Good morning, everyone. This is Anna Marie Wagner. I'm the SVP of Corporate Development at Ginkgo. I'm joined today by Jason Kelly, our co-founder and CEO, and Mark Dmytruk, our CFO. We're honored that you chose to start your week with us, and we're looking forward to updating you on our tremendous progress so far this year. Needless to say, it's been an exciting quarter, and to help warm up the crowd, I just wanted to remind you that during the presentation today, we'll be making forward-looking statements. Those involve risks and uncertainties, so please refer to our filings with the Securities and Exchange Commission to learn more about those risks and uncertainties. During our quarterly earnings call, we will, of course, be updating you on our financial progress. We also want to use these opportunities to continue to build a deeper understanding of what we're doing at Ginkgo.
After our financial updates, we'll always feature a strategic deep dive each quarter, which today will be led by Jason. If there are topics you'd like to see in a future deep dive, please let us know. We'll end with a Q&A session, and I'll take questions from analysts, investors, and the public. You can submit those questions to us in advance via Twitter, use the hashtag Ginkgo Results, or via email at investors@ginkgobioworks.com. Now, without further ado, I'll hand it over to Jason to kick things off. Jason?
Thanks, Anna Marie. Just do a quick intro and you'll hear from me later in the deep dive. You know, our mission here at Ginkgo is to make biology easier to engineer. We do that by operating as a horizontal platform. I think this is a key idea about Ginkgo. We wanna program cells for customers across a range of industries on this common platform, and then we monetize that platform similar to how a tech company would, but by capturing a portion of the value of the applications that are developed on top of that platform. Myself and the founders at Ginkgo have been working on this mission since we met at MIT almost 20 years ago now.
you know, the technical progress and tangible results that we've seen over the past year feels like a real inflection point, you know, at Ginkgo, but honestly across the synthetic biology industry in general. I could not be more excited to share our results with you today. you know, one of the most important things for us is new program additions on the platform. that's one of our most important KPIs. you might remember, you know, this summer we updated our expectation for the year from 2023 to 2030 of those new programs. We remain on pace to hit that. in fact, we added 10 new programs in Q3. ultimately, Ginkgo's success is measured by our customer success, right? You know, and we saw some awesome progress in our customer cell programs.
I'm excited to be able to announce today that just last week, Cronos confirmed the performance of a second strain, following on from one we announced earlier this year. This one will be producing CBGV. We delivered that strain, and it has paid a second equity milestone in that program, which will be included in our Q4 financials. Again, this is one of the things I get the most excited about is seeing organisms go out the door to customers excited to be commercializing those, and then value flowing back to Ginkgo. Additionally, Aldevron has commenced commercial operations for vaccinia capping enzyme, BCE.
You know, this is one of the ingredients used in the manufacturing process for mRNA vaccines, and it's produced from a strain that we delivered in Q3 that yielded an over tenfold improvement in yield compared to Aldevron's previous process. Really excited about this. It's an opportunity for an impact in the world and also a chance to see value come back to Ginkgo again from our customer success. Finally, just last week, Synlogic announced that it's a big week that they're advancing a Ginkgo-engineered strain for the treatment of homocystinuria to IND-enabled studies. I'm so excited about this, right?
Seeing Ginkgo's organisms on a path to going to patients in therapeutics, it's been a long time goal for the company, to be honest, and it's something we hope to see a lot more of in the future. On the biosecurity side, this has really picked up steam with now 10 state-sponsored K-12 contracts, over 1,500 schools being served by our biosecurity brand, Concentric. As of the week of November first, we were collecting over 220,000 samples per week. I could not be prouder of how the team came together to respond really to a crisis here. It's truly a privilege to be building really part of the world's biosecurity infrastructure. I think this is, you know, I've talked about this previously.
This, I think, is an absolutely critical thing in a post-COVID world as we are building out the tools to make it easier and easier to program and engineer cells. We have to build this type of security, biosecurity globally, and I'm proud that Ginkgo is a part of that. Finally, we capped off the quarter with our official listing on the New York Stock Exchange with the ticker DNA. You know, we stand on the shoulder of giants with that ticker that you know we hope to do the prior owners, Genentech, proud. Finally, we are thrilled to be able to see many of you at our annual conference, Ferment, just a couple weeks ago, over 700 people.
Yeah, that was a real thrill to see everyone. We're hopeful that more of you will come back and join us next year. Now I'm gonna hand off to Mark to share the details on our financial performance this quarter.
Great. Thank you, Jason. Now, before we get into the financial slides, first some context. We are very pleased to report a strong quarter in terms of revenue. Total revenue in the third quarter of 2021 increased to $78 million, representing growth of nearly 6x the third quarter of 2020. Year to date, total revenue grew to $165 million, up from $45 million in the comparable prior year period. This quarter's financial results highlight the tremendous progress and growing diversity in our business model as we receive significant revenue contributions from foundry services, downstream value share, and biosecurity. Now moving to cell programming highlights.
We added 10 new cell programs to the foundry platform in the third quarter of 2021, bringing the total number of new programs to 21 year-to-date. As a reminder, our new cell program count is a key KPI that we're focused on as this metric drives both near-term foundry revenue and potential future downstream value share. We only count a program that has a certain expectation of scale and are typically doing several proof of concept programs in addition to the reported numbers, which can ultimately lead to larger paid programs. The 21 new programs we added year-to-date compares to 15 new programs added in the comparable period last year, representing 40% growth. We supported a total of 61 active programs in the year-to-date period across 30 customers on our foundry platform.
We continue to see good industry diversification in new programs as well as further proof points in therapeutics, a newer field for us, with six of the 21 new customer programs being from the pharma and biotech industry and the rest diversified across the many other industries in which we participate. Foundry revenue increased to $35 million in the third quarter of 2021 from $12 million in the third quarter of 2020, representing over 200% growth. Similarly, foundry revenue for the year-to-date period increased to $79 million, representing growth of 84% over the comparable period last year. Importantly, foundry revenue in the third quarter includes an equity payment we received for achieving a commercial milestone with Cronos, the first time that Ginkgo has received significant downstream value share.
