Twist Bioscience Corporation (TWST) Earnings Call Transcript & Summary

Good day. Thank you for standing by. Welcome to Twist Biosciences conference call to discuss the license agreement for the B-Body bispecific technology platform. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the call over to Angela Bitting, SVP of Corporate Affairs. Please go ahead.

Thank you, operator. Good morning, everyone. I would like to thank you for joining us for Twist Biosciences conference call to discuss our license of the B-Body bispecific technology. We issued a press release early this morning and is available at our website at www.twistbioscience.com. With me on the call today is Dr. Emily Leproust, CEO and Co-Founder of Twist; Adam Laponis, CFO; Dr. Patrick Finn, President and COO; and Dr. Colby Souders, CSO, will be available in the Q&A session after our prepared remarks. We ask that during Q&A you limit your questions to only one and then requeue as a courtesy to others on the call. The call is being recorded, and the audio portion will be archived in the Investors section of our website for 2 weeks. During today's presentation, we will make forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements, except as required by law. We'll also discuss adjusted EBITDA, a financial measure that does not conform with generally accepted accounting principles. Information may be calculated differently than similar non-GAAP data presented by other companies. If available, a reconciliation between GAAP and non-GAAP financial measures will be included in our earnings documents, which can be found on the Investors section of our website. With that, I will now turn the call over to our CEO and Co-Founder, Dr. Emily Leproust.

