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spk06: I have financed this fiscal 2022 for financial results conference call. At this time, all participants are in a listening mode. After the speaker's presentation, there will be an answer session. To ask the question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to turn the conference over to Angela Bidding, SVP of Corporate Affairs and Chief ESG Officer.
spk01: Thank you, Operator. 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 2022 first quarter financial results and business progress. We issued our financial results this morning, which is available at our website, www.twistbioscience.com. With me on today's call are Dr. Emily LaCroost, CEO and co-founder of TWIST, and Jim Thorburn, CFO of TWIST. Emily will begin with a review of our recent progress on Twist Businesses. Jim will report on our financial and operational performance. Emily will come back to discuss our upcoming milestones and directions, and we will then open the call for questions. We would ask that you limit your questions to a maximum of two, and then re-queue as a courtesy to others on the call. 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 security 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 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 ongoing 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 will now turn the call over to our chief executive officer and co-founder, Dr. Emily Leproust.
spk09: Thank you, Angela, and good morning, everyone. We continued our momentum through the third quarter of fiscal 2022, reporting a record revenue of $42 million and almost $50 million in order, setting the stage for robust growth in 2022. Our investment in new products, biopharma and data storage, continues to accelerate innovation and creates upside opportunities in the medium term. Beginning with Symbio, I'm pleased to report record revenue of $18 million and orders of $22.2 million. We shipped 125,000 jeans in a quarter, a new record for Twist, and have increased our jean capacity to 65,000 jeans per month, with an eye to have 90,000 jeans per month in the near future. The increased capacity allows us to accommodate both the ongoing and surge demand as we work to bring the factor of the future online. For NGS, revenues and orders for the quarter were $19.2 million and $21.8 million, respectively. NGS revenue and orders were impacted by the timing of the early days, as well as some customer labs impacted by Omicron, with strong growth projected for the remainder of fiscal 2022. We have a great project offering and market that I expect to grow as our customer product lines moves from development to commercialization. To give you a bit more color, I'd like to dive into two opportunities we see for 2002 and beyond in MGS. The first is liquid biopsy. The market that BCC research estimates would be $19.6 billion by 2025. While we do not develop liquid biopsy tests ourselves, we estimate that the DNA portion is approximately 5% to 10% of the total market, adding one to two billion dollars of serviceable market to Twist. Our deep-read biopsy customers are at various stages of development, both in their own drive towards commercialization and in their use of Twist products. Some are just starting to create tests and piloting our products. Others have completed the design and product specifications, including our MGS products and are conducting clinical studies. And a few are already commercialized. At the clinical trial and commercial stages, each patient's samples processed used some to his DNA. So as they advance in their drive towards commercialization and ramp their commercial test volume, our NGS revenue increases proportionally. Once the equipped BFC customer receives clearance from the U.S. Food and Drug Administration, the components of the test are set for the foreseeable future, and changing those components is difficult. As a result, These customers are extremely sticky. To get a bit more granular, we are currently working with more than 20 companies developing liquid biopsy tests. Many of these customers use our fully inclusive workflow to detect methylation in the assays. In addition, we introduced circulating tumor DNA reference, which may play an important role in tuning the accuracy of cancer detection. We believe that developing and standardizing this ultra-sensitive yet accurate CCDNA-based assays is paramount to ensure the resulting analysis from the test informs clinical decisions reliably. As the tests come to market, and as the reimbursement landscape becomes clear, liquid biopsy customers will present a tremendous supply of waste. Another key market where we see a significant opportunity is in minimal residual disease, or MRD. MRD assays are used to determine if cancer treatments are working, to check for recurrence of cancer, and to guide further treatment plans. MRD assays have primarily been used for blood cancer, but there are many tests in development for other oncology applications. There are three ways that we work with customers in this application. The first is through low-pass sequencing, where we provide elaborate preparation. This is straightforward, and again, every patient sample needs elaborate preparation. The second is where there is a universal panel for all patients, similar to liquid biopsy assay. The third way we can work with MRB customers is a scenario where every patient gets their own bespoke panel. While it is difficult for others to offer a bespoke panel that is cost-effective for patients, custom panels account for 80% of our MGS revenue. So custom is something we know well and do well at a reasonable cost. These are just two opportunities we see for growth in 2022 and beyond. In addition, we've launched several products in the December and January timeframe that we believe will contribute meaningfully to growth, including XM22, with industry-leading content and performance. The 96-place laboratory preparation kit, a twistified version of the product we acquired from iGenomics that we believe will drive the conversion of SNP macroarray to twist plus nomadic, and a robust canine exonome, panel that was designed with the Booth Institute with applications not only in veterinary medicine, but also human health as well for cancer, heart disease, rheumatoid disease, and autoimmune conditions. We also launched a micron-bionic control in 14 days, a record time and critically important for the research community as COVID continues to evolve. Importantly, We offer three separate Omicron controls, which include the stealth Omicron variant seen most recently in the United States and earlier in other geographies. Moving to BioPharma, we closed the acquisition of Adveris in early December, and the integration is going well. From an external perspective, we expect them to continue to operate relatively separately and collaboratively through the end of Canada 2022, which will allow for a thoughtful and non-destructive integration as well as account for a specific revenue target earn out at that point in time. Moving to 2023, we expect a combined offering will be the most