Twist Bioscience Corporation

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.

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.

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.