Thank you, Angela, and good morning, everyone. This morning, we announced that Twist will be the co-exclusive provider of the B-Body bispecific technology platform together with Invenra. This license builds upon our momentum in AI-enabled drug discovery to serve the rapidly growing market opportunity as it fits very well with our high-throughput automated platform and drive more volume to our proprietary silicon chip. Through the license to this innovative technology, we complement and extend our DNA synthesis and Protein Solutions group with a patent-protected clinically validated technology. Taking a step back, a bispecific antibody combines the binding arms of 2 unique antibody proteins, each with independent mechanisms of actions, into one molecule, potentially enabling a single therapy to engage 2 disease targets at the same time. This dual action has the possibility of improving effectiveness by, for example, directing immune cell more precisely, blocking multiple disease pathways at once or enhancing drug delivery to disease-affected tissues. Of the hundreds of commercially available antibody therapies today, bispecifics represent a small but rapidly growing and very promising drug class. However, bispecifics have been famously difficult to develop as they have 2 different binding domains bound by an engineered linker that is, by definition, unnatural. This creates challenges in automating discovery, producing many high-purity variants, testing those variants and scaling up manufacturing for clinical and commercial use to treat patients. On Slide 4, we have detailed the differences between monospecific antibodies and the challenges bispecifics present. First, they are more complex than standard antibodies. A commercial antibody is built from 2 identical halves. These halves naturally find each other and assemble efficiently within a cell, like 2 pieces of a puzzle and are then expressed as a single molecule. Bispecific antibodies combine 2 different binding arms connected by unnatural protein engineering, which increases the chances of [indiscernible] during assembly. Cells may put the wrong pieces together, creating imbalance production and an overall reduction in yields or unusable product. Second, the protein must fold correctly. Proteins are like origami at the molecular scale. Bispecific antibodies contain more moving parts and unnaturally engineered geometries, making correct folding harder. The cell, which is used to express the bispecific protein, often degrades incorrectly folded antibody proteins, resulting in a significant decrease in the amount of antibody to characterize and validate for further development. Third, building on the first 2 points, folding and assembly challenges create stress within a cell used for expression. Stressed unhealthy cells slow down growth, production and robustness, resulting in significant manufacturing challenges. Fourth, once a potential therapeutic antibody completes discovery and preclinical studies, human clinical development presents an additional challenge. Once [ that lands ] into humans for bispecific antibody to work safely and effectively, the molecule must closely resemble antibody structures that the body already recognizes at cells. By their very nature, bispecific antibodies include man-made engineered changes. If any portion of bispecific antibody, including the engineered portion that links the 2 domains together, appears artificial offering, the immune system may treat the antibody as a threat, reducing its effectiveness or causing safety issues. Because of this, the linker must be carefully designed and tested to ensure minimal or no activation of the human immune system to the engineered bispecific antibody. Finally, standard manufacturing platforms experience repeated challenges as many bispecific formats require multiple purification steps to yield high-quality material and also require specialized production system that are not widely used. Further, some require complex processing conditions to make a bispecific out of 2 different monospecific antibodies and then [indiscernible] the fraught with risk and increased cost. Turning to Slide 5. At Twist, we built a semiconductor-based platform to write DNA sequences at scale. The DNA powers the creation of antibody proteins with unparalleled speed, throughput, quality and cost advantages. As a reminder, when developing therapeutics, our customers are engaged in the design, build, test, learn cycle, as shown on the slide. The customer design the sequences, we build the proteins, and we then conduct a series of analytical measurements to test the proteins. Once we deliver the data or product, the customer learns from the information and optimizes the cycle for the next iteration. To date, when we work on bispecific antibody discovery, we will work on each individual arm separately. Those customers will then take the individual optimized antibodies and conduct bispecific reformatting and optimization in their labs or with a specialized provider with expertise in bispecific expression and purification. Moving to Slide 7. Today, we have a patent-protected clinically validated platforms to support automated bispecific discovery, reformatting, expression and analysis, significantly expanded our expertise and meaningfully enhancing our ability to compete and capture value in this high-growth area, transforming market access into competitive participation. Essentially, it gives us more short-term goal to expand our wallet share within existing accounts and access to new customers who are solely focused on bispecific therapeutic discovery. We reviewed a number of bispecific platform and selected the B-Body technology as it fits very well with our robust semiconductor-based synthesis, high throughput platform and extreme automation for speed, scale and throughput. In addition, the B-Body platform solves the manufacturing challenges to enable safety and stability, reducing Chemistry, Manufacturing, and Controls, also known as CMC risk. On Slide 8, you will see the B-Body specific platform is a plug-n-play system designed so that the 2 binding functions are connected using antibody structures the body already recognizes as noninvasive. Rather than using unknown artificial connectors, the B-Body format uses native human antibody building blocks with very minor changes to the linker itself, making them easier to express, purify and characterize. On Slide 9, you'll see data showing that B-Bodies have high purity and homogeneity that makes them compatible with our existing high-throughput automation technology. Critically, the B-Body bispecifics are not recognized as foreign by the human immune system. Moving to Slide 10. While bispecific antibodies were previously within our capability and part of our serviceable market, we now have the technology to allow us to successfully navigate the challenges, automate onto our platform and scale bispecific discovery in a way that has not been previously possible. To give you a sense of the opportunity, antibody campaigns today may typically result in approximately 12 antibody variants generated as leads for each arm to test further. Ideally, to pursue bispecific antibody discovery, these variants will then be combined in all variations and configurations, resulting in 12x12x2 or 288 different bispecific antibodies. With legacy bispecific technology, expressing, purifying and characterizing 288 bispecific antibodies is impractical and is not done routinely. With the plug-n-play ability of the B-Body technology, together with the Twist platform, we will be able to conduct such testing in high throughput easily and cost effectively. We know that bispecific makes up an increasing portion of clinically approved antibodies. And further, as of December 2025, there were more than 180 bispecific antibodies in clinical studies for a wide range of applications. The number of bispecifics entering clinical trials has doubled since 2019, confirming the opportunity and the acceleration of interest in this area of therapeutics. Importantly, this meaningfully enhances our ability to compete and capture value in this high-growth area, accelerating market participation through execution and commercial violence. On Slide 11, you will see overarching product groups of Twist, DNA synthesis and Protein Solutions, including several of our applications and our bispecific fits directly within our robust and expanding portfolio of products and services. With bispecific representing a growing therapeutic modality, building bispecific large language models has been exceptionally difficult as the generation of robust data set at scale has been impossible to date. Specifically, it has been impossible to produce purify and test in an automated fashion. We believe that combining the B-Body technology with a high throughput production and characterization platform opens up AI-enabled discovery to bispecific. Large technology customers may build new LLM models, pharma customers may augment existing models and importantly, it expands AI-enabled bispecific discovery capabilities to small organizations that can benefit from our platform. Turning to the financials. On Slide 12, Invenra will receive $5 million in cash and approximately $15 million in Twist common stock for the 7-year co-exclusive license. Concurrently, in a secondary transaction with Invenra stockholders, Twist also acquired preferred shares representing approximately 6% ownership in Invenra, along with rise to one seat of the Invenra Board of Directors for $13.8 million in Twist common stock. We also expect Invenra to transfer technology to us to enable future success. Twist will receive all revenue generated from bispecific antibody discovery programs we conduct. In addition, customers developing B-Body bispecifics need a commercial license at the time they enter a human clinical trials. Whether this license is generated through customers working with Invenra or Twist, Twist will receive all of that revenue and subsequently pay Invenra a 20% royalty. To summarize, we believe this is a compelling strategic and financial opportunity. We are gaining access to an innovative patent-protected clinically validated technology at an attractive valuation relative to its long-term potential. We expect this capability to benefit significantly from automation and optimization with our proprietary platform and NPI engine, further strengthening our competitive position and expanding our revenue base. We expect the agreement to be accretive to revenue and adjusted EBITDA in fiscal 2027 and beyond. This is part of the turbo engine we discussed on our earnings call. We are layering capabilities on top of our platform this year to expand our funnel and top line growth next year. We expect to transfer and automate this capability within our existing operating expense structure. Importantly, we remain committed to achieving adjusted EBITDA breakeven for the fourth quarter of fiscal 2026. At this time, we will open the call for questions. Operator?

