☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2022
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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Common Stock | TWST | The Nasdaq Global Select Market |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§229.405) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. ☒
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$2.39 billion based upon the closing sale price on the Nasdaq Global Select Market reported for such date. Shares of Common Stock held by each officer and director and by each person who owns 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
56,568,420.
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our ability to increase our revenue and our revenue growth rate;
estimates of our expenses, future revenues, capital requirements and our needs for additional financing; our estimates of the size of our market opportunities;
our expectations regarding our ability to increase DNA production, reduce turnaround times and drive cost reductions for our customers;
our ability to effectively manage our growth;
our ability to successfully enter new markets and manage our international expansion;
our ability to protect our intellectual property, including our proprietary DNA synthesis platform;
costs associated with defending intellectual property infringement and other claims;
the effects of increased competition in our business;
our ability to keep pace with changes in technology and our competitors;
our ability to successfully identify, evaluate and manage any future acquisitions of businesses, solutions or technologies;
the success of our marketing efforts;
the potential purchases of common stock by certain of our existing stockholders and their affiliated entities, including stockholders who are associated with certain of our directors;
significant disruption in, or breach in security of our information technology systems and resultant interruptions in service and any related impact on our reputation;
the attraction and retention of qualified employees and key personnel;
the effects of natural orman-made catastrophic events;
the effectiveness of our internal controls;
changes in government regulation affecting our business;
the impact of adverse economic conditions; and
other risk factors included under the section titled “Risk Factors.”
expressions. You should not rely upon forward-looking statements as predictions of future events. Such statements are based on management’s expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results, events or circumstances to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughoutinclude:
this Form10-K to reflect events or circumstances after the date of this filing or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
us.
DNA is the fundamental building block
•healthcare for the identification, prevention, diagnosis and treatment of disease (antibody discovery and optimization technology);
industrial chemicals•chemicals/materials for cost-effective and sustainable production of new and existing specialty chemicals and materials, such as spider silk, nylon, rubber, fragrances, food flavors and food additives;
•food/agriculture for more effective and sustainable crop production;
•academic research for a broad range of education and discovery applications; and
•technology for potential use as an alternative long-term data storage medium.
Background
The synthetic biology market is growing rapidly and is being fueled by increased access to affordable and innovative tools that enable new applications. We believe this is analogous to the trends seen in the next generation sequencing, or NGS, market, where declining costs of sequencing drove adoption, new applications and market expansion. Similarly, tools that combine advanced production technology with modern digital technology and software capabilities, such as our DNA synthesis platform, are driving growth and market creation for synthetic DNA and syntheticDNA-based products. According to BCC Research, in calendar year 2017, the market for synthetic biology products was approximately $4.4 billion and is expected to grow to $13.9 billion by calendar year 2022. We believe this period of accelerated growth in the synthetic biology industry is in its early stages.
The applications of our DNA synthesis platform are broad. We currently generate revenue through two primary product lines:our synthetic biology and NGS tools and next generation sequencing tools.product lines. In addition, we are leveraging the versatility of our platform to expand our portfolio to include other syntheticDNA-based products and address additional market opportunities, including vertical market opportunities in biological drug discovery and development and digital data storage.
In April 2016, we launched the first applications of our platform, synthetic genes and high diversity collections of oligonucleotides, or oligo pools, to disrupt the gene synthesis market and make legacy DNA synthesis methods obsolete. We believe that the traditional DNA synthesis methods used by our competitors are inherently limited in scalability and are not optimized to satisfy the rapidly growing demand for high-quality,low-cost synthetic DNA. Our silicon-based chip technology can increase DNA production by a factor of 9,600 on a footprint like that of traditional DNA synthesis methods. Also, it significantly lowers the volume of required reagents, specifically the most expensive reagent by a factor of 1,000,000, and improves the precision of the synthesis process relative to legacy methods. This enables us to produce high-quality synthetic DNA on a much larger scale and at lower cost than competitors. Importantly, it is this platform that can be applied to multiple market opportunities to harness the power of DNA—from next generation sequencing to drug discovery to data storage—to enable life-changing products and therapeutic medicines.