comprehensive discovery platform in the industry with synthetic, in vivo, and AI-based tools to identify and optimize the best biologics against a wide range of targets. We're reported by a formal revenue of $4.8 million for the quarter and $5.6 million in orders, which includes one month of adveris. In the first quarter, we added eight new partners for Twist by a Farmer with 42 partners in total. We initiated 21 new programs with 52 active programs ongoing at the end of the first quarter. We completed seven programs during the quarter for a total of 39 completed programs for Twist by a Farmer. Of our 91 total active and completed programs, 50 have milestones and royalties, an increase of 15 programs with downstream economics, during the third quarter of fiscal 2022. ADVERIS has 72 projects underway, which, as a reminder, are fee-for-service and typically take three to six months to complete. We recently announced a collaboration with APCAN for discovery around antibodies for diagnostic and research applications. This is a robust partnership that provides license, fees, and commercial milestone payments for SWIFT. We also announced collaborations with SOCI at Paris for antibody discovery in the GPCR space, and Artisan for discovery of next-generation cell therapeutics. In addition to our work for partners, we published data detailing our COVID antibody development in the peer-reviewed journal MADS, and Revelob Therapeutics published a preprint paper showing that our bispecific antibody license from us, RBT0813, neutralizes both Omicron and Delta variants of SARS-CoV-2. This buy-specific hits all non-buyers of concern today, and Revela expects to submit an IND to begin clinical studies in the first half of calendar 2022. Recall that Revela was launched by TWIST in November 2021 and licensed the TWIST by a firm that discovered COVID antibodies, including RBK0813. We are eligible to receive success-based milestone payments spanning over $100 million for the achievement of key development, regulatory, and commercial milestones. as well as meet single-digit royalties on any future net sales of RB2-0813. We are committed to provide up to $10 million in emission funding. In addition, Revela can enter into up to five additional resale programs directed at non-COVID targets over the course of the next four years, with each program subject to additional milestone payments and royalties for free. For data storage, We know that today the amount of data storage is increasing dramatically, with the archival market expected to reach 60 to 80% of the total storage market. Last year, about one zettabyte of enterprise data storage was shipped, and estimates show that by 2030, the amount of enterprise data storage shipped is expected to grow to 12 to 32 zettabytes. According to these estimates, in this decade, there will be 10 to 30 times growth in the amount of data storage needed. The current technology to store data, hard drive, flash, and tape are just not able to scale to these levels. And there's a huge zone of potential insufficiency, and in our view, DNA is the only technology that holds promise to scale to its future demand. In January, we announced our third solution would be a sensory archive, enabling storage of data for 100 years without any migration, energy, or maintenance needed. This product is not available from any provider, and archived data currently needs to be migrated on a five to seven year time frame over and over. Moving to the technology roadmap, we expect that our next silicon chip, the HAPA chip, will be a revenue generating fortress. This chip moves us into the terabyte scale of DNA storage capability with further cost reduction as we develop future chips. For the century archive, We intend to offer storage as a service, and we will share additional details as we refine our product performance. Looking further into the future, as we always think long-term, even as we execute day by day, we know that hyperscalers need an enterprise class of storage, and that it will have to run within their facility. For this market, they cannot use hazardous chemicals, and will likely need enzymatic synthesis. When we began looking into the available options for enzymatic synthesis, we found that there are hurdles to overcome. Besides error rate and length, which are not yet optimized, the main issue is that enzymatic synthesis offerings today are very expensive. Indeed, although our approaches to make DNA using enzymes are about 1,000 times more expensive than buying oligos on our website, there are two reasons for that high cost. The first is that enzymatic synthesis requires nucleoside triphosphate, which is a very expensive reagent. The second issue is a biological issue where Michaelis constant tells us that the high concentration of NTP is required for each base to be added using enzymatic synthesis. So not only are the NTPs expensive, but a large excess of them is needed. To navigate this challenge, our scientists developed a chemistry where we tether one NTP with one enzyme, which massively reduces the cost. And now we have a low-cost enzymatic synthesis method, but there is an additional problem created by linking the NTP to the enzyme that we need to navigate. And that problem is that a linker that tethered the NTP to the enzyme typically creates a scar when the ACGOT is introduced. Over time, as the scars accumulate, the enzyme can't hide more nucleotides and DNA synthesis stops, limiting the length of the oligonucleotide. In addition, the scars make the DNA unnatural, which may create issues in downstream applications. At WIST, we are overcoming this challenge by developing a unique and innovative way to tether, which provides a scarless DNA that is identical to natural DNA. So now we have an enzymatic synthesis process that is low cost, scarless, and finally, we have the ability to develop and perfect the enzyme quickly because we have built an NGS-based platform to screen hundreds of thousands of mutants at the same time. That means that we can engineer accuracy faster and we can cover the IT space more effectively because we have already tested more sequences. While we are quite excited about our new approach, today we use chemical synthesis for all of our products, and we do not see that changing anytime soon. We believe chemical synthesis will remain instrumental as we continue to ship billions of bases a year to thousands of customers. However, we also believe enzymatic synthesis will be useful in enterprise offering for data storage, in creating new product lines for our core business, like cell-based synthesis of specimen DNA, I mean, decentralized DNA synthesis. But we do not have to develop all of those applications ourselves. We are happy to OEM our chemistry. An important thing to know about race is that as we grow, we will not lose our spirit of innovation. We are students of the market. We will always be executing what we work to perfect our next innovations to continue to write the future. Enzymatic synthesis is a perfect example of our culture of innovation and execution. And now, I'd like to turn it over to Jim to review our financials.
