed to commercialize the product for data storage. Once the integrated chip is working, our next step is to create an integrated alpha 3D chem chip, miniaturizing the feature size even further. We expect that once the alpha chip rides TINA consistently, this chip will support our first early access commercial offering. The target customers will be those who preserve cultural heritage as well as media and entertainment organization. The DNA Data Storage Alliance is now 34 months strong. There is an active website and the group released its first white paper on the state of DNA data storage in June. They meet monthly. and are making great progress in educating the larger storage community on the benefits of DNA as a storage medium. At this time, I'd like to turn the call over to Jim to review our financial results for the quarter.
spk09: All right. Thank you, Emily. As Emily noted, our results continue to demonstrate the advances we are making in executing our business strategy and investing in our platform. Revenue for the third quarter was $35 million, a new record per twist and up sequentially 12%, and year-over-year 65%. Orders were $39.1 million for the quarter, a sequential decline of 6%, and year-over-year increase of 58%. Cross-margin for the third quarter was 40%. We shipped to approximately 1,800 customers in the quarter and approximately 2,600 customers year-to-date. and we ended the quarter with cash and short-term investments of approximately $519 million. Now, I will provide more details and orders for our third quarter. NGS orders for the third quarter were $18.6 million, and that's comparable to the second fiscal quarter and 113% higher year-on-year. This reflects our larger customer base, increasing adoption, and increasing NGS applications, including liquid biopsy, diagnostics, RNA controls, and other applications, clinical applications included. During the quarter, we received orders from approximately 700 NGS customers, and the top 10 accounts placed orders of approximately 7 million, as compared to approximately 8 million for the top 10 in the previous quarter, and highlighting the continued diversification of our customer footprint in quarter three. Our pipeline for larger opportunities continues to scale, and we're now tracking 182 accounts, up from 170 we noted in our last earnings call, and 79 have adopted Twist, which is an increase from 65 last quarter. Now turning to SynBio. Our SynBio orders, which includes Gain Pool, Genes, DNA Preps, IDG Libraries, and OligoPools, were $15.7 million, in the third quarter, up from 14.9 million in June 2020, and down sequentially, primarily due to decline in industrial biotech orders. Now to BioPharma. BioPharma orders in quarter three were a record 4.8 million, as we continue to build our pipeline of customers, projects, and opportunities. And as noted earlier, we now have 31 partners with 43 active programs, and 26 of which have milestones and or royalties. Please note, we provide orders not to directly translate into revenue, but to provide a trend line for each product group. Now moving from orders to revenue. As noted earlier, revenue for the quarter was $35 million and brings our cumulative revenue for our first three quarters $94.4 million, which compares to $57.7 million for the same period in FY20. and that's approximately 64% year-over-year growth. NGS products continue to scale and climb to $18.7 million for the quarter, as compared to $9.1 million for the same quarter in the prior year. Year-over-year growth has more than doubled, and with sequential growth of 10%, this reflects expansion of our pipeline and increasing number of applications, such as liquid biopsy scaling up. Our syn-bio product revenue for the quarter is $14.3 million, and that's up sequentially from $12.9 million last quarter, and an increase from $11.8 million in Q3 FY20. Some of the highlights include shipping to approximately 1,707 bio customers in Q3, and that's up from $1,300 in the previous quarter. Our Q3 genes revenue was $11.2 million, sequentially up from $9.2 million. and up from 9.6 million in quarter three FY20. We shipped a record number of genes in the quarter, approximately 107,000, and an increase from 90,000 genes shipped in quarter two. Please note that as Ginkgo is now less than 10% of our revenue, we're no longer breaking out Ginkgo activity, and this also highlights our growth and continued success in expanding our customer base. By a farmer, Our revenue for the quarter was approximately $2 million in upfront services on our antibody project activities. Now I'll briefly cover our regional progress. Our investment in building out our international commercial organization capabilities is reflected in strong international growth this quarter. EMEA had another terrific quarter with Q3 revenue of $12.7 million versus $6.4 million in the same period last year. and now accounts for 36% of our worldwide business. APAC had a strong quarter as well. Q3 revenue is $3.1 million versus $1.2 million for the same period last year. And US revenue is $19.2 million versus $13.6 million for the same period last year. I'll now quickly give an update on our segment revenue. All segments showed strong growth. Healthcare is now our largest segment and accounts for approximately 50% of our business, with a revenue of $17.4 million in Q3 versus $8.5 million in Q3 fiscal 2020. And that's reflecting strength in our NGS. Industrial