In February 2018, we launched an innovative and comprehensive sample preparation kit for next generation sequencing. Our kit leverages our platform to precisely synthesize short pieces of DNA called probes, and thus uniformly amplify the desired target DNA segments, considerably improving the accuracy of the downstream sequencing analysis, saving both time and sequencing costs. We have expanded our NGS offering to include both general and customized tools in addition to adding the mouse exome. In addition, we have formatted our NGS tools to work within an automated and advanced workflow.
Our currently marketed products target the synthetic DNA market, asub-segment of the synthetic biology market, and NGS sample preparation, a large adjacent market opportunity. We estimate that the combined market opportunity was $1.8 billion in calendar year 2016. Based on market research, we believe that current estimates understate our market potential because they reflect the costly, time-consuming, and cumbersome nature of legacy DNA synthesis technologies. We believe our solution has the potential to materially expand our initial market by providing end users access to high-quality and lower cost tools, encouraging adoption and facilitating new applications for our products.
We are also leveraging this capability for our internal antibody discovery efforts.
sector and $1.2 million to the agricultural sector. The industrial chemicals segment includes sales of $9.2 million to Ginkgo Bioworks (which we believe is the largest purchaser of synthetic DNA).
We generated revenues of $54.4$2.2 million in fiscal 2019, $25.4 million in fiscal 2018 and $10.8 million in fiscal 2017, while incurring net lossesrevenue from the food/agriculture sector.
Our headquartersproducts serve life sciences researchers across a variety of healthcare applications including drug discovery, disease detection, enzyme engineering, gene editing and manufacturing facilities are located in South San Francisco, California. As of September 30, 2019, we had 414 full-time employees worldwide, including three locations in the San Francisco Bay Area and an international location in Tel Aviv, Israel. We also utilize a team of 32 dedicated commercial consultants across the European Union and the United Kingdom and 18 dedicated commercial consultants across Asia.basic academic research. In May 2018, we received private funding to establish production facilities and commercial operations in China for the manufacture of the back end of our NGS product line. We expect to establish back-end production facilities to expand our commercial market for our Next Generation Sequencing (NGS) product line in China. We expect this site will be open by the end of December 2019. This site will be used to ensure Asian customers receive products in a timeframe similar to other parts of the world. Our advanced front-end manufacturing facilities to createaddition, our synthetic DNAbiology products will remain in the United States and subject to comprehensive patent protection in key jurisdictions. Twist will continue to use our best practice biosecurity screening program in servicing the China market, a part of the world that is dominated by foreign actors that we do not believe have rigorous biosecurity screening measures.
Through September 30, 2019, we have raised a total of $444.4 million in net proceeds from public and private funding. Specifically, we have raised $290.5 million in net proceeds from the sale of redeemable convertible preferred stock from January 2016 through July 2018, and a total of $153.9 million in net proceeds from the sale of stock, including $84.3 million in net proceeds from our public offering in May 2019 and $69.6 million in net proceeds from our initial public offering in October 2018.
Our Markets
The synthetic biology industry
Our initial suite of products serve the field of synthetic biology, which is undergoing an era of rapid innovation and transformation. Synthetic biology is the engineering of biology to build new biological systems orre-design existing biological systems. The ability to design DNA and engineer biology is creating advances and benefitsare used for a broad and growing range of applications for synthetic DNA and syntheticDNA-based products across multiple industries, including:
healthcare for the discovery and production of new therapeutics and molecular diagnostics;
industrial chemicals for cost-effective and sustainable production of new and existing specialty chemicalschemical and materials such asapplications including development of synthetic spider silk, nylon, rubber, fragrances, food flavors and food additives;
agriculture for more effectivefood and sustainableagricultural applications including improving crop production;
academic research for a broad rangetraits such as adding vitamins or improving drought tolerance, and engineering bacteria to deliver nitrogen at the root of applications; and
technology for potential use as an alternative long-term data storage medium.