spk07: All right. Thank you, Emily. We started off fiscal 22 on a strong note as we continued to scale our platform. Revenue for quarter one was $42 million, which is sequential growth of 11% and year-over-year growth of 49%. Orders were $49.6 million for the quarter, a sequential increase of 10% and 48% year-over-year growth. Gross margin for the first quarter is 35.6%, and we shipped to approximately 1,800 customers for the quarter, and that's up from 1,500 in the first quarter of fiscal 21. And we ended the quarter with cash and investments for approximately $409 million. Now I'll give some more color and orders. NGS orders for the first quarter were $21.8 million, which is an increase of 28% year over year. And during the quarter, we received orders from approximately 700 NGS customers, and the top 10 accounts placed orders for approximately $7 million, as compared to approximately $10 million for the top 10 in the previous quarter, confirming we're seeing continued diversification of our customer footprint. Our pipeline for larger opportunities continues to scale, and we're now tracking 225 accounts, up from 199 we noted in our last earnings column, In quarter one, 96 have adopted TWIST, and that's an increase from 88 last quarter. This growth reinforces the robust and growing market opportunity, our expanding portfolio, investments in our commercial organization, expanding our customer base with increased adoption of NGS applications, including liquid biopsy, MRD, diagnostics, RNA controls, and clinical applications. Now turning to SynBio. We saw robust growth in our SINBio orders, which includes genes, DNA preps, IgG, libase, and oligopolies. Orders rose to 22.2 million in the first quarter, up from 20.1 million in the fourth quarter of fiscal 21. This was sequential growth of 10% and up approximately 40% from 15.9 million in the first quarter of fiscal 21. The major contributor to growth is the industrial segment sector, though healthcare and academia were also very strong in the quarter. Now to biopharma. We continue to scale our biopharma business, including at Barris, as orders rose to $5.6 million for the first quarter, and that's up from $3.4 million in Q4 compared to $1 million in the first quarter of fiscal 21. For a twist biopharma antibody platform, we have 42 partners. with 52 active programs, and now have 50 milestone and royalty programs, and that's up from 35 in the last quarter. Please note, orders may not translate into revenue, but provide a trend line for each product group. Now moving from orders to revenue. Revenue for the first quarter was 42 million, representing approximately 49% growth from 28.2 million in the first quarter of fiscal 21. NGS product revenue was 19.2 million in the first quarter of 22, and that's 23% growth year over year. In quarter one, fiscal 22, top 20 customers accounted for approximately 44% of our NGS revenue. Our Synbio product revenue for the quarter was approximately 18 million, up from 13.9 million in the same quarter of fiscal 21. Some of the highlights include shipping to approximately 1,300 Sin Bio customers in the quarter. Jeans revenue was $13.5 million, up from $8.9 million in the first quarter of fiscal 21. We shipped approximately 125,000 jeans. Now to buy a farmer, our revenue for the quarter was approximately $4.8 million, which includes one month of Averis. I will now cover our revenue breakdown by industry. Healthcare revenue in quarter one was 21 million, up from 16 million in the first quarter of fiscal 21. Industrial chemicals was 12.5 million versus 7.1 million in the first quarter of fiscal 21. Even though we're operating in a pandemic where many academic labs were impacted globally, our academic revenue was 7.9 million versus 4.9 million in Q1 21, reflecting our continued focus on growing the long tail. And agricultural revenue was 0.6 million versus 0.2 million in the first quarter of fiscal 21. I will now briefly cover our regional progress for first quarter fiscal 22. Our investment in building out our global commercial organization is reflected in the strong international growth. EMEA had a great start to the year with first quarter revenue of 15.4 million versus 9.1 million in the first quarter of fiscal 21. APAC had a terrific quarter one with a revenue of $4 million up from $1.8 million from the first quarter of fiscal 21. U.S., which includes Americas, revenue was $22.6 million in the first quarter of fiscal 22 versus $17.3 million the same period of fiscal 21. Now moving down the P&L, our gross margin for the quarter was approximately $15 million or 35.6% of revenue versus 35.5% in quarter one fiscal 21. Our gross margin this quarter was influenced by a combination of the production challenges we highlighted in our previous call and higher mix of sin bioproducts. Now to operating expenses. Our quarter one operating expense, which includes R&D, SG&A, and change in fair value of acquisitions, was approximately $71 million. R&D for the quarter was $22.6 million, an increase from $19.4 million in quarter four primarily due to increased biopharma