As Jason mentioned, Cronos has also just confirmed that we hit their spec for a second molecule, which triggers the payment of a second equity milestone, which will be reflected in our Q4 financials. Finally, just to make a comment on related party revenue. Related parties represented 38% of foundry revenue in Q3 2021 and 47% of year-to-date foundry revenue. This compares to 63% of foundry revenue in Q3 2020 and 70% of foundry revenue in the 2020 year-to-date period. This mix shift toward more third-party revenue was due to both the downstream value share received from Cronos, which is not a related party, as well as just general diversification in the business. If we could now turn to biosecurity.
Our biosecurity offering generated $43 million of revenue in the third quarter and $86 million of revenue year to date. This tremendous growth has now exceeded our recently expanded full-year target in just the first nine months of the year. Biosecurity revenue can consist primarily of product and service revenue from our end-to-end COVID testing offering, and the growth is being driven primarily by K-12 pooled testing. We have now been awarded state-sponsored K-12 testing programs in 10 states, and as of last week are collecting over 200,000 samples weekly. Biosecurity gross margin was 48% in the quarter, a significant improvement versus prior quarters, and this is primarily due to maturation of the business and the benefits of larger scale. Now if we could turn to the detailed P&L, I'm going to provide a little bit more commentary on the other line items.
Starting with R&D expense, R&D expense grew to $53 million in the quarter, driven by expansion of foundry capacity and increased breadth of capabilities to support both current and future collaborations, along with further development of our biosecurity offering. G&A expense grew to $29 million in the quarter as we invested significantly in business development and all other G&A functions to support the higher level of foundry activity and our biosecurity offering, along with our very extensive public company readiness efforts. Now to provide a quick comment on the net loss line item, it is important to note that our net loss includes a number of non-cash expenses as detailed more fully in our financial statements, and these include, just by way of example, mark-to-market adjustments on equity method of investments where we have elected the fair value option.
It includes reductions in the carrying value of those platform ventures that we account for under the equity method, and we take those reductions in the quarter that the equity is issued to us. Thirdly, it also includes mark-to-market adjustments on the Soaring Eagle public and private placement warrants that came onto our balance sheet as a result of the merger. Those are all reflected as a liability. Because of these non-cash expenses, we look to Adjusted EBITDA as a more accurate measure of our profitability. Adjusted EBITDA in the quarter was - $18 million, and for the year-to-date period was -$107 million. A full reconciliation of EBITDA is provided in the appendix to this presentation and in our MD&A.
Adjusted EBITDA was favorably impacted by gross profits in biosecurity this quarter and by downstream value share, which typically drops straight to the bottom line. CapEx in the year-to-date period was $51 million, reflecting foundry capacity and capability investments. Examples of this include the substantial completion of our new broad-use foundry, Bioworks 6, which is located in our Boston headquarters, as well as foundry space build-out in Cambridge, Massachusetts. Now if we could turn to outlook, I'd like to provide some brief commentary on revenue outlook for the rest of the year. We expect to add an incremental nine new cell programs in Q4 for a total of 30 new programs in 2021. We expect foundry revenue to exceed $100 million for the full year 2021, inclusive of both downstream value share and services revenue.
With respect to biosecurity, as a reminder, in August, we updated our biosecurity revenue outlook to be at least $75 million for the full year. Given our strong third quarter result, we expect to significantly exceed this revenue target for the full year. While we're not providing a point estimate on revenue, as there's still significant uncertainty in the K-12 testing market in general and the facts and circumstances of the pandemic change regularly, we are confident that Ginkgo is positioned well in this market. We expect biosecurity revenue of at least $110 million for the full year. We further believe our performance in building an offering of this scale from scratch in such a rapid timeframe is indicative of a strong execution capability on future opportunities as the biosecurity market further evolves.
Before I wrap, I'd like to make a comment on how we're thinking about guidance and breaking out foundry revenue in future time periods. We are internally evaluating this right now, but we do not anticipate that it will make sense for us to either guide to or break out foundry services revenue and downstream value share revenue as separate components. As we are now reaching the phase of company maturity where we are seeing downstream value share hit the top line, we are seeing in real time that there are customer confidentiality considerations as well as situations in which it will be a smart business decision for us to make trade-offs between the two. Just to conclude, in summary, we think this quarter demonstrates the strength in the business model.
We're seeing an increase in diversity of customers operating in many industries, developing a wide array of different products on the platform. Downstream value share is a tangible commercial proof point, and it typically drops straight to the bottom line. The progress in our biosecurity offering is truly impressive. Now, Jason, back to you.
Thanks, Mark. That is great to see. I just wanna say, I am continually impressed by the Ginkgo team. You know, just in the last three months, we took the company public, hosted a 700-person-plus annual meeting, managed launching K-12 testing at the start of the school year across, which, you know, as parents on the call know, is a slightly stressful time in general for parents, across 18 states, and continued to deliver steady successes in cell programs for our customers. You know, the team at Ginkgo did not blink, and it has been awesome to watch.
You know, in addition to reading out on our financial performance, I wanna use these quarterly earnings calls to give a deep dive on aspects of the business that we are hearing questions on from investors, both institutional and retail. So please keep those questions coming. It will help inform what we put in this section in the future. We also had a short report I noticed come out about a month back. While the guy that did it wasn't especially serious, he did make a bunch of, you know, serious claims publicly about Ginkgo's financial practices.
Not surprisingly, given the nature of the claims, we also received an informal inquiry from regulators at the DOJ, and commenced an independent investigation led by our audit committee and supported by an independent law firm and forensic accounting firm. I'm happy to report that the investigation found the claims were baseless, and I'm gonna give you a readout on that as well today. I'm gonna cover three topics in the deep dive. First, I wanna talk about our horizontal business model, as we're really pioneering that model in biotech, bringing it over from the tech industry. Second, sort of the silver lining to a bunch of baseless claims being made about the business, is that it gave us a chance to make sure our house was in order.