According to BCC Research, the overall market for synthetic biology products was approximately $4.4 billion in calendar year 2017 and is expected to grow to over $13.9 billion by calendar year 2022. This industry momentum creates a significant opportunity for us to grow within our existing markets as well as expand our product offering.
purpose. While synthetic DNA has been produced for more than 40 years, the complexities of biology and the production constraints inherent in legacy processes have historically limited the applications and market opportunities for DNA synthesis.
Limitations of existing solutions
Traditional methods of DNA synthesis consist of atwo-step process that initially involves the synthesis of oligonucleotides, also referred to as oligos, which are short strands of DNA. These oligos are then combined to create longer strands of DNA. Currently, there are two primary methodologies used by others to create synthetic DNA, the96-well plate method and the microarray method, each having production limitations that we believe make these technologiessub-optimal to satisfy the rapidly growing demand for synthetic DNA. In addition, because the synthesis of oligos can introduce errors
96-well plate method of DNA synthesis
Introduced as early as the 1950s, a96-well plate is a flat plastic plate, roughly the size of two smartphones, with eight rows of 12 wells that are used as small test tubes. Instead of creating one sequence of DNA at a time in a single test tube, the96-well plate allows researchers to create 96 oligos in parallel, one in each well. While this process successfully achieves DNA synthesis, it requires high volumes of phosphoramidites, an expensive raw material, as well as other ancillary reagents. It also produces excessive amounts of the final product, significantly more than is required for most subsequent processes, resulting in material that is discarded and an unnecessary expense. Additionally, this process is not scalable to produce high volumes, as approximately 100 oligos are needed to assemble one gene and therefore only one gene can be made from each96-well plate.
Microarray method of DNA synthesis
Unlike a96-well plate, a microarray is a flat surface made of plastic or glass on which DNA is synthesized directly in an array of discrete locations. Microarrays allow large numbers of oligoscustomers prepare their patient samples to be synthesized in parallel, increasing DNA production by up to four orders of magnitude when compared to the96-well plate. However, while this method can make 100 genes in parallel, it remains difficult to scale, requires many steps, and results in significant waste of materials.
Cloning
Cloning is a tedious process to filter out errors and produce many identical copies of a strand of DNA, such as a gene. While the cloning process results in a precise sequence, it is incredibly slow and labor intensive and generally takes around 10 business days to complete. As a result, it is time consuming, expensive, and, in many cases, not an efficient use of researchers’ time. In general, more accurate DNA synthesis technology results in fewer errors in the sequence order and reduces the time and costs required or allocated to the cloning process.
Our platform
We developed the Twist Bioscience DNA synthesis platform to address the limitations of throughput, scalability, and cost inherent in legacy DNA synthesis methods. Our platform stems from extensive analyses of, and improvements to, the existing gene synthesis and assembly workflows. Our core technologies combine expertise in silicon, software, fluidics, chemistry, and motion and vision control to miniaturize thousands of parallel chemical reactions on silicon and write thousands of strands of DNA in parallel. With a footprint that is similar to the size of a96-well plate that produces one gene, we are able to produce 9,600 genes in parallel. Based on current production needs, we have intentionally designed our latest chip to make 6,144 genes in parallel, but we have the current capability to increase this to 9,600 genes, as needed. We have combined our DNA synthesis
technology with propriety software and a scalable commercial infrastructure to create our vertically integrated DNA synthesis platform capable of delivering very large volumes of high-quality synthetic DNA at low cost.
Next Generation Sequencing Market
Our next generation sequencing (NGS) product line improves the work of our customers within large and growing markets.sequenced. NGS has transformed many markets in recent years by changing the landscape of diagnosing disease and disorders to offerand offers a path to preventionprevent or treatment oftreat disease. Some of the markets impacted by NGS include:include oncology, reproductive health, food/agriculture, consumer genomics, infectious disease research and drug discovery. As NGS technology improvedimproves and the cost of sequencing declines, new emerging markets that were once considered impractical, such as population-scale sequencing, liquid biopsy (a test that detects multiple types of cancer from a single blood sample), minimal residual disease testing and single cell sequencing, have become major areas of interest and investment.