chemicals was $9.4 million in Q3 as compared to $7.5 million in Q3 FY20. Academic revenue in Q3 2020 was $7.7 million versus $4.6 million in Q3 FY20. We noted in the call last quarter, academic was continuing to recover or increase. Agriculture revenue was 0.5 million. Now, moving down to P&L, our gross margin for the quarter is approximately 14 million, or 40% of revenue, up from 39% in the prior quarter, and up from 22% in quarter three of fiscal 20. Our operating expenses for the quarter, which includes R&D and SG&E, was 54.2 million. R&D for the quarter was 19.8 million as compared to 10.4 million in the third quarter of FY20 and 15.8 million in quarter two of FY21. Over the last year, we have invested in our R&D resources and capabilities, and our headcount has increased to 189 from 125 in quarter three of fiscal 20. We're seeing the benefit of this investment in our product launches and our innovation, And consequently, the major increase in spend was compensation and also outside services, primarily our data storage technology development activities. It's worth highlighting in Q3 FY20, this included 1.4 million of grant reimbursement as compared to 0.3 million in Q3 FY21. Both are netted against our R&D spend. Just quickly on the sequential growth, the increase in spend was primarily compensation. an increase in outside services of $2.3 million, and that's for our data storage technology development activities. Our SG&A in Q3 was $34.5 million as compared to $34.3 million in Q2 and $22.5 million in Q3 FY20. Year-over-year SG&A expenses increased by approximately $12 million due to higher compensation, of approximately $7 million, which includes stock-based comp of approximately $2.7 million, and that's primarily associated with increased investment contained to build out to commercial organization. And the headcount is increased in a commercial organization to 195, and that's up from 161 in Q3 FY20. And this includes our expansion in both Asia and EMEA. In addition, in the quarter, we incurred higher outside professional services, approximately $3 million, due to audit and SOX fees as we've been continuing to invest in enhancing our control environment. Also, during the third quarter, we hired Kevin Yankton as our Chief Accounting Officer. Kevin brings significant industry experience and depth of knowledge in technical accounting matters, and I'm thrilled to have Kevin as part of our finance team. Our loss from operations before interest and taxes for the quarter was $40.2 million, which includes stock-based comp, of $9.2 million and $2.7 million depreciation. CapEx on the quarter is approximately $7 million, which brings total year-to-date CapEx to approximately $19 million. And we concluded the quarter with cash and short-term investments of approximately $519 million. As Emily highlighted, we closed our acquisition of iogenomics in June, and this reflected in our balance sheet with an additional intangible assets of approximately $17 million. and the balance is goodwill offset by a deferred tax liability. In April this year, we extended the lease of our Portland facility and started to record the amortization lease payments. Total amount in the quarter was $0.7 million, and future quarterly expenses will be approximately $1 million per lease payments. I'll provide an update to our financial guidance for fiscal 2021. As Emily noted, we're seeing strong growth in our customer base, strong market growth, and at the same time, there remains uncertainty associated with the pandemic. And we're also approaching a time of year where we have seasonality in Europe. As noted earlier, Europe is now a larger part of our revenue. However, we're increasing our revenue guidance for the year and now expect revenue in the range of 129 to 132. This is up from our prior guidance of 121 to 129, and we're estimating quarter four revenue within the range of 35 to 37.5 million. SynBio is estimated to be in the range of 54 to 56 million, and this comprehends Ginkgo revenue. NGS revenue is estimated to be in the range of 69 to 70 million, and BioPharma revenue is estimated to be approximately 6 million. Our gross margin range for the year is expected to be between 38% and 40%, as compared to 36% to 38% in our last guidance. Operating expenses, which includes R&D and SG&A, are expected to be approximately $200 million for the year, as compared to $192 million in our prior guidance. And this reflects higher stock-based comp charges, rental expenses for the factory in investment in R&D and sales and marketing organizations to support growth in FY22 and beyond. Our R&D investment for the year is approximately $70 million, up from $66 million due to outside services primarily associated with data storage technology investments. Our net loss guidance for the year is expected to be approximately $150 million as compared to $144 to $150 million in previous guidance. Stock-based comp is expected to be approximately $37 million, and depreciation is expected to be $10 million. And we anticipate CapEx to be approximately $40 million for the year. In summary, we'd like to thank all twisters for delivering another quarter of record growth. We're executing our strategy, enjoying broad demand from our customer base. Our new products are being well-received, and we're investing in our platform as we continue to tap into new revenue streams. With that, I will now turn the call back over to Emily.
