Twist Bioscience at Barclays Conference: Strategic Growth Amid Challenges

On Wednesday, 12 March 2025, Twist Bioscience (NASDAQ: TWST) presented at the Barclays 27th Annual Global Healthcare Conference. The company outlined its strategic initiatives to navigate current market challenges and seize growth opportunities. Key discussions included their focus on long-term growth, operational efficiency, and customer retention, with a balanced outlook on both opportunities and risks.

Key Takeaways

• Twist Bioscience is focusing on commercial expansion and customer retention, emphasizing long-term growth without further capital raises.
• The Express Genes portfolio is being leveraged to penetrate the academic market, with strong adoption across various customer segments.
• Twist aims for a 50% gross margin by Q4 2025, driven by revenue growth and operational efficiencies.
• The company is strategically slowing its DNA storage investment to conserve capital while maintaining a commitment to future development.
• Twist is expanding its NGS tools and product offerings, with significant growth expected from new applications and automation improvements.

Financial Results

• Gross margin expansion has been a significant focus, with $0.75 to $0.80 of each revenue dollar contributing to the gross margin.
• The company targets a 50% gross margin by the fourth quarter of 2025.
• NIH funding directly accounts for only 2% of Twist’s global business, minimizing exposure to potential funding cuts.
• Investment in the DNA storage business has been reduced by 50%, from $50 million to $25 million, to manage capital expenditure.

Operational Updates

• Twist is offering Express Genes at no additional cost temporarily to boost market share in academia.
• The company is shifting its focus from large pharmaceutical accounts to the academic sector, using digital marketing and a strong sales team.
• Twist’s competitive advantage lies in its speed and service, with Express Genes delivering in four to seven days.
• The NGS tools business is expected to grow by approximately 24%, driven by cost-effective target enrichment.
• Automation and process improvements have significantly reduced cycle times and increased production capacity.

Future Outlook

• Twist is committed to long-term investment and growth, aiming for sustained profitability without resorting to additional capital markets.
• The company plans to continue margin expansion beyond the 50% target, focusing on cost savings and operational efficiency.
• DNA storage commercialization is contingent on the development of a terabyte chip, with no specific timeline yet.
• The BioSecure Act and supply chain security offer potential growth opportunities, particularly in the biotech sector.

Q&A Highlights

• The Express Genes promotion is a strategic move to enhance Twist’s presence in the academic market amid funding uncertainties.
• Twist’s NGS tools have a diverse customer base, including both established and emerging companies.
• Enrichment kits for MRD applications are expected to reduce costs and improve margins in the liquid biopsy space.
• The BioSecure Act’s impact is still unfolding, but Twist anticipates benefits from its U.S.-based operations.
• The timeline for DNA storage commercialization remains linked to technological advancements in chip development.

For a detailed understanding, readers are encouraged to refer to the full transcript of the conference call.

Full transcript - Barclays 27th Annual Global Healthcare Conference:

Luke Sergott, Analyst, Barclays: morning, everybody. Luke Sergott for Barclays.

I cover Life Science Tools and Diagnostics. Up with me, I have Adam O’Pona, CFO and Patrick Flynn, the kind of Swiss army knife at Twist, I’d say, that officially Chief Operating Officer. It’s a pleasure to have you guys up here. It’s a little change of pace. I’d love to kick off and talk about just the recent announcement of new product you guys offered.

And then it’s a good segue also into getting to NIH. But you launched the Express Genes for the academic market. So talk a little bit about that and the strategy that you guys see.

Adam O’Pona, CFO, Twist: Thanks, Luke, and great to be here. It’s the Express Genes for academics. We announced this week that we are offering for a limited time basis Express Genes at zero premium. And really when we look at what’s going on in the marketplace today, we see an opportunity to go on the offense. It’s really around how do we help meet the needs of customers and how do we do it in a way that allows us to give them more shots on goal and take some share.

And if you look at the markets we played into the last three ish years where biotechs had some significant funding challenges, we’ve been able to higher quality, faster speed and better service really drives share gains in that space in a challenged funding environment. We know we are underpenetrated in academia. And we and then although we have seen stability in the months since the election in that segment, we do think there’s an opportunity to accelerate our share gains given some of the turbulence around funding.