Platform
Synthetic Biology Products
and gene fragments
Clonal genes in a Twist Bioscience or customer vector
Our premier gene synthesis offering delivers clonally perfect genes. For our clonally perfect genes, we perform the cloning on behalf of our customers and deliver DNA in either a customer-supplied vector or a Twist Bioscience vector. Customer-supplied vectors greatly simplify downstream work for our customers, allowing them to take our genes and pass them directly into their workflows. We have also developed a catalog of our own specific vectors.
Non-clonal genes
Non-clonal genes serve customers who prefer to conduct their own cloning protocols or that do not need, or want, to pay for perfect quality genes. Weoffer non-clonal genes of up to 1,800 base pairs in length, which we believe addresses the vast majority of demandfor non-clonal genes. We also offer turnaround timeslarger quantities of six to nine business daysDNA for non-clonal genes, with what we believe is the lowest industry error rate of 1:3000 base pairs. Our standard pricingcustomers who require it for non-clonal genes is $0.07 per base pair.
their development efforts.
Oligo pools for CRISPR gene editing
CRISPR is a recently discovered gene editing tool that has become an area of significant research focus, especially in drug development, and is a rapidly growing application that is contributing to growing demand for
our oligo pools. In the CRISPR editing process, a short sequence of RNAcalled guide-RNA (gRNA) binds to its target DNA sequence in a host cell, indicating to an enzyme where to cut and edit the DNA. In order to conduct gene editing research, manysingle guide-RNA must be created. Researchers can use oligo pools for CRISPR gene editing to silence, through editing, DNA locations. This process creates an error at a particular location in the DNA of the cell, rendering that location unusable, in other words silenced. By studying the relationship between silenced regions and change in phenotype (did the disease get worse or better), researchers can find the genomic regions important to the disease and identify targets for therapeutics. Similar to our standard oligo pools, we offer oligo pools for CRISPR screening with a diverse and customizable set of specifications, including pool sizes ranginghigh throughput IgG capability, removing this bottleneck from a few hundred oligos to over one million. From oligo produced on a single silicon chip, researchers can edit up to 1,000,000 DNA locations. We currently offer oligo pools for CRISPR screening of up to 300 nucleotides in length, which in each oligo, allows for two guide-RNAs. As such, where previously researchers could study one region at a time, with the ability to create doubleguide-RNA pools, there is now the ability to study two regions simultaneously, which has the potential to expand the knowledge of a particular target or disease as well as the underlying biology.
Gene pools
The growth of the synthetic biology industry continues to see incredible innovation and new applications facilitated by unlimited access to the building blocks of research, including synthetic DNA at unprecedented scale. Where previously researchers worked in individual workflows with one gene in one tube, the explosion of biological information provides new opportunities to work in massively parallel workflows to exponentially accelerate the rate and scope of research. Gene pools are similar to oligo pools, but provide multiple genes within one test tube. Designed with the flexibility to have up to 180,000 genes in a single tube at an affordable price, we introduced gene pools in October 2019 as part of our new Twist Innovation Lab that continues to drive toward products that enable customers to innovate at the pace of today’s research and truly change the world for the better.
Next generation sequencing (NGS)antibody discovery process.
We recently expanded the application of
The ability of the probes to bind to the target segment of interest impacts the ability to capture the correct DNA from the sample, which is subsequently sequenced. Though many factors can influence the efficiency of such capture, a primary consideration is how well the DNA sequence of the probe matches the target (sequence complementarity), as this affects both the efficiency and selectivity of capture. Our target enrichment capture probes are unique in the enrichment market as they consist of double stranded DNA. During the melt step the probes unwind, becoming two independent probes of complementary sequence. When the genome fragments unwind, both strands are captured independently. Each genome fragment can be sequenced twice. Also, with some genomic fragments, one of the two strands may be difficult to capture due to unfavorable sequence composition, as in some cancer mutations. By using double stranded probes, capture efficiency can be maximized as there are multiple opportunities to capture a single fragment. Data shows that uniform synthesis of probes is important for downstream productivity. Because we synthesize each probe individually, our solution allows genome fragments to be captured uniformly.
