30 minutes for the presentation. We should have about 10 minutes at the end for Q&A, so if you have a question, you can type that into the bottom of your screen. With that, it's all yours, Matt. I think we still need to share your presentation, just so you know. There we go. Thank you.
All right. Thank you. Thank you, Jim, for having us and Sadodi for giving us this opportunity to present to you today. My name is Stephen Gunstream. I'm the CEO and President here at Teknova, joined by Matt Lowell, our CFO. Like Jim said, we'll do about 15-20 minutes of presentation and then happy to open it up for questions. Just to start, obviously, some forward-looking statements here. At Teknova, we are a leading provider of Reagents for the entire life science community. That's everything from discovery through process development, through clinical manufacturing, all the way through to commercial support. We have over 3,000 customers here in the United States. We're in every biotech, pharma, life science tools, diagnostic company here, primarily with our discovery products.
What you hear as you go through this presentation is we've really built out a capability to make custom products and support some of these emergent therapies by providing smaller-scale custom reagents really quickly, which is really needed in the industry today. Now we have, through those efforts of the last three or four years, put ourselves in a position where we have a foundational business that is growing in the double digits and actually historically has grown 12% since 2009. On top of this, we have a number of clinical programs working their way through the pipeline that should aid in developing a growth trajectory of the 20%-25% top line growth. Last piece here is obviously the last three or four years have been particularly challenging for emerging biotech companies.
We continue to gain customers there, but we have done the investments already to put ourselves in a position to scale the business to $200 million-$250 million in revenue without significant additional CapEx. You will see a lot of that sitting on our gross margin today, but 70% of every additional dollar flows all the way through to the bottom line. We are excited about where we sit. We have the capital to get to profitability. We have a growth trajectory that looks really good, and we have a number of customers moving through here that puts us in a great position for long-term success. A little history of the company: it was actually founded in 1996 by a scientist out of Genentech.
He was ordering internally reagents for his own research and became frustrated that he could not get the products fast enough and at the quality he needed. So he actually started making Teknova's first products out of his garage in 1996. The company literally grew by word of mouth up until 2019 when a private equity firm invested and bought the majority shares of the business. Everything's done by word of mouth in that period, no external capital coming in, but a focus on quality and science that put us in a great position where we're in every lab in the United States. In this sort of 2019-2020 period, that's when we really began investing to scale the business. I joined in 2019. It became clear to me that the industry really needed a lot of customization to support these emergent therapies and emergent diagnostics.
We're getting requests for these custom formulations in very small batches, and no one else was able to sort of supply those at a reasonable time frame and at a reasonable quality. Realizing this, we decided to make a pretty big investment in this company. That is, build the infrastructure, build the IT systems, build the quality systems, build the leadership to actually scale the business to that couple hundred million and support these customers as they go through the clinical trials. Before Teknova, we had the large players in the space like the Danahers, the Thermos that supplied reagents to the entire bioprocessing community. They set those up to scale at sort of 10,000L batches, very standard, same reagents over and over again.
What customers loved about that was they had the infrastructure, the quality systems, IT systems in place to support them through commercialization. If you want anything smaller, anything custom, you're waiting months for those products. You had companies like Teknova. They're a very small company, sort of in that $10 million-$20 million in revenue size. They could do that customization, but they didn't have the infrastructure facilities to scale that to really support those through clinical trials and commercialization. Our vision here was to be the best of both. This is why we took the company public in 2021, raised the money. We built the facilities. We built the infrastructure. We built the quality systems. We actually built the commercial team to put us in a position to scale this. Now we're onboarding clinical customers. That's where we are now in the scaling period.
What do we sell? We sell agar plates as a part of our business. It's been around for a long time. Think about these as Petri dishes. These are things that go in everywhere from academic labs to grow bacteria or engineer bacteria to environmental monitoring in bioproduction facilities. Microbial cell culture media, this is the food that grows bacteria. If you're thinking about making plasmid, you usually put those within bacteria like E. coli. In order to grow the E. coli, you have to feed it. That is what Microbial Cell Culture Media is. We're probably one of the leaders in the space of that. Then buffers and reagents, which encompasses everything from your seventh-grade chemistry class. This is acids, bases, detergents, salts, sugars. This does everything from resuspending DNA up to very complex chromatography buffers.