spend associated with Revolar and the Adveris acquisition. Our SG&A costs in quarter one was $51.1 million as compared to $38.2 million in quarter four due to increase in stock-based comp of approximately $9 million. Change in fair value contingent considerations and damage to holdbacks for the quarter resulted in a gain of $2.8 million. Stock-based compensation for the quarter was $18.1 million up from $9.2 million in Q4 due to a combination of annual stock grants and the various acquisitions. Depreciation was $2.8 million for Q1. Our net loss before tax was approximately $56 million as compared to $40.9 million for Q4, primarily due to the aforementioned increases in operating expenses, primarily stock-based compensation and costs associated with reveler. In Q1, we recorded a tax gain of $10 million associated with the Averis transaction, which brings our loss after tax to approximately $46 million. CapEx for the quarter is $22 million, mostly associated with our factory-to-the-future investments. Given the global supply chain challenges, we have strategically increased our inventory to $40 million compared to $32 million at the end of fiscal 2021. We ended the quarter with cash and investments of approximately $409 million. I will now provide updated financial guidance for fiscal 22. As we noted, quarter one bookings were strong and we were optimistic on our opportunities. In the same time, there remains uncertainty associated with the pandemic. For the year 22, we're increasing our revenue guidance to $189 to $198 million, and that's up from the previous guidance of $183 to $193 million. Symbio revenue is estimated to be in the range of $70 to $72 million compared to $67 to $70 million in our previous guidance. NGS revenue is estimated to be in the range of $94 to $96 million as we're projecting strong second half based on our increased pipeline production scaling. Biopharma revenue, including the bearer's acquisition, is estimated to be in the range of approximately $25 to $30 million as compared to previous guidance of $22 to $27 million. There is no change in our projected FY22 gross margin guidance in the range of 35 to 37%, which reflects costs associated with our Portland grant. Excluding these costs, gross margin guidance would be 42 to 44%. Operating expenses. which includes R&D and SG&A, are expected to be approximately $335 million for the year, including $130 million in R&D expenses, as we previously guided. Our net loss guidance for the year will be approximately $260 million. Stock-based compensation for the year is projected to be approximately $74 million. This is an increase from our last projection of $47 million, primarily due to the various acquisitions. Depreciation is projected to be $13 million, and projected CapEx for FY22 continues to be $80 to $90 million, including $75 million for a factory and future investment in the Portland area. In summary, we'd like to welcome all the various team aboard and thank all the twisters for delivering another terrific quarter of record growth as we continue to execute our strategy. With that, I'll turn the call back to Emily.
spk09: Thank you, Jim. Looking ahead, we have amazing opportunities across each area of our business to both grow our revenue and expand the markets we serve. In synthetic biology, we plan to continue to build our business and expand our customer base. We remain focused on bringing up the factor of the future to reduce overall turnaround time, especially for jeans. And with the additional space that we have, we expect to be able to launch new products enabling us to address new markets with some of those products offering the potential of increased margins. In NGS, we believe our serviceable market is growing and could expand significantly as liquid biopsy and MRD assays from our customers reach the commercial marketplace, which we expect will expand our revenue base accordingly. In addition, we aim to own the space between the sample and the sequencer. We'll continue to grow our customer base in liquid biopsy and MRD, as well as adding R&A and laboratory preparation products and driving SNP macro-reconvulsions, now that we have launched the 96 Plex laboratory prep kit. And by far, subject to regulatory approval, we expect to have the first TWIS discovered and established in the clinic this year through Revela. And with the integration of TWIS and ADVERIS, we believe that we have a greater possibility to ramp proven use and monetize our platforms through returning customers, cross-selling, additional partnerships, out-licensing, and advancing our internal pipeline. In data storage, we have a roadmap to reach the terabyte scale of DNA storage offering with our first alpha chip. We plan to introduce a century archive solution and will work to continue to drive down the cost of storage significantly. Finally, I'd like to mention that we issued our first TSD report at the end of January, and you can find this on our website. We're extremely pleased to share our results in this front. With that, let's open up the call for questions. Operator?
