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twist bioscience corporation (twst) q2 2019 earnings call transcript

by:LSDD     2019-12-16
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Twist biological sciences (NASDAQ: TWST)
August 1, 2019 4: 30 third quarter 2019 revenue callm.
Content: notable questions were prepared and comments answered by all participants: Ladies and gentlemen, welcome to the conference call on financial results for fiscal year 2019, distorted Biosciences.
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I would like to introduce Mr. host of this conference call.
Chief Financial Officer Jim sorbornYou may begin. Jim Thorburn --
Thank you, chief financial officer, Kevin.
Good afternoon, everyone, thank you for joining us today at the Twist Bioscience conference call to review our financial performance and business progress for the third quarter of fiscal 2019.
Please check the press release we posted earlier today, which can be found on our website www. Twistbioscience. com.
I was with Dr today.
Emily Le Proust, CEO and co-founder of Twist.
Emily will start by reviewing our overall progress and I will report on our financial and operational performance.
Emily will then discuss our upcoming milestones and directions.
We will then start asking questions.
This call is being recorded as a reminder.
The audio section will be archived in the investor section of our website for two weeks.
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A statement in the sense of federal securities law. Forward-
Outlook statements are usually related to future events or future financial or operational performance.
Our expectations and beliefs on these issues may not be achieved, and actual results and financial periods are subject to risks and uncertainties that may lead to significant differences in actual results from expected results.
These risks include the risks raised in our press release earlier today, as well as those more adequately described in our submission to the Securities and Exchange Commission. The forward-
Forward-looking statements in this presentation are based on information available to us as of the date of this agreement and we do not assume any obligation to update any forward-looking
Except as required by law.
With this in mind, I am now transferring the call to our CEO and co-founder, Dr. Emily Leproust. Emily Le Proust-
Thank you, Jim. Good afternoon.
During 2019, we did a very good job in all areas of our business, maintained growth in synbio and NGS, and invested in continuous technological progress and product offerings, this will create additional sources of income to consolidate our leadership in the field.
At the beginning of the fiscal year, we set an ambitious set of goals for each vertical industry.
I am pleased to report that we are achieving these goals and even exceeding them in some cases.
Overall, in the three quarters of this fiscal year, we have shipped to 1,091 synbio and NGS customers, compared with 717 customers throughout fiscal 2018.
Our income is $13.
This quarter was 6 million.
Although our income was flat in the second quarter, our business revenue has achieved significant results.
In fact, we only had one customer last quarter, which accounted for almost $3 million.
This large liquid biopsy is not included.
Our revenue will increase by nearly $3 million in turn.
For synbio, we have shipped to nearly 1,000 customers this fiscal year and we continue to see revenue growth in this area.
In the third quarter, we prepared our back movement
A new manufacturing plant in South San Francisco ended genetic production.
We are pleased to report that this initiative went smoothly in the first few weeks of July, without any production disruptions, and that there was only a minimum delay in Gene orders during the period from July 1-7 to 20.
In the third quarter, the number of customer orders increased by 3.
A year-on-year increase of 2 times, while the average order size decreased by about 60% year-on-year, indicating that while we are at the beginning of the track, we are reaching smaller customers in the market.
We believe this is by our electronics.
The commercial platform reaches the long tail of the market.
Ginkgo revenue was $2 in the third quarter.
2 million, we continue to expect them to meet or exceed their contractual obligations of $9 million this year, reflecting the continued need for ginkgo to produce a large amount of DNA from Twist.
In this quarter, we are all together.
Hosted an event with Arzeda, Labcyte, and TeselaGen showcasing the integration of the respective platforms to create workflows that speed up the design build test cycle.
In April, The Economist published an insightful article detailing the value of the evolving field of synthetic biology.
As described in the article, the integration of technology and the preparation of the market to accept the growing benefits of synbio are integrating different technologies to stimulate new exciting research.
We continue to play an integral role in synbio\'s investment, our DNA writing capabilities and the products we produce through proprietary technology.
As proof of our continued innovation, on Monday, we announced the introduction of long-Poly nucleotide or poly nucleotide with a length of up to 300 bases, which we believe is the longest commercial product in the industry.
Historically, due to the chemical reaction in efficiency, it is difficult to make oligos more than 200 bases.