Luke Sergott, Analyst, Barclays: Yes. And I guess on the academics, you just mentioned that you guys were under indexed to that market. Talk about why that is kind of where your focus has been and now trying to get into the market, obviously, with the noise that’s been going on with the NIH and the cuts there. How is the what you guys have been seeing from orders and labs and early up take with your existing customers on before the eXPRS gene? No, sure.

If you kind of if you

Adam O’Pona, CFO, Twist: look at the customer base we serve, there’s many customer companies out there that have over hundreds of thousands customers. We have a few thousand. We knew early on that we wanted to go after where the biggest opportunities lie, and that was with some of the larger accounts in pharma and other areas. And now that long tail of academia, we’re really we’ve honed our digital presence, we’ve got a great sales team, and we’ve got the right product now with the speed of Express that can really meet the needs of that long tail. We think we’re right to take share.

And we’ve seen in since the launch of Express a year ago, every time we run a promotion on Express, we see an increase in take rates and an increase in adoption. So we think there’s a winning proposition here to really go after that market in a time when they need our help.

Patrick Flynn, COO, Twist: Sure. And just to underline what Adam said, the power of speed, the Express portfolio really does allow us to push more aggressively into that market, partnering that with digital spend, then also the tools to make it easier to transact with us, B2B type interactions, integrating well with procurement systems just strengthens our channel and makes that customer experience a little bit stronger. So again, we do see opportunities for great improvement. If you look at spend constraints, our value proposition is really straightforward. It’s more shots on goal for dollars spent.

And the second thing is if this truly does ripple through to a point where there’s essentially fewer PhD students less postdocs, then our value actually becomes even stronger in that friends don’t let friends clone. And so therefore, we’re going to be able to pick up a great deal more work for that segment to be continued.

Luke Sergott, Analyst, Barclays: And I guess on the your exposure to NIH is small directly, but the overall exposure is going to be much higher. So talk about global exposure versus just U. S. And then what you’ve been seeing there from early on within those customers?

Adam O’Pona, CFO, Twist: As you can imagine, we watch this pretty closely. Yes. But we about 19% of our business globally is in academia, but a little less than half of that’s in The U. S. And the NIH so call it just 9% or 10%.

Luke Sergott, Analyst, Barclays: The NIH itself as the

Adam O’Pona, CFO, Twist: direct spending, what we can see and tease out is about 2% of the global business. So we’ve been watching those order trends pretty closely and we haven’t seen any disruption in the order trends since the change in administration.

Luke Sergott, Analyst, Barclays: And within that customer class, when you think about where you have a bigger presence, I mean, the time to customer, the length, the accuracy. I mean, I would feel like that you would be more exposed to like a big genome center or somebody that needs the probes or the genes a lot faster. Talk about could you segment out that U. S. Exposure by particular customers or application type?

Adam O’Pona, CFO, Twist: It’s a good question. It’s pretty broad. I think the unique element of Twist is we serve thousands of customers. And particularly in the academic space, it’s a long tail of folks in labs across the world. It’s a lot different than the major genomic centers where they might be buying hundreds of thousands of dollars a box versus a single lab buying $100 to $200 gene.

So there is a dynamic here. I think we’re different in the sense of we’re not selling major capital equipment and we’re not plugging a box, no wall and then doing a big procurement contract. This is something that this is the standard reagents you’re using in your everyday lab use. So we think there’s a dynamic difference. But we do see a variety of across academia of who’s using our products.

But it spans the gamut, I’d say. Okay.