spk06: Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. We ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Catherine Schulte with Baird. Your line is open.
spk04: Hi, everyone. Thanks for the questions. I guess first, maybe on the enzymatic synthesis platform, can you just talk through the path forward there? You know, what development milestones or updates should we be expecting to hear from you in 2022? And it sounds like you might not be set on developing your own instrument there, but rather work with a partner or license out your chemistry. Now, at what point do you think the chemistry will be in a state that's ready to start potential partner conversations?
spk09: Thank you, Catherine, for the question. The impetus initially for the enzymatic synthesis development was our roadmap for data storage. The first product that we're going to launch is a century archive that will be run as a storage as a service. However, in our roadmap in future generation, we know that we need to develop an enterprise version of our data storage and that enterprise would be used as hyperscalers in their facilities, and there we won't be able to use the ARCH chemicals of chemical synthesis. Therefore, for the hyperscalers and the enterprise data storage, we need enzymatic synthesis, and there we probably will do the development. So we will develop... our own hardware that works for asthmatic synthesis in a decentralized manner, at least for data storage. We have not closed the door for other markets to do it ourselves. However, we do believe in being disciplined and focused on what we do. And so that means that for other markets, it could be done with partners, or it could be ourselves. So we have not closed any doors. We have created an option IDC. But at the same time, we have a very strong internal roadmap for SYNBio and NGS. And as we develop the enzymatic synthesis approach and we get to the length and error rate that we want, as we launch new products, Internally, we'll have a choice, and at the time, we'll choose whichever is the best technology to produce the product at the time.
spk04: Okay, got it. And then maybe for NGS, we get a lot of questions on pricing variation for that product, and you talked a lot about liquid biopsy today. Is there, you know, a different average pricing when it comes to liquid biopsy customers? You know, how much can pricing per sample vary for, you know, a panel versus an exome and so on? And then do your methylation panels have different pricing?
spk09: So, yes, pricing is a little bit complex in NGS just because there are many different combinations of the products. In general, the more probes in the panel, the more expensive it gets. And so if you have a panel that has a million probes to have very wide analysis of different genes, that would be more expensive than if you have a narrow panel that has 50,000 probes. And then the pricing per sample goes down as the number of samples goes up. And so if you buy a panel that will capture 1,000 patients, the per sample price would be higher than if it's an order that will be able to capture a million samples or more. So those are the two components in addition. So that's for the DNA. In addition, there is a library prep cost. And so depending on whether the customer chooses Twist for the adapters, the blockers, the buffers, the beads, and the enzyme, there is additional cost. In general, we tend to incentivize customers to bundle. and so that enables us to drive revenue up and margin. So, yes, it is a relatively complex matrix. That being said, in general, our aim is that the part that TWIST collects from a liquid biopsy revenue point of view is about 5% to 10%. of what the liquid biopsy market is. That gives you a little bit of a sense of the revenue that we are targeting per patient in liquid biopsy.
spk06: Thank you. Our next question comes from Tycho Peterson with JP Morgan. Your line is open.
spk11: Hi, guys. This is Casey. I'm for Tycho. So it looks like EMEA had a strong quarter of growth. Can you talk a little bit about where the strength came from in that region and, you know, if the growth there is sustainable?
spk07: Sorry, I was in mute there. Yeah, so, sorry, I just missed your question there. The line went fuzzy on me. So you can repeat the question.
spk11: Yeah, yeah. So EMEA looks like it had a strong quarter growth. Can you talk a little bit about where the strength came from in that region and if the growth is sustainable?
spk07: Yeah, no, the growth, EMEA continues to have sequential growth every quarter. We've invested heavily in a commercial organization, EMEA, delivering on SynBio, large pharma. We're seeing opportunity on biopharma antibodies as well. Plus, EMEA is doing exceptionally well in NGS. We're seeing across all key countries, and that would be Germany. You see it in the Netherlands. You see it in the Nordics. You see it in the UK as well. So there's a couple of drivers. It's product quality, the strong customer support, and the commercial capabilities of our team in Europe. really pleased with what's happening in Europe, and we see significant opportunity to continue our growth in Europe.
spk11: Gotcha. And then just on the cash burn guide here, are there any supply chain or inflationary headwinds that are baked in there? And, you know, maybe what are some sources of upside here as we progress through the year?
spk07: Thank you. Yeah, the supply chain has gone well. We've increased our inventory. We continue to manage that very aggressively. We did a fantastic operations and purchasing team that worked well with our partners. I mean, obviously, it's a lot of work keeping on top of it. But if we go back to the beginning of the pandemic, we continue to invest in our inventory. We now increase that to 40 million. In terms of going forward, we see plenty of opportunity for up-sites and bio is extremely strong. As Emily's highlighted, we're seeing opportunities in MGS, liquid biopsy. We continue to see the number of large MGS customers. The pipeline continues to grow. And we continue to see significant growth opportunities, not only in EMEA, but we see opportunities in APAC. And then we get the agronomics upside coming as we see more opportunity from microwave to MGS conversion. Averis is doing extremely well. The team there is fantastic. We had a good first month. The squash is looking good, and we're very optimistic and bullish on the outlook there.
