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spk10: Good afternoon. This is Anna Marie Wagner, SVP of Corporate Development at Ginkgo Bioworks. As usual, I'm joined by Jason Kelly, our co-founder and CEO, and Mark Dimitrick, our CFO. We thank you for joining us and look forward to providing you with an update on the last quarter. As a reminder, during the presentation today, we'll be making forward-looking statements which involve risks and uncertainties. Please refer to our filings with the Securities and Exchange Commission to learn more about these risks and uncertainties. As usual, we'll follow our standard agenda for these calls, providing an update on our financial progress while also taking time to dig deeper on our strategic priorities. We'll end with a Q&A session, and I'll take questions from analysts, investors, and the public. You can submit those questions as usual to us in advance on Twitter with the hashtag GinkgoResults or by email at investors at ginkgobioworks.com. All right, over to you, Jason.
spk01: Thanks, Annemarie. So we always start with this slide because our mission drives much of our long-term strategy at Ginkgo and even many of the day-to-day decisions in the company. So very simply, we want to make biology easier to engineer at Ginkgo, and we do that by scaling our platform for programming cells. So what does that look like? Right. So we work with our customers to define what they want to develop. In other words, the spec for the cell they want to engineer. And this is a key idea. We are operating our platform as a B2B service to enable our customers to develop end products for consumers. Right. And so our platform consists of two assets, our foundry and our code base. Our foundry is an automated lab. The key idea here is we're able to turn what is typically an underutilized fixed cost investment for most companies. In other words, the sort of physical R&D labs that our customers might have in their facilities into what's now for the customer, a variable cost available to them as a service. And that attribute is particularly attractive to our customers in a more challenging economic backdrop. Especially small companies might not even need to build these facilities in the first place. And so being able to turn that on and off R&D spending is a benefit. Our customers also benefit from the scale economics that we can generate as we invest in our platform. Our code base is a learning asset. It accumulates as we run more experiments and includes physical strains, data, and various tools for programming cells. We can reuse these learnings in incremental programs, which in turn increases the probability of program success and reduces program costs for customers. I know some potential customers may be listening right now as well as you follow our new program announcements and the new capabilities that we're building both organically and through acquisitions. And we do have four acquisitions that closed just this quarter. Please do reach out. We'd love to work with you. And again, we do operate as a service business. It's very easy to get on the platform. We'd love to get you on the platform. Okay, before I turn over the call to Mark to discuss our financials, I do want to highlight a few recent highlights at the company. So we continue to focus on attracting new programs to the platform. And I'll talk more about why that metric is so important to us a bit later. We were pleased to add 15 new programs in the third quarter. And I specifically want to highlight our Merck collaboration announcement because we've continued to see really strong momentum in the pharma and biotech vertical. So here we were able to leverage our fungal strains and other expertise to win an enzyme development project with a blue chip pharma customer with up to $144 million in milestone payments. In biosecurity, we executed well as the school year started. And as you'll see, we are once again increasing our financial guidance for this business. More importantly, we continue to see real traction across our long-term strategic initiatives. I'll have more to say on that topic later in the call as well. Finally, you'll see at the bottom of the slide that we closed four acquisitions in the month of October. I'd like to give a special call out to the Ginkgo team and also to the new team members that worked with us closely at the acquired companies. This was an enormous lift for a company Ginkgo's size, and the process went amazingly well. Importantly, we were able to close the Zymogen transaction more quickly than we initially anticipated, and I'll discuss why I think that presents a real strategic advantage for us. We completed the Bayer acquisition, strengthening our capabilities in the AgBiologics vertical, and also announced two smaller transactions, Circularis, which has a circular RNA and promoter screening platform that will help drive our work in cell and gene therapy, and Altar, a longtime partner of ours that has a screening platform that will drive adaptive laboratory evolution. These technologies both deepen and broaden our capabilities, and we're excited to welcome these teams to Ginkgo. I'll note that I think our recent M&A activity demonstrates our ability to play offense in the current market environment while still thoughtfully managing our cash balance and multi-year runway. That's something you've heard me talk about before, and I consider it strategically important to the company to maintain that. Okay, so we won't be able to do a deep dive on our biopharma work this quarter, but I do wanna call out some recent results we shared at the Society for Immunotherapy of Cancer Conference, CITC last week, just here in Boston, as we got a great reception from biopharma companies there about the data. So the ability of a CAR T cell, and this is, you know, many of you are familiar with this, but this is a type of immunotherapy for cancer to be able to persist post administration in a patient and continue to kill tumor cells is in part driven by the signaling domains of the CAR. And so what we did here was we built a 10,000-member CAR library. And you can see the library design on the left side of the poster here. And we introduced that library into primary human T cells to look for combinations of signaling domains that would improve on this challenge of T cell exhaustion, which is a big challenge just generally in the field. And we tested these by serially challenging the CAR T cells, both with hematological and solid tumors, and saw some nice results, including a number of designs that outperform canonical car signaling domain design such as bbz and 28z in head-to-head comparisons in our assays and you can see uh that data in the center panel uh so we're very happy to dive in on this more deeply with folks that are interested uh this is an internal work we've been doing at ginkgo that was really meant to showcase the muscles we've been building over the last four years as we expanded our foundry capabilities into mammalian cell engineering so again it's not us developing a new therapeutic of our own but really a chance to show to customers what the platform's capable of. And I found that when we announced this, we showed at CITSE, we encountered a bunch of folks who were just sort of surprised. They thought GIGO only engineered microbes and fungi, which is not the case. Again, we've been sort of building this infrastructure out the last four years. So expect me to be a bit of a broken record coming up on the applications of the platform in cell and gene therapy, as I want to get the word out to customers. I think there's a lot of great business for us there. So it's a great time to talk to us if you're a biopharma company. Everything you see here is all available as a service today to accelerate your drug development efforts. And I'll also be sharing more detail on all our biopharma platform capabilities at the JPMorgan conference later this year or early next year. So, okay, that's a quick overview of our recent highlights. And with that, I want to hand it off to Mark to walk through our third quarter financial performance.