Of course, we offer all of these solutions in everything from two-mill tubes, so very small tubes, up to 200L single-use bags. We can support customers from discovery all the way to commercialization. Because of those products, we actually sit in every customer segment in the life sciences. Think about our products as sort of the cornerstone for all basic research, but then also as you're manufacturing therapy, you need these in larger scale to actually make those products and those proteins at a scale that can be used for therapeutics. Our end markets today, we'd like to split it up by looking at catalog versus custom. Catalog, think about products that go into a warehouse of, say, a pharmaceutical company.
These are things that the discovery teams, the R&D teams will go in, pull out, say, a reagent to use on their bench to sort of identify the next greatest protein for therapy. They're working doing general R&D. It's also what academics use, and it's also, say, what a life science tools company might use to do development on a new product. That is 60% of our business. We believe that'll grow low single digit for the full year. To that end, though, actually in Q1, that actually grew low double digits. We are seeing some nice uptick in our general base business here. Such an important part of our strategy here. This is the foundation. It's very diversified. It provides us an insulation from all of the other macroeconomic trends.
Also allows us to continue to manufacture and utilize our facilities while we get this custom business up and going. Custom represents about 35% of our business. Of that, 25% of the 35% is biopharma. Consider this custom biopharma. This is really the bioprocessing side of our business. This actually grew 40% last year. Non-biopharma is everything from life science tools and diagnostics to agriculture to food testing and things like that. Other will be services. You think about our business as a 60/40 split between catalog and everything else. What makes us different? Quality, number one. We're founded by a scientist. We really focus on this on a day-to-day basis. We've built a fantastic brand in the space.
We do 4,500 QC release assays a month, I'm sorry, 20 validated QC assays, a ton of focus around making sure the products are the highest technical and scientific quality. The two pillars in the middle are what's hard to do together. Customization can take an order, get a formulation, get it in production within a matter of weeks versus months from our competitors. That custom and speed is actually combining those is what you really need to invest in from an infrastructure perspective. That's everything from how do I look at this formulation, know how to quote it. Once I quote it and I get the PO, how do I know how to route it through manufacturing to do that really quickly and provide that same scientific quality? Last pillar here is around service. When someone calls us, we answer the phone.
You'd be surprised at how different that is from everyone else right now. You get fantastic service, whether that's how do I make the right reagent, what is the right formulation for purifying this type of product, but also where's my order? Can I change this? Can I find a different supplier for that? We get a ton of accolades from our customers around our service levels. We have a net promoter score in the 70s for post-transactional. Just as a sort of demonstration of the quality that we're getting from our service team. From an overall strategy perspective, it's sometimes helpful to take a step back and say, where are we from a scientific perspective? There was this small molecule piece for many, many years ago, and then the biotech boom, and then, of course, now we have these emergent therapies.
In the meantime, though, obviously, we've had a ton of scientific advances in the last 25 years from sequencing to understanding the immune system. All that advance has been great. Of course, we've now had a ton of innovation because of that in drug discovery. The bioprocessing methods required to manufacture these at scale are not there. This is one of the biggest hurdles in the space, whether you're talking about cell therapy, gene therapy, mRNA. The ability to do this in an efficient, quick manner is not there. A lot of that has to do with the fact that suppliers are not able to make their products different, custom, scalable, and smaller. That is really kind of the vision that we've laid out here.
How we do this is you almost think about what we call a modular manufacturing facility that instead of building manufacturing lines end to end, where you put raw materials in and you get widgets out the other side and they are all 10,000 the exact same thing, we have modules of ways in which we manufacture. You can pick your product grade and that selects how we route it through the manufacturing system, the quality system that it sits on, what size of bioreactor. We have everything from less than 10L up to about a couple thousand liters. Formulation, based on if you have a high sugar, we actually need to heat it to get into solution. It is some of these complex mixtures. You actually have to have one ingredient added before another and get it into solution. We have a lot of know-how around that.
Sterilization, lots of different ways to sterilize your product. Dispensing, some things we manually dispense, some things we have automated dispensing that we build in-house, some things are bags and some are automated bags so that you can pick, you can have the same formulation and get it done in two mill tubes, or you have the same formulation, get it in 200L bags. We do not have to change a manufacturing line. We just route it through a different setup. Same thing with labeling, automatic labeling, manual labeling, custom labeling, and then, of course, pick from a menu of your quality control of what action this was tested. We put these together for customers. We can now take these intake forms, get them quoted within a day, and then automatically route it through our system.