spk06: Thank you, Jim. In conclusion, we continue to build our business, our customer base, and revenue stream. This quarter, we have accomplished a lot, even more than envisioned at the beginning of the year in the midst of COVID-19. As we move into the final quarter of our fiscal year, we expect to continue to take market share and team value, growing more rapidly than the market while we prepare our factor of the future for production in 2022, position us to accelerate Agro. For NGS tools, we will continue to grow revenue and increase adoption, as well as the number of large accounts we funnel into the pipeline. In addition, we plan to relaunch the IGNAMIC library prep kit to drive Smith-Aquarius conversions moving into 2022. For BioPharma, we intend to sign additional partnerships and add programs, as well as pursue opportunities to participate in a greater share of wallet and rapid clinical advancement. For the internet data storage, we will drive towards an alpha commercial product offering executed on our IRPAC contract and actively advance market adoption of this new storage medium in concert with the IAM. With that, let's open up the call for questions. Operator?
spk05: Thank you. As a reminder, to ask a question, you would need to press star then 1 on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Doug Schinkel with Cowan. Your line is now open.
spk07: Good morning, everybody, and thank you for taking my question. So on Illumina's call last night and in talking to them, I think a little bit after the call, they talked about a lot of progress they're seeing with assay development in the industry combined with you know, the fact that guidelines and the reimbursement environment coming out of the pandemic, at least we hope coming out of the pandemic, is driving increased demand for sequencing consumables within the clinical end market, especially in oncology. Based on your results in the quarter and what you talked about in terms of backlog, it sure sounds like you're seeing the same thing in your business. I just want to make sure that's the case. And if so, You know, as we think about, you know, the implied fiscal Q4 guide, you know, would you say the bias, especially when it comes to this part of the clinical business, is to the upside? And then by extension, how should we be thinking about momentum as we start to look ahead to fiscal 22?
spk06: Thanks, Doug. Maybe I'll stop and Jim can continue. So as a reminder, first of all, I totally agree with what you say. We see something similar. But as a reminder, there's kind of two stages when we work with customers in the clinical space. The first stage is in the development of the assay. And so in that stage, customers want many different panels to try different content. That's where, frankly, we shine because we can make panels very quickly and very cost effectively. And then once the customer has finalized the content that we need, then we go into a more of a scale-up where the revenues can run. And so depending on where they are in their asset development and validation, Some customers are still early in trying different content, and some customers are already in that more skilled version. And we are seeing strength in both areas. Jim, is there anything else you'd like to add?
spk09: Yeah. So, Doug, yeah, it's definitely an area we're seeing strength in. If you look at the backlog of the large NGS customers we're tracking over the pipeline, We're now tracking 182. So, you know, just look back in perspective, that's twice the number we're tracking approximately this time last year. The number of adopted means twisters has been assigned into the assay. That's now increased to 79. I mean, as opposed to about 50 this time last year. So we're seeing momentum in the back, in the pipeline. Overall, we had another strong bookings quarter. The number of larger accounts is increasing, so all the signs are we're going to have a very strong momentum building up in this area. If you look at our guidance for the year for NGS, we've upped our guidance again, and we continue to have a very strong showing, and we expect to to continue to deliver strong growth in the NGS space. Hello?
spk07: Yeah, thank you. No, that's real helpful, Jim. Thanks to both of you for all that. I mean, I think importantly, right, when you run through all those metrics, Jim, I mean, there's not a single thing trending in the wrong directions. And I say that not to be a cheerleader. I say that because as I'm thinking about the outlook for fiscal 22, there's nothing you're seeing that would suggest the building momentum is going to slow.