spk07: Thanks, Jason. Our third quarter financial results reflect solid execution in both our self-programming and biosecurity businesses. Total revenue in the third quarter of 2022 was $66 million, representing a decline of 14% compared to the third quarter of 2021, primarily because we had a lump sum equity milestone in foundry revenue in Q3 last year. We've discussed in the past that quarterly lumpiness is inherent in foundry revenue, and you'll see that when you look at the past six quarters sequentially. That said, we're very pleased with how total revenue is landing on a year-to-date basis. I'll begin with the discussion of our cell programming business. We added 15 new cell programs to the Foundry platform in the third quarter of 2022. As a reminder, our new cell program count is an important long-term value driver, and Jason will talk more about why that is a bit later in this call. We supported a total of 85 active programs in the third quarter of 2022 across 43 customers on our Foundry platform. This represents substantial growth and diversification in programs relative to the 54 active programs across 27 customers in the third quarter of 2021. We continue to see strong growth coming from the pharma and biotech industry and the food and ag industry segments in particular. Foundry revenue was $25 million in the quarter, down 29% compared to the third quarter of 2021. As mentioned, the third quarter of 2022 did not include any large milestone payments, while third quarter of 2021, Foundry revenue benefited from downstream value share revenue related to the achievement of an equity milestone for Kronos. Now turning to biosecurity, our concentric offering continued to perform well in the third quarter of 2022, generating $42 million of revenue in the quarter. Biosecurity revenue consists primarily of product and service revenue from our end-to-end COVID monitoring services, with the largest current driver being K-12 testing. Biosecurity is performing ahead of our expectations as COVID monitoring services are proving to have some level of durability as schools reopen and resume testing in late Q3 and other entities such as the CDC are extending contracts. We are also encouraged to see government investments being made in longer term biosecurity infrastructure. Biosecurity gross margin was 41% in the third quarter, an approximately 5 percentage point increase from the prior quarter performance. The sequential increase in gross margin percentage was driven in part by favorable revenue mix. And now I'll provide more commentary on the rest of the P&L. Where noted, these figures exclude stock-based compensation expense, which is shown separately. R&D expense, excluding stock-based comp, increased from $53 million in the third quarter of 2021 to $73 million in the third quarter of 2022. R&D expense related to the foundry increased as expected year over year, driven by expansion of foundry capacity and increased breadth of capabilities to support both current and future collaborations. G&A expense, excluding stock-based comp, grew to $59 million in the third quarter of 2022, compared to $29 million in the third quarter of 2021, as we invested in business development and all other G&A functions to support the growth of new customers and programs, as well as a higher level of foundry activity, our biosecurity offering, and public company requirements. We also incurred approximately $12 million in transaction and integration costs related primarily to the four transactions we closed in October. In this environment, we are very focused on containing operating expense increases to areas that are customer facing and that drive growth, such as business development and initiatives that will drive foundry productivity. In Q4, you will also see the OPEX impact of the two large acquisitions we just closed. we will of course report out on that inorganic impact in detail when we report q4 results but as a high level outline you will see firstly new run rate opex related to the bayer transaction which we expect would be largely offset by the revenue from our new collaboration with bayer secondly new run rate opex related to the zymergen transaction which is largely just a pull forward of spend we would have incurred organically in 2023 and 2024 to build these capabilities. And thirdly, significant one-time transaction costs and near-term integration costs, particularly related to the Zymergen acquisition. As Jason will discuss later, we closed Zymergen with a significant cash balance, which significantly mitigates the above spend. Net loss. It is important to note that our net loss includes a number of non-cash income and or expenses as detailed more fully in our financial statements. Because of these non-cash and other non-recurring items, we look to adjust at EBITDA as a more indicative measure of our profitability. Adjusted EBITDA in the quarter was negative $70 million compared to negative $18 million in the comparable prior year period. A full reconciliation of adjusted EBITDA is provided in the appendix to this presentation and in our earnings release. Adjusted EBITDA declined year over year due to the decline in revenue and increase in operating expenses. And finally, CapEx in the third quarter of 2022 was $13 million, reflecting foundry capacity and capability investments. We do expect an increase in CapEx in Q4 relative to prior quarters as we complete certain projects, including our BioWorks 7 facility. But in general, we are applying the same discipline to CapEx investments as we are to OpEx increases. One final comment on stock-based comp expense. As a reminder, we provided extensive disclosure in our Q4 2021 earnings release relating to the GAAP accounting for the modification of restricted stock units issued prior to becoming a public company. Substantially, all of the $563 million stock comp expense in the third quarter relates to this ongoing wind down. And we now expect significantly smaller amounts to be booked in the fourth quarter and in 2023 and beyond related to this wind down. Now I'd like to provide some commentary on our refined outlook for the full year 2022. We expect to add an incremental 16 to 21 new cell programs in the fourth quarter for a total of 55 to 60 for full year 2022. This guidance reflects very robust growth as we are almost doubling our new program additions year over year despite a challenging economic climate. Jason will further discuss our thinking and providing a range on new programs later in the call, but we are encouraged by both the depth and quality of our sales pipeline. We are increasing our full year guidance for total revenue by $35 to $40 million over our prior outlook to a new range of $460 to $480 million. We are revising our foundry revenue outlook to be in a range of $150 to $170 million for full year 2022. When we provided our initial full year 2022 guidance in March, we explained that the range was in part dependent on the timing of downstream value share and that we would update you all as we learn more. Now that we are closer to year end, we have a better sense of the potential timing of certain specific events. Our previous guidance included revenue in 2022 from several discrete milestone payments, three of which we have not yet earned. The low end of our new guidance range assumes that we receive one of those remaining milestone payments in 2022 with the remainder anticipated in 2023. The upper end of the new guidance range assumes that we receive all three remaining milestone payments in 2022. While this reflects our best estimate at this time, there is still some risk with respect to the achievement of any one or all three milestones. However, based on our significant technical progress to date, we remain highly confident that we will achieve them in the relatively near term. The guidance revision exemplifies the lumpiness that can arise from downstream value-share timing at a company of our size. Now on biosecurity, based on our strong performance in the quarter, we now expect biosecurity revenue to be at least $310 million for full year 2022, an increase of $50 million from our prior outlook. As was the case throughout 2021 and the first half of 2022, there still remains significant uncertainty in the biosecurity market in general, Although we saw an increase in testing volumes at the beginning of the fiscal school year relative to summer levels, visibility into near-term volumes remains quite limited. More importantly, we are seeing traction in our broader biosecurity efforts, including passive monitoring and international programs, though this remains a nascent business and is not yet a meaningful contributor to our guidance. In summary, then, we are pleased with our overall progress. We are executing on what is now a diverse portfolio of 85 programs on the Foundry platform. Biosecurity continues to perform very well, and the company's total cash position of over $1.3 billion remains strong. And now, Jason, back to you.