What this allows us to do is really deliver much faster than anyone else. This ability, right now, our research-use-only products ship in about two weeks, two to three weeks. Our custom GMP products might be four to eight weeks. Consider this compared to what the typical norm is, is something more like four to eight months from the larger players in these custom GMP products. Here on the right-hand side is just an example of a customer that was very stuck. They needed to get some stuff into clinical trials. They need eight custom GMP reagents. You can see we did the quote. We received in November, we received the PO at November 18th. Product shipped in January 22nd, allowing them to meet their start date.
The alternative was another supplier that would have actually shipped it or planned to have shipped it in April or May. This saved them about three months. Of course, this became a very loyal customer of ours and now orders all the reagents from us. I talked about research to discovery all the way through commercial production. One of the things that is really important for everyone to understand here is that as customers migrate from catalog to custom to GMP reagents with us, as they go down that clinical pipeline, the amount of spend they spend with us increases dramatically. If you normalize to customers that only buy catalog products, you can see that customers that buy catalog and custom products spend on average 22 times more than those that buy catalog products.
Those that buy GMP catalog or custom products spend 44 times more than those that only buy catalog products. Our strategy is very simple. We have this giant base of catalog customers, many of which are in the biotech pharma space or life science tools and diagnostics space that are only buying catalog. Getting into those custom formulations and then going down that clinical pipeline will drive significant revenue increase. The last piece here is around the batch sizes. I mentioned around monoclonal antibodies and about the large players being set up to scale for 10,000L batches. We really focus on these much smaller sizes, and these emerging modalities are much smaller in nature. You're talking about 100L batches when they start to get to phase two even.
The ability to actually do these small batches in a high-throughput manner in a quality system in customization sets us apart big time. You can see because of that, we continue to increase the number of clinical customers that we're supporting despite a very challenging biotech environment. Why Teknova? We have an expansive catalog portfolio that fills in all the workflow gaps. We can make products in every shape, size that's needed from a customer. Quality you can count on across the board. Fantastic customer service and sales support. Our customers absolutely love us. As we enter a new customer, we start to expand within there. Certainly an industry leader in turnaround time.
Once people get used to this idea that they can order and get product within a couple of months or even six weeks for GMP, it's very hard to go back to waiting and planning for four to six months. Just real quick, I want to touch on the cell and gene therapy side of things. I mentioned around small molecule drugs. This is just as you go through time, every single step of this process and bioprocessing has increased complexities from small molecules to small biologics. This is emergence of the biotech boom into large biologic monoclonal antibodies. This is cell and gene therapy.
You just look at the complexity of actually, instead of making a monoclonal antibody, the idea of making an AAV Capsid with a gene inside of it to do gene editing in that cell, the complexity of manufacturing is so much more than even the large biologics. To be with more complexity, you need a lot more customization. While every monoclonal antibody is essentially made the same way, every gene therapy, even within AAV, is actually purified in a different way, for example. Cell therapies are totally different processes. mRNA, completely different process. You need a lot of different types of reagents to make this happen. What we have done, I am obviously not going to go through all this, but this is an AAV example of a workflow. You see all these names in black. These are reagents we supply for these workflows.
The ones in purple are proprietary reagents we developed over the last three years. What you can see is that we support all of the reagents as you go through manufacturing AAV in this case. Same thing with plasmid production. This is a plasmid workflow where we're supplying a lot of reagents for use for plasmid production. I mentioned as the customers go through that clinical trial, the amount they spend increases. If you look here on the top, this is about if you normalize to how much a customer spends in phase one to phase two, phase three, and a commercialization, you think about a 30-fold increase as customers move down that pipeline. From a therapeutic perspective, we are actually supporting three customers in the phase two, phase three region right now, 10 customers in phase one, and about 40 plus in preclinical development.