I wanna give a few, you know, comments from my seat here, on that. Then finally, I wanna dig a little deeper into the financial structures and motivations of the types of deals we do for our three major customer types, sort of first, the large and mid-size companies, second, these existing startups out in the world, and then third, new startups that launch day one on the platform. You know, these deals are designed based on what works best for each customer type, and I wanna outline how they work and the progress we've been seeing across all three categories. Okay, let's dive in. Number one, you know, we're bringing a horizontal business model, common in tech, into the biotech space.
The key idea is we are gonna serve customers in any market vertical that needs cell programming. It's obvious today, you know, for say, Amazon Web Services, that it doesn't matter what market your website is to go use their services. In my view, it'll eventually be equally obvious that it doesn't matter what market you're in, who you would use for your cell programming platform will be independent of that. We don't wanna organize our customers at Ginkgo by market vertical, okay? We wanna organize them really by the stage of the company they are in. That's a much better predictor of the type of commercial arrangement preferred by that customer.
With the large or mid-size companies, such as our deals this year with Corteva, Biogen, Aldevron, and Selecta, you know, the customers are often paying foundry service fees in cash and downstream value share via royalties or milestone payments. As a reminder, this is kind of. You know, these value share payments are kind of similar to like an app store model, right? We get a piece of the downstream value of, the products that we enable. In our deals with these startups, both the existing and newly formed, those companies often prefer to offer Ginkgo equity in their company as for either these service fees or for the downstream value share. In those cases, this often create related parties in our filings. It's a great structure for startup customers.
Ultimately, like, you know, that's what matters as we've been creating these deal structures is what is gonna work best for customers, what creates the least friction to get them on the platform. That's really what we've oriented around because startups, frankly, are one of the most important parts of our business model. They're a key customer segment because they haven't invested already in large R&D labs. They don't have that sunk cost that the big companies do, where they already have, you know, big labs and all that equipment and infrastructure, so they can, you know, in many cases, start foundry native, right? Like, they can be born on our platform. This is something that happened, you know, in with, like, cloud computing. We had cloud-native companies come along. People talk about this ten years ago.
That's really exciting. It really speeds up the launch of companies and can save them a lot of upfront cash. I'll talk about these in more detail coming up, but I wanted to highlight how all three types of these deals are important for Ginkgo, why as a horizontal platform, you know, that's the right way to approach the market, and that we plan to do more deals of all these types, just like we've done in 2021 in the future. You know, this slide here just to flag it, is from our PIPE deck. For those of you who are kind of engaged with us during that process, I think it nicely highlights that we've been planning for a while here to really develop an ecosystem of services around our platform and developer community. Okay.
That ranges from things like capital access, like we see with our structured partnerships and platform ventures, to manufacturing access, like, you know, we worked with Cronos to help them, you know, bring their facility online in Canada. We do community building, like our Ferment event and so on, and you have seen this be key in the tech world. You have to bring together a community of people that are gonna build on your platform. We are doing that very deliberately, and we wanna keep offering them more ways to get value by engaging with Ginkgo alongside our technology platform. Okay, number two. All right, so, you know, as I mentioned, the short report made a number of claims publicly about financial misconduct.
We are lucky to have a very strong leadership on our board, and this triggered an internal investigation that concluded there was no basis in those claims. Look, I'll give you a little more context. On our board, we have two sitting CEOs in Reshma Kewalramani at Vertex and Christian Henry at PacBio. Shyam Sankar is the sitting president and COO at Palantir. We have three former CEOs in Marijn Dekkers and Harry E. Sloan and Arie Belldegrun from Bayer and MGM and Kite, you know, right? Christian heads up our audit committee, and following these claims in the short report, the audit committee called for an independent investigation. The audit committee brought in as part of that Milbank as an independent counsel. The team was led by former DOJ prosecutors, engaged Ankura as forensic accountants to support their investigation.
Just to share how extensive this process was, the team reviewed thousands of pages of documents following an examination of electronic records, including email, Slack messages, financial, internal and external documents. They also conducted extensive interviews, and so I'd like to take a moment to thank the audit committee and the Milbank and Ankura teams for their diligence, their care, and their time in this process. I'd also like to express my admiration for the Ginkgo team, particularly our finance and legal teams, who had to do all this on top of their day jobs, keeping Ginkgo's ordinary operations humming, just as you heard from Mark, during a very busy time for the company. As I mentioned, it is also not surprising in the case of public claims of financial misconduct to hear from regulators.
Shortly after the report came out, we received an informal inquiry from the DOJ, which is why I'm very happy to report today that based on the independent investigation, the audit committee found that any suggestion of fraud, reporting violations, accounting errors, or other wrongdoing contained in the short seller's report were unfounded, and importantly, that no restatement of our financials was needed. I will say as CEO, it is very, very rewarding to see so many parts of the company and so many people on the team strenuously pressure tested like this and see them pass with flying colors. It is a testament to the culture we've been building at Ginkgo the last 13 years now. I'm not gonna call the process following up on the short report particularly fun, but it was rewarding, and I'm glad we're through it. Okay.
Number 3, I'm super excited to use this opportunity on the deep dive to share some of the financial structures and motivations for the types of deals we do for our three major customer types: large or mid-size companies, existing startups, and then new startups that launch day one on the platform. As I said, these deals are designed to fit each type. Let's dive in with large companies first. It's worth noting, you know, Ginkgo's doing large enterprise sales, right? You know, I did this myself. You know, the commercial teams always rolled up to me. I did a lot of hands-on enterprise selling, particularly in the early days of Ginkgo. It really helps to be able to tailor those deals to a particular customer.
What works for Bayer might be different than what would work for Roche. You know, but in general, the larger mid-size company customers prefer deals where the kind of fees are paid in cash and the downstream value is in the form of royalties or milestones. Three good examples of those sorts of deals you can see here. Our collaboration with Aldevron, there, the fees were we did pro bono as part of our COVID-19 work, but for the upfront fees, but then it incorporated royalties on sales with the product. In our Cronos collaboration, we negotiated largely fixed R&D fees with commercial milestones downstream upon completion. In other words, like, the amount we were getting paid as we did the process was fixed over time rather than a function of the work we did here.