spk01: Thanks, Mark. I wanted to follow up with a quick comment on our revised guidance. As we get towards the end of the year, we have a much better idea of the timing on binary events like program launches and milestone payments compared to when we guide in March and try to predict the whole year in front of us. So just as we've been updating on the biosecurity side, if we've had solid reasons to update you all, we want to pass along that information on the cell engineering side as well. And as I've said before, this is part of establishing our trust with you all as we launch as a public company. All that said, the team at Ginkgo is aggressive and we're motivated to hit the high end of the ranges we provided. And I do think we have some space to pull that off. Okay. So, you know, we've spoken to you a couple times about why we're so excited to be acquiring Zymogen, as well as the Bayer Biologics Group. But the Bayer deal closed around when we expected, while the Zymogen deal closed much earlier than expected. And I want to explain why I think that early close is such a big deal strategically. I also want to talk about program additions, both to highlight the impact on scaling our platform, but also as a reminder of the significant value potential from downstream economics on those programs. I think sometimes that gets lost, so I want to highlight it. Finally, I want to update you on our progress in biosecurity as it expands beyond K-12 COVID monitoring, as we're seeing really encouraging signs there. Okay, let's dive in. All right. So as you might remember, we had expected Zymergen to close in Q1 2023, but instead we closed last month. So the faster timeline here means that Zymergen brought in more cash and we can get to work right away on the potential upside opportunities. So at close, you know, Zymerger is coming in with over $100 million in cash, even after paying all the transaction-related expenses, including severance, bonus acceleration, advisor fees, and insurance premia. So you can think of that as a truly net cash number. As we previously discussed, there are a couple of discrete items that represent potential upside to our base case. While we aren't going to continue Zymergen's products independently, in other words, we're not going to invest really to try to commercialize those ourselves, and we don't expect revenue from this portfolio, certain more advanced products such as the functional barriers and 3D printing programs are attracting inbound interest now, and we will continue to explore strategic alternatives to sell or partner those assets. Additionally, we've talked about Zymergen's real estate footprint, which was a significant area of due diligence for us as we evaluated the transaction. We do have more real estate in Emeryville than we need right now, and we're working to consolidate our footprint down substantially. A positive outcome in these efforts could drive material upside to our cash flow forecasts, and I'll note we're already in advanced negotiations to sublease one of these properties starting next year, which is really great to see. I want to spend a minute here on this topic of sort of team fit because I was really excited about how amazing a fit the Zymergen team was for our near-term goals at Ginkgo when I gave a kickoff presentation to that team out in Emeryville a few weeks back. As a quick reminder, the biggest difference between sort of the two companies between how Zymergen and Ginkgo were approaching the world was Zymergen was going out with a product business model and Ginkgo, as I mentioned, had a B2B services business model, but underneath We're really both building strong horizontal technology platforms. And this is a huge deal for how valuable this team and technology can be to enabling Ginkgo's 2023 goals. It can happen very quickly because there is a ton of cultural overlap between the teams. And I was feeling that energy when I was out in Emeryville and interacting with the teams there. It was really exciting. So it's already been amazing to see how proactive the former Zymergen folks have been in finding ways to support the programs and technical plans that are ongoing at Ginkgo. I've seen material contributions from those teams already, and this is just barely getting started, right? This is last month. It's really a huge win to have them on board so quickly and now oriented against our services business model at Ginkgo and bringing the Zymergen team and technology expertise to our customers rather than just being applied to internal projects. It's a really big deal to have this happening now instead of next year. And I'm thrilled about it. So it's also important to point out that Zymergen undertook significant standalone restructuring efforts prior to closing. So to put these changes into context, Zymergen had over 750 folks in spring of 2021, ended last year with over 500 employees. So as you think about the OpEx we're taking on and compare it to Zymergen's historical OpEx, I do think it's important to understand just how much the Zymergen cost structure has changed since then. You can categorize the folks who ultimately join the Ginkgo team in three main buckets. The first is the automation and software team, which will become deeply integrated with Ginkgo, helping drive our core platform development. that sort of foundry and code-based bullet that we mentioned earlier. The second bucket comprises Zymergen's remaining product teams, right? So these are the folks that were leveraging that platform to pursue products at Zymergen. We'll focus these teams towards the type of R&D partnerships with customers that you typically see Ginkgo enter into, and we're already seeing traction there. The ultimate size of this team will depend on the outcome of some strategic alternatives for some of the assets and ultimately will fit into Ginkgo's program objectives for next year. Finally, a number of G&A folks joined with the acquisition and will help us ensure a smooth transition as we integrate the companies. But ultimately, we expect over time that our combined G&A team will scale down as the level of integration of the companies increases. So the bottom line is this is a really transformational acquisition for us at Ginkgo, and we're thrilled to have the talented former Zymergen team on board so quickly. It's really exciting, and it's a gift to be working with that team. Okay, so next I want to talk about the importance of program additions as a metric, because I think sometimes folks can sort of solely focus on near-term foundry fees for programs and miss the bigger value we hope to see from downstream value share in our customers' products. All right. So we have this in sort of three parts. So first, I want to talk a little bit about how we sell these new programs. OK, so program additions is a critical performance measure for Ginkgo. And our management team internally here is very, very focused on it. We're expecting to grow new programs by almost 80 percent year over year in 2022. So from the 31, you know, Mark mentioned we had last year to this range of 55 to 60 this year. This is an awesome accomplishment by the team. I want to say that. But as I mentioned earlier, I'd like to see us get to the high side of that range, you know, for the Ginkgo folks listening. In other words, to get to the 60 programs as that is a real value driver for the company. I know folks are closely watching on the analyst side, kind of the biotech R&D spend outlook. In other words, how much are biotech companies spending on their R&D efforts in this market and what that could mean for 2023 during the starting seasons. While we don't plan to provide any guidance today on 2023, I do want to make a couple of comments on our program outlook. So the first is we are in the very, very early innings of tapping our addressable customer base at Ginkgo. Right. So many customers in, for example, biopharma are really hearing about us for the first time, you know, in our meetings with them over the last six months. For example, at the SITC meeting I mentioned earlier, you have folks who are, again, just learning that it goes even working in mammalian cells. So in my opinion, we're sort of more insulated from total R&D budgets because it's not like we've penetrated heavily. And so as that market moves, we move with it. Really, what's more important is how does Ginkgo's sales pipeline look, right? And from my perspective, the customer demand there remains very strong. And I feel really good about our pipeline heading into 2023. We're not seeing any deceleration there as we exit the year. Second, we are continuing to evolve how we sell our services. So as an example, one of the things we're hoping to do is to have a segment of our offerings be increasingly standardized from the customer perspective. In other words, more standard milestones and cost structures, standard IP terms and timelines. And the hope is this can start to speed our sales cycle. So in other words, reduce these cycles of sort of months of negotiating around some of these details. And then importantly, on the backside also lead to