spk06: Thank you. Our next question comes from Punit Sudha with SVB Learing. Your line is open.
spk05: Yeah, hi, Emily, Jim. Thanks for taking the questions. So first one is really around the quarter. I mean, you delivered strongly in SynBio, but, you know, NGS was impacted by Omicron, as you mentioned. So I just want to make sure that the production challenges that you had for the quarter were all, for the last quarter, are all resolved, if you could confirm that. And, you know, if you can clarify, what was the catch-up in SynBio there? And what are you currently seeing among the labs, especially the academic labs returning back and overall NGS volumes currently? And then I have a follow-up on guidance.
spk09: Maybe I'll start on the production issue and Jim can answer the NGS part of the question. So, yes, the production issue is behind us. in terms of identification, resolution of the problem, and shipping out all the backlog that may have been created by that production issue. Again, customers never got any bad products because that was taught at QC, that some of the genes we had to remake, and so some customers experienced some delay. Again, a clarification, the production issue was only limited to gene production, so it did not impact NGS at all. And so we're quite pleased with the number of genes that we shipped last quarter, 125,000 genes. That's a record. And we have strong orders in symbiote.
spk07: Yeah, so at Puneet, you know, orders were very strong in SynBio. We had 22 million orders in SynBio up sequentially. We're seeing strong demand from an increasing customer base. So we've got wind in our sails in SynBio. In terms of NGS, we had booked an order of almost 22 million in the quarter. And that's flat with quarter four. Our quarter port, September quarter, tends to be strong in bookings on NGS. We feel very good about the outlook for NGS in terms of $94 to $96 million. As I said, the number of customers, large customers, continues to scale. Adoption increases. We're continuing to launch more products. We get the hydronomics opportunity coming ahead. So I think the The setup for NGS looks very good. Plus, you go back to SynBio, we had a very strong gene shipment. We shipped 125,000 genes. That's one of our strongest quarters ever. We've got the production issues behind us. We've increased capacity in genes. We're getting set up to open up Portland in July. That also gives us... more capability and positions to have a really strong fiscal 23.
spk05: Okay, that's great. And then, you know, on the guide, you know, I appreciate the guide raise that appears to be about six and a half million at the midpoint, including Averis. And it seems that about half of that is on SynBio, other half is on Biopharma. Your NGS guide remained the same. So just given the A number of comments that you've made throughout the call for liquid biopsy, MRD, a number of other products. Overall, just given the momentum you're sort of seeing in NGS, the NGS guide, is this still flat for the year? So I just wanted to clarify what I'm missing there and just wanted to make sure that we're capturing that. Is this just sort of a near-term conservatism with Omicron? We're just emerging out of that, or is there more to this? And if you could clarify, thanks.
spk07: So a couple of points. Near-term conservatism. Secondly, we're getting set up for a very strong second half on NGS. And that's driven by adoption, driven by the growth in the customer base, and just our outlook in terms of where we see the market going. So if you just step back and look at the numbers, we built about 19 million in the first quarter. as we progress through quarter three and quarter four.
spk06: Thank you. Our next question comes from Luke Sergott with Barclays. Your line is open.
spk10: Morning, everybody. Thanks for the question. Excuse me. I just wanted to get a clarification to get an idea of how you're thinking about when you're going from you were at 40,000 genes per month, now you're at 65, and then you're going to 90 in the near future. Can you give us a So how should we think about that rolling through the revenue? I mean, you're not seeing that type of step up implied in the guide, just kind of the dynamics there. And then if you could give any clarification on near future, that'd be helpful.
spk09: Yeah, no, thank you, Luke. That's a great question. And so the emphasis for the increased capacity is to be able to capture search demand. So we have two types of customers. We have the big accounts, and then we have the long tail of a few genes at a time. And so last quarter, we had 125,000 gene shifts. And so in In theory, with 45,000 genes capacity per month, we can do it. However, depending on when those genes come in, we also need to be able to capture the search demand. And so by increasing the capacity, that means that genes never have to wait. As soon as they hit the website proof the next day, they can go online. So this is the first impetus, the search demand. And then the second is give us a little bit of protection from what happened in August and in a small way in October where we had a problem in the fab. And when the fab is full and you have to remake some jeans, it's very hard to catch up because the fab is full, you have more jeans coming in, you have to remake. And so it takes a lot longer to recover from something that's relatively... It's simple to fix. And so by having extra capacity, if we have an issue in a fab where we are done for a day or two, it becomes completely transparent to the customer because we have additional capacity to just catch up. So that's really the impetus for it. And over time, as we keep delivering, we capture more and more of the market. We're growing about twice the rate of the market. So we are going to grow into that capacity. And so the capacity of the factor of the future is going to be important for us. And in addition, in the factor of the future, we'll have new product features such as increased speed that will enable us to increase the price of the product at the same cost and so get better margin. So that's really why we're doing it.