Our collaboration with Givaudan, the service fees are based on the amount of work we do, and we get a royalty, as the downstream value share mechanism. Okay, you can see even with the big companies, a little bit of variability. On the existing startups, you know, the reality of startup companies is they're more cash sensitive than large companies. By the way, I know this, right? You know, we started Ginkgo, we bootstrapped for six years, right? You know, like, when cash is tight, cash is king, right? Our platform, however, like, offers tremendous value to these companies. Right? Because they can forego completely building out that in-house cell programming R&D infrastructure, and instead focus all their R&D efforts on the product related things.
If you take a company, you know, like Motif for example, they would invest in food scientists rather than biotech scientists, right? You know, that's a big leveling, you know, that's an opportunity for a lot of leverage for those companies. The opportunity afforded by getting those companies on our platform when they're small also is very good for Ginkgo. Like, this is well understood in tech. You know, Amazon gives free credits on AWS to Y Combinator or at least they used to Y Combinator companies. You know, Stripe famously got Shopify when they were pretty small, it's now a $200 billion market cap company.
You know, our approach is not to offer free services yet to those companies, but to take equity in place of cash for foundry service fees. This aligns us with the investors on their cap table, and it also helps the startups conserve that, you know, cash that's quite precious to them. We've done a number of deals like this with startups. Recently with Huue, Synphonix, Cambium, and Tantu. That's something, yeah, you know, I think we will keep doing in the future. I will say, I think we've hit on something with this, with these startup biotech companies. You know, we hosted our first cell developer virtual conference last week, and we had over 500 people register for this, right?
You know, if I look back at Ginkgo five years ago and said like, "Yeah, we put up a flag like this and 500 people would sign up," you know, it was certainly not how things used to be. Startups and entrepreneurs are really hungry for access to the Ginkgo platform. You know, and not having to build those labs themselves. I get this. You know, you can see the kind of timeline on the left here from Ginkgo's history, right? We spent a long time trying to scrounge to get you know the money to build out the labs to do the work here, and it's not easy. You know, we wanted someday to be as easy to launch a biotech as it is to launch a website.
That day is not yet, right? Everything we can keep adding to make that easier, I think, creates new opportunity for Ginkgo and our customers. What is really exciting is companies that don't already exist and haven't even built any R&D lab infrastructure, but on day one, this newly formed startup can just be born on our platform. You know, with this approach, I think this moves the needle almost the most to solve this problem because it saves completely those upfront fees for the customer. You know, these companies hopefully will never need to build it. Ginkgo also helps connect strategic and financial investors to amazing entrepreneurs to get these companies off the ground.
We're getting a lot more interest here because of the success of some of our earliest platform ventures, for example, like Motif, and like most recently, Arcaea is an example of a platform venture where Ginkgo does not invest any cash, okay? But we are paid in cash revenue over time as we perform the R&D services. But in lieu of, like, a royalty on the downstream value share, we get equity in the company, okay? And so we get an equity position for that downstream value share, but importantly, we're getting cash for foundry services today. Now that initial equity grant does need to be accounted for under GAAP, okay? In other words, we have to earn it.
While I encourage you to read our public filings for the precise detail and accounting treatment, the end result is that we book a deferred revenue liability on our balance sheet when we do these sorts of deals. We plan to do many more of these Arcaea type deals. They are great for our customers, they are great for Ginkgo, and so we'd love to do more of them. You know, I'll say one of the things that's really exciting when you launch these platform native type companies is you can recruit CEOs that are expert in the specific product vertical of the company rather than bioengineering PhDs, right? Not, you know, that there's anything wrong with bioengineering PhD CEOs. But, you know, like this is. We've seen this in tech nowadays, right?
Like, the people who launch companies are often, they might be experts in product design or in some particular vertical, they don't no longer need to be necessarily a software engineer, right? For example, you know, Jon McIntyre, the CEO at Motif, he was a senior executive at PepsiCo and a number of food companies before that. Jasmina Aganovic, you know, previously ran and launched a beauty brand, Mother Dirt. Mike Miille, the CEO of Joyn, was previously the head of biologics at Bayer and CEO of a company called AgraQuest in the biologics space. Nicole, prior to being the CEO of Allonnia, had a long career at DuPont Water Solutions and Solvay. This is really enabling.
Like, there's a lot of people out there who could launch cell programming apps, but don't have that kind of base bioengineering experience. They make for excellent CEOs. We've seen that success already. You can see it also in the type of investors that are then showing up alongside these companies, right? We have, you know, great financial investors like BlackRock and Ontario Teachers coming into these companies. We've also been fortunate to get vertical specific strategic investors that wanna stay close to technologies emerging in their industry. You know, Givaudan, Chanel, Bayer are companies that have participated in these. It's really a cool ecosystem to be building. You know, I'll give you a few highlights.
There's a lot to be proud of for Motif, which launched just a couple of years ago. They, you know, raised $226 million series B this summer. They're launching their first couple products. The coolest thing was that Ferment, we had 700 people there, and everyone got to eat Motif meat, animal-free meatballs, which we had a lot of good food at the event, but those were by far the best. And as I mentioned earlier, Arcaea is a super exciting new company, and Jasmina built that, you know, while she was an entrepreneur in residence here at Ginkgo, and publicly launched it with $78 million in funding just at the day of Ferment, or day before.
They had, again, Chanel, Givaudan, and others coming in there. Really thrilled to see her apply biotechnology in the beauty industry. Joyn has started trials of its nitrogen fixation, disease, pest solutions. This is one of those areas that gets me so excited. It can be hard to really appreciate how massive and resource intensive the ag industry is. You know, 4% of global energy consumption, 5% of global greenhouse gas. Nitrogen fertilizer alone is a $70 billion industry.
We need to do better in this space. I'm really excited that Joyn has the potential to do that. Along the same lines, biology is a whole new approach in waste remediation. The complex chemical pathways that allow biology to break things down can be applied in areas like remediating toxic waste, and things like that. I think Allonnia is really a great area to be expanding biotech into, and I'm super excited to see what they do there. All right, I told you a little bit about Motif, but I'd love you to take a minute to hear it from Jon, the CEO of Motif himself, about the impact of Ginkgo's platform following their recent $226 million fundraising. Voila.