Luke Sergott, Analyst, Barclays: And then from when you launch the Express portfolio, I mean, you have not just Express Deans anymore, but you launched that and that was always going to be targeted towards the more industrialized user, right? I mean, just from what it offers from a needs perspective. And then the thing was that, okay, once you penetrate that market, you’ll start going to academia. Do you just view this opportunity to get in with just Express Genes as just like, hey, we’ll strike when everybody’s on their back foot and go after them and continue that commercial violence that you guys talk about? Or is this like you started to penetrate that industrial market a lot faster than

Patrick Flynn, COO, Twist: you were expecting kind of? I think the surprise, we had a core hypothesis when we launched the Express product offering, think in industrial segment or the healthcare segment would receive it more welcome would be more welcoming to it than academic segment. What we find was it’s across all segments, which is actually very, very interesting. And so obviously the time it can take a student to do their own cloning experiment, if we’re too slow, we don’t solve the problem. But now that we’re down at sort of four to seven days at scale, that fits quite beautifully.

And then of course in the enterprise selling, more tons per year is just good for business.

Adam O’Pona, CFO, Twist: And so

Patrick Flynn, COO, Twist: that’s been very well received just for existing customers. But again, with our speed at scale, which none of our competition has, we are definitely starting to see that be more broadly adopted, particularly in the healthcare segment. What it also allows us to do is then move along the value chain a little bit and essentially have wallet share. So it’s not just about the gene as you were saying. We can then move downstream into prepped product.

And for those in the antibody space, we’re either we can be producing IgGs and doing characterization work. So the value as we walk along goes from essentially like $100 worth of DNA all the way through to high hundreds of dollars depending upon where we leap off. So it’s a very, very enabling platform. And just from a competitor standpoint, I don’t really think about ever being on the back foot. That twist is not built for being on the back foot.

We are built for offense. And so that really does allow us to push into markets where we are in customer segments where we are underserved right now underserving right now. Yeah.

Luke Sergott, Analyst, Barclays: I know we’ve been hammered on the academic government side a lot on the cBio. But when you look at your NGS tools and how that’s kind of you guys are looking for like a close to 24 growth at the midpoint within that business in one or your 2Q. Think about walk us through what you’re seeing from the NGS side, whereas the Syn Bio side, you’re not going to see as much pressure. You might the thinking is, as you’re selling into these larger general mix oriented centers and if there’s CapEx spending or there’s projects being wound down, your NGS tools piece will take a bigger hit? Yes.

Patrick Flynn, COO, Twist: I mean, we’re continuing to be very bullish on the NGS product offering. We have some customers at various different cycles of essentially commercialization on the platforms. We’re seeing growth at our mature customers who have fully adopted and now commercializing product on the back of the technology. Our value proposition resonates more than ever. What the technology and why we win in the sequencing space is our price point for target enrichment remains the same as everybody else.

But we save you sequencing costs through more effective and efficient enrichment. That value proposition resonates across the board. So we’ll continue to drive that out into the market with the platform being easy to adopt and it scales quite beautifully as our customers get stronger and bigger and come to market. And the second part of it we’re seeing, we massively underserved the front end of the sequencer. So expanding out the menu of products we’ve got upfront the sequencer means again we’ve got a serviceable opportunity that just continues to increase.

So things like an R and D product offering that’s starting to get some traction in the market. We’re obviously very excited about what’s coming in the MRD space where we’ve got tremendous value to bring to the customer base there. And we’ve just launched a beautiful new product called FlexPrep for high throughput sample preparation. It’s an incredibly straightforward workflow that we think we’ll see ultimately the beginnings of the end of the microarray as that starts to transition towards sequencing. So we like what’s happening to menu expansion, more workflows and leveraging our core strength from enrichment.

Luke Sergott, Analyst, Barclays: Ed, can you walk through your kind of customer base as how that looks versus the regular company or the overall company from the different end markets. But I’d love to understand better from a liquid biopsy perspective, you guys just mentioned MRD, right? I mean, this is the whole idea is like these guys are focused on driving down costs, like why not every one of them should be using your enrichment kit on the front end.

Patrick Flynn, COO, Twist: You just send them like Emily there, Luke. Yes, agreed. You guys run well. Yes. We’ve seen some very, very good examples.

And again, saving sequencing costs, we have seen companies that partner with us do well. We’ve seen some examples in rare inherited disease where company share price has exploded from sub penny and gone up 100x and so on when you use the Twist platform. And we’ve seen those that haven’t used the Twist platform kind of go out of business. So we think that really helping our partners drive margin into their business and quite frankly supporting their financial viability is part of the magic. And so we agree it’s a very, very enabling platform.