spk09: And what's interesting is you look at the breadth of coverage or the breadth of adoption tends to increase. I mean, it has been lumpy, has been scaled down. For the last two quarters, I mean, the top 10 have accounted for roughly about, say, 40% of our orders. And that's a really good sign. That shows that the number of customers increasing, the volumes they're placing is also increasing.
spk07: Okay. That's great. And then if I could ask, I guess, if I could ask or actually just really talk a little bit more about something else on the biopharma side. and specifically on cell lines and antibodies. Libraries of libraries is a great capability, but there does seem to be a movement towards increasingly sophisticated cell engineering efforts for antibody development and targeting. Is there any change in how you feel about your positioning in this context? If so, how does that impact existing and future partnership development efforts? And, of course, embedded in this question is really just a question about how you're thinking about your efforts to increasingly advance internal sophistication in this context. It would be great to hear about your thoughts on the competitive environment and your efforts.
spk06: Thank you, Doug. Again, I definitely agree with your assessment of the market. The great thing around cell engineering is that you need a lot of DNA and you also need DNA, custom DNA in production. If you go to a mode where every patient gets a different engineered cell, then there is payload that needs to be made for each patient. And so what that means is that typically in Symbio, we only participate in the research and development. Typically, we don't participate in the production because once you have the one genetic material, you can just propagate it by amplification. Whereas in cell engineering, again, if every patient gets their own payload, then we can participate in the production mode. And so at that point, we have the chance to not only do the R&D but also be in production. So definitely, that is an opportunity for us, especially since we have a great custom genetic material payload production system. I think that's the first thing. The second thing I'll say is around the fact that our BioPharma team is kind of like the bleeding edge of science. And we sell to our customers on the scientific prowess that we have. And what that means is that as our BioPharm team gets dragged into cell engineering, there's a very great virtual circle because the BioPharm team creates a tool that solves the customer problem. And then that tool gets, I would say, productized and scaled up and then becomes a tool that the Symbio team sells. And so for instance, we've seen that with IGG, high throughput IGG production. That was initially a capability that our BioPharm team developed on their own because they needed it. And then when we saw it could be applicable to many other customers, we prioritized it, scaled it up, moved it into regular SIEM bioproduction, and now Twist Biopharma is a customer of the tool, even though they were the original developer of it, but they became one customer, and we can sell that product to many other customers. I think something similar could happen with SIEM Engineering as our biopharma team gets uh involved in in that business tools are going to get developed and and and one of the great things we do at twist is really scale up uh industrialize those tools so uh i think we have those those two good things going for us one is we have a great platform uh and two is we have a with biopharma almost a applied science team that is a great developer of future tools that will drive future growth.
spk07: Okay. Thanks again. Have a great weekend. Thank you.
spk05: Thank you. Our next question comes from the line of Matt Sykes with Goldman Sachs. Your line is now open.
spk03: Hi. Good morning, Emily and Jim, Angela. Thanks for taking my questions. Kind of similar along the lines of Doug's question, just on the NGS business. Jim, you mentioned 182 customers you're tracking and 79 adopted customers. I'm just wondering if you could give any more color on the mix between existing versus new customers and what you're seeing in NGS and maybe the frequency and quantity at which they're ordering.
spk09: Yeah, so the mix in terms of new customers, don't break that out, but the mix in terms of new customers over the last year has certainly expanded significantly. In terms of volume, I think the thing that's very encouraging for us is the pipeline keeps increasing, but also the breadth of customer ordering keeps increasing. If you go back maybe a year ago, it tended to be rather lumpy, where the top 10 was about 60% of the orders. Now the top 10 is about 40% or less. So that's an encouraging sign. the number that keep adopting is increasing as well. We've now got 79 have adopted. That's up from 65 last quarter. And those assets are obviously going into production. So as we talked about earlier, all the signs are positive. We continue to see the overall pipeline increase. And the new applications, such as liquid biopsy, are starting to take off. Although we don't break that out, we see a number of large liquid biopsy customers working with us. And it's certainly an exciting product for us.
spk03: Great. Thanks for that call, Jim. And then just on EMEA, you had a good quarter. It sounds like momentum is building there. Just maybe any of the drivers that are driving growth in that region for EMEA?