Thank you so much. Well, should we try it while it's still hot?
Absolutely, that's the best way.
Okay. It's good. It's burgeoning, for sure.
Mm-hmm.
I mean, on the chart and all that, you can
The chair?
Yeah.
The bite quality's much better. I would say that old generations of plant-based meat, the first bite you might get this crust on the outside you like you see here.
Yep.
The second bite would be more mushy. The inside would not have texture. Look at all the effort. I mean, that pretty much looks like what you might see in a burger.
Yeah.
You notice all the pieces, the way it crumbles. The other thing I noticed is there's definitely that umami kind of.
Well-
Note on it.
... our ingredient we call HEMAMI, and it's essentially the molecule in the muscle of a cow that makes beef red. It makes it give you that beautiful sear-y, bloody flavor. It catalyzes a whole bunch of the chemistry in there, and that is an amazing piece of technology that Ginkgo Bioworks created for us. Ginkgo was able to look at 300 different muscle proteins from different species. Mini sperm whale's one that comes to mind.
Okay.
Tuna, pork, chicken, a whole series of different birds, and they're already sequenced. It wasn't like we took any animal material.
Yeah. When they did the sequences, it was for...
Specific muscle protein.
A spec-
A class called myoglobin.
Okay.
Ginkgo got us the ability to look at all the different properties, stability, taste, flavor, color, and then once we honed in on the ones we wanted, we asked them to optimize the yeast to kinda turn that into a mini factory so that we can make it, and so we can have the great taste of beef without using any animals.
That was great.
Voila.
Yeah. You know, I have to say that project with John looking at all the different species, it was sort of like a Noah's Ark situation around here. It was really fun to pull those genes from all those different organisms. So, yeah, working with the team at Motif has been great. Working with Jon has been awesome, and he's got amazing snacks, so, we're really excited to be working with him. All right, so I really have this. I love this picture of Ferment. You know, we had over 700 people turn out just a couple weeks ago in Boston. It was really great to get the community back together in person after not seeing each other for a long time.
You know, the diversity and strength of the ecosystem developing around us here at Ginkgo, it's so exciting. You know, we look forward to continuing to welcome new partners and potential partners in the future. You know, this is a lesson we've learned from the tech companies, you know, Apple, Microsoft, others. You have to nourish this ecosystem of developers so they can get the most out of your platform. You know, everyone wins when that happens, right? I think we're at this, you know, moment where for our community they're starting to say, "Hey, if, you know, Ginkgo develops more stuff, that's good for me," right? So that's a really exciting moment and we're really thrilled to play that role in the community. Wanted to show a slide here of some of the products.
You know, at the end of the day, the success of Ginkgo's platform is written in the success of our customers. you know, you look at products from Aldevron, Cronos, and Motif. You know, I mentioned at Ginkgo Ferment that the exponential growth in our platform output, right, like what's coming out of the foundry, means that we did more lab work in the last year of Ginkgo than the first 10 years combined, right? it's not surprising that we're seeing the rate of cell programmings, programs finishing and going to market for customers increasing. you can see in this chart one of the things that makes Ginkgo's platform so unique, you know, there are six species, four end markets, three product types, six different customers represented, just in the eight products shown here, right?
That breadth of work on one common platform has really been our vision for Ginkgo since, you know, day one of the company, right? It is rewarding to see that. You know, like that is a difficult technological challenge to pull off and I'm really, you know, proud of the progress we've made there. You know, one of... You know, I'll end on this. You know, one of the things that comes with being the leader sort of in an emerging technology area, whether it's, you know, electric cars or synthetic biology, is that people are gonna try to tell you why what you're doing isn't gonna work, right? But honestly, it's worth it, right?
You know, we've been working for 20 years to be able to have an event like Ferment a couple of weeks ago, and seeing the community in synthetic biology rally around the emerging technologies, getting excited about the leverage via our platform was incredible. It's especially incredible because the Ginkgo platform improves with scale, so, like, the more excitement, the better we're gonna get, right? I haven't been this excited about synthetic biology since the day, honestly, I started my PhD at MIT. I love that many of you listening have chosen to come on this ride with us. You know, what you choose to invest in moves the world in that direction, right?
Ginkgo's gonna strive to continue to be clear and transparent about the direction we're heading, and we hope you're as excited as we are about that direction. Thanks so much for your time today and we look forward to taking your questions.
Great. Thanks Jason. We're just gonna switch over to Q&A in just a second here. For the analysts who are on the call, please just raise your hand and we will allow you to unmute and ask your question. Then we'll also again be bringing in questions from both Twitter and email. That Twitter hashtag is Ginkgo Results, and then the email address is investors@ginkgobioworks.com. We'll be back in just a few seconds here to start Q&A. Hi everyone. All right, we're gonna kick off Q&A now. I'm gonna start with a question from from Twitter just as everyone is getting getting acquainted and raising their hands. I see a bunch of hands raised there. Tejas, it looks like you are the first.
You'll be the first question once we take one from Twitter here. Jason, I'm gonna give this one to you. It's from BEZ on Twitter, who by the way, came to Ferment. BEZ-
Amazing
During the height of the pandemic, pro bono work was done leading to a 10X of mRNA capping enzymes and resulting in a great partnership with Aldevron. What is Ginkgo's strategy for managing pro bono work going forward?
This was a pretty cool experience for us, because, you know, that project really cranked. I mean, we did that in sort of around about a year, kinda start to finish on the R&D side. One of the takeaways for us was because we were doing it pro bono, like, the team at Ginkgo was just really controlling the kinda design of the project end to end. That's a process when we work with our customers that is very collaborative. I think, you know, one of our takeaways here was we should really make sure we're like packaging projects. Like when we engage with a customer on a project where they're gonna get engaged from the first day, we should be a little more clear.