more efficient utilization of our platform. In other words, you know, certain programs are we can get higher leverage from our automation and our foundry. It's great to do more of these. So a good example of this is in the enzyme space. And earlier in the call, I highlighted our new collaboration. That's exactly the sort of more standardized offering. I want to do more of this year and next year. Okay. So that's how we're selling programs. Okay. Now, every time we add a new program, I want to talk about how it adds both near term and then on the next slide, long-term value for Ganko. So first in the near term, we got this virtuous cycle where each new program adds learnings to our code base, right? Which is that sort of data and intellectual property and so on that we get reuse rights for as we do these projects with our customers. And that can help make future programs easier, okay, because of what we've learned from our past ones. And importantly, it can also drive operational improvement in our foundry, right? Again, this is very similar. Think like a chip fab or a chemical plant. As the place gets bigger, the unit economics improve. And so physical scaling lowers our unit costs as we increase our output. So as we add new programs, As a as a whole, the founder and co-based the platform gets better, which makes it easier to attract future customers. So that's one of the reasons we're sort of maniacal on driving the team to add new programs, as we think it's fundamentally what makes the platform improve, which makes our lives easier in the future. And then lastly, we generate upfront R&D fees from new programs, and that cash helps to de-risk the resources we devote to serve our customers. while we were building that code base and foundry scale. And so we spoke last quarter about our flexibility in structuring programs. So we can sort of adjust, you know, if it's a tight market, maybe we want to have more upfront cost coverage in the new programs. It's a nice knob we can turn. But I just want to highlight, even from a near-term perspective, it's only one of the one of the sources of value we get when we sign up a new program finally i want to mention that when a new program is also tied to a new customer like for example merck or lagos or recent new customer deals where we haven't been working with them before that has that's extra value right because we have an approach where we can expand via inside sales with these customers in the future it's not often not a one and done here. And so good examples of this is our expansion over the years with Jivadon and Bayer. And this land and expand activity is an easier sales cycle than onboarding a customer in the first place, right? Because we have a chance to build that relationship. And that's part of how we plan to build bigger program growth numbers in future years. Okay, finally, and most importantly, I want to remind folks of the significant downstream optionality created by the increase in our new program additions, again, from 31 last year to over 55 that we're aiming for this year, and then the robust growth we anticipate again next year. Each new program brings an opportunity to share in the value of our customers' products in the form of royalties or equity or milestone payments. So we get asked all the time, you know, why doesn't Ginkgo vertically integrate into final products? You know, the TAM for end products and biotechs is huge. And we would keep more of the economics, obviously, for sharing them with our partners. And our view is that we do still get a piece of that downstream exposure by sharing in this value with our customers while diversifying away from individual product risk. Okay. And importantly, it also means we get to build a much, much bigger platform than you could if you were just pursuing your own products. And the rapid growth in new programs creates many more shots on goal and increasingly diversified exposure to end markets and products. I mean, at this point, we are in a pretty broad range of different end product markets from fragrances to gene therapy, right? And so I think that type of breadth, it does help diversify our risk. Importantly, downstream value share carries essentially 100% incremental margins, and we believe has the opportunity to be ultimately the most valuable part of our business. It is on a much longer timescale to realization than near-term foundry fees. And this is one of the reasons I think people you know, forget about it or sort of push it to the side. And I'm sympathetic to the challenge of modeling the exact timing and amounts of downstream value share, especially because these aren't our products. And so, you know, at Ginkgo, we are often constrained by our customers and how much information we can share publicly with you all, even about what targets we're going after, right? Remember, this is essentially the R&D and product development pipeline at our customers. That's something that folks are rightly very protective of as they're thinking competitively with their competitors in their market. However, we're very confident in the upside generated by having this many shots on goal, and the TAM across synthetic biology products will ultimately be large. So now that we're getting to a larger number of programs at Ginkgo, however, What I'd like to do is a better job of quantifying downstream value potential publicly. So, for example, when we sign up, you know, like the 15 deals this quarter, how much value could it yield for Ginkgo in the long run? Right. If we were successful technically and our customers were successful commercially, what could it be worth? Right. And you'll still need to discount that for technical and commercial success. Right. Like think like you would for a therapeutic drug pipeline, as an example. But I do think it will help folks to better understand the long term value of program. And if you, in some cases, you can see the specific numbers already, right? So for example, on the slide here, we highlighted a few recent deals where we have been able to publicly announce specific potential milestones, like the $144 million in the Merck deal, or $115 million in Biogen, or the $200 million per product for Selecta, right? But when customers don't want to share those specifics, which is often, I do think we can still work to share more aggregated information with you now that the number of programs is getting large enough at Ginkgo that it wouldn't disclose anything specific about a single customer's project. So we'll work to do more of that in the future. Okay. So I want to wrap up with some thoughts on biosecurity. There's palpable momentum in this space. This fall alone, we saw several important White House initiatives prioritizing biosecurity. The U.S. government is clearly focused on it, and Ginkgo is very aligned with these priorities and is ready to help lead the future of this industry. So how do you get in your head? What would be the components of a long-term biosecurity infrastructure globally? So our first formal offering spurred by COVID was building a collection platform. So this is the infrastructure layer between specific collection activities and local labs that will run the lab analytics on the samples that are collected. Okay, so COVID monitoring remains an important part of our business, but we're focused on helping drive more widespread surveillance and monitoring of biological risk in general. So even our collection platform alone is now much broader than our pooled COVID testing offering. That was largely what was deployed in schools, but now includes all supportive entry testing, wastewater testing, and other both passive or proactive measures for monitoring. To that end, we've recently added several important modules to our platform, including our acquisition of the epidemiological data assets of BACTUS. The CDC recently started including data from our airports program, in their variant tracker, and we recently hosted the director of IARPA at Ginkgo for a press conference to announce the success of Ginkgo's NDAR program. And I wanted to just give a little more detail on this one because I think it's sort of indicative of what I think the direction biosecurity is headed in. So IARPA, if you don't know it, is sort of the intelligence community's version of DARPA. All right, so they launched a program. They launched this program with sort of six or seven performers, started several years ago before the pandemic. And as I mentioned actually before, you know, GitGo has been involved in biosecurity-free pandemic. It just was not at near our current scale. And that's, again, because we think it's an important complement to the technologies being built out here around programming cells. It's one of the ways we develop our platform with care is to sort of work to reduce the malicious uses of this technology. So the goal of the program is to detect, of this IARPA program, is to detect if a sequence of DNA was genetically engineered. So imagine, you know, some white powder shows up at the Capitol building or a new viral variant shows up at, you know, JFK Airport in a screening