spk09: Yeah, I mean, we saw SynBio is doing well. Yeah, what's interesting is we had a record number of gene shipments, genes business doing well. In terms of MEA, we're seeing good, strong NGS. We're seeing good, strong syn-bio orders, particularly in genes with pharma, the usual suspects of large pharma in Europe. They come in with some larger orders at the end of the March quarter, so that pick up in our revenue. What's interesting is book-to-bill in San Paolo is still above one for this quarter, so a good encouraging sign as we enter the summer period. We've got lots of strong momentum in the business. Great.
spk03: Thanks. Appreciate the call. Okay.
spk05: Thanks. Our next question comes from the line of Catherine Schultz with Bayard. Your line is now open.
spk04: Hi, congrats on the quarter and thanks for the questions. First, last quarter you mentioned you were experiencing some headwinds with a key supplier for NGS. Have those issues been resolved or are they still a bit constrained?
spk06: Thank you, Catherine, for the question. We've made very good progress on that front. um we have launched a additional kit that is actually an improved kit which enables us to move new customers to to to that to that kit so there is very little constraint for new customers for existing customers we've moved exist some existing customers to the new kit which relieves some of the pressure so we're not completely out of the the woods uh yet but um The team has done a great job to mitigate and we anticipate that we will be able to get more material from our supplier to accommodate more growth of existing customers. So we are cautiously optimistic, but that's definitely something that we keep a close watch on.
spk04: Okay, great. And how do you feel about your course in biopricing as we stand here today? Is there a path to lowering price to unlock incremental demand or the potential for dynamic pricing based on premium turnaround times?
spk06: Definitely the latter. As you know, we're making a big investment in a factor of the future in Portland. and what that does is it will give us not only more capacity but also it's going to give us the opportunity to add attractive features to our product including speed and so we believe that we will have the opportunity to have more dynamic pricing where there's a premium component available. And our cogs should be about the same. And so there's definitely an opportunity to improve margins for the section, the segment that will get faster speed.
spk04: Okay, great. Thank you.
spk05: Thank you. Our next question comes from the line of Vijay Kumar with Evercore ISI. Your line is now open.
spk08: Hey, guys. Thanks for taking my question. Maybe first one on the order trends here. It looks like Symbio orders were down sequentially. Is that just timing, sequentially flattish NGS orders? I was curious. I know last year in Q4, we had some timing elements. Is there something like timing element that happened this quarter?
spk09: Yeah, Vijay. Yeah, what's interesting is that last quarter, your point is noted on the orders for SynBio. One of our industrial biotech customers' orders were down sequentially. Also, at the end of the March quarter, we had a number of large orders from large pharma that came in the end of March. Those orders didn't come in in June, but that's just a timing issue because of where they fell at the end of March. In terms of NGS, we continue to build on the NGS business. We upped our revenue forecast, so we feel good about both SynBio and NGS. Although the orders are worth talking about, I would highlight that last quarter was the highest gene shipment ever, 107,000 genes. with a lot of momentum in genes, number of Symbio customers expanding, gene customers increased by roughly 200. We shipped to almost 1,200 gene customers this last quarter. So we're seeing good demand from our Symbio customers, and it was a little bit lumpy from the March to the June quarter.
spk08: Understood. Then, Jim, maybe... One related on the updated guidance here, so the Q4 revenues, the headline, the optics look like it's 10% growth year on year. Now, I know last year you had the pull forward of NGS customer. I think adjusting for that, I'm getting to perhaps maybe mid-30s growth for Q4. Given we've been tracking it north of 60% growth year to date, Any reason why, on an underlying basis, except one-off orders, growth should slow down here in Q4?
spk09: The only comment I would make is we've got a lot of momentum. Europe is now a larger part of our business, so we've got to take that into account. We're also at the impact of the pandemic. If you do go back to revenue this time last year, our revenue in Q4 last year was $32.4 million. If you take out the $9 million for the Regeneron order, you can see there we're down to about $23 million. So if you look at that versus our forecast of 35 to 37.5, We're up substantially. And I mean, the only calibration I would say is that we're accommodating higher European revenues this year. We've got broader customer base, number of customers keep increasing, and we're looking at the potential impact of seasonal implications in Europe. So I think it's just a matter of working through the summer period and the impact of the Delta variant right now.
