Welcome to the Telesis Bio's First Quarter of 2023 Earnings Conference Call. At this time, all participants are on a listen only mode. After the speaker's presentations, there'll be a question-and-answer session. To ask a question at that time, please press star one, one on your telephone. Please be advised today's call is being recorded. I would now like to turn the call over to Jen Carroll, Telesis Bio's Vice President of Investor Relations. Please go ahead.
Thank you. Good afternoon. Thanks for joining us for Telesis Bio's first quarter 2023 earnings call. With me on the call today are Telesis Bio Founder and Chief Executive Officer, Todd Nelson; President and Chief Operating Officer, Eric Esser; and Rebecca Goodrich, Senior Vice President of Corporate Development. Our first quarter 2023 financial results press release is now available on the investors section of our website.
Before we begin, I would like to inform you that certain statements we make during the call will be forward-looking statements that involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Such factors include those referenced in the safe harbor statement included in our earnings release and in our filings with the SEC.
This conference call contains time-sensitive information and is accurate only as of the live broadcast on 11 May 2023. Finally, any percent changes we discuss will be on a year-over-year basis unless otherwise noted. With that, I will hand the call over to our CEO, Todd Nelson, and we can get started.
Thanks, Jen. Welcome, everyone. Thank you for joining today's call. We're very pleased with our company's execution this quarter, and we thank our team for their continued focus on smart growth. As you will see in this quarter's results, we continue to grow both our revenue and install base. We delivered three BioXp kits to the market under the new Select brand and kept a steady hand on our operating expenses.
Throughout the remainder of the year, we will continue to make strategic and measured investments to drive long-term sustainable growth by expanding our BioXp customer base and our customers' ability to more broadly use our products and services in their research and development efforts. We will also stay laser-focused on watching operating expenses as we move towards a time where we can become a profitable company. Also, of note during the quarter, we successfully moved into our new headquarters.
It's exciting to have so much of our team together in one location. In our new headquarters, we have the space and in-house talent to do many of the things that we plan to do related to improvements in our supply chain quality and our gross margins, which we'll cover in more detail toward the end of today's call. Since our company began, our vision has been to provide researchers with the tools to build biology in their laboratory without any constraints.
Our products' unique ability to rapidly create novel synthetic biology products such as long pieces of DNA, mRNA, and eventually proteins at the benchtop allows us to continue to address large unmet needs in our targeted markets and workflows.
As a reminder, the first quarter BioXp Select kit launches were a significant strategic achievement that add to the value proposition offered by our de novo gene synthesis kits because it is the first time that scientists can use their own DNA as a starting point in experiments on our BioXp systems. By doing so, we now have the ability to offer our customers a complete solution for many DNA and RNA synbio applications.
We believe these make-to-stock kits will allow our current and future customers to use their BioXp systems more frequently, thus driving up recurring revenue growth rates. These kits should help us to unlock the remainder of the synbio TAM of approximately $2.6 billion, which is estimated to be growing at a rate of 27%. Now, moving on to our first quarter results.
Our detailed financial results for the first quarter are included in today's press release. Total revenue for the first quarter was $6.3 million, representing growth of 12% over last year's same period. Notably, our core BioXp revenue, which consists of instruments and kits, grew at 28.5% year-over-year for the first quarter. This revenue growth reflects strong continued demand across our BioXp product portfolio.
Gross margins came in at 55.6% for the first quarter compared to 49.3% for the same period in the prior year, reflecting positive mix shift in revenue from recently launched products, including the BioXp 9600 system, as well as new kits for mRNA, long fragment builds, and cell-free DNA scale-up.
Operating expenses were approximately $14.5 million for the first quarter of 2023 compared to $15.6 million for the same period in the prior year. This decrease is primarily the result of prudent cost-cutting decisions made about a year ago in the second quarter to focus the team on our most profitable and near-term opportunities. Net loss was $11.1 million for the first quarter compared to $13.2 million in the same period the prior year. Net loss per share was $0.37 for the first quarter of 2023 compared to $0.45 for the corresponding prior period. Cash and cash equivalents were $32.2 million as of 31 March 2023.