Like, "Here's exactly what we would do," right? We can now lean on this experience of like, look, like this maybe would be a lot more effort in the facility than you would traditionally imagine doing, but that might be a function of, well, you've been kinda limited working at the lab bench with pipettes, and so you don't actually design those experiments at the same scale our internal team would. There was actually a learning on kinda program design, I would say, that fell out of that. I think it was also a pretty cool instance of, hey, there's a global scale problem, you know, Ginkgo cares how our platform is used. Sometimes that's making sure it's not used in a negative way, but sometimes it's also, hey, make sure it's used in a positive way, right?
We can put our foot on the scale at Ginkgo to go do that when we feel it's the right thing, and then it's a cool experience here with COVID that also turned out to be quite, you know, financially beneficial at the end, even though that wasn't really, I would say, the motivation when we first launched that pro bono work. Those are probably my two learnings. It's not a bad thing to push in an area if it's one we care about. Then secondly the program design.
Great. Thanks.
It's a good point.
All right, Tejas, I'm gonna allow you to talk, so you should be able to ask your question now, but you will have to come off mute. There you go.
Perfect. Hey guys. Thanks for taking the question.
Sure.
Jason, appreciate the color on the short report. It certainly has been something on a lot of investors' minds. Appreciate you addressing that upfront just a couple of quick follow-ups there. Mark, I believe in your prepared remarks, you mentioned not breaking out sort of foundry versus downstream economics going forward. Given that sort of choice that you've made, how should investors think about modeling the trajectory of foundry revenues in 2022 and beyond? Jason, you mentioned sort of getting a clean chit from your internal inquiry with the auditors. How is there anything that's remaining to be done in terms of the process with the DOJ inbound at this stage?
Why don't we start with the question on guidance and our plan there, and then we can take the second question. [crosstalk]
Thanks Tejas. Yeah, the reason that I made that comment is we are sort of learning in real time right now that there are going to be situations, particularly in these early days, where downstream value share may only be attributed to a few customers, where breaking that out may create confidentiality issues. The second thing that we're realizing very much in real time is that it will make sense for us to make trade-offs between downstream value share and foundry services, and to do that sometimes also very much in real time.
Aldevron is a great example, where we didn't recognize any foundry services revenue for that at all in 2021, and yet it has very significant potential to contribute revenue to us. We're sort of in this kind of real time learning mode, Tejas, where we're evaluating this question. That's why we made that comment, because the line is blurring between the two. You know, we would expect to be providing you with guidance on foundry revenue and to be held accountable to that. We would expect to be providing you with guidance on new programs and to be held accountable for that sort of breaking out the two, like I said, the line is, it's just blurring a bit and we are very much kind of evaluating sort of how best to do that going forward.
Thanks.
Yeah, the only thing I would add on that front is you will occasionally. I mean, it's gonna vary by customer, right? You'll see, like in the case of our Cronos value share, you know, that is publicly disclosed, right? You know, you'll see publicly that in Q3 that was, you know, about $12 million through that value share milestone. There'll be some customers it's not an issue, but we do have this challenge, particularly while the number of programs giving value share is small, that there'll be folks who don't want that information out there. We need to be sensitive to that. That's where this, you know, a chunk of this comes from.
Yep. Jason, the second question from Tejas was around any next steps or further process on the internal investigation.
Yeah, right. As I said in the earnings call, right, shortly after the short seller report comes in, we received a preliminary inquiry from the DOJ, informal. Based on that on the independent investigation, again, the Audit Committee found any suggestion of fraud, reporting violations, accounting errors, other wrongdoing contained in the short sellers' report were unfounded, and importantly, that no restatement of our financials was needed. We are cooperating with regulators. There's not too much more I'd add at this point on it.
Got it.
Thanks, Jason. All right. I'm gonna go ahead. Matt Larew, I should have given you the warning, but you're the next on the list, so I'm gonna allow you to talk. So you can go ahead and ask your question. You'll have to unmute as well.
Thanks. Okay. Can you hear me?
Yep.
Good deal. Jason, you referenced the recent ecosystem events you hosted with Ferment and then the cell developer event last week. Just curious if you could share any feedback or data points, in terms of the potential new partners that you engaged with, things you track internally really to determine the success of those events.
Yeah.
The second part, if I could, just more broadly, with the launch of CDKs now underway, maybe just remind us how the CDKs are able to break down barriers to entry for new partners, in terms of the capital intensity and sophistication required by those partners?
Sure. Yeah. This is a great question. Yeah, maybe just to give a little extra context, right, like I mentioned, we had Ferment, which was our big in-person event here in Boston, and that's really serving as you know, we highlight some of the developers on the platform, so you got to hear lightning talks from a number of the companies that have been successful you know developing or launching on the platform. There's other companies in the room that get to hear that. It also brings investors in that are interested in synthetic biology. Many of you folks in the analyst community and others are there to join, and some of the technology providers, you know, like Emily Leproust from Twist and folks like that, right?
It's a broader tent. The virtual event was really a launching our CDKs, and these are cell development kits. The analogy is a platform software company like Apple would have a software development kit, an SDK. This is basically a set of tools given to app developers so that they can more quickly launch apps on Apple's platform. It's clearly in Apple's interest to have these out in the world, and it's great for developers because it's now less friction for them to get a product built. The same spirit is applying with our CDKs. We want to make it easier and faster for someone launching a new company or a startup that already exists to come and say, "I can engage Ginkgo's platform.
I can get a product built quickly, get it out in the world, and start making money." Then Ginkgo does well, again, through our value share mechanism in that case. That's why we're doing these things, and that's the two different types of event. You know, our internal metrics really tracking are entirely around follow-ups with the commercial team and the deal team. So based on the, you know, the. We basically have a funnel of, like, people sign up, people attend, and then how many real leads do we get on the backside of that? We haven't disclosed any of that specifically, but that would be the internal metrics we'd be driving against.
My biggest motion on this is just, you know, two years ago there was almost no inbound to Ginkgo, right? Like this is just a new concept because of our profile going up and, in particular, the success of people who engaged our platform two and a half, three years ago now showing progress. People see that, and like, proof's in the pudding. So that is now driving for the first time really the opportunity for us to market like this. You know, that really all previously was largely outbound, like, kinda sales. So that's what I would say. One last point I'll make briefly, 'cause I didn't touch on it much in the earnings call.