[Operator Instructions] Our first question coming from the line of Subbu Nambi with Guggenheim.

You'll be paying Invenra a 20% royalty on all license revenue. Is that an impact on the 2026 margin expectations and breakeven in 4Q -- fiscal 4Q '26?

Thank you, Subbu. Your line was a bit muffled for me, but I think you were asking about our gross margin in Q4 and our adjusted EBITDA breakeven in Q4. There's no change. We are very, very committed to the guidance we've provided at the last earnings call. And we're excited about this deal, but it's not changing our commitment to adjusted EBITDA breakeven in Q4 of this fiscal year.

And our next question coming from the line of Puneet Souda with Leerink Partners.

So really, bispecifics have been around for some time, and you have had the biopharma antibody discovery program as well. And if we recall, some of those programs have started and also shut down. Again, this is -- antibody discovery is a multiyear endeavor, 7 or more years to really see the results and see if the products can actually get into clinic and eventually to market. Maybe could you talk about what agreements Invenra has and what are those royalties are at today and the number of those agreements? And how should we think about this more near term, what it could do for Twist beyond bringing the bispecific platform technology and adding to your already existing mAb technologies that were part of your biopharma program?

Yes. Yes. Thank you, Puneet, and you touched a very, very important question. And you're asking what value vectors are we going to see at Twist. First and foremost and most important, we think that it's going to increase the volume of discovery that happens at Twist. We were -- we report the numbers every quarter. We're doing really well. The revenue that we're getting from antibody discovery is ramping. It's one of our fastest product line. At the same time, we also recognize that we can compete really, really effectively in monospecific. In bispecific, we can't leverage the full advantage of automation because the other bispecific technologies that are out there that we can use are very hard to automate for us and for everybody else. So we like the B-Body because now we can very easily automate the production, the verification and the characterization. And so we think that, first and foremost, is going to drive revenue through discovery. In addition, there is licensing opportunities as a second vector of value to us. Those will happen as customers want to go into the clinic. So it's not royalties in the sense of when the drug finally sells in the future. Those licenses have to be taken before going to the clinic. So it will happen a bit sooner than 7 years, but we anticipate that the main value creation for us will be that the volume it's driving discovery. And then last but not least, we're also a small -- now a small investor in Invenra and so this will create some value in the future as well.

And our next question coming from the line of Doug Schenkel with Wolfe Research.

A couple of questions really on the customer profile. So really, what I'm trying to get at is when you think about what you were hearing from the customer base and when you looked at it, how much overlap is there with your existing customer base? So that's the first question. And kind of building off of that, is this a capability or technology that those customers, whether it was Invenra's, whether it was your core customers, is this something that they were looking for? And kind of by extension, was this a hole you felt you had in your offerings? I guess what we're trying to get at is, one, how much synergistic fit is there with your customer base and what you're selling today as we try to really better understand the impetus for the deal?

Thank you, Doug. That's a great question. So if you take AI out of the equation, the largest top 20 pharma type customers, frankly, they probably do not need this. Most of the big pharma have developed their own proprietary technologies for bispecific. And so if you were to just take AI out, maybe it does not -- it's not greatly appealing to large pharma. However, again, taking AI out, any new biotech that wants to go into bispecific, they need access to a platform, and they need a platform that they can trust, a platform that is already clinically validated because you don't want to take a risk on a new platform that once you go into the clinic a few years down the line, you have a toxicity product. And so for smaller and starting biotech and drug discovery companies that this becomes really appealing, especially now that it will be on the Twist platform, we'll be able to enable high throughput. And so it's a way for us to keep reaching the full market. Now going back to -- and I'll say actually, the same is true for kind of Magnificent 7 that are going into AI. They all need a bispecific platform that they can get to. And now going back to the top 20 pharma, now adding AI in the equation. AI so far has been -- in drug discovery has been applied to monospecific. And to the extent that those big pharmas are going to want to go into AI-driven bispecific discovery. Now you need to be able to build large language model. And to be a large language model, you need to build a lot of bispecific and making those bispecific, if you -- if they are not -- the technology is not intrinsically enable to high throughput expression, purification, characterization becomes really hard. And so what we think is combining our high throughput platform with AI could open bispecific AI-driven drug discovery for top pharma. So very much appreciate the question because that's how we think about market access as well. And so we think that for us, it has a broad access to smaller biotech companies, large pharmas and the Magnificent 7 focused on drug discovery.