It’s quick to design your panel. It scales quite beautifully. And as you go through research, discovery, verification, validation, then ultimately your commercial scale up, we’re there to stand behind you.

Luke Sergott, Analyst, Barclays: And then from a is there a tissue naive versus tissue informed, is there a particular area where you guys think that you have a better edge?

Patrick Flynn, COO, Twist: Great question. So across the board, we’re really excited about what we bring to the customer base. If there’s a whole genome or SkinCeq type play, We have a new library construction kit that’s underpinned by our own proprietary ligase. Super efficient, leaves no molecule behind, which we think in a diagnostic setting is very important. But if you go to a situation where it’s a fixed panel like an excellent type scale panel for your MRD experiment, then I think our reputation is well known and the economics are clear for our partners.

But if you go to tubed and formed bespoke panels, we believe we have a best in class offering. Nobody else can do what we do with the speed and the quality and the economics we provide to deliver on bespoke panels. So we don’t play in the current market leaders. I mean, that PCR based methodologies is not us. Yeah.

But when you look at the emerging or the emergent companies that are looking to come in and disrupt and play in the market, we think they’ll do well on the Twist platform.

Luke Sergott, Analyst, Barclays: Sounds good. And then as you think about outside of MRD and the other liquid biopsy applications, I assume that you also have products and you guys are scaling up with those customers as well. Is that so as you think about the NGS tools business growth going forward, still targeting around 20%, I think 23% for the quarter, but scaling up into 20%. Is there as that continues to build, should we think about this as kind of being the jump off point or as we think about getting out a couple of out years?

Adam O’Pona, CFO, Twist: Yes. I think the as we look at the great question, I think the fundamental strategy at Twist is we aren’t just looking at the next quarter. We’re looking pretty far down the line when the company IPO ed many years ago, Our NGS business was a couple million dollars. We’re talking about liquid biopsy. And some of those bets we knew were going to pay off.

And it was just a matter of helping the customers through their R and D clinical and now commercial and option phases. We see that same type of opportunity in MRD. I think Patty hit on some of the microarray conversion opportunity. There’s a number of things we see coming down the pike as it relates to the long term growth opportunity. And I think the core tenant is we don’t want to do anything to slow down the growth.

We want to make sure that we’re investing not just for the current quarter, but we’re investing for the long term as well. And as a team, I think we’ve done and the relatively new member of the team, it’s been amazing to watch how much of the thinking is not just a quarter or two out, but it’s a year or two or three out. We’re putting bets in place that we think will play out for a number of years. So, I expect good things to come.

Luke Sergott, Analyst, Barclays: Yes. And that’s a good segue. Let’s talk about putting these guys IPO, the pushback was all this will never be a profitable business. So you’ve had a really strong step up in the margin on the quarter. Feeling is that you pulled forward a lot of what you had available for the year.

Like you guys even said on the call that shouldn’t expect the two fifty basis points where it was sequentially step up there every quarter. But talk about what you guys have left for the year to leverage the pool. You’re just very dynamic environment, obviously, right? You’re starting to offer some discounted Express Genes in academia. So obviously, I would just walk us through what you guys are saying.

So first off,

Adam O’Pona, CFO, Twist: I think there’s a lot of credit to Patty and the entire organization for the hard work that’s gone into all the efforts to drive now the continuous process improvement that’s ultimately becoming a tailwind in the cultural shift to twist how we do business. All that said though, the majority of our margin gains in the last six, seven quarters has been from the continued growth of the business. And so, what we said is, if every dollar of revenue growth, we’re seeing $0.75 to $0.8 of that drop to the gross margin line, whether that be because of the new product introductions or it be because of the continued commercial execution, we’re seeing that being the primary driver of our margin expansion. We don’t expect that to slow down anytime soon. The positive news of the last quarter, I think the timing of some of those continuous process improvements, that can vary and those will come in and jump.