On our earnings call in March, we shared our expectation that revenue will be back-end weighted in the second half of the year, reflecting the timing of the launch of multiple new BioXp kits and the continued commercial ramp of our recently launched 9600 system. Against that backdrop, I'd like to acknowledge the broader economic impact we're seeing within our space. I'd like to note that we have seen some scale back in demand from customers who are reducing spend to conserve capital and longer capital purchasing cycles due to macroeconomic caution.
We expect that to continue in the first half of the year, anticipate improvement in the second half as biotech and pharma budgets are released. We remain confident in the vitality of our end markets; our core franchise pipeline remains healthy. Moving on to our product pipeline update. Our product launches are on track.
During first quarter, we launched three BioXp kits under our new Select brand. These new products not only allow us to offer a complete synbio customer solution for DNA and mRNA applications, it has the advantage of allowing researchers for the first time to start with their own DNA to perform automated downstream workflows. In February, we launched the BioXp Select mRNA Synthesis Kit, which allows customers to synthesize mRNA in just hours using DNA that they bring to the system.
This new kit will enable greater flexibility for our customers, empowering them to streamline and accelerate discovery workflows in mRNA therapeutics, vaccines, and precision medicine. With this new kit, customers can automate and accelerate their research, ensure high quality and consistency, and generate transfection-ready mRNA with the push of a button.
In March, we delivered the BioXp Select DNA Cloning and Amplification Kit and the BioXp Select Plasmid Amplification Kit, which enable our customers to start experiments with their own plasmid or linear DNA fragments and perform automated cell-free DNA amplification and scale-up. We believe this can accelerate discovery, particularly in antibody and protein engineering, as well as within cellular immunotherapy workflows.
As a reminder, we anticipate launching several additional BioXp kits and two new BioXp systems before the end of the year. The first system we anticipate launching is focused on next-gen sequencing library prep, which gives us access to an additional TAM of $1.6 billion growing at 25%. This launch remains on track for third quarter.
The second system uses our proprietary SOLA enzymatic DNA synthesis reagents. We will target our early efforts within the CRISPR market, enabling for the first time same-day turnaround for these important reagents. This, too, is a new market for us and represents a new opportunity of greater than $1.5 billion growing at 25%. We remain enthusiastic about the future growth, which will be driven in part by our continued focus on expanding the portfolio of applications and workflows enabled on our BioXp system. We believe we are still in the early stages of our targeted workflows.
Our value proposition to researchers will continue to increase. Moving on to gross margin. During the quarter, our team achieved important milestones, which set us up to successfully expand gross margin throughout the year. As a reminder, we have a three-point plan for achieving these targets.
Number one, there will be contributions from a favorable mix of higher margin products like the 9600 and the Select kits. Number two, we have insourcing initiatives related to raw materials manufacturing. Number three, we will be integrating our instrument manufacturing for both the 3250 and 9600 instruments. We have made significant progress on the establishment of our proprietary oligo production operation. During the first quarter, we brought the first of five oligo synthesis systems online and began commercial delivery of BioXp kits incorporating these oligos.
We are confident that we remain on a path to internally produce sufficient oligo volumes by the end of 2023 to substantially replace our existing supply from outside vendors while also improving quality and cost of goods. We are also on track to internalize the production of both the 3250 and 9600 BioXp instruments.
We anticipate shipping our first internally manufactured BioXp system in the third quarter of this year. Our expectation is that these insourcing efforts will be substantially completed by year-end and that full year benefit will be realized in 2024. In closing, we are pleased with our performance this quarter. We're proud of the products that we're delivering to our customers.
As a reminder, we remain focused on achieving our near-term commercial goals, launching new products, improving our profit margins, controlling our costs, and furthering new and existing partnerships. With that, I will ask the operator to open the call for questions. Thank you.
Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star one, one on your telephone. Again, to ask a question, please press star one, one. One moment for our first question. Thank you. Our first question comes from the line of Brandon Couillard of Jefferies. Your line is open.