We have found a proprietary way to make our oligos a record 300 base with a very low error rate.
We believe that this not only provides a competitive advantage for our oligo products, but in oligo products, longer oligos are very useful in drug discovery and development, it is also very useful in data storage. Longer DNA fragments can store more digital data per chain.
In addition, we believe that long oligos will be very useful for gene editing and protein engineering in cripr.
In fact, 300 bases were able to directly synthesize two guiding rna to study the synergistic effect of multiple guiding rna.
For protein engineering, 300 base pairs should be in the length of 100 amino acids or protein subunits.
When we look forward to synbio, we look forward to the continued growth of synbio revenue, and we believe that with enhanced product supply, we have a great opportunity in the pharmaceutical sector.
Our current goal is to launch several new products later in the calendar year, and we believe this will increase our curve growth in 2020 and beyond.
For Genomics and target NGS, target enrichment products have been shipped to more than 2019 customers in the third quarter of fiscal 150, of which 26 are now in production.
For the NGS, our revenue continues to grow well and our customer base is moving from pilot to production.
As we said before, we expect a large number of orders to become chaotic as customers buy [1]inaudible]
The product, then needs several quarters to process the inventory before placing another big order.
In addition to expanding the base of our large diagnostic testing company (which is the source of most of our revenue today), we have seen two other market opportunities.
The first is to study the market.
In June, we launched mouse exome, taking advantage of our ability to generate custom panels quickly, cost-effectively.
When collecting the sequence data of the mouse, the mouse exome provided by our competitors is based on the sequence information of more than five years.
Our mouse exome includes the latest consensus genome construction, which we expect to be an important source of division.
In addition, the quick and cost-effective delivery of a completely different variety of large panels in a custom panel design is an extraordinary feat that reflects the value of our capabilities and technology platforms.
Looking forward to the future, in addition to expanding our human NGS product line, we intend to provide
Extensive research is needed.
The second area we see growing is the transition from SNP arrays to NGS.
We received $800,000 in July.
00, this is the beginning of the conversion from the microarray to the NGS.
As we mentioned earlier, several customers have demonstrated that sequencing of library preparation and target capture using Twist is performed on [inaudible]
The platform can be cheaper than running a DNA microarray for SNP analysis, and we intend to continue to achieve this conversion.
Although SNP arrays are widely used in the field of consumer DNA testing, they are also widely used in the biotechnology market for genetically typed chicken, beef, salmon and other foods.
We believe that the market opportunities for SNP array market segments totaled $0. 5 billion.
We do expect that it will take some time to penetrate this area due to the large shift in workflow.
That is to say, the unique combination of our platform with sequencing on [inaudible]
Compared with SNP arrays, more abundant gene typing data is available at an attractive price point.
It represents a medium and long term
Twist expands long-term opportunities for our platform\'s available markets.
In the third quarter, we launched
Business platform for several of our NGS products.
All NGS customers are now able to track their order status and choose the standard NGS products that customers can purchase through our electronics
Business platform.
In this quarter, we intend to launch a few more electronic products.
Design and customize the commercial functions of the panel implementation.
Looking ahead to the cost of the bioengineering business, orders are still well above $18 in revenue.
Revenue grew 1 million in the third quarter, indicating recent revenue growth
With these orders converted into revenue.
We are therefore still working to achieve the guidelines for this fiscal year.
I will have Jim provide a detailed review.
Vertical Industry--
For Bio-Pharma, we continue to work with our partners Pandion Therapeutics and LakePharma as we continue to validate our GPCR Library internally.
As mentioned earlier, we have found additional functional cues for GLP1R, which promotes insulin inhibition of pancreatic β cells and plays a role in type 2 diabetes and Alzheimer\'s disease
I would like to point out that being able to identify several functional antibodies against a GPCR target is an important scientific proof of our platform strength in itself.
In addition, I am pleased to report that last quarter we identified features for the other two relevant and important GPCR targets for a total of three goals.
Looking ahead, we will run these threads through a typical representation workflow in order to build the packets needed to explore its monetization.
We are also continuing to explore other goals to create a pipeline of clues for multiple goals.
We have also established a series of single-domain antibody libraries.
The single-domain antibody is a much smaller antibody fragment than the entire antibody.
A complete antibody is composed of two heavy chains and two light chains, and a single antibody is designed by a heavy chain antibody, also known as a VHS fragment.