On the bottom here, you can actually see the number of clinical customers. I just talked about therapies, but the number of clinical customers we've supported over the years. 62, and they're buying only catalog customers. Catalog for this is cell and gene therapy. I'm sorry. 62 cell and gene therapy customers that only buy catalog products. 23 of those of the total hundred that we support are buying custom products, and 23 of the cell and gene therapy customers are actually buying GMP products from us today. You can see underneath these are how much it's increased over the last couple of years. Last piece here, and I think it's really important for everyone to recognize, the investments have been made in this business already.
We spent the last three years putting investments into our facilities, our infrastructure, our IT systems, our leadership, our commercial engine to scale the business. If you look at our CapEx spend, you can see a big time over the last year or two, the decrease in the CapEx spend. That's because we've already made those investments. We can scale this business to $200 million-$250 million without significant more CapEx. We've increased our customer clinical solution base from 13 to 48 over the past four years. We believe through these investments we've made and that foundational business that we can drive long-term above-market growth to 25%. This is a picture of the team and our new facility. We have a 30,000 sq ft GMP facility that is ready to scale.
We're operating this on a daily basis now, but with plenty of capacity to onboard more customers. We can manufacture bottles from one liter up to 200L bags. Everything in the facility is controlled just like a customer would want. I can tell you this is, I kind of jokingly pushed the sales team, this is the best salesperson we have is when we bring a customer in and they audit us and they see this facility because it's that point at which they realize we can compete with the big players in the space, but provide them the flexibility and speed that they need for manufacturing these therapies. At the same time, we've also done the commercial side of things. We have built this commercial capacity for hundreds of millions of dollars in revenue. Also, we are now starting to partner with companies on that commercial side.
This is a new partnership we announced last quarter with a company called Pluristyx. They developed a Cryopreservation Media. This is used for cell therapy and freezing cells and bringing them back so you can shift them around or move them for engineering. They came up with a proprietary formulation. We are the exclusive manufacturer and commercial engine for this particular product suite. It allows us to put something else in our bag since we're already talking to these customers, how else can we help them? We're going to do hopefully more of these collaborations and potentially some M&A in the space to build this out over time. Last here, obviously a phenomenal team. I'm really excited about our management team. We have experience across many industries, but importantly, both small and large companies here.
That's our ability to sort of set this up to scale is because of that. We have some people that have history of Teknova, some people with history of large companies, many of which have done small, made too large, and knowing how to scale this business. It's a really amazing team. Key takeaways here, we're a critical life science reagent supplier, attractive growth profile. Like I said, growing the business, a core business 12% since 2009, now layering on these clinical therapeutic support that we believe can drive the business to 25% sustainable growth. We've made investments for long-term growth. It's not like we're going to say, "Hey, we need to build another facility until we get closer to that $200 million in revenue." Great leadership team, and we're executing that plan.
We've done basically what we said we'd do when we took the company public in 2021. Now we're in a position we have the capital runway to get to profitability. We believe our adjusted EBITDA break-even will be in that $50 million-$55 million in revenues. Maybe with that, I'll stop here and turn it to questions with Jim.
Thank you. Thank you, Stephen. There's been a ton of changes the last five to six months. Changes with tariffs, with the FDA, with NIH, just the global macro environment. How are you adapting to those changes?
Yeah, I think it's a really important question because we get this obviously now every week. We are in a good position relative to the direct changes from tariffs to NIH. 100% of our manufacturing is done in the United States, 95% of our sales in the United States.
Very little exposure to tariff-related parts. Our raw materials, we source about $1 million of raw materials from outside the United States, which is a small percentage of our overall material or our direct costs. Even so, very limited impact on us overall. We feel pretty insulated from the tariff perspective. On NIH funding, we support over 500 academic and government institutions, but that represents less than 4% of our total sales annually in 2024. Even in that, you're not going to likely decide to save money by cutting $3 aggregates you're buying from us, for example. It's much more the more expensive instrumentation and other reagents that you're buying from others. We feel pretty insulated even at that 4%. All that's really good.
I think that the hard part is obviously the second-order effects of we are supporting a lot of small, mid-sized biotech companies, which are reliant on the market to raise money. We have always said that biotech funding environment is what will drive the therapies going through to commercialization. We have been fortunate that even despite the challenges, because of our product offering, we continue to increase those numbers to customers. That is why we believe that particular segment will grow in the sort of 15% so far or overall in 2025.
