Twist Bioscience Corporation

The conference will begin shortly. Good day, and thank you for standing by. Welcome to the Twist Bio Fiscal 2022 Fourth Quarter and Year-End Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to turn the call over to your speaker today, Angela Bitting, Senior Vice President of Corporate Affairs and Chief ESG Officer. Please begin.

Thank you, Operator. Good morning, everyone. I would like to thank all of you for joining us today for the TWIST Bioscience Conference call to review our fiscal 2022 fourth quarter and year-end financial results and business progress. We issued 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 Leprous, 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 direction, and then we'll 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 relations section of our website and will be available for two weeks. During today's presentation, we will make forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements generally relate to 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 disclaim any obligation to update any forward-looking statements, except as required by law. With that, I'll now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily LaProost.

Thank you, Angela, and good morning, everyone. This morning, we reported record revenue of $203.6 million for fiscal 2022 and $57.3 million for the fourth quarter. We continue to take market shares in both SynBio and NGS by expanding our customer base, delivering differentiated, high-quality products, and anticipating market needs. In addition, our biopharma business continues to sign an increasing number of partnerships with biotechnology and pharmaceutical companies to conduct discovery and optimization projects. Fiscal 2022 has been one of macroeconomic contraction, COVID shutdowns, geopolitical instability, and more, and yet, We deliver 64% revenue growth year-over-year, and we grew our customer base to over 3,000. In the slide deck for this annual call, we have included a list of some of our customers who have published, conducted webinars, case studies, or have notes using Twist products. You will see that the list is broad and deep, and just a small fraction of our total customer base. Our Twist team continues to demonstrate exceptional resilience in the face of challenges, Our silicon platform for DNA synthesis enables us to compete in multiple markets that each experience different market dynamics, hence reducing risk through diversified revenue and customer base. Taking a minute to highlight our technology, for those of you who may not have had the opportunity to visit our FAB, we have miniaturized the process of making DNA using traditional DNA synthesis chemistry by making DNA using our proprietary silicon chip platform, we have been able to reduce the amount of reagents used by 99.8% compared to a plastic plate platform. These reagents are a material driver of COGs, so leveraging this dramatic reduction enables us to achieve significantly lower COGs than our competition. The way it works, on each chip, we make short pieces of DNA called oligonucleotides or oligos, The oligos are built base by base, like stacking Lego blocks on top of one another, and then can grow up to 300 bases in length. As a reminder, each base being one of the four building blocks of DNA, A, C, G, or T. This type of oligosynthesis on silicon chips is common for all of our products. We call it the front end, and it is where half of the magic happens. By magic, I mean where the technological differentiation originates. The vast majority of our cells are custom products, meaning that the sequences of DNA are defined by the customers. However, we have designed our technology such that on each chip, on every chip, we can group orders for many customers and multiple projects. Indeed, the oligos for all of these orders are synthesized in parallel on the chip, and because each chip can synthesize up to one million oligos, we can leverage the silicon platform to achieve differentiated scale. Once we've made the oligos, We extract them from the silicon chip and they are then sent to the appropriate backend workflow. This might be engine production, NGS target enrichment panels, oligopools, AGG proteins, synthetic controls, and so on. Each of these backend processes is unique based on the skews and flavor of DNA produced, but typically operators work 24-7 to run batch processes for multiple orders on commercial automation. Because the front end provides scales, low cost and quality, The back-end processes are remarkable by how unremarkable they are. The second half of the magic lies in the overall complex, highly automated processes of capturing an order, of designing the oligos, of synthesizing multiple orders, multiple customers on a single chip, of sending them to the correct back-end lab for further processing, quality control, packaging, and shipping. This in-house developed software we use to track and direct These complex production processes in an automated manner enable us to rapidly go from order placement to shipping at scale and low cost, which is another true differentiator. This workflow speed and efficiency continues to provide the foundation for our revenue growth. Specifically, for Finbio, we reported revenue of $18 million for 2022, an increase of more than 50% year-over-year, and $21.6 million for the fourth quarter. The strength in SynBio came in across the board, with genes and oligopools experiencing significant growth. An important point to make is that our products that generate revenue in our SynBio verticals are used by pharmaceuticals, biotech, industrial chemicals, and agricultural companies, as well as academic labs. We ship approximately 558,000 genes in fiscal 2022, compared to 372,000 jeans in fiscal 21. To support our continued growth, we are ramping our factor of the future in Portland, Oregon, with the 24-7 manufacturing team currently training and producing test products today. Of note, we have about 40 employees from South San Francisco that have moved to Portland, bringing with them experience in our manufacturing processes and intricate knowledge of the Swiss culture. These employees are now training our new employees. With 177 employees in Portland as of today, we remain on track to begin shipping products out of Portland in January 2023. Initial manufacturing in Portland will focus on jeans, jeans fragments, and oligopools, targeting a turnaround time of approximately 10 to 12 days for jeans, the same as our current average turnaround time for jeans in 2017. As we run production in Portland, we expect to introduce fast jeans, which we believe will offer a significantly faster turnaround time. enabling us to tap into the DNA maker's market with premium pricing while maintaining our position as the most cost-effective gene synthesis provider. We expect to introduce fast genes in the fall of Canada 2023. I'd like to personally invite you to tour our Portland manufacturing facility. On Tuesday, November 29th, we will be arranging tours for investors and analysts who wish to visit. Please contact Angela if you'd like to schedule a tour. Turning to NGF, We continued our strong back half of the year with $29.2 million in revenue for the quarter, bringing