These fragments are small and modular antibodies that are both stable and robust [inaudible]
Discover and develop.
The initial features of these libraries have begun, and the design of other libraries has begun.
In addition, we are able to build such a diverse library quickly and at a low cost.
So that we can make it quickly [effectively [inaudible]
Content that can be filtered for specific features has multiple opportunities to find future leads for difficult goals.
With these new tools, we have made good progress in building cooperation and partnerships for discovery and early development capabilities.
With regard to data storage, we will continue
Through the government\'s contract on the storage of DNA data, we are still encouraged by the progress in this regard, although there is no guarantee that we will receive funds under this contract.
We are also pleased to announce that we are moving forward with the design of our next generation [in the expectation of this project]inaudible]
Specific to the storage of DNA data. A similar [inaudible]
Will be designed and manufactured to be compatible with multiple device designs and will be a key part of our methodical development path to achieving functional density.
Similar chips require multiple quarters in design and production, so we will continue to carry out the engineering roadmap to improve functional density.
The first phase will characterize the device design from 1 to 5 microns.
As a reminder, as the function size decreases, the cost of oligo and the cost of storing bytes will decrease.
For example, from 50 microns to 5 microns, 10 times smaller, reducing the cost by 10-Square or 100x.
Also, a reminder that once a similar chip is obtained, different device designs can be manufactured and tested relatively quickly.
Therefore, this is a key milestone for future improvement.
We are encouraged by our progress and the potential to make the cost of DNA storage competitive over the long term
Storage options.
We also added Nelson Chan to the board this quarter.
Nelson has consulted us over the past year and a half, and has brought incredible experience in the semiconductor industry and the storage market.
It is important that he plays an important role in introducing and establishing the SanDisk flash market.
Finally, we recently signed a contract with Imagene, a French company that supplies DNAshells, a very small stainless steel capsule that can store digital data encoded in the target [DNA]inaudible]
No degradation.
This is another part of the business infrastructure that brings DNA digital data storage to market as a commercial product.
Finally, regarding our China strategy, I would like to reiterate that we will keep all the advanced know-how in the United States.
Assemble a more standard back by visiting a factory in China
In the final process of our NGS products in the Asian market, we will be able to speed up the time from order to delivery for these customers.
In this way, we will be able to protect our overall property and still be able to quickly meet the needs of customers who need their NGS products.
We still expect that the initial shipment of the facility will be ready for space by the end of calendar 2019.
At this point, I would like to transfer this call to Jim to review our financial performance for the quarter. Jim Thorburn --
Chief financial officer. Thanks, Emily.
First of all, we would like to thank all the shareholders who have supported our recent listing in May.
We raised about $84 million in net income, which allowed us to end the quarter of June at $161.
Cash and shorts 8 million-
Regular investment.
As Emily pointed out, the results of this quarter confirm that our implementation is in good shape and we now expect our revenue this year to be between $52 million and $53 million, our previous guidance was $50 million to $52 million.
I will introduce some quarterly highlights soon. Revenue is $13. 6 million.
The reservation is $18. 1 million.
This is a record for the company.
Our business team performed very well and continued to deliver.
Our book ratio is 1. 3 to 1.
Our order so far is $50 million.
Our gross profit margin for the third quarter was 16%.
Our ginkgo business is doing very well. We had $2.
Orders and bills are $4 million.
2 million this quarter.
We did a great job of expanding our customer base, surpassing ginkgo and expanding synbio coverage.
So far, we have issued quarterly invoices for more than 1,000 customers.
I will now delve into some details of the order for the third quarter. $18.
1 million of orders increased by 69% year-on-year and 8% month-on-month.
Our synbio order (defined as Gene, library and oligos) is $11.
Including ginkgo, 3 million of the season.
Non-continuous growth of 7%
Ginkgo sequential growth of 10%.
I would like to stress that our genetic business is doing very, very well with orders of $9.
The 3 million advantages in the EMEA and US markets are mainly from the industrial, biotechnology, academic and pharmaceutical sectors.
The NGS order is about $6.
The quarter was $8 million, rising in turn from $6. 2 million Q2.
We received orders for 178 accounts in this quarter, up from 137 in the second quarter and have extensive orders
No major customer dominates the order-based booking.