You are obviously very good at helping companies develop the products with those initial batches. Do you think you are in a position now when those products are commercialized that you can supply reagents and other materials? Do you think that they will still be going with Thermo Fisher?
Yeah, it is really hard to transition out, number one.
We have a 95% retention rate, by the way, of our customer base year on year. It is very hard for customers to switch. I'll tell you this from experience because we did switch from a customer that was using a large player to us that was a phase two. It took about 18-24 months to go through that validation process for them to switch to us. We know it is a whole lot of work to change out. Our conversations with these customers to date have been very positive in that they want to stay with us as they go to commercialization. Certainly, we have the facility and the capacity to bring that on board. At this point in time, we do not see that happening.
I think you said your business is about 60% of catalog, 40% other products.
I assume the other products are a higher margin. Do you think that as a result, you'll see margins start to widen even further as they become a bigger part of the mix?
Yeah, I'll take that one. I think, yes, there is an underlying, over the longer term, potential mixed benefit to margins of some of the custom and especially the GMP clinical-grade products. Those are at a higher margin on average. I would also say, in general, just fundamental growth in the business from any products, just utilization of the infrastructure, the fixed costs that we have, is going to see nice reflection and incremental profitability to the tune of that 70% on incremental dollars that Stephen mentioned earlier. I think the answer is yes.
Mix is a benefit over the longer term, but just general volume increase is helping right now and will also continue to help.
You talked about the recent partnership you just signed. Are there other deals like that in the future? What kind of companies do you think you'll work with?
Yeah, great question. Yeah, we did recently sign this partnership with Pluristyx. I do think there'll be more in the future. Here's the reason. A lot of the last couple of years, we've been invested in the ability to manufacture and to commercialize these products. While we have capacity there, many other companies have invested in the R&D side of new novel technologies. The idea of them then building out their own commercial side or their own operational to do that in a time like this is really challenging. Most of these are small companies.
We're seeing kind of sort of that glove ball fit right now where, hey, there are companies out there with great capabilities. We've built the channel. We can manufacture it. They have the technology, and then we can put those two together. What we're looking to do is build out those workflows for customers. In particular, like the cell therapy with the cryopreservation, there are maybe some cell therapies, cell culture media in there that we don't have, but there are some other providers out there that we can put those together. Yeah, we're engaged with a number of other groups. Obviously, these are very hard to tell timing-wise and when those happen.
We are excited about the fact that we can provide a great alternative for them having to either raise money or work with a large distributor that does not really understand the products that have the relationships with the customers that we do.
All right. Maybe you can talk a little bit more about the financials. It sounds like you are well on your way to cash flow break-even. How long do you think it takes to get there? Do you have enough capital on the balance sheet now to get you there?
I will start with the last part, Jim. I mean, we do believe that we have enough capital. We had $26 million of cash on the balance sheet at the end of Q1 and an untapped revolving line of credit.
We have, in the past, laid out the assumptions of what do we think it takes to get to cash flow positive. That is the 12%-13% growth on average, 70% drop-through on incremental revenue to profits, which, because of the high fixed cost base that we have, means managing minimal increases in OpEx and roughly $2 million in CapEx per year. With hitting those marks, which we think are reasonable assumptions, we will get to cash flow positive. We talked about adjusted EBITDA break-even in the $50 million-$55 million revenue range, and then cash flow positive will be on the heels of that. We are very thankful. We did have a successful capital raise last summer.
As I noticed, there were some questions about the stock price, and the stock has moved upwards since that time, I think in large part because of the visibility to getting the cash flow positive with the capital that we have, as well as the improved performance in the business in the subsequent quarter. I think we're feeling like we're in good shape right now.
Great. Great. We are bumping against our time limit. Stephen, do you want to make any closing comments before we sign off?
Sure. Yeah. First of all, again, thank you for having us. I'm excited about the business. We've put ourselves in, I think, a strong position. We're unloading this clinical customers. Our foundational business is returning to 12% growth, and we don't need to make any significant investments to get to that profitability and drive that gross margin up.
We are kind of in a position now where it is execution mode, and we have shown that we can do that for the last three years. I appreciate the time, and please reach out if you have any other questions.
All right. Thank you for the presentation. I know we are keeping you busy today with meetings. Thank you for that, and hope to get an update soon.
Thank you, Jim. Thanks, Jeffrey. Take care, guys.