The targeted segment of DNA can then be copied uniformly prior to NGS analysis by our customers, yielding a larger volume of targeted segments in the sample used for sequencing. Because we are able to precisely target, extract, and uniformly amplify the target DNA segments, our solution considerably improves the accuracy of the
downstream sequencing analysis. This enables our customers to perform fewer sequencing runs per sample, without sacrificing accuracy, saving them time and money.
ISO Certification
In January 2019, our quality management systems for manufacturing our NGS Target Enrichment Panels in our Mission Bay San Francisco offices received ISO 9001:2015 and 13485:2016 certifications, the latter for medical device applications. In addition to continuing to provide NGS tools to our current customer base, we now have the ability to support customers in more regulated markets that require ISO certification from their key reagent suppliers. We anticipate obtaining these certifications for our new facility in South San Francisco in the first quarter of the calendar year 2020.
Human Core Exome Kit
A human genome is incredibly complex. Genes (the parts of the genome that encode proteins) are fragmented, scattered across the genome and surrounded by other DNA. That other DNA is required for maintaining the genome’s integrity, for controlling each gene’s expression, and in some instances, its function still remains a mystery. A researcher’s aim in an exome sequencing experiment is to isolate the DNA sequences from a genomic sample containing only the protein coding regions called the exome. Only 1% of a human genome contains gene encoding regions, yet around 85% of genetic mutations known to cause disease occur in the exome. By isolating just these regions, the amount of genomic DNA that needs to be sequenced to get meaningful data about a disease can be lowered. Exome sequencing provides an important “first pass” screen for mutations.
The Twist Human Core Exome Kit includes the library preparation and enrichment components of the NGS sample preparation process for the entire known coding region of the genome for known inherited disease. Compared to traditional capture methods, our kit(FastHyb), which allows researchers to increasego from sample throughput,to sequencer in a single day.
Library Prep Kits
reverse transcription-polymerase chain reaction (RT-PCR) assays. Our SARS-CoV-2 controls are now included on the U.S. Food and Drug Administration website as reference materials.
Fixed Panels
We offer a suite of products that have specific probes to address specific needs. We sell the Human RefSeqTwist Respiratory Virus Panel to complement the Human Core Exome Kit. We sell thePan-Viral Panel that contains over 1,000 viral human pathogens for rapid identification in various settings and the Mouse ExomePan-Viral Research Panel, withfor the most current content in the industry.
FastHyb
A key step in the sample preparation process is hybridization. This is the process whereby the probes are mixed with the genomic sample and then the target DNA is extracted. This step often takes many hours and can even take days, and is an important rate-limiting step in the sample preparation process. With our FastHyb solution, customers can complete the hybridization step in as little as 15 minutes, enabling the sample to be moved through the workflow and onto the sequencing stepdetection of disease in a single day.
In our FastHybresearch setting. All products can be used for environmental monitoring and Wash Kit,surveillance testing, while also providing insight into the probes are mixed with the genomic samplefull sequence information to monitor viral evolution and then heated to above 95°C to melt the base pair interactions in the double-stranded genomic DNA, forming a pool of single stranded DNA. Bringing the temperature down allows the genomic DNA to start to form back into complementary double stranded molecules. As the probes are designed to be complementary with the exome, they will also form base pair interactions with the genomic DNA.
strain origin.
DNA libraries are collections of DNA fragments that are primarily used by pharmaceutical companies during antibody discovery and development. During the drug discovery phase, a pharmaceutical company typically has a biological target or function of interest. In order to find antibodies that best bind to that target in a specific region of a gene and deliver a therapeutic effect, it may be necessary to test many variants of an antibody. Synthetic DNA libraries become useful in this process, as they produce customized, controllable groups of antibodies from specific DNA sequences to run through assays that assess function, toxicity and binding affinity.
Traditionally, pharmaceutical companies have generated antibody libraries through a process called “random mutagenesis.” This uses a technique called polymerase chain reaction (PCR) mutagenesis, where PCR is used to introduce many sequence errors, or variations, within the copies of the antibody. While this generates many different antibody variants, the changes are entirely random and are unknown until the antibody DNA is sequenced. In addition, because of the random approach, there is no guarantee that the resulting antibodies will target the desired region of interest.