spk08: Just to clarify, Jim, the Regeneron, was that six or nine? I thought for some reason I had a six as being above plan.
spk09: Yeah, so the overall Regeneron was $9 million and a quarter. I'm just clarifying how much was Regeneron last year. Um, so three would have come in last year. Correct. But six would have come in this year. Um, so I just took it out, uh, 32.4, uh, less nine, just to give you a frame of reference from Q4 last year to Q4 this year. Understood. Thanks guys. Okay.
spk05: Thank you. Our next question comes from the line of Matt LaRue with William Blair. Your line is not open.
spk02: Hi, good morning. On the SynBio side, number of customers up about 30%. Maybe just talk about where you're seeing the most interest from new customers and maybe any of the impact from the recent launch product like DNA preps, clonal ready gene fragments, IgG. To get more color there.
spk09: Yeah, it was a strong quarter for us. Genes, a strong business, had another strong quarter. The number of genes we shipped, 107,000, was a record for us. For SynBio, just take a look at the orders. The industrial chemicals was down sequentially. And I was driven by one large customer. But overall, industrial chemicals is still a very strong business for us. Healthcare was strong in the quarter. We saw a pickup in academic. And although pharma was down sequentially, that was due to a number of customers that had large orders at the end of the March quarter. We had strong pharma customers. quarter for us in bio so our focus on expanding customer base targeting large pharma is working and you can see with record gene shipments this last quarter okay and then in terms of biopharma partners there's a big step up I think you said the numbers 31 here and
spk02: you know, it seems like maybe you're seeing an inflection point. So just curious if there's anything to call out in terms of, uh, you know, some sort of network effect or, uh, the way the product's being received in the market.
spk06: Yeah, I think, uh, thanks for noticing it. A couple of things. Um, number one, uh, as we get more and more paid, uh, projects that get completion, we have more data that we can share. in an anonymized manner and so basically we have more proof points and that definitely helps to get new business. Another point is we have built a little bit the commercial team and so now we have boots on the ground in each region of US, EMEA and APAC so more people with great data.
spk02: Okay. And then, uh, speaking of data, um, sorry, I apologize. I cut you off there.
spk06: Yeah. So we're, we're seeing repeat business. And so, uh, in a way you get the, that does the flywheel effect of the repeat business is almost for free. And so you can compound that repeat business with new customer. And so that's the results of, and that's what we see.
spk02: Okay, great. And then, sorry, the last one was asking, in terms of the white paper that was up in June in terms of DNA data storage, just curious if there's anybody's feedback or reaction they've gotten from customers or potential partners, potential customers or potential partners.
spk06: I think on the potential partners, the number of people, of groups, companies in the alliance keeps growing. I'm losing track, but that means there's more and more partners available. So that's one aspect of it. We don't necessarily need partners. We should be able to be self-sufficient, but to the extent that partners accelerate, we are definitely keeping our options open. And then with the number of partners growing and with the white paper as a first step, there is, I think, the outcome that we're looking for is working, which is there is more and more realization in the minds of our customers that DNA data storage is real, DNA data storage is coming. And so there is a growing mindshare that DNA data storage is something to be on the lookout for. So I think I think our strategy of being a leader and getting that alliance started is working. I expect acceleration. We're still early in the game. But I think things are definitely going to the right direction. Thanks, Amai.
spk05: Thank you. Our last question comes from the line of Tycho Peterson with JP Morgan. Your line is now open.
spk11: Hey, thanks. I want to start with maybe a higher level question just around the competitive environment. You know, there's a wave of companies you know better than, you know, us around, you know, some are leveraging semiconductors, some are leveraging mathematics, you know, some have a decentralized benchtop approach. So as you kind of look across the landscape, can you maybe just talk about how you think about competitive dynamics, how you think about pricing going forward? to what degree maybe you're evaluating some of these technologies, that might be helpful. And customer stickiness as well, I think, is a question we tend to get a lot, too.