But there is absolutely a lineup of things we’re going after, most of which we won’t talk about because they’re meaningful to things like capacity unlocked, they’re meaningful to helping improve our turnaround time, but they’re also meaningful to cost savings on a micro basis. But on a macro basis, we’ll keep hitting on the big ones. We’ve got a lot more to go, but we’re also fighting the treadmill of inflation and where there are raging suppliers or we love our employees, we like paying them more every year, we’re going to balance that. And so I think the long term view is, we have a long way to go on that margin expansion. And once we get to the 50% by Q4 of this year, we won’t stop, we’ll keep going.

Patrick Flynn, COO, Twist: Also made a good investment in supply chain. I think if I look at the improvements in the organization over the last few years, when you pop up that with decent growth numbers, it puts us in an interesting position if you’re supplying to us. Where you’re posting high double digit growth and everybody else is struggling in our space and it creates a nice negotiating point. So if you want to stay in the Twist ecosystem, we’re looking to have our partners help us out a bit there.

Luke Sergott, Analyst, Barclays: It’s good. I would not like to sit across from you on a

Patrick Flynn, COO, Twist: negotiation. Sorry, friendly. Well, it’s win win all the time. Too bloody nervous. Yes.

Luke Sergott, Analyst, Barclays: I guess as you think about that, because you guys are in growth mode, right? So you’re not going to when we talk about like productivity and stuff, you’re not you’re actually adding people to the organization. So how much of this is on automation? And when you think about the NGS tools versus the SynBio piece or Express Genes, like where are you getting these productivity initiatives? Like where are you getting the biggest lift right now?

Adam O’Pona, CFO, Twist: So the way I think about it is the same talent that was used from engineering and scientific perspective to build out the factory in Oregon shifted to focus on the express chains and turn in turnaround time is now leading the charge on this wave of continuous process improvements. What you think about as in growth mode early on, everything was about how do we help serve the customer faster and grow the business faster. We gold plated a lot of things. We’re now going back and looking at that and saying, you know what, we can do 25% better there, we can do 50% better here, we can tweak the dials. And this, I think the best example of that last year was the writers we have across the manufacturing sites.

We have a thirteen minute cycle time in between printing each oligo. With a chemistry change and a process change, we will change the dials and move that to a six minute cycle time, doubled the rider capacity, reduced reagent use, allowed us to innovate with 500 base pair direct synthesis. And it’s actually leveraged our employees because the same number of employees running the riders can now produce twice the number of oligos in a given day. It’s impressive to watch that thinking at work and my sense is we’re still in the early innings of what that team can do.

Patrick Flynn, COO, Twist: Yes. Look, it’s also such a good comment. It’s something that we’ve understated. Obviously, we’re led by DNA chemists, which is a very useful thing if you’re going to be a DNA synthesis company. But our strength in automation is very understated.

We do have a competitor manufacturing in China that recently was boasting about having 400 PhDs working on producing genes. I think it’s well known over time with industrialization of methodologies where the unfair advantage is. So we’re going to continue to use our skills, extreme automation in our platform and we think that’s going to be an operating advantage over the coming quarters, years and decades. Speaking of

Luke Sergott, Analyst, Barclays: China, a lot of noise from the BioSecure Act. And there was a the thinking was that obviously customers this would be another lever you could pull in your negotiating tactic and say why use a lot of these customers? Update

Adam O’Pona, CFO, Twist: us.

Luke Sergott, Analyst, Barclays: Have you guys started to see any type of flow there now that that has kind of come down and doesn’t look to be as had as much teeth as it appeared to have?

Patrick Flynn, COO, Twist: Yes. Well, I’ll paraphrase or repeat Emily’s comment. We’re going to win each account by winning. And what she’s clearly saying there is that we obviously we care about customer acquisition, but we truly care about customer retention. And that comes from just delivering a fantastic product and experience for the customer.

So win by winning is absolutely the right way to look at this. And you can see the investment in the portfolio with speed and menu expansion. I think what we’re seeing is certainly a raised awareness. Certainly the supply chain discussions we’re having, you can see customer base thinking about supply chain and supply chain security for sure. And then also even just from an auditing standpoint, we’ve had customers have audited the competition and then come to us.