program. And the question is, you know, was this something that was deliberately engineered or is it naturally occurring? Did it, you know, come up from nature or was it? you know, deliberately engineered in the lab. So in the program, we were given challenge samples of either engineered or non-engineered organisms. We were blinded to which ones they were, and our technology had to make a call on which it was. And I'm happy to report that we were one of the top performers, and we're seeing a lot of interest in this sort of technology in both the U.S. and internationally. You know, Dr. David Markowitz is IARPA's program manager for this program, noted on our recent press conference. that they have had robust demand for all of the platforms from partners, not just in the United States, but in the usual partner countries that the U.S. intelligence community works with. So this is the vision we've had, that biosecurity is really distinct from diagnostics or therapeutics. So products like NDAR, that's what we call this, sort of think of it like like a radar for engineered biology are a great example of a pure play biosecurity product. It's not a diagnostic tool, right? Diagnostic tools don't need to know if a piece of DNA has been engineered or not. It's a pure play biosecurity product and expect to see more of those. Okay. In the US, the government is increasingly prioritizing biosecurity and biodefense. Last quarter, we announced a new contract with the CDC to expand our traveler-based COVID-19 genomic surveillance program at certain US airports. And since then, the Biden administration has issued an executive order on the bioeconomy and a national biodefense plan, both. I was fortunate to be asked to speak at the summit about the EO at the White House in September. In the last 10 years of engaging with the US government on both biosecurity and synthetic biology, this is by far the most progress I've seen for the field. It is a really exciting time, not just for Ginkgo, but for everyone in synthetic biology and biosecurity. While biosecurity is clearly important in the U.S., the reality is that biology does not respect borders. What is ultimately needed is global biosecurity infrastructure. And we are beginning to see that traction. In the second half of the year, so far, Ginkgo has publicly announced that we signed MOUs with the government in Saudi Arabia and Rwanda. We're able to draw on our experience in helping collect and analyze data at ports of entry for the CDC in the U.S. and hope to expand this activity internationally. So biosecurity was a nice place to end, I think, because our strategy and activities there really illustrate how we think about caring at Gingko. So biology affects all of us, and specifically related to biosecurity, infectious diseases, as I said, do not respect borders. We think individuals deserve the most sophisticated surveillance and monitoring tools available to protect themselves and their families from pathogens. And we think that can happen by working with public health institutions around the world in every country. We should invest in the world we all want to see exist. You know, I've said this many times. And that is one, from my perspective, that would have a heck of a lot less infectious disease. And so I hope we're working towards that. And I'm happy to take your questions. Thank you.
spk10: Great. Thanks, Jason. We'll switch over to Q&A in a few moments. And as usual, I'll start with a question from the public. And just reminding the analysts on the line that if you'd like to ask a question to please raise your hand on Zoom, and I'll call on you and open up your line. Thanks all and we'll be back in a moment. Great. Welcome back, everybody. So as usual, I'll start with a question from the public. So this one is from Twitter, Kirat Kursar. So Jason, going into Q4 and 2023, how is the mixture of new programs looking? Which sector are you seeing the most interest in? And also any update on how the agriculture pipeline is looking with the Bayer deal completed?
spk01: Yeah, so I talked about this a little earlier, but I'm really excited about the momentum we're seeing in biopharma in particular. And again, just to highlight it, we've been building out infrastructure now for several years, and the fruits of that are starting to pay off in mammalian cell engineering in particular. So I was able to show some nice results around that. building large car libraries. We also have very interesting results on AAV vectors for gene therapy, capsid work, and so on. And so we are finally kind of getting those engagements. And I think the fact that we did these deals with large biopharmas, with Merck and with Novo Nordisk in the last year, also helped to kind of validate you know, we've been around the block with folks with that sort of high bar for working with an R&D partner and past. And so that helps us with new customers there too. So I'm really, really excited to push more in that direction in 2023. In ag, I mean, the Bay Area, asset and team is just a unique asset in the space, frankly. So I think we're what's, you know, we just haven't had it like literally integrated with us until last month. And so I'm excited to get out in the market, have that team that's that's really been working in ag biologicals, you know, for some folks there for pushing 20 years out in the market, talking to folks, coming up with new ideas, engaging with big ag and small ag companies. So I'm optimistic about it, but it's an asset we've just brought in. So we'll see how it goes in 23. Great.
spk10: Thanks, Jason. I'll call on you next, but I know that to give you time to prepare, Laurence Alexander from Jefferies wasn't able to join the call, but sent one into our inbox asking about biosecurity and specifically what kind of revenue run rate would it take to step up our level of investment and staffing to support biosecurity more broadly?
spk01: Yeah, so I think one of the things that's nice about how we've built out, and I talked a little bit about the different parts of the biosecurity kind of infrastructure, but on that collection and sort of like group monitoring testing that we built out for schools and we leveraged some of which at the airports, is that that is done with local laboratories doing the sort of COVID or other now disease screening and running those tests. And so we have the ability to kind of ramp that both down and if things were to grow substantially up quite easily without having to make major investments. It's a little different. if we're looking at some of the international work. So, A, we're going to build out similar infrastructure. We want to work with labs locally in those countries. But I do think we would, if we had a big program develop in one of those countries, we're going to likely need to have some investment of folks on the ground there to complement those local labs. But we wouldn't, we shouldn't need to build out sort of big capital investment infrastructure in those other sites. We really are counting on laboratories in country to do that.
spk10: All right, Tejas, I've just opened your line. Go ahead and Rahul, you'll be next.
spk00: hey guys uh thank you and annemarie thanks for the heads up here uh as i try to do some mental math um all right so uh you know it looks like you're calling for about you know 70 million in family revenues in the fourth quarter uh jason um you noted that you know the the pharma budget flush is not really a a major dynamic for you at this stage um can you just um sort of like talk to what what's driving your confidence in that number um and then um you know mark if you can help us quantify the size of that first milestone that you've baked into the low end of the guide um i think that'll help get us um sort of a better sense of that quarter over a quarter increase in the base relative to the 25 million here in the third quarter and and what exactly are we expecting for barrier in the in the fourth quarter as well
spk01: Yeah, and so maybe I'll speak just for a minute on the general R&D topic, and then I'll hand to Mark a little bit to speak to the specific numbers for the upcoming quarter. So when it comes to the larger R&D spend, again, the point I was just making is, We're so early in terms of penetration that something like the remainder of the year is not really dependent on macro effects and R&D. It's very much dependent on the specifics of the current programs we have in our pipeline. And then even if I look to next year and I think about how many programs can we bring in and so on, that's also very specific to what our sales pipeline looks like, right? And right now, both of those... A, we have a good amount of visibility into what will happen just because we're getting near the end of the year. And then for next year that, you know, I have good visibility into our sales pipeline. You know, you never know over time, obviously, if things tightened up dramatically. But I still think we're really far from moving kind of with those macro trends in the R&D spending. But Mark, do you want to speak a bit how we came to the numbers?