Our next question in queue coming from the line of Matt Larew with Stephens Inc.

Maybe just a follow-up on the last point. How differentiated is B-Body in generating these high-throughput data sets versus existing bispecific formats? And maybe just to follow up on Doug's question as well. Does this open up the opportunity for new logos, too?

Sorry, what was the last question? Does it open opportunity for new?

New business partners, new logos.

Yes. No, absolutely. So our view is that it fits really well with our current customer base and it expands it in 2 ways. One is we can upsell the current customer base where we were not doing a lot of bispecific business. Again, we didn't have a differentiated technology, and now we do because it's highly automatable. And then the second is it expands the customer base to new customers that now we can win because we have a bispecific. And so it's something that -- again, we have been doing a little bit of bispecific, but now we can really lean into it because we have access to a best-in-class technology. In terms of your initial question of how differentiated it is, again, there are hundreds of technologies out there. But as far as what we could see that if clinically validated and available, we believe this is the absolute best in terms of being able to put it in high throughput, number one. And then number two, there is another aspect that we haven't really touched on quite yet on this call -- on the Q&A is the ability to plug-n-play. So if you have, let's say, a dozen antibody for one arm and a dozen antibody for the other arm, it's actually really hard to combine them with existing technology. Whereas with B-Bodies, that plug-n-play ability, it's very easy to combine -- to make the combinations and test them. And so again, this being so compatible with our platform that is highly automated, we believe it's going to give us a leg up and it's going to enable growth, again, growth within existing accounts and growth with new accounts.

Our next question in queue coming from the line of Brendan Smith with TD Cowen.

I wanted to actually ask a bit more about the technology itself. And I appreciate this might be getting a bit ahead of where it is now, but kind of piggyback on the last few questions. I guess, do you expect the B-Body platform could, over time, allow design of other biologics, trispecific or even ADCs? Or is this really intended to kind of just maximize share within bispecifics alone with maybe expansion into other modalities something you might explore separately down the line? Just kind of trying to contextualize the land and expand strategy here.

Thank you, Brendan. Very, very great question. This is specifically for bispecific. It is not a trispecific license and not an ADC license either. So you're correct, there are other modalities out there. Right now, bispecific has a high growth rate. And we think that some of our customers are going to be able to realize that the legacy bispecific format that they have been using will be able to be replaced with our new and improved format like the B-Body. But it's -- right now, it is fully focused on bispecific.

And our next question in queue coming from the line of Matt Larew with William Blair.

Maybe just following up on that point, Emily, you mentioned that many larger pharma customers may have in-house capabilities. But as you've spoken with other customers, just trying to get a sense for what those customers are doing today, if this is something that they've been coming to Twist and asking about? So sort of getting a sense for the push versus the pull and perhaps tied to that, you referenced it being accretive to revenue and EBITDA in 2027. Could you just give us a sense for what that looks like today in terms of where the company is at?

Colby, do you want to take your first crack at the question, and I'll circle back with the financial comments?

Yes, absolutely. Thanks, Emily. Great question. And what we've seen a shift in the landscape over the last 2 years or so has been companies that have been interested in replacing some of the legacy platforms. So like Emily was saying in response to the last question, we've seen folks ask if we have a proprietary technology or bispecific format that could be used. So this will directly address that market so that we can capture that market share and meet those customers. So that's been our goal there.

And in terms of financial, it's going to drive revenue in 2026. And at the same time, we are, again, very, very committed to adjusted EBITDA breakeven in Q4 in 2026. And we believe that adding this capability will enable us to accelerate the growth as much as we can in 2027 and beyond. So we are adding this bispecific into our NPI engine, and we'll be able to provide a fully automated end-to-end solution to our customers that's going to drive revenue with existing customers and new customers.

And I'm showing no further questions in the queue at this time. I will now turn the call back over to Dr. Emily Leproust for any closing remarks.

Thank you for joining us today. Supported by growing clinical success, favorable regulatory pathways and strong industry partnerships, bispecific antibodies are rapidly becoming a cornerstone of precision medicine and a key growth driver in biopharmaceutical innovation. We believe that incorporating the B-Body technology platform in our DNA synthesis and Protein Solution groups will position us to continue to lead at the forefront of next-generation antibody innovation and drive shareholder value. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.