our NGS revenue for fiscal 2022 to just shy of $100 million, coming in above our guidance. For the year, NGS revenue grew approximately 37%, faster than the market is growing. Others came in at $28.2 million for the quarter, and we expect fiscal 23 to again be back half loaded, similar to 22. I'd like to point out that recently we shifted the incentive structure to our core business sales force. As we built our business, we moved from equal compensation for orders and revenue to one where sales commission is now 90% tied to revenue. Both orders and revenue continue to be important metrics for us to track, but the incentive for sales team has shifted and along with it, the significance of order numbers going forward. Of note, For the remainder of the organization, our burden structure is based on both revenue and gross margin. On the market side, many of you are aware that the sequencing landscape continues to evolve with less expensive whole genome sequencing options now available and several new and exciting players introducing solutions for longer read offerings. For TWIST, these technical advances offer opportunities. Indeed, we are sequencer agnostic and an enabler across platforms. We recently announced an agreement with Illumina, whereby we will manufacture and they will sell an Exome target arrangement kit. We believe that by leveraging their robust self-force and integrative install base, we will reach a differentiated customer set. In addition, we're working with PacBio on a robust solution for their newly announced sequencers. For Exome sequencing today, we offer a complete workflow solution, including target arrangement, library prep buffer bits, bees, blockers, adapters, EDI, etc. As the cost of sequencing comes down, we expect that over time, some applications and groups will move from exome sequencing to whole genome sequencing. When that happens, meaning when applications like germline sequencing or government-funded initiatives to sequence populations move from exome to whole genome sequencing, we will have an opportunity to continue participating through our LabrioPREP offering. For the very large market opportunities like cancer screening, the dynamic will be different. Indeed, they will still require deep sequencing, and panel and exome sequencing will continue to be the mainstay. For instance, customers pursuing liquid biopsy or minimal residual disease need deep coverage of specific genetic sequences, sometimes 5,000x coverage or more, in order to ensure capture of the disease-driving mutations at low allelic frequency with high sensitivity. For these applications, we expect it to be cost prohibitive to conduct whole-genome sequencing, even as the cost of sequencing decreases significantly beyond what we see today. Additionally, we believe that the reduction in sequencing costs will encourage adoption of liquid biopsy and MRD assays as overall test costs will decrease and make them increasingly palatable for reimbursement and routine adoption by customers. Of note, in these applications, product pricing is expected to remain constant, even as the cost of sequencing drops. When we introduced our NGS offering in 2018, we anticipated this sequencing price reduction, and our product portfolio evolved over time. In fiscal 2021 and 2022, we introduced several new products in the NGS space, with the vast majority targeting Kanto. We have launched our metadata solution, the Human Meso panel, CFDNA controls for liquid biopsy tests, and a rapid cost-effective patient-specific MRD panel targeting up to 500 mutations. And we've added oncology focus alliance panels developed by key opinion leaders at leading institutions like the Broad and Baylor. These products support our effort to enable our customers and dominate the workflow between the sample and the sequencer. Moving forward, We see growth in NGS coming from clinical advancement of liquid biopsy testing as well as taking market share in research applications. Recall that it is a long cycle for customers to adopt our target enrichment panels as they need to undergo pilot testing, verification, validation, rigorous re-clearance, and clinical testing before broad-based commercialization. But once we're including a test that reaches the market, it is very sticky as they will need to be validated through regulatory agencies for any changes. Today, we have about 50% market share for packet enrichment and library prep. We have a lot of market share to gain, so in addition to escalating volumes for customers who enter the commercial phase, we continue to win pilots which bodes well for future growth. In biopharma, we reported $24.2 million in revenue for the fiscal year, tremendous growth over fiscal 2021, and yet still just short of our guidance. Revenue for 2022 first quarter was $6.5 million, almost all of which came in September. Importantly, orders for the fourth quarter remain strong at $9.4 million, and we fully expect strength in Biopharma's return in fiscal 23, given that in the conversations we are having, our positioning as the high quality local leader resonates with our partners now more than ever. For Swiss Biopharma team based in San Francisco, We currently have 59 partners in Bayou Pharma with 83 completed and 50 active programs. 59 of the 133 programs have milestones and royalties associated with the projects. The Twist Boston team has 62 active programs ongoing as of September 30, 2022. As we look ahead, we expect continued growth across the portfolio as we are moving towards a combined product and service offering together with the Twist Boston team. targeted for launch in the second quarter of 2023. Working together for a little over a year, we have incredible synergies that we believe will enable us to expand our reach and market share in the biopharma segment. With reference to Revela, we did not see the outcome we were hoping for. We invested a small amount of capital to take a long shot, did not exceed our original commitment, and showed it off quickly when the opportunity did not materialize. This illustrates our discipline when it comes to investment decisions. Moving to data storage, we now have 37 employees working on the team, including 31 engineers and scientists. We continue to bring up our proof-of-concept chip, which we expect will enable us to move from writing one megabyte of data to one gigabyte of data in a single synthesis run. We are also working to integrate the chip into our prototype electrochemistry DNA writer system. This system will enable us to launch our Century Archive pilot to early access customers. Importantly, the Century Archive is expected to set a new standard for archive data retention longevity. In late October, we announced the appointment of Paddy Finn to our newly created position of President and CEO. Paddy has been with the company for eight years, taking greater standard controls, and he demonstrated success. We conducted an external search for the position and found that Paddy was the right person to lead our next phase of growth and fiscal responsibility. I look forward to partnering with Paddy and the executive team to achieve our aggressive objectives. With that, I'd like to turn over the call to Jim to talk us through our financials.