Our pipeline continues to grow.
We have 58 pilots and validation now.
42 increase from last quarter.
Keep in mind that we have tracked larger accounts that can bring in more than $250,000 in revenue.
Four of us are tracking now.
In addition, two large customers are expanding the production scale, bringing the total number of our production customers to 26.
How are we doing globally?
Our global expansion is progressing well.
About 41% of our reservations are beforeUS.
EMEA also performed strongly in six quarters.
1 million orders, including 2.
1 million from em and synbio 4 million with solid orders in the field of industrial biotechnology, academic and pharmaceutical in EMEA.
Our orders are stronger in the Asia Pacific region. 4 million.
Including China bookings at 0. 8.
US orders for this quarter are 10.
6, including 7 million of synbio.
I would just like to point out that the orders we provide are not intended to be converted directly into revenue for the next quarter, but rather to provide trend lines for each product group.
At the moment, both synbio and NGS are growing strongly, although we expect both syn and ginkgo orders to fluctuate on a quarterly basis.
I comment now on revenue.
Revenue for the third quarter was $13. 6 million.
It was a fantastic quarter for Twist, up 108% from $6.
5 million Q3 2018.
Our NGS business is strong with $5.
Revenue is 6 million, compared to $1, we now have about $15 million in bills on the NGS each year.
The same period in 2018 to 8 million years.
As we noted in our previous earnings call, NGS orders and revenues can be confusing.
In the second quarter, we billed a client for $2.
As Emily stressed earlier, there were 7 million NGS tools.
Products were used for several quarters this quarter.
So we did not ship to this customer in the third quarter.
So, that\'s $2 not included.
From our results in the second quarter, 7 million, our continuous growth in NGS was 97%, and in this quarter, NGS customers shipped 153.
This shows that we are a very powerful product line and our products are being adopted.
Please note that the goods shipped to the NGS customer in the previous quarter are approximately 104 pieces.
Synbio earned $8 million, up from $7.
Revenue for the second quarter was $1 million, and synbio\'s revenue so far this year was $23.
6 million, including ginkgo.
Excluding ginkgo, our synbio revenue grew by 70% year on year, indicating that we are making great progress.
It is worth noting that our genetic income is $6.
2 million, including $2.
2 million from ginkgo.
Gene revenue grew 3% in a row this quarter, and our longer gene 5kb earned $1 million.
It is worth noting that our 5kb products have 110 customers.
So far, the price of genes is $19 million, compared with $11. 9 million.
Excluding ginkgo, our genetic business grew by nearly 90% year on year.
I just want to summarize the $13.
The 6 million in the third quarter is good because when you exit $2.
7 million, as Emily emphasized, we have grown nearly $3 million in a row and are in the middle of our actions.
I just want to thank the whole organization for its execution.
It was a great quarter and I am very supportive of tornadoes and obviously they will continue to be available. Good job, team.
Turn to regional review--
In the third quarter, we continue to expand our global operations.
Income in the United States is $9.
$2 million, bringing us revenue to $27 so far this year. 4 million.
This accounts for about 70% of our total revenue, up 125% year on year.
As mentioned earlier, this is an excellent quarter for the United States, as the previous quarter reflected a huge $2 revenue.
7 million NGS shipments.
EMEA\'s revenue is $3.
This quarter was $5 million, up from $3.
The second quarter was 3 million, accounting for about 6% of continuous growth.
Nine months before the 2019 fiscal year, EMEA earned $9.
3 million, above $4.
Fiscal year 18 was 1 million in the same period, up about 125% year on year.
Asia-Pacific revenue was $0 in the third quarter.
9 million, starting from $0. 7 million.
In the first nine months of 2019, revenue in the Asia-Pacific region was $2 million, up from $0.
The same period of 7 million fiscal year was 2018, up 127% year on year.
In terms of market segment revenue this quarter, academia, including synbio and NGS, performed strongly.
In the first nine months of fiscal 2019, our two largest sectors were industrial chemicals, which was about $16.
1 million of income and health care accounted for $12. 4 million.
Now, go to P & L--
As we have stressed, our gross margin for the last half of the fiscal year is in the medium term
Last quarter, teens and our profits actually hit 16%. That\'s $2.
Security deposit 2 million.
We are following up based on our initial guidance.