To support our efforts to add further value for our customers and potential partners, wegenome.
Additionally, we are leveraging our ability to rapidly generate custom libraries to discover novel therapeutic antibodies against biological targets that have traditionally been difficult for biological drug development. We have developed a proprietary antibody library targeting a major class of proteins known as GPCRs. GPCRs are important receptors that control and drive the biology of nearly all disease classes, including inflammation, cancer, metabolism, respiratory, and pain. According to a recent publication in Molecular Pharmacology, approximately 700 approved therapeutics target GPCRs, representing approximately 35% of all approved drugs. However, they remain a difficult class of targets for antibody development due to the lack of exposed protein surfaces to bind. We have created a series of single domain antibody libraries. Single domain antibody libraries are antibody fragments that are much smaller than a whole antibody. Where a whole antibody is composed of two heavy chains and two light chains, single domain antibodies are engineered from the heavy chain antibodies and are also called VHH fragments. These fragments are small and modular antibodies that are both stable and robust for potentially faster discovery and development.
Using our proprietary libraries, we have identified three different functional antibodies to the GLP1R receptor, an important target in type 2 diabetes and also Parkinson’s and Alzheimer’s diseases. We may partnerPartnerships with other technology providers to advance development of our antibody discovery efforts. We expect to continue to develop additional libraries for screening and selection of other biological therapeutic targets such as ion channels and membrane-based transporters.
leading companies
Collaboration with LakePharma
In April 2019,proprietary platform. To date, we announced a strategic collaboration with LakePharmahave generated antibody leads to offermultiple biological targets and these antibody leads are in various stages of early discovery and development solutions to pharmaceuticaldevelopment.
Antibody Optimization Service for Pandion
In April 2019, we announced a new collaboration with PandionNeogene Therapeutics, to apply our antibody optimization platform to the targeting arm of a bispecific antibody. The initial project required Twist to improve the affinity of an oncology bispecific antibody across multiple species for optimal preclinical testing, which was completed successfully. Based on that success, we are now working to optimize two additional antibodies for Pandion.
Our target markets
Our currently marketed product offering addresses a market opportunity that was approximately $1.8 billion in calendar year 2016. We believe our solution has the potential to materially expand our initial market by providingend-users with access to high-quality and lower cost tools, encouraging adoption and facilitating new applications for our products, such as pharmaceutical biologics drug discovery and digital data storage in DNA.
Synthetic DNA market
We believe that our current market opportunity for synthetic DNA was approximately $1.3 billion in calendar year 2016. The market consists of those who buy DNA, or DNA Buyers, and those who make their own DNA, or DNA Makers. Driven by access to more affordable and high-quality synthetic DNA, we believe that there is a strong trend of DNA Makers converting to DNA Buyers. According to BCC Research, the size of the DNA Buyer market in 2016 was approximately $300 million and is growing at a rate of approximately 20% annually as existing DNA Buyers develop new uses for synthetic DNA and existing DNA Makers convert to DNA Buyers. We estimate our market opportunity in the DNA Maker market to be approximately $950 million. Our market estimate is based on the market sizes for products used in manual DNA synthesis, including the cloning and restriction digestion enzyme market in 2016, according to a report on Molecular Biology by Markets and Markets.
NGS sample preparation market
Our NGS sample preparation kits address the demand for better sample preparation products that improve the sequencing workflow, increase sequencing accuracy and lower sequencing costs. We offer kits consisting of double-stranded DNA probes and a comprehensive target enrichment kit that are used for exome sequencing and custom targeted sequencing. Kalorama Information, a division of marketresearch.com, estimates the market for sample preparation for next generation sequencing was approximately $500 million in calendar year 2016 and growing at approximately 20% annually.
Inc. In addition, we believecollaborate with companies that bring complementary technologies to expand our opportunities and reach.