spk10: Okay, that's helpful. And then lastly, you guys have been signing a bunch of deals. You did one with APCAM most recently. You have something with Artisan to do next-generation cell therapy. So can you give us a sense of or update us on any expected milestones, kind of the pacing throughout the year, anything from any of the biopharma partnerships? other than, you know, I understand the guide, but any particular programs that stand out that we need to keep up on?
spk09: A big focus of ours is from those deals, we get upfront payments, which is good. It pays the bills, 50%, 60% margin, so it's great. But as you suggested, the majority of the economic value is actually the milestones and royalties. And so what we've been doing is stacking the number of milestones and royalties last quarter out of 21 new programs, 15 of them, and milestones and royalties. So that is great. Timing is uncertain. We do our work in about six months. Then it can take 18 to 24 months for our partners to go to IND where we could start collecting some milestones. So we know it will happen. Difficult to guide. I'll point out that AppCamp is an especially good or exciting deal for us because it's not in the therapeutics area. It's more in the research area and diagnostics. So that means that the potential for milestones and royalty is a lot faster to happen. than a therapeutic deal. And so that was an especially strategic one for us. And the last thing I'd say is that we definitely are working hard to coax partners to be able to be more public about the types of deal we are making. For instance, we were quite successful with Boeinger Ingeleim We were able to describe the $710 million of milestones that we can earn with them. So we want to make more of those disclosures, but unfortunately we need the cooperation of the partners that are not always willing to do that. But at the end of the day, we are stacking those milestones on Realty. deals, and we are quite excited at the prospect of starting to be seeing some of them.
spk06: Thank you. Our next question comes from Matt Sykes with Goldman Sachs. Your line is open.
spk00: Hi, good morning. Thanks for taking my questions. Maybe along the lines of Luke's last question, just on the biopharma, I'm just curious from a high level, Emily, as you talked about it, early stages, the conversations you were having from an economic standpoint weren't as beneficial because you were still trying to prove out your capabilities, but now you've gained a lot of momentum. You've signed a number of new collaborations and agreements. I'm just wondering how the nature of the conversations have changed not just from an economic standpoint, but perhaps folks coming to you as the word gets out in terms of your capabilities and how you see that business in terms of growth trajectory today versus what you might have imagined it would have been, you know, a few years ago.
spk09: Yeah, it's quite exciting, the change. A few years ago, we were a very risky bet and very, Really, the most likely deals we will get were from small companies that were looking for a bleeding edge advantage. However, now that we have generated a lot of data, we are starting to develop a reputation. And it's quite exciting that as we engage more and more in the biopharma world to hear people that I meet for the first time say, oh, Swiss, you guys are doing great. You guys are respected. And so it's becoming a lot easier. And in a sense, we are kind of almost crossing the chasm in biopharma as we went from being a risky bet to being a sure thing that even companies that are a bit more prudent, a bit more conservative, are science willing to embrace. And so that's really the benefit of our science focused. We knew that our customers were skeptical scientists, you know, the VP of biologics discovery, They are scientists. They are very skeptical. And so we made an effort of building a strong data set. And now that data set is speaking for itself. And that translates into more partnerships and easier conversation around economic sharing.
spk00: Great. Thanks for that, Emily. Very helpful. And then maybe just one for you, Jim. Just on the expense side, you've been pretty clear about the margin guidance and the CapEx guidance and the impact from Factor of the Future. I'm just wondering from a conservatism standpoint, as you look at the build-out of Factor of the Future, kind of what's been built in for that and any potential issues that might come up over the course of the year.
spk07: Yeah, I mean, so for Factor of the Future, we're projecting about $25 million of spend, OPEX spend, And as we, that's for the year, and as we ramp it back to the future, that's going to start impacting Q3, Q4. Margin impact in Q4, we're probably going to see roughly about 7, 8 million, depends on timing, to hit the cogs in Q4. But one issue it highlights is that, you know, what's interesting on margins this year, we've given guidance that's back to 37. Just one point of note, if you look at Q1 and you look at Q1 versus Q4, you know, why is it down? Well, we had in Q4, 56% of our business was NGS. Q1 is 46%, and we're going to see that NGS climb in terms of revenues through the year and NGS whenever stronger margins. So we've got a couple of areas that we're looking at that we're still managing. We feel good about the catch-5 to catch-7% guidance for the year.
spk06: Thank you. Our next question comes from Vijay Kumar with Evercore ISI. Your line is open.