You know, the idea behind the CDK, you know, and the first ones we launched are for protein production, is to give, like a pretty defined box and say, "Listen, if you're trying to make, in this case, a low-cost protein, we have some existing assets. We have host strains that produce proteins at low cost. They're all, you know, one of them is really well scaled up on the foundry. The other one's, it's sort of beta and getting onto the foundry. You can deploy those in that area, and we can move really fast. Then a first engagement for phase one is only $100,000. That's a low cost in the biotech world that's the, you know, that idea of making it less frictional just to get started with us is really the key idea there. Yeah, it's a great question. Thanks for that, Matt.
Great. And just to give everyone a heads up, we'll probably go five to 10 minutes late since we started late. Apologies for the late start, but we'll give a little extra time here. Rahul, you'll be next on the question list, but I'm gonna go ahead and take one from our investor inbox in the meantime as you get ready. We got one into the inbox that says, "Climate change and pollution are some of the most important challenges mankind is facing. In what areas could synthetic biology have the greatest impact, and is Ginkgo planning to start any JVs to accelerate the change and attack climate change?
Yeah, I'll move quick. You know, I mentioned at Ferment that in the lightning talks for next year's Ferment, I'd love to see a bunch that were about climate applications specifically. I do think this is a big opportunity right now because you have seen the success of companies like Tesla, for example, you know, passing $1 trillion. You had Bill Gates just a few weeks ago say that in climate there'll be eight to 10 Tesla scale companies. You have actually suddenly a lot of investor interest, but the big companies in the space, the big energy companies, have been slower, you know, for a variety of reasons, to consider adopting biotechnology. That's a great opportunity for us in the platform ventures area, right? Like, that's why we do those things.
It's like, well, we have a lot of investor interest, but there's less existing partners and startups are just getting going. Let's do some. Folks that wanna launch those types of things, we do think there's a great opportunity there. I will also point out, you know, Joyn Bio, which we mentioned on the call, focused on nitrogen fertilizer production. You know, synthetic nitrogen fertilizer is a huge greenhouse gas emitter. That's already in that direction. I think that's a wave that'll support them. When it comes to kinda environmental cleanup, Allonnia is working in that area. We already have a few of our folks, customers on the platform, but I'd love to see more, and I think we will see more hopefully.
Absolutely. All right. We'll do a few more analyst questions here. I would just ask one part questions so that everyone gets a chance. Rahul, I'm gonna go ahead and allow you to talk, and then just unmute.
Great. Thanks, Anna Marie. Can you hear me okay?
Yep. Hey, Rahul.
Perfect. Thanks. Morning, Jason, Anna Marie, Mark. Thanks for taking my questions. I'm just gonna follow up a little bit based on Tejas' question. Congratulations on hitting that second milestone, the Cronos partnership, of course, that's something that, you know, we watch carefully and that we expect to book that in Q4. With the first equity milestone booked in this quarter, Mark, if we heard you correctly, you mentioned that this equity payment was attributed to foundry revenue. Given that this upfront book value of the equity has now been booked to foundry revenue, how should we be thinking about treating book versus mark-to-market incremental value of that same equity, going forward?
We will do an evaluation, a mark-to-market adjustment at each reporting period end. We also make some sort of GAAP adjustments to that to account for just the type of equity that we have. That gain or loss flows through the other income & expense line on the P&L.
Thanks.
All right. Harsha, I should have given you the heads up, but you can probably see that you're next in line, so I'm gonna go ahead and allow you to talk, and then, Matthew Sykes, you'll be next.
Oh, yeah. Hi, can you hear me?
Yep.
Hi, Harsha.
Yeah. Hi, guys. Just a very quick one on related party revenues. Given all of the recent focus on this topic, could you perhaps talk a little bit about your plans when it comes to accelerating the pace of new additions, of new programs in the platform via direct equity investments and what that might mean for near-term share of related party revenues? So I'm wondering, as you deploy some of the capital you've raised and as existing program scale, should we actually expect related party revenue share to increase over the next year or so, and how that mix shifts? Thanks.
Sure. Mark, do you wanna comment on how we're thinking about it from a projection standpoint? I can comment on some of what I think is likely to happen sort of philosophically.
Just kind of, I guess maybe just general trending as I discussed, we generally see the mix shifting towards more third parties versus related parties. We don't have a particular sort of bias towards one versus the other. Like, we don't inherently think that's a good mix shift or a bad mix shift. It's just a factual one. It is indicative of just the sheer number of new customers we brought on this year. I mean, the customer count was significant and the program count was significant, and those are weighted to third parties. That's just as a factual matter, that's why the mix shift is happening. I'm not sure that we really think about it kind of from a projection point of view per se.
Um, so... Yep.
Yeah, yep. Yeah, thanks, Mark. Yeah. What I would say is there's these three buckets of customers, and I mentioned they're sort of the mid and large. There are existing startups, and then there are brand new startups on the platform. I think we are seeing a lot of excitement in the startup category, right? I think that, you know, we are seeing a lot of inbound. I would say for the large companies that, you know, I think the reality is that's still gonna be, you know, solid enterprise sales, right? In other words, it's gonna be like what we do every day around here. It's having meetings and going out and the business development team and getting deals done, right? We're good at it, but it does take time.
I think you're seeing a change in customer behavior on the startups, and the startups tend to, but not always, tend to lead to more related parties. I would agree with Mark. It's not like a certain thing we're trying to solve for in terms of our direction. Our strategic goal is as many new programs on the platform as quickly as possible and then delivering on those programs for customers so we can realize value share. How that ends up shaking out related or not is less of a guidepost for us.
Okay, thanks. That's helpful. Thank you.
Yeah. No, that's a good question.
All right. Matt from Goldman Sachs, I'm gonna allow you to talk, and then Rachel from J.P. Morgan, you'll be next.
Hey, everybody. Thanks for taking my questions. Appreciate it. Just one question from me on biosecurity. You know, you mentioned release, it's an uncertain business. I'm just wondering how you're thinking about the durability of biosecurity revenues going forward as it relates to testing and/or infrastructure.