SNP arrays are used extensively in the consumer DNA testing space as well asdiscovery of large, diverse sets of monoclonal antibodies (mAbs) for our partners. As of September 30, 2022, the agricultural biotech market. In the agricultural market, SNP arrays are used to genotype chicken, beef, salmon and other food products. We believe that together, these SNP array market segments represent a total market opportunity of $500 million. We do expect it to take time to penetrate this area of the market as the shift in workflow is substantial, though it could result in richer genotyping data at an attractive price per point compared to SNP arrays.
Pharmaceutical biologics drug discovery
We believe we are uniquely positioned to capture a larger portion of the drug discovery value chain given that our synthetic DNA products are already used by our pharmaceutical partners throughout the drug development process. As part of our effort in this market, we recently launched our custom DNA library solution which facilitates biologic drug discovery and development. We are already in agreement with a top three pharmaceutical company by revenue to supply our custom DNA libraries instead of them producing their own. In addition to our custom DNA libraries, we are also developing other proprietary tools, such as a wholly-owned GPCR library and an antibody optimization solution, that we believe will enable us to provide anend-to-end solution in biologics drug discovery and early development, from target to investigational new drug, or IND, application, and adding value as a partner to biotechnology and pharmaceutical companies. These partnerships may include upfront, milestone and royalty payments.
Digital data storage in DNA
Due to the explosion of data across many industries, finding efficient means of storage has become more important. Through the Semiconductor Research Corporation, many leading semiconductor companies, including Microsoft Corporation, IBM Corporation, Micron Technology, Inc., Autodesk Inc., Mentor Graphics Corporation and GlobalFoundries Inc., are exploring DNA as a data storage medium. We have strategic relationships with
Microsoft Corporation and the University of Washington through which we have demonstrated the feasibility of storing data on DNA and the unique benefits of longevity, density, and universality of this format. We believe that in three to five years, new DNA technologies and cost efficiencies could surpass mature information technology hardware solutions to allow data storage in DNA to become cost competitive with traditional storage media and enable us to target several large markets within data storage. The market for digital data storage is more than $35 billion and we believe DNA can address several segments within this market.
Maintain•maintain and expand our position as the provider of choice for high-quality, affordable synthetic genes and DNA, RNA and proteins to customers across multiple industries;
Become•become a leading supplier of NGS sample preparation products;
Conduct•conduct antibody therapeutic discovery and optimization for our current customers and future partners;
Continue•continue to explore development of DNA as a digital data storage medium viathrough internal research and government and industry partnerships; and
Expand•expand our global presence.
offerings.
In fiscal 2019, 66% of sales were derived from the United States, 27% from Europe and the Middle East, 3% from China, 2% from the rest of the Asia Pacific region, and 2% from Canada and Mexico. For financial information about geographic areas for each of our last three fiscal years, see Note 15, “Geographic and product
information”, to the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form10-K, which information is incorporated by reference into this Item 1. For a discussion of the risks attendant to our foreign operations, see Item 1A, “RiskFactors-Our international operations expose us to material risks,” which information is incorporated by reference into this Item”.
Research and development
Our research and development expenses were $35.7 million in fiscal 2019, $20.3 million in fiscal 2018, and $19.2 million in fiscal 2017. As of September 30, 2019, we employed 100 people in engineering and research and development activities.
Process•process development for higherhighest quality oligos;
Optimization, automation and miniaturization of gene and NGS pipelines;
Silicon
Building•buildout of a massively parallel screening facility for our pharmabiopharma initiatives that allows us to screen over a dozen antibody phage display campaignsthousands of antibodies per week; and
Expansion•expansion of our product offeringofferings for oligo, gene, synthetic controls, NGS library preparation and NGStarget enrichment, and DNA Libraries products; and,
sub-assemblies to third party manufacturers. All of our products originate from synthetic DNA obtained from nanostructured clusters fabricated on our proprietary silicon technology platform. Due to itson-demand nature, the gene synthesis business requires manufacturing operations to be in operation 24 hours a day, seven days a week, 365 days per year. For synthetic
genes, we have built a highly scalable gene production process with what we believe is industry-leading capacity of approximately 45,000 genes per month to address the growing demand of scalable, high-quality, affordable synthetic genes.