spk07: TAB, Mark McIntyre:" Yes, it is i'll bring you to the low end of the guidance range of 150 which would imply Q4 revenue of 60 million just to make it a little bit easier so. TAB, Mark McIntyre:" Roughly speaking, about half of that 60 would we would expect to come from downstream value share and most of that downstream value share is coming from the discrete event that we mentioned. In the portion of the 60, the other half of the 60 would then be foundry services. And there is a component of Bayer revenue in that. It's not a massive component, but there is a component of Bayer revenue in that. And the way to think about it is you could look at the Q3 number of 25, right? And just sort of assume that we'll get about that same amount of money
spk00: of foundry services give or take and then you've got the bayer acquisition on top of that got it that's that's actually super helpful thank you um and then uh you know jason back back to you on on your comments on the pipeline um is there any color you can provide in terms of the the new versus existing customer mix um you know what percent of those do you sort of like consider you know quote unquote locked in for 23 um and and as we think about sort of you know we're hearing from know other life science peers comments around you know folks being increasingly selective about where to place their bets or perhaps taking longer in terms of the sales cycle now i know you mentioned standardizing your contract structures as sort of you know compressing that your own sales cycle but any color you can share on that dynamic would be helpful
spk01: Yeah, happy to. Yeah. So just in terms of sort of inside, outside sales, we don't have any sort of specific numbers to disclose there for next year. But I would say I'll just point out we we have more customers, you know, on the platform that we did at this at the start of 22. So, you know, our ability to do inside sales has improved. Right. And so that's something I'm very excited about, because, you know, part of what we're negotiating is the IP terms. And, you know, there's just a lot to how we engage with customers that we've already gotten through once somebody is on the platform. And then it's really more of a discussion with their R&D team, right? Are they interested, you know, in a new area and so on? But a lot of the commercial, you know, you know guts of negotiation has been done and so so inside sales is just faster right there it's a little more of like a customer appetite thing um uh when it comes to selling externally yeah i mean i'm you know cautiously optimistic that we can you know like i mentioned the merc deal and like the kind of work we're doing in enzymes we can make that more standardized uh that will also help just by the way in terms of the capacity out of the foundry as well. If we can make the work we're doing more standard, it allows us also to do more of that work. Because we've got to solve both sides. We want to increase our demand next year, be able to bring in more programs. Obviously, we've grown our sales team, but just generally making that have less friction. But then we also want to make sure, as we're scaling our infrastructure, it can support all those additional programs. And so the standardization helps on both sides of that.
spk00: Got it. Very helpful. Thank you, guys. Appreciate the time.
spk10: Thanks, Dejas. Rahul, I've just opened your line. Go ahead. And then Matt Sykes, you'll be next.
spk03: Can you hear me okay? Yeah. Terrific. Good afternoon, guys. Thanks so much for taking our questions. So Jason, it's terrific to hear that you plan to report and aggregate value on the collective set of new projects onboarded. And so I wanted to ask, so now that the Zymogen and Bayer acquisitions have closed and balancing the fact that you've really specifically highlighted Biopharma a lot this quarter, Can you give us a sense for the balance or stratification of projects, so ag-bio versus consumer versus pharma, going into 2023? And again, because you've spent so much time commenting on biopharma, is this specifically a space that you see providing the highest present value per project onboarded within the aggregate number you plan to report?
spk01: Yeah. Okay. So let me unpack a bit of that. So one point is I think we should have that split of ongoing programs and things is in the slides. So I don't want to get the numbers wrong, but you should be able to find that there in terms of what we're currently working on. And then the second part of your question was around the... Remind me, it was the... So the balance of project stratification and also the relative value of winning. Right, right. Okay, so the challenge with... So what would we like to do on the downstream value share? So the first point is we would like people to... know that it exists okay right uh so that's part of what we're doing here because we're signing up lots and lots of programs these programs have you know they could have between a six month and a two year timeline right so the the time for us to harvest back that downstream value share is always we're always gonna have more of it in front of us right um just it's just kind of the nature of the business and so one of the reasons we want to talk about it is just for like awareness right so the next question is how do you value it right and so i think the trick when it comes to looking at different markets is if you were to look at the expected value you have you then get to factor in you know, the likelihood of success, the time to market, dah, dah, dah. And so if you look at something like a food or like say a fragrance or a materials product, the regulatory, for example, dramatically less risky compared to a therapeutic product. Right now. But then the value also different. Right. You know, and so you you we're not going to try to do that. You know, again, we're not able to break out individual products. I'm not going to be able to say, well, you know, this one we think has an expected value of this based on, you know, what we think is the likelihood of success on regulatory or anything like that. Well, what I would like to get to. And again, you know, we haven't done this yet, but we just be to communicate what's the potential. Right. Just so people have a sense of the ballpark of that. I would like to get there. And I think part of the reason we couldn't do it before was the number of programs was smaller and it was a little bit dicey what we'd be kind of sharing. But now as we're getting more, I think aggregate numbers are more doable. But I won't be able to give you, hey, here's my expected value on this. Often I don't have the information from even at a customer level. It's tough. It'd be a swing, but I certainly it's hard for me to communicate it to you.
spk03: Terrific. That's really helpful. And even just the aggregate numbers certainly will be helpful going forward. So we'll do our best. That's all from us today. Thanks.
spk10: Thanks for that. All right. Matt Sykes, I've opened your line. And Steve Ma, you'll be next.
spk04: Great. Can you guys hear me? Yep. Great. Good afternoon. Thanks for taking my questions. Maybe just first part, and I have a follow-up. Mark, just want to confirm, based on your comments, it sounds like there wasn't any bear revenue recognized in the third quarter, given your comments about the base-to-base from Q3 to Q4. So I just want to confirm that. Yeah, correct. Okay, great. Secondly, I don't know, maybe for you, Annamarie, or others on just the M&A, just given the volume of M&A that you've done, what has been sort of the strategy and sort of institutionalizing the integration of those companies? Because it's obviously a lot to do at one time, but just would love to hear how you're thinking about that integration to make sure that it goes fairly smoothly.
spk10: Yeah, this is definitely where I'm spending most of my time right now, so I can speak to it. I think overall integrations are going really well. And as Jason mentioned, really excited to be able to get an earlier start with Cymergen. One thing that's important to understand is that most of the transactions that we've done are really quite, quite small companies that do fit nicely within our existing team. So it's actually much less of a whole company integration effort and much more a team that's kind of getting integrated into the foundry, into even a portion of our foundry. And so those tend to go pretty quickly. Bayer and Zymergen closing the same week was obviously a big lift for the team. And so I will reiterate what I've told the team internally a lot, which is thank you to all of our bioworkers who are listening. um but but they're also quite quite different businesses and we're very grateful to have the zymogen team and a full you know a full support team there that is helping us integrate those assets um there in some ways is much harder because it was a carve out and so we've had to rebuild much of the support infrastructure you know everything from procurement to hr in that organization. But the good news there is that we've been working on that transaction for a much longer time and the close process there took longer given candidly the complexity. And so we went into that with a lot of groundwork already covered. So certainly a lot of work, but integrations are going well. And I would say it'll probably be a while before we do something of that size so that the team does have the opportunity to get those kind of up and running more sustainably going forward.