Yeah. Here's how I think about it. It is, you know, a super good question. The thing that I think of is, like I'll give you an analogy. Flu is an endemic disease, right? We know flu is not going away, and we have a certain set of mitigations in place in society. By and large, that's the flu vaccine that comes out. By the way, we have to make a new one every year because the nature of that virus, but fine. That's like our societal mitigation to get flu to a point where it is not annoying and otherwise disruptive to society. Like we're comfortable with the level of mortality, and we're comfortable with the amount of impact it has on our lives.
COVID-19 is going to become endemic, right? I think that you speak to experts, that's what you're hearing again and again. It's not gonna just disappear on us. I think that's widely appreciated now worldwide. The question is, what are the mitigation measures that society needs to put in place so that this thing is not annoying? I tell you that from quarantines at schools to masks to everything else, we're not at a point yet where we get to not think about this thing in the same way we currently really, by and large, didn't think about the flu other than certain public health folks that sort of take care of us there, but society at large is not a top of mind issue. We're not there yet with COVID. The question is, what will be enough?
Is it just the annual vaccines and then nothing else? Well, you know, like certainly not yet, right? The question is, where will these types of other biosecurity measures fit in? I think that, you know, the big tools in that bucket are gonna be updated vaccinations and boosters. It's gonna be better therapeutics over time. It's gonna be monitoring surveillance, basically testing for biosecurity purposes, not diagnostics. You know, we obviously have stuff going on in the vaccine space as a support role, but in that sort of monitoring, weather mapping type new area of testing, I'd say we are definitely a leader.
Will that end up being part of the mitigation? That's why, you know, it's hard for us to guide to exactly what it's gonna be next year. I think if it does, we're in a great spot, right? That's how I would try to frame it, Matt, if that makes sense. I do think biosecurity in general worldwide is here to stay at some level. The question is just exactly what are the set of mitigations that make COVID go away, and will surveillance and monitoring be one of them?
Great. Thank you.
Yep.
All right. We'll take our last two analyst questions, and then, I haven't gotten any dinosaur questions on Twitter yet, which is actually pretty disappointing. If there are any good ones that come in, I might ask one. Rachel, I'm gonna go ahead and allow you to talk from J.P. Morgan.
Hey, Rachel.
Perfect. Good morning, you guys. I have a few questions on the new cell programs and guidance for the year. It's great to hear that you launched 10 programs this quarter. During your last call or during your last earnings call, you mentioned that it would be heavily weighted towards 4Q this year. Based on 3Q, guidance implies 9 programs in 4Q, which is a slight step down. Can you just talk about if any programs were pulled forward into 3Q? Walk us through your approach to guidance and if there's any conservatism baked into that 4Q number. Thanks.
Yeah, so I th-
Go ahead, Mark.
I think, Rachel, at the time that we did that first half update, we mentioned that yeah, I'm not sure that we were necessarily trying to distinguish between how much of what was left would land in Q3 versus Q4. I will say that we did say that we didn't expect a lot of revenue by Q4 just because of program start times, et cetera. That said, I will say that we did make a fairly aggressive push to bring those programs on as soon as we could, and that was largely because you wanna have the ability to hit the ground running for 2022.
There was sort of a very concerted effort in Q3 to just not wait and to get programs on the foundry as soon as possible because there is a startup time. Yeah, I think we're targeting the 30 programs. I think we obviously have a pipeline that if everything landed, it would exceed that. But 30 is the number that we're comfortable with right now. Yeah. The only thing I'd add, you know, I think it is a little tricky. Again, the enterprise sale nature of it, you can have things move, you know, a month or two here and there.
That's like probably a little more true when we're engaging with a large company than a smaller company, but it's not always. I do think like we end up trying to have a big funnel, and then we know some are gonna shake and move to next year or not, right? Try to really push the team to hit our annual number. I think it'll be a little harder to predict quarter to quarter exactly how many programs. I'd say it's not like a big particular driver for us versus like trying to keep the overall number going up at a healthy clip annually. Yeah.
Thanks, Rachel. All right, I can't leave just one person hanging on their questions. I'm gonna let Mark from BTIG ask his question, and then we'll wrap up. Here you go, Mark.
Hey, can you hear me?
Yeah. Hey, Mark.
Awesome. Thanks so much for the question. You guys have made good progress with Cronos and also with food ingredients, et cetera. I guess, how would you characterize your funnel in biopharma, and in which particular areas are you most encouraged by, especially as we are about to turn into 2022? How should we think about the potential for equity in milestones in 2022 and 2023?
I can speak to the biopharma side. You know, we had David Chang from Allogene Therapeutics and Arie Belldegrun, who's on our board now and from Kite Pharma, speak at Ferment on the area of cell and gene therapy. You know, Arie Belldegrun just kinda brought up some of the history in cell therapy and how these were really the first, like, wholesale therapeutics that were getting developed, live cell therapeutics at Kite Pharma. Like, you know, and that, you know, he was like, "That's also been a 25-year..." He was kinda talking about kinda the 20-year history of synthetic biology. You know, that's exciting, right? Like, that whole, like, living cells as therapies, I would say, like, that's our bucket, right?
You know, with Synlogic, that's a bacteria, you know, with other in the area of cell therapy that's often T-cells. Like, that's where you should think about Ginkgo generally being excited. We're also gonna be supporting engineered cells to produce various things, as we always do. When it comes to, like, a new area I really think we can push into but haven't done as much to date, it's sorta that general category of sorta live cells as therapies. Cell and gene therapy tends to be where that shows up the most. Was there a second part there, Anna Marie? Sorry.
Nope.
No.
No. Okay.
Is there anything else you wanted to deep read?
All right. No, that's great. Thank you.
Great. Well, thank you everyone for joining us for our first official earnings call. Apologies again for the technical streaming difficulties at the beginning. We'll make sure that a full video is uploaded and well distributed so folks who missed the first few minutes as you were transferring over can catch up. We'll try to work out those kinks for next time. Thanks again for spending your Monday morning with us, and have a great week.
Thank you, everybody. Thanks.