As of September 30, 2022, we employed 331 people in our manufacturing and operations team.
We take substantial measures to safeguard our intellectual property and keep our advanced and proprietary technology within the United States. We have kept and will maintain all front-end advanced technology in the United States. To support the rapidly growing Asian genomics and NGS markets,
Over time, to further improve our production process, we intend to outsource varioussub-assemblies to third-party manufacturers.
We initially certified our Quality Management System (QMS) to the ISO 9001:20002015 (Quality Management Systems—Requirements) standard and in 2019 updated our certification to ISO 9001:2008.13485:2016 standard (Medical devices—Quality management systems—Requirements for regulatory purposes). ISO is an internationally recognizeda global network of national standards with over 18,000 standards for nearly every aspect of technology and business. ISO has standard for quality management systems. Subsequent auditsbodies in 163 countries. ISO Surveillance Audits are carried out twice within a three-year period by the registrar have been and will continue to be carried out at regular intervals(certification body) to ensure we are maintainingmaintain our system in compliance with ISO standards. Recertification is required every three years and we have been successfully recertified since obtaining our original ISO certification. Also,Most recently, we havewere registered with the FDA as a manufacturer of “Reagents, 2019-novel coronavirus nucleic acid”.
2016.
cost-competitive basis may be compromised, which may have a material adverse effect on our business, financial condition and results of operations.
•price;
•product quality, reliability and accuracy;
•product offeringofferings & complexity;
•turnaround time;
•breadth of product line;
•design and introduction of new products;
•market acceptance of our products and those of our customers;
•throughput and scale;
and•technical support and service.
Regarding these factors, we
other emerging competitors.
At have the opportunity to refine or develop professional skills, learn new software, and explore as they plan their career growth. The platform also offers tremendous potential for managers and employees to create development plans as part of the performance review process.
Board Member | Gender | ![]() | ||||||
Nicolas Barthelemy | Male | |||||||
Nelson C. Chan | Male | |||||||
Robert Chess | Male | |||||||
Keith Crandell | Male | |||||||
Jan Johannessen | Male | |||||||
Xiaoying Mai | Female | |||||||
Robert Ragusa | Male | |||||||
Melissa A. Starovasnik | Female | |||||||
Emily Leproust | Female | |||||||
William Banyai | Male | |||||||
Female | 30 | % | ||||||
Male | 70 | % | ||||||
Total | 10 |
Executive Team Member | Gender | ![]() | ||||||
Emily Leproust | Female | |||||||
Jim Thorburn | Male | |||||||
Bill Banyai | Male | |||||||
Angela Bitting | Female | |||||||
Siyuan Chen | Male | |||||||
Dennis Cho | Male | |||||||
Patrick Finn | Male | |||||||
Paula Green | Female | |||||||
Steffen Hellmold | Male | |||||||
Tracey Mullen | Female | |||||||
Nimisha Srivastava | Female | |||||||
Aaron Sato | Male | |||||||
Erin Smith | Female | |||||||
Female | 46 | % | ||||||
Male | 54 | % | ||||||
Total | 13 |
Gender | Percent of all Twisters | ![]() | ||||||
Female | 41 | % | ||||||
Male | 59 | % | ||||||
Total | 989 | |||||||
Region | Percent of all Twisters | ![]() | ||||||
Americas | 85 | % | ||||||
EMEA | 10 | % | ||||||
APAC | 5 | % | ||||||
Total | 989 | |||||||
Seasonality
Over1 or 2 genes, we are able to produce approximately 1,000,000 oligos or 9,600 genes in parallel.
Government regulation
The
“Research Use Only,” or ROU, is a term limited to our target enrichment products for the next-generation sequencing market and is specifically applied only to kits sold to this market segment, and is intended to restrict use of the kits tonon-in vitro diagnostic purposes. The RUO label is not affixed to any other products. Our NGS target enrichment and library preparation products are used in a more comprehensive workflow for next generation sequencing. It is this larger workflow that can become an in vitro diagnostic, after undergoing the appropriate regulatory processes. As noted above, our NGS products target a market opportunity for NGS sample preparation that was approximately $500 million