Excluding the cost of revenue for the third quarter, our operating expenses increased by about $30.
$3 million and $28 million.
R & D increased to $9 million compared to $8.
The second quarter of fiscal 9 million was 2019.
Our SG & A has increased to $21.
Compared with $19, 3 million.
1 million second, mainly due to some higher legal costs and additional business costs due to our ongoing investment in business organizations.
In the third quarter, we added 11 people to our business organization, and last year our organization expanded from 57 to 106.
Our net loss for the quarter was $27.
9 million, an increase over the loss of $25.
The second quarter was 9 million, mainly due to higher operating costs.
All in all, our income for nine months before our 2019 fiscal year was $38.
6 million, an increase of 127% over the same period in fiscal 2018--
Our genetic commands are powerful.
Our NGS products are gaining momentum as more and more customers adopt and start mass production.
As a result, we increased our income guidance to $52 million to $53 million in the 2019 fiscal year, compared to $50 million to $52 million we discussed before.
Ginkgo revenue is expected to be about $9 million. Non-
It is estimated that Ginkgo synbio is approximately $23 million and Gingko is approximately $20 million.
Our net loss guidance for this year is $0. 102 billion to $0. 104 billion, compared with the previous guidance of $97 million to $99 million.
We are increasing our investment in business institutions to prepare for strong growth in 2020.
It will take about six to nine months to report and make our sales staff fully capable.
We would like to have about 70 full sales staff.
We expect to need about $1 million on the move.
The associated costs associated with our new facility, together with four new writers, will enable us to expand our revenues to $0. 2 billion.
All in all, we carried out the plan ahead of time in the past year.
We made a strategic investment in our business and strengthened our balance sheet.
The business is doing very well, our organization is executing and we are positioning ourselves to achieve strong growth.
I\'m transferring the phone to Emily now. Emily Le Proust-
Thank you, Jim.
As we are now in the last quarter of the fiscal year, we have achieved several key milestones and developed an overall plan to continue to grow our business.
For synbio, we expect revenue from ginkgo to increase as we continue to grow from the larger synbio market.
We look forward to long\'s contribution. inaudible]
And our long genes.
Looking forward to 2020, we have a solid roadmap for products that we believe will drive growth in the pharmaceutical market.
For the genomics market, we continue to bring our customers from pilot to production.
We are encouraged by the early progress we have made in the large SNP market.
As an opportunity for biological research and direct consumer-oriented NGS, we will continue to focus on the traditional diagnostic market.
For bio-pharmaceutical, our science is constantly improving, and we plan to pass
Dilute cooperation and partnership.
We are also looking forward to signing more revenue generating partnerships, starting with smaller agreements that focus more on services, and developing into real discovery partnerships along the value field.
In terms of data storage, we look forward to continuing negotiations [inaudible]
Financing and expecting it to be completed.
Finally, we released the case update detailing the development of the ongoing litigation by Agilent on June and 9, which can be found in the News and Events section of the investor relations section of our website.
We still believe that this case is worthless and we plan to defend ourselves strongly.
As you know, we will not discuss the proceedings in a conference call.
We encourage you to read the updates on the website.
With this, let\'s start asking questions. Operator?
Questions and Answers: operators, if you have any questions or comments at this time, please press *, and then press the 1 key on your key phone.
If your question has been answered and you want to remove yourself from the queue, press the key.
Our first question came from Tycho Peterson at JPMorgan Chase. Unknown --J. P. Morgan --
Guys, analyze it. This is [inaudible]on for Tycho.
I want to start with the NGS business.
Emily, can you--
I know you mentioned the 150 customers that you shipped this quarter and also very strong orders.
How many of them are driven by e-commerce
The launch of the business platform and how it was formed there? Emily Le Proust-
This is a big problem.
Thank you very much.
E-commerce has yet to reflect most growthBusiness launch.
So, we are still waiting for the benefits of e-commercecommerce. Unknown --J. P. Morgan --AnalystGot it.
Following the NGS, I think you only mentioned two incremental customers that are moving to the production model.
Are you surprised?
Is it normal every quarter?
It sounds like between the first and second quarters you have six or seven customers from validation to production.
Is there any rhythm to read? Emily Le Proust-
This is a matter of time.
I think this is also an invalid issue. It\'s timing.
At the same time, our people [inaudible]
Pick up a difference-time $2.