spk01: But the thing I'd add, I don't want to sell the team. I do think we now have built a muscle that's going to enable it, enable us to do integrations much more easily in the future. And so, you know, we won't be afraid to flex that if an opportunity comes along.
spk04: Got it. And then, Jason, one for you, kind of high level, but just, you know, you talked about learnings and the platform, but I'm just curious. know how have you learned when you're signing on new customers you know how have you learned what helps achieve success in realizing that downstream value meaning can you help accelerate the realization of downstream value by applying what you've learned from past programs whether they be successes or failures i mean you want to have a lot of shots on goal but you want to improve the accuracy of those shots and does that inform how you toggle the upfront fees for maybe programs that you might not feel has as great of a downstream value success as others and and how have you kind of modified that over time over the course of this year.
spk01: Great. Yes. So short answer is, yes, the code base makes it more feasible for us to succeed at downstream value share. No, we don't try to be overly clever about how to structure the deals. And so let me unpack each of them. So, you know, we break our platform into two pieces, the foundry, physical infrastructure, automation, reduced cost of lab work with scale, and then the code base, which is sort of what you're talking about, all the data and learnings from previous projects that essentially save you work in the lab, right? Like the perfect project is you come in, you ask for something that I have so much learning about that I design one cell and I hand it to you, right? And it is very fast. It requires no cost, you know, and what you're really banking on is all my previous knowledge. That's an extremely high margin project for me. You're thrilled about it. You get results quickly. So absolutely. So that is the direction we want to take things. Now, in terms of how we price to customers, much more about what is of interest to the customer today. Because my prime driver, and I'm a broken record about this, program counts. I want more programs on the platform. I think it's what validates our entire business model of being a platform company, doing services across all these different markets. That is shown in new customers, in particular signing up, but really new programs on the platform broadly. And so I want to make that as easy as possible. So if I have a certain customer who's got a lot of sensitivity to royalty and less sensitivity to fees, fine. If it's the reverse, also fine. And I want to make sure we have the margin of safety as a company to allow me to have that flexibility. And then I watch it. We report out our cash balance. It's important to us. We're careful with it. But I want to have that so that I can ultimately make it as easy as possible for customers to come on the platform. Does that make sense? I could imagine maybe someday we really had better models, but I'm not trying to handicap that risk. I'm really focused on just getting customers on platform.
spk04: Got it. Thanks for the call. I appreciate it.
spk10: Thank you, Matt. All right, Steve, I've opened your line and Madeline, you'll be next. You might need to unmute. All right. We may have lost Steve. We'll come back to you, Steve. Can you hear me?
spk05: I'm sorry.
spk10: Yeah, go for it.
spk05: Sorry about that. Just one follow-up question on Matt's question about deal structuring.
spk10: That was entirely my fault. Hang on. I'm going to open you back up. Sorry about that.
spk05: Too much power now.
spk09: Too much power.
spk05: Yeah. All right. Can you hear me now? Yeah. Okay. Just a follow-up question on Matt's question about the deal structuring. You know, I know you guys, you know, there are different levers for you to pull, but, you know, given... know given the macro environment are you are you seeing or are you expecting a slowing of upfront r d licensing or foundry fees um you know going forward and having them having the deal structures be more back-end weighted and uh and did that impact the the q3 foundry revenues or was that year-over-year decline primarily due to the chronos milestone realized in third quarter 2021
spk01: Yeah, so the year-over-year decline is definitely the Kronos milestone. And then I'd say generally a lot of foundry fee ramping has to do with kind of getting programs started and sort of less spend at the beginning as part of it. Remind me of the beginning of your question one more time.
spk05: I lost it. Oh, no. The lever of being more back-end weighted versus upfront weighted, given the macro environment.
spk01: Yeah. So far, it's not been like that. It tends a lot more to do with the type of company we're dealing with more than anything. Bigger pharma companies prefer to pay more up front and less on the back end. Smaller startups that are more cash sensitive prefer the reverse. I think that's still probably the dominant thing we see rather than some bigger macro issue um and i could even see in a pot in a more flush environment that trend more or less staying the same um so and again like i said for now i'm mostly focused on getting people on the platform we end up with a decent mix you know i do want to bring in uh you know i think it's been like i said earlier like getting these kind of blue chip biopharmas on the platform in the last year is helping us then sell into that category same goes for the startups by the way Right. If we don't bring in, you know, it's been great in the sort of industrial biotech sector, you know, folks like Lagos and Bolt coming on the platform. That's, you know, people look at earlier companies, look at them. You know, they're sort of leaders have been around the block on the startup side. You know, that helps us bring other new earlier stage companies on. So so I need these folks. You know, I want to have a spread, but it's more for kind of sales purposes rather than some sort of macro driver.
spk05: Okay, got it. Thanks for that color. And one on Zymergen. Now that that's closed, and I'm not sure if you finalized your strategy, but you know, Zymergen had a rack automation offering that they were selling into third party labs. Is that going to be something Ginkgo's going to continue to sell? Or is it Zymergen's automation capabilities just going to be integrated into the foundry?
spk01: So a lot will be integrated into the foundry. That's really the big strategic reason that we're excited about bringing that on. I talked about during the call earlier than I think the getting the Zymergen team and infrastructure pointed at 2023 Ginkgo R&D service targets, you know, is is what I'm most excited about, particularly given how quickly this all happened. That said, you know, they had a good pipeline of folks they were talking to. So I do think there's some interesting things there and we're going to be exploring that, you know, in the coming quarters.
spk05: Dr. Okay got it and then last one for me on biosecurity you know, given given the risk of other respiratory viruses coming back to this upcoming flu season and biosecurity are you guys currently doing combination tests such as you know coven was rsv coven was flu Andy etc.
spk01: Dr. don't know what we've announced publicly. Dr. Do you Anna Marie.
spk10: I think we might have to get back to you.
spk05: Yeah, let's make sure we get back to you. Yeah. Okay, understood. All right, thanks for the questions. Sure.
spk10: Great, thanks. All right, hopefully I'll do this right this time. Madeline, I'm opening your line. Should be able to speak now.