So I think we do see the beginnings of it. I think it will continue, but it’s only sustainable if we’re delivering best product, which we’re going to be relentless in delivering. I don’t know if you wanted

Adam O’Pona, CFO, Twist: to add to that. I think Patty is right. And if anything, we are starting to see we’re seeing tailwinds, it’s not headwinds, but we haven’t seen a tariff implemented until very recently. And there’s been the diminutinous requirements that so we think it’s early days. And again, I think our focus on it is meeting the customer needs, executing.

We see that we’re taking share and we’ll continue to do it. And we think that any kind of, I’ll call it, trade more kind of activity is going to be a tailwind to

Luke Sergott, Analyst, Barclays: us given we manufacture everything in The U. S. More incremental than an actual like, hey, this just happened. Got you. On the DNA storage, just a quick change gears there.

The prototype is ready and are you guys going out to have some commercialization this year? Is that the right timeline? I’m updating on the timeline and then kind of what the big question is obviously R and D and the amount of spend that you guys have past profitability. You guys you’re very adamant, not going to need to raise again. But like you look at that DNA storage piece, and it just still seems like this big moonshot.

So look, you say well, I

Adam O’Pona, CFO, Twist: think it would have as a leadership team, we are very excited about the opportunity and the asset we’re creating in DNA storage. The flip side of that is our North Star is we’re not going back to the capital markets to raise more money on our path to profitability. So what we’re doing is we’re actively managing our pace of investment. The DNA storage business two years ago was spending about $50,000,000 a year of OpEx. Today, we’re spending about $25,000,000 And that titration is slowing the progress of that business.

And we know if we because it is an engineering challenge at this point of how do we continue down the progress of going from the terabyte chip so the gigabyte chip to the terabyte chip. We know that that engineering work takes energy, it takes time, it takes investment. And by constraining the rate of investment, we’re changing the pace of that. So, we know that there’s more work to do, but we do think we’re building that valuable asset. We’re excited about it, but we’re not going to deviate from our North Star of we’re committed to not coming back to the capital markets before we get to profitability.

Luke Sergott, Analyst, Barclays: So the commercialization port for if we were thinking about maybe coming this year, that’s probably not? We haven’t put

Adam O’Pona, CFO, Twist: a date on it at this point. And so the work continues, and it’s really around that next generation design with the CMOS chip and You’re just

Luke Sergott, Analyst, Barclays: waiting for that terabyte chip because that’s the That

Adam O’Pona, CFO, Twist: will be the point where we believe there’s an opportunity to commercialize the product.

Luke Sergott, Analyst, Barclays: Okay. And up until then, it’s just kind of just developing. You’re not going to go past that. You’re going to stretch that out. Okay.

On the same thing as on the biotech side, you guys had a decent, I guess, you sold off the license or which is the whole point of building this business out in the whole model. Like, talk about where you are and within that business and interest in other licensing or clinical trials or unlocks that you guys have from the portfolio of active programs that have finished or that have royalties like how this is like where are we in this business build perspective?

Patrick Flynn, COO, Twist: Yes. So we’re managing that business personally myself over the last couple of quarters, looking at some antibody discovery capability. We’re seeing well, first things first, it’s a very important product to our general business. When we sell into the biotech pharma segment, whether we sell Eugene all the way through to a full antibody discovery characterization project, there’s a very nice continuum of value that we bring to the customer base. Coming back to the licensing question, what we’re seeing there is most of the assets that we’ve turned over and managed to get deals done, they’re incredibly early.

So it’s really preclinical. And so the timeline and essentially I think it’s fairly extended to get to a point where those milestones will engage, so it will start to happen. So we continue to watch the space, stay close to our customers. And as each quarter goes by, some of the assets will get closer to advancing. That’s kind of the state of the universe right now.

And the actual discovery business itself, we’re starting to see some signs of life in terms of the leading indicators of upcoming success in growth. So we’ll continue there and again ties to the rest of the product portfolio very effectively.

Luke Sergott, Analyst, Barclays: I love to hear it. All right, guys. Thank you. It’s good.

Patrick Flynn, COO, Twist: Appreciate it. Cheers. Much appreciated. Thank you. Cheers.

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