spk06: Yeah, no, thank you, Tycho, for the question. I think we're a technology company in a high-tech field, and so... I think we have a healthy dose of paranoia ourselves looking over our shoulders to make sure that we don't miss anything. So from that point of view, we are definitely a student of the market and we look very carefully. As you pointed out, there are different ways to slice and dice. One way is centralized versus decentralized. There's a company that's sitting now with Codec, a decentralized offer. Frankly, we never see them in the market. So I think there's plenty of fish in the water. There's plenty of needs. And I'm sure there's a need for a decentralized approach, but we don't see it at all impacting our customer base. Our customer base are interested in the high throughput, in the dynamic throughput, and then in the low cost. Another aspect is the enzymatic synthesis. And I think we've said in the past that our technology is compatible with enzymatic synthesis if and when it's better. I think all of those methods, they'll never be cheaper. And so I think we'll always have the cost advantage And so we have shown to the market that at this point we don't see a competitive pressure and frankly we're focused on executing what we are doing. I think it's ours to lose. We have our futures in our hand and our investment in the factor of the future is is a key one for us to fuel the growth and move us to the next stage.
spk11: Okay, that's helpful. And then thinking a little bit on the near term, you know, we get a number of investor questions around just the COVID opportunity. I know you're launching the RNA reference control. So are you able to just kind of think about how you're sizing that opportunity in the near term?
spk06: Yeah, so we've said that it's that it's non material. So it's less than 10% of our revenues. But you know, it's great revenue, we love it. And it's amazing margin. And we keep launching RNA controls, one because it's useful to the to the to to the the scientists and the health care system that they do testing. But what we've seen is, frankly, the revenues of our early controls have by and large disappeared, but the revenues from the new control have kept the momentum. And so it's a pretty stable revenue stream for us. Again, not material, but I'm very glad that we have it both for the contribution we provide and the revenues it brings. We have other opportunities. As you know, through our antibodies, we contribute to the development of antibodies. And I think as COVID is going to be with us for a long time, I think there is opportunity in the therapy area where there will always be people that are not vaccinated and that need therapies. And then there will always be the antibodies that are needed for testing. So we will keep pushing on the diagnostic and therapy axes as well as we think we have opportunity to out-license some of the antibodies that we have found.
spk11: Okay, that's helpful. Lastly, maybe two quick ones, unrelated, but I'll put them together in the interest of time. The iGenomics deal, can you just talk a little bit about what that brings to the NGS workflow for you guys and then separately on the factory in the future I'm wondering to what degree you can start to kind of pre-sell some of that capacity ahead of that coming online. Thanks.
spk06: Thanks. So on iGenomics as you know we've put a target that we want to convert the SNP macro market into sequencing. We think we have a unique solution there. There are proof points that it is possible. Regeneron would not have moved and if it was not cheaper to use NGS at the same time. So the proof point is there that it is cheaper. At the same time, we recognize that there's some barriers to switching. One is the content. Which content do I use? Because with Twist, it can be anything that you want, which can be a bit daunting. And so in that area, we have licensed out the original content, which is available for sale. And then the second friction to switching is around automation and being able to process thousands of samples a day. As you know, the ligation-based process of doing shearing and repair and polyattail and ligation, it's a very heavy process to automate. With the iGENOMY process, we have a PCR workflow. And so that makes the automation, I don't want to say trivial, but a lot easier. And so what iGEMIC brings us is a very easy to automate workflow that's based on PCR that will help us in that SNP to microarray conversion. And then on your second comment around pre-saling of the factor of the future capacity, I'll say probably not. We know that the demand is there, but uh it will initially be a symbio uh symbio uh product line and so in that product line people they give us a sequence they want their dna now and so there's not there's not a lot of preceding to to be done um but at the same time it's not a let's build it and they will come we are pretty we're pretty certain that there is a demand for it so uh we're not too concerned about about demand generation once the capacity is there.
spk11: Okay. Thank you. That's helpful.
spk05: Thank you. Thank you. There are no further questions at this time. I would now turn the call back to Dr. Emily Loproust for closing remarks.
spk06: Thank you very much. And thank you for joining us today. We are, as you know, at TWIST, we are bridging the promise of synthetic biology and genomics. with the reality of building an exciting business. We maintain our momentum moving into the remainder of the year. We have the team in place to foster innovation, and we hold ourselves accountable to execute aggressively. We look forward to sharing our progress with you in the months ahead, and with that, this concludes today's call. Thank you very much.
spk05: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Disclaimer