Our orders for the last quarterJim Thorburn --
I would add that we now have nearly 40 customers in the validation phase.
Most of them are in the later verification phase.
So, it\'s going through the pipe.
Part of it is that we have a lot of negotiations and the team is tied together in terms and discussions, which I don\'t think is surprising in terms of expansion.
To my surprise, it\'s encouraging how many people actually went into the post-validation phase. Unknown --J. P. Morgan --
Fast track by AnalystOne
At Lake pharma--
Can you talk about your success so far in penetrating the customer base through your discovery and optimization platform? Emily Le Proust-
They make us very useful in front of people.
We are discussing with multiple lake pharma customers.
As you can imagine, it will take some time for these types of activities to contribute.
But so far it has been very positive. Jim Thorburn --
The other thing I added to the NGS, chief financial officer, is that we did move our lab this quarter and integrate it in San Francisco.
So we have been very cautious about how to manage our customer base.
The team actually performed very well. Unknown --J. P. Morgan --AnalystGot it.
This makes sense.
Is there a slight delay in opening your facility there in China?
It sounds like the end of the calendar year.
Is there anything to elaborate on? Or is this a normal business process? Emily Le Proust-
Last quarter, we have directed the end of the fiscal year for the first shipment-
I\'m sorry. I was wrong.
In the previous earnings call, we have led to the end of the previous calendar year.
So, we\'re on this track. Jim Thorburn --
Our priority is to integrate our business into San Francisco. Emily Le Proust-
At the same time, we can ship from here to China.
It will be better when we are in China, but we can still serve from here. Unknown --J. P. Morgan --AnalystGot it.
And then Jim, I know you may not want to say too much concrete in the next fiscal year yet, but given that you have led to the medium term
Gross profit margin in the back teens-
Half of this fiscal year, it is clear that you have increased some business investment in the second half of this year, how should we look at profit growth? Is that mid-
Gross profit margin in our teens is a good baseline figure, when we move to the next 18 months or so, we can consider the order improvement, or if there are other mobile apartments that may materially change thisJim Thorburn --
Ask the Chief Financial Officer.
This is what we focus on.
Part of the integration in San Francisco is the organization where we can leverage synergies.
By the end of this year, we will add four new writers.
This will help us reach about $0. 2 billion.
That\'s what we think of the business.
Our goal should be to provide a gross margin of about 50%.
Our goal is to reach this level as soon as possible.
We expect that at the end of the next calendar year we should keep this running speed.
The next question is Ross Muken from Evercore ISI. John --Evercore ISI --
This is John of Ross.
Focusing on data storage and imaging transactions, I would like to know what your vision is for how to commercialize.
What does it take to have a business package in this space, does it require complementary technologies such as throughput reading? Emily Le Proust-
This is a big problem.
In the data store, you need to be able to input/output data.
You first need to code the data with DNA.
That\'s software.
Then you need to write DNA.
This is our silicon chip.
Then you need to store your DNA.
Then, you have to PCR the data out when you need it.
Then you have to sort and decode it, which is also software.
In terms of going to market strategy, the most meaningful thing in the first place was to get code data, so data that was not read frequently.
So you need to be able to read the data when you need it, but the percentage of reading the data is small.
This means that the current sequencing technology is perfect at this point.
Over time, the sequencing technology continues to improve, and perhaps there will be cheaper sequencing technology that will allow us to enter the market with higher frequency of data reading.
However, since we can\'t control the reading of data, we initially focused on the market with very low frequency of data reading.
FYI, the data is called wear and tear, which means that it is written once and never read.
The vast majority of the world\'s data is old. John --Evercore ISI --AnalystGot it. Thank you.
In terms of this imaging transaction, how much closer does it make you to the product in the Wear data?
Do you know when we can see a similar situation? Emily Le Proust-
We are selling Chief Executive Officer today.
We have a small amount of sales in data storage.
But today, the cost of the ramp is limited.
This is limited by the density of silicon chips.
About $1,000 per megabyte.
It is very cheap to store bitcoin if you are storing it, but if you want to store financial data or your personal photo album, it can be very expensive today.
That\'s why the market is limited.
So our next chance is that we can reduce the cost of writing a lot.
With the silicon chips we are developing, we have made this transition.