spk08: Hey, guys. Thanks for taking my question. Jim, I had, you know, I want to start off with the guidance here. You know, Q1, The guide was 37 to 38. You guys beat by, I call it roughly 5 million-ish. The guide raise was by a similar amount. So one, was there any climbing, you know, impact in Q1? Why wouldn't the strength carry through to the back half? And what was the M&A contribution in the Q? Like when I look at the guide raise, I think some of it was by a pharma. Was that or was it the base biopharma increase?
spk07: So good question. A couple things. Averness did contribute, and we're also seeing growth in the base biopharma business. So combination, we're doing well there. In terms of against original guidance, we had a very strong SYNBIO Q1, NGS is continuing to do well. At the same time, you know, we're still got some issues with the pandemic. So as always, we're prudent in terms of our guidance. So we're looking at strong, strong orders in Q1. Orders were close to 50 million. And at the same time, we've got to, we're dealing with pandemic. We're managing supply chain issues. And we're prudent in terms of our guidance.
spk08: Sorry, what is being assumed for adverse contribution? I think the prior guidance had it at 10 million. Did that change?
spk07: Adverse has changed a little bit. We're not going to break that down now. We're going to just have biopharma as a total number, but adverse did increase a little bit, and our antibody discovery projections increased a little bit as well.
spk06: Thank you. Our next question comes from Matt LaRue with William Blair. Your line is open.
spk02: Hi, good morning. Obviously, you broke out some of the revenue by industry, but I'm curious more around the growth and the send-by of customer base. Assuming most of those customers probably start small, so it might not tie to the revenue growth. I'm just kind of curious where you're seeing the fastest areas of new customer growth and if you can tie any of that to some of the new products that you've added in the last six months.
spk07: Yeah, no, the customer growth is in bio. We had a strong quarter. You know, industrial was strong. You know, the number of genes we shipped was a record. So we saw very broad customer demand from industrial, healthcare, pharma, and also academic. So the I would say it's very broad demand, and it just highlights the strength of the portfolio. So Jean said strong quarter. We saw a little bit of ITG come on last quarter. All the good pools. We had another good quarter and all the good pools. So there's a broad, broad range across Symbio.
spk02: Okay, and then obviously you're just a few months away here from factoring the future opening. You mentioned last quarter that the focus was on sort of adding the capital equipment, starting to get the hiring funnel going. What do you see as potential risks to the opening, or do you feel like at this point you have the equipment, most of the hires have been made, and it's just a matter of really getting through the ramp to go live?
spk07: Yeah, I mean, there's – For the equipment, I mean, obviously we started engaging with suppliers last year, so we keep close tabs on the supply chain. Construction is going well. We are hiring. Obviously the other key component is software. Software team is on track with the new software. Don't have too many issues on the supply chain. We'll keep managing it. Hiring, I said starting off, so that started off well. So we feel good about where we're at. We're tracking to our internal plans and the target date is July for early starts.
spk06: Thank you. Our next question comes from Dan Brennan with Cowan. Your line is open.
spk03: Great, thanks for the questions. Maybe the first one just on the revel our opportunity for COVID antibody. You know, the 100 million of potential payments is pretty solid. We're just wondering, can you just walk us through, you know, timing, catalysts, and what's the potential for milestone payments this year?
spk09: Yeah, thanks for the question. So in terms of timing, they are driving very hard to have IND in the first half of this current year and then go in the clinic. In terms of milestones, we have a classic structure at IND phase 1, phase 2 launch and so on. And in addition, we have opportunities to earn additional fees and milestones when they start declaring additional targets that they're going to go after.
spk03: Got it. Thanks, Emily. Maybe, maybe the SNP conversion opportunity. I haven't heard it come up on the call, but just kind of walk us through how those discussions are going. Uh, anything likely to close, just kind of walk us through what the opportunity could look like for this year.
spk09: I'm sorry. I missed the first part of the questions. Ah, the SNP. Yeah. The SNP micro rate.
spk03: Yeah. Yeah.
spk09: Yeah. Yeah. Yeah. So very excited about that. Um, and, um, We've made the acquisition of Agenomics. It took us a few quarters to twistify the kit. The kit has been relaunched as the 96-plex library preparation kit. And so now we are putting it into the twist channel that we've built. And so, yeah, we are quite excited that – to see the contribution that this acquisition will make. And so we should see more conversion in the near term.
spk06: Thank you. And I'm currently showing no further questions at this time. I'll turn the call back over to Emily LaProust for closing remarks.
spk09: Thank you very much, and thank you for joining us today. While the stock market has been a bit rocky lately, We continue to deliver solid revenue growth across our businesses by focusing on executing every day. And we look forward to keeping you appraised of our innovations and advancement that are all driven by the very hard work of all the twisters. With that, thank you very much.
spk06: This concludes today's conference call. Thank you for participating. You may now disconnect.
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