spk01: But I would say that that is absolutely what we want to have happen, right? Like from our standpoint, like all these things we're building out in that infrastructure, like collections at airports, right? why isn't that a great place to look for flu variants? Every year we have to figure out what the new flu variant is going to be, where do you think it shows up first, right? Not at hospitals, shows up at airports first, right? So if you want to add a few weeks to being able to predict flu variants, collect where people are, collect in international airports, you know, right? Like this is a, uh anyway you know i'm a broken record on this but having visibility into infectious disease post-covered globally feels like a no-brainer um it's just we are collectively too exposed and certainly in the us it would be crazy not to do it in my opinion and i think you're seeing that with the executive order and things like that you're you're there's awareness of this um so i am i'm hopeful uh that we will end up having that sort of uh monitoring way more pervasive than we did pre-covered Sorry, didn't mean to interrupt. Thanks, Jason.
spk09: Go ahead, Madeline.
spk08: Yeah, thanks. This is Madeline on for Matt LaRue from William Blair. Just a quick one for me. As you integrate the Zymergen deal in particular, but also the Bayer deal, can you give us any color on what your cash burn profile is going to look like going forward? I know you mentioned that the Zymergen capital structure is very different than it was a year ago, but any information you can give on that would be great.
spk01: Yeah, Mark, do you want to comment?
spk07: Yeah, yeah. in q4 uh what you'll see with the sort of combined effect of zymogen and bayer is like just directionally speaking just um a round number of call it 50 million of additional opex that includes dna so that's not on cash obviously that also includes a bunch of transition costs like the gna support for example that will eventually phase out during the course of 2023. So that cash burn decreases. That number does not include one time costs related to the acquisition. Some of that was paid at closing. Some of that will be paid during the course of Q4 or even a little bit beyond that. The cash that we inherit at closing for Zymergen, in effect, is able to very significantly mitigate all of this. And on the Bayer side, the cash that we get from the revenue collaboration also very significantly mitigates the burn that we inherit on the Bayer side of things. So that's sort of the profile that you're looking at.
spk08: Great. Thank you.
spk09: Great. Thanks, Madeline. And I think closing us out, we've got Mark Mazzara from BTIG. Great, can you hear me? Yeah.
spk06: All right, terrific. So I do want to ask about the Foundry Services Revenue I think you were operating at around 21 to 26 million per quarter. This quarter came in a lot lower. So how should we think about revenue per program and maybe walk through some of the drivers there? And, you know, recognizing that, you know, the macro certainly is pretty tough. I'm not sure we we heard why the services revenue was down in the quarter.
spk07: So, Mark, let me clarify. Why are you saying services revenue is down? It was 25, which is consistent with what you've been seeing over the past few quarters.
spk06: The foundry revenue X milestones.
spk07: Yes, which was approximately 25 million this quarter because we didn't have any material milestones land in this particular quarter. okay understood um your question is still good about uh revenue for programs i can speak to that but mark yeah yeah the revenue so yeah so the revenue per program so the the foundry services revenue this quarter is approximately 25 million and that does not include any major milestones so it is about in line with what we've seen in the prior quarters um the revenue per program number is down, as you pointed out, and that's largely because we added 15 new programs in the quarter, but we see almost no revenue contribution from those 15 programs in the current quarter. So it'll take some time for those programs to ramp up. So you're just seeing the math there work out in a way that the revenue per program looks lower. And that's just because it was our largest ever new program ad for a quarter and almost no top line contribution in the quarter from that. So Mark, does that answer the core of your question?
spk06: Yes. Yes, that's helpful. And then I know you've received this question a few times tonight. you know, questions about the uncertainties related to life sciences funding. Can you just give us a sense for, you know, obviously you do have some larger pharma companies in your portfolio as customers, but just give us a sense for some of the more emerging companies, what you're seeing in terms of funding dynamics and how should that factor into how we think about new program wins in 2023?
spk01: Yeah. So, yes, what I would say there is I think we are, again, a little bit broken record, but I think we're early penetration on that. Right. We don't have that all that many small biopharm is on the platform today. Right. We have a few, you know, we've talked about like Selecta and others. But so I think in large part, it's still more of a. Does Ginkgo have relevant infrastructure for you? You know, yes, we can do deals versus like a macro slowdown if we already had relationships with many small biopharmas, right? It's just an area that's one of the later markets for Ginkgo to move into. So we have a little more insulation there. You know, it's just kind of the nature of it from my standpoint. So I don't, again, I would say based on our sales pipeline, I don't feel... like a bit like a big threat from that shift for ginkgo in particular that doesn't mean that that is not happening in in the wider market um and i do want to add one extra piece of color to just what mark said about the program revenue keep in mind you know with like like i said earlier with the code base a perfect deal for genco would be i do almost no work And I give you what you want, right? Because I've learned enough that I'm actually saving lab work for a given project. Now, you might then come to me and ask for a more sophisticated project. That's what I'm expecting. As I get better at doing what was hard two years ago becomes easy, you're suddenly going to ask me for something more valuable to you that's harder, right? And that follows the same trend you would have seen with like compute projects. right like when compute was expensive you know like this was a hard project but then it gets cheaper and it's easy but people come up with new things to do with compute we expect kind of a similar drive for people to keep asking us difficult things but easy programs should should actually start to take less effort and and if we're and for the fees part of it means less fees, right? Now, it means I'll get the downstream value share with higher probability and do the programs faster. And so I'll make more on the downstream. But there'll be an interesting dynamic as we try to actually standardize and make programs simpler for customers where it could drive fee revenue down, but hopefully expected value of downstream value share up, or certainly at least over a window of time, drive it up. So we will aggressively try to make that happen. So I do want to just highlight that that's an interesting dynamic that makes the program, you know, the fees per program kind of just requires some extra thought. But does that make sense?
spk06: It does. It does. Thank you. And then just last one for me on Zymergen, you know, obviously you're looking to rationalize real estate and exploring strategic alternatives on the product side. What other sort of key strategic initiatives or milestones should we think about that business through, you know, the next 12 months and How can we think about that as maybe a transition year, or do you think there are opportunities that are significant?
spk01: It's such a great fit. As I recall listening today, I think the team there can plug right the heck into what we're trying to pull off at Gingo in 2023 for our targets. It's just... It's just, you know, they think like we do. You know, the team historically at Ginkgo has thought, and it's a cultural fit. So I actually, I'm actually pretty bullish that a lot of the contributions will come quite quick on the Zionism side. Again, there are these sort of longer cycle things, you know, maybe we can you know, they have certain product assets we'd like to partner or sell or things like that. That's fine. But, but when I, you know, my expectation is they help us hit our numbers, program numbers and scaling targets. So yeah, I'm, I think it's great. It's really nice. And we're thrilled to have that team coming on. All right. That's it for me. Thank you.
spk10: Great. Thank you all. I don't see any other questions on the line. So maybe Jason, I don't know if you have any closing thoughts just to wrap up the night, but then we'll let folks get on with their evening.
spk01: Nope, I think it was a good coverage of everything. I appreciate all the good questions and thanks everyone for spending the time with us.
spk09: All right, thanks.
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