So the next target is about $100 to $1,000 per gigabyte.
Once you have these, you can start serving some very interesting markets.
So the opportunity will be bigger, and the next step after that will be $100 per megabyte, about the price of the hard drive.
At this point, you can go to the whole market.
This will be gradual, but the next step is $100 to $1,000 per gigabyte.
As we mentioned, it will take several quarters to design and manufacture the first silicon chip.
The good news is that we have a roadmap.
We are executing.
We are moving forward.
If I could add
The diluted funds we expect will accelerate this process.
The next question comes from Doug sheenker and Cowen. Doug Schenkel --
Cowen and the company-
Good afternoon general manager.
I want to go back to the previous question or build it in a different way.
So juts reviewed some of the numbers reported several times and the number of customer evals jumped from around 100 to over 150.
42 pilots went to 58, and then the number of people produced increased from 24 to 26.
So, you get more evals.
The pilot is also jumping.
I think what we are waiting for is a bigger increase in production customers.
Can you share some rules of thumb with us? Normally, how long does it take to move from one stage to another, and then maybe build on that, what type of money are we talking about?
The second one may be a bit difficult.
Obviously, we have three quarters of revenue at this point.
We know what your guidance for the NGS section is this year.
You don\'t seem to have much extra conversion before the fourth quarter, and I guess it\'s just conservative.
I ask this because it looks like you\'re clearly building momentum towards the end of the fiscal year.
If you can give us some rules of thumb about these things, I think it will enable us to think more wisely about what will happen in this part next year. Jim Thorburn --
The chief financial officer is somewhat conservative.
Keep in mind that part of the reason for conservatism is that we are integrating into San Francisco.
We\'re still tracking.
Over the past few months, we have found that we have a lot of negotiations on the client side.
What I find interesting is that if you put an order on our chip, this item was in July last year and we started negotiations on February 2018.
It took us over a year and nearly six months to convert it.
We started shipping about September.
As far as our expectations are concerned, we will do about 20 pieces this year.
We must take a step back. You\'re right.
We\'re motivated.
There is more in the verification.
This is the late stage of verification negotiations.
We should expect to double our business next year.
It\'s hard to say when these verifications will be adopted now, but my point is that once they are validated, you may be talking about three to six months of adoption.
Verification is late.
We define the delay validation as we are actually negotiating terms, talking about pricing and T and C. Doug Schenkel --
Cowen and the company-
Managing director
You have a lot of motivation.
It\'s still early.
It is too early to comment on the signs that these conversion schedules are tightening.
I can imagine it took a year and a half for big companies to reach our current level.
My guess is that if there is another such thing today, it will probably take less time. Is that fair? Emily Le Proust-
We have done it several times and we can better predict what people want.
Therefore, there is less exploration of demand.
A lot is already in the funnel.
I don\'t think many people are talking yet.
This fiscal year seems conservative.
I think we\'re fine-
From the perspective of growth, we are positioned on what we want to achieve next year. Jim Thorburn --
Another problem is that we have increased our investment in business organizations to support growth.
If you look at it, we\'re adding nearly 70 sales people, 30-
The Odd will support the NGS and we will build the technical resources around this as it is a technology sale.
When we start to segment the business, both clinical and diagnostic, each segment in the NGS requires a different style and a different value proposition that they have their own traits.
So we are accumulating this knowledge.
Part of the ramp must be to have the right person talk to the right customer in the right place, but definitely a good product. Doug Schenkel --
Cowen and the company-
The general manager asked me to ask another question.
About this topic
I think the last point about the 70 new members you introduced, 30 people are looking at this part.
Do you want them to help you?
I think you \'ve been strong in basically converting some of the large research and large business labs that need to get good target capture tools at a lower price.
Will the business scope help you deal more with these types of customers and convert them faster, or if it will make you spend less on chasing a bigger market share in the number of possible customers, but there are more. Emily Le Proust-
Chief Executive Officer thinks that\'s all.
I think more ground personnel have the ability to do more high contact management work related to big customers.
At the same time, if we have a pilot project every time we enter the account, we win, and then, we should let more people knock on more doors earlier, so we can plant the funnel and get more people moving from the pilot to the production department.
It extends a little bit of both.
This will help big customers and more moderate customers. Doug Schenkel --
Cowen and the company-
There may be several cleaning directors in the management director--
Where do you think the genetic turnaround time will be? end?