Thanks. This is Matt on for Brandon. Todd, I'd be curious to get a bit more color on how first quarter tracked versus your own internal expectations. I think you noted customers taking a bit longer on purchase orders, more sluggish budget releases, and sounds like that'll improve in the second half. Just what gives you confidence in visibility that things get better in the second half there? Just to clarify, is the over $45 million target from last quarter still the goal for this year? Thanks.
Matt, thanks for the question. With regards to the first part of the question, you know, how do we feel about the first quarter? We, by way of review, had provided annual guidance. We had mentioned that the year would be back-end weighted and, you know, likely that the back-end weighting would be back-end weighted towards the fourth quarter.
That being said, we're actually on track generally for expectations with the first quarter. We expect now that we've launched the BioXp Select kits, that will continue to ramp up. We've launched three of those. We've got a number of those we'll continue to launch into the back end of the year. We're scaling our commercial team currently, getting people on board and ready to go.
We are continuing with the ramp and the launch and the building of the funnel for the 9600. I feel confident at this point that there is no need for us to change guidance, and we won't be doing that. We will, I think, keep a close watch on the macroeconomic environment, the trends therein, and, you know, see how the second quarter comes along. As far as the first quarter, we were on track with our internal results.
Okay, great. Thanks. Then how many placements for the BioXp did you have in first quarter? Any chance you give us the mix between 9600 and the BioXp 3250? Then any more color, I know you said the BioXp overall was up 28% of the growth rates between instruments and consumables. Thanks.
Yeah. Matt, we haven't typically split that out, probably not likely to do it here. I think that what we said is that, you know, we'll generally provide annual guidance on those things. I think it's possible to kind of back your way into what those numbers might be. I don't think we've said we're gonna ever do that, and we haven't provided the mix. The reason for that is that the 9600 just launched in the fourth quarter, and as the funnel builds, it can be a little bit lumpy. It's very difficult for us to have the requisite amount of visibility to provide specific guidance on product mix between the two as they ramp up.
Okay, thanks. Last one from me. Sounds like you guys made some progress on the internal manufacturing of BioXps, you know, here at third quarter. Can you just remind us of the potential benefit, I think you noted be in 2024 on an annualized basis, but, you know, that you expect to see to gross margins from moving that manufacturing in-house. Thanks.
Let me just back up and provide the context more broadly around your question, which is related to two of our three initiatives on improving gross margin. One is the insourcing and manufacture of our own oligos. Those are critical raw materials that we use. By the end of the year, we expect that to be on track, as I mentioned, to substantially offset all of the purchases that we currently make from our outside vendors. That will have its major impact in 2024.
The same thing for the instruments. We are on track to launch those in the third quarter. Again, the full benefit of that will be in 2024. I'll hand it over to Eric Esser to actually answer the question on the accretion of gross margin.
Yeah, thanks, Todd. Hi, Matt. We would anticipate, I think we said this last time as well, several hundred basis points of improvement to gross margin as a result of both of those insourcing initiatives. Again, we would start to see that in 2024. That's our estimate right now.
Just as a reminder, Matt, I think we guided to 55% to 59% for blended gross margins in 2023. Eric's comment should accrete to that number.
Super. Thank you.
Yeah.
Thank you. One moment, please. Our next question comes from the line of Chad Wiatrowski of Cowen. Your line is open.
Hey, guys. Chad Wiatrowski on for Steve Ma. Appreciate the ongoing headwinds. I think that's been expected from emerging biotech and small pharma. Do you have any comments on what you're seeing from large pharma, in terms of CapEx delays?
Yeah, hey, Chad, it's Todd. Thank you for the question. you know, our comment on the macroeconomic observations for us, I think, as everyone knows, we've got significant exposure to pharma biotech as a customer base. It's larger than 50% of our current customer base, and within that, we have significant exposure to small biotech companies. We're watching that very closely. Your question was around large pharma, and I can say that with specificity, we haven't seen a tremendous reduction in large pharma as far as, you know, the sequencing of discovery orders and things like that.
That being said, I think as everyone knows, there have been a few, you know, there have been some layoffs, divisions are closing, and we're waiting to see what the impact is. The answer is not yet, and don't know about the future. Some exposure there to be sure.
Thanks for the color. Just another one from me. On the kits and the pipeline of products being launched this year, how do you manage? You referenced building out the commercial team, but how do you manage R&D spend and sales and marketing spend in the midst of getting all these pipeline products out?
Chad, a good question, I think it's an appropriate one, given where we're at and we're trying to get profitable and whatnot. I'll take the first part of that and hand it over to Eric 'cause he'll have some details. You know, at the highest level, what we've done is prudently look at what we're building now. It may sound like a lot, right?
That we say we're gonna launch 11 kits and we've launched three. What I wanna remind investors of is this is a very scalable platform from an operating perspective inside the organization. We're effectively doing technology integration and not de novo development for many of these kits. Because we have two systems that will run the same kits, it's easier to launch more kits across the system.
It might sound like a lot, but we're confident that we can get that done, and I think the evidence of that is that we're on track so far, this year, and we've launched three of those kits. It's a scalable operation, and I'll hand it over to Eric to maybe go through some of the details.
Yeah. Thanks, Todd. Hi, Chad. I think, as you know, we made some adjustments last year to our... the programs that we were focused on for development. We set up our team last year knowing what our product roadmap was gonna be for this year, and I think that team is executing against that roadmap well. We did the things we wanted to do in first quarter, so we're happy with the three product launches that we've done.
We have the team and the process in place to get the rest of the work done that's in front of us for the year. I think we guided at a high level that, you know, obviously we're being prudent with our spend and with our total OpEx, and that remains true. We're not ramping resources, and we don't need to add additional development resources in order to do the work that's in front of us for this year. I think we have what we need.
Appreciate the extra color. Looking forward to the rest of the year. Thanks, guys.
Thanks, Chad.
Thank you. One moment, please. Our next question comes from the line of Harrison Schrage of Key. Your line is open. Pardon me, Harrison Schrage, your line is open.
Oh, hi there. Sorry, I've been having issues. My call dropped earlier, so I apologize in advance if I've missed this. Todd, I was wondering if you could give an update in regards to your Pfizer milestones. Then, as a follow-up, I'm also wondering, did you break out the kit revenue in particular here in the quarter? I know it was 28.5% growth for the BioXp platform at large but wondering if you can parse out kits.
Yeah, Harrison, happy to help you out there. First on Pfizer, thanks for asking that. Collaboration is a large one for this company, as you know. In bio-bucks terms, what we've talked about before is it being over, you know, $500 million in potential value for the company over the next few years. The hard dollars associated with that I think we've discussed previously, but just to review that, there was an $8 million upfront fee that's been amortized over the course of the last couple years. The milestones, specifically what you asked about, we are on track there and anticipate meeting an additional milestone or two this year.
We met 1, I'll just remind you of that, in the fourth quarter of 2022. I think we're on track. We are on track to the best of my knowledge right now; to meet the other milestone that's right in front of us. Those are all on track.
Great. Thanks. Then parsing out the kit revenue on the BioXp platform.
Yeah, I don't. You can kind of back your way into that, and I know. What I would say is that of the 28.5% growth, it was greater than 50% of that. We saw a greater than 50% growth in the BioXp kits year-on-year.
Okay, got it. That's really helpful. Last one, you mentioned the 9600 SOLA platform launch. I believe you previously mentioned that was targeted for the third quarter. Is that still on track for the third quarter?
Harrison, that's on track for the fourth quarter, and we communicated that out, I don't know, in the fourth quarter, the first quarter. It remains on track. This is the CRISPR guide product, so it's a variation of the program that we had last year. This is on track for fourth quarter this year, and it'll be using SOLA for CRISPR RNA guides. It remains on track from our perspective.
Got it.
Thank you. I'm showing no further questions at this time. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.
Thank you.