How important do you think this is in opening up more markets? Emily Le Proust-
Chief Executive Officer sees this as a key focus for us to expand our business.
The more DNA flavors we can add, the more attractive it is for more researchers, and in a sense, the faster turnaround time is to enable us to reach more people.
Therefore, our goal is to continue below the turn-around time of 12 days in the near future and then move forward further.
In 12 days, our competition will be very fierce.
Then, when you reach 11 days and 10 days, it is irresistible at the price point and the scale we have. Doug Schenkel --
Cowen and the company-
The last managing director-
In the context of discussing your new growth drivers in your prepared comments, you mentioned the ability to use distortions
Enabling snp rna tools to drive more and more migration of customers from arrays to Novaseek.
To be fair, a good validation of this will be in the upcoming conference call, being able to disclose signs that you have gained early interest from some of the Big ag accounts?
This is what we should look for next, as a validation of your progress there? Emily Le Proust-
There are many departments in the Chief Executive Officer.
One of them is the ag market.
The other is direct DNA testing of consumers.
I think these will be a proof.
I think we are very pleased with the $800,000 ordered for one of the early conversions in July.
So, in a sense, this is the first proof that we can compete in this market.
As we mentioned, it will take some time as this is a big shift in the workflow, but once you prove that the price point is there, this is the most important part of typing, that means you can do it.
If you can do it once, then we will repeat it. Doug Schenkel --
Cowen and the company-
The managing director is done.
Thanks again.
The next question comes from Catherine Schulte and Baird.
Catherine Schulte-Robert W. Baird --
Back to the NGS, just curious, what about the absorption of the products you launched at AGBT, especially the Fast Hyb protocol? Emily Le Proust-
Thank you, chief executive.
Fast Hyb is a great product.
This really opens some doors for us, and as we mentioned earlier, we allow people to reduce the cost of sequencing per sample, but for some, they already have an asset that has been verified.
The cost savings we bring may not cover the full cost of revalidation under the new switching product.
Fast Hyb is a great door opener in this case, because at this point we not only save the cost, but also bring the workflow advantage.
So in general, it was well received.
Beyond my expectations of the customer, the customer responded positively to it.
It\'s really a door opener.
Catherine Schulte-Robert W. Baird --AnalystOkay.
You \'ve talked a lot about the conversion from SNP arrays to NGS.
Today, how many customers have you served in the app, switching from arrays? Emily Le Proust-
Chief Executive Officer less than five-year-old.
This is a very small number at this point. Jim Thorburn --
It\'s too early for our CFO to do so.
Obviously, we have been doing it for a while.
In fact, we did receive the order in July, which is quite close to the time we expected.
So, I would say we\'re following up on our plans.
It may be tracked slightly in advance.
Catherine Schulte-Robert W. Baird --
Finally, the analysis of drug discovery, what other packets do you need before you think you can monetize this capability, how far do you think we are from this? Jim Thorburn --
This is a big problem.
So now, we know that weinaudible].
We know they are functional.
I think a little bit of googvodata will go a long way.
This is what we focus on at this point.
As soon as you have wikivodata, then it\'s a clinical candidate.
Catherine Schulte-Robert W. Baird --AnalystGreat. Thank you.
At present, no further questions have been raised by OperatorI.
I want to transfer the phone to our host. Emily Le Proust-
Thank you, chief executive.
All in all, this is an exciting time to distort the biological sciences.
As we move into the last quarter of the fiscal year, we continue to achieve strong growth in the synbio and genomics business, and we are investing in our long-term business
Long-term opportunities for bio-pharmaceutical and data storage.
As customer-driven revenue streams continue to grow, truly demonstrating the ability to change the world, for a long time
Long term vertical market opportunities and a great team are in place to execute our overall plan and we are well on our mission to deliver sensitive DNA for improved health and sustainability.
We appreciate your continued support and look forward to your update on our progress.
This is the end of today\'s speech, ladies and gentlemen.
You can now disconnect and have a great day.
Participant: Jim soburn--
Emily Le Proust, Chief Financial Officer-
Unknown Chief Executive Officer. -J. P. Morgan --AnalystJohn --Evercore ISI --
Cowen and the company-
Catherine Schulte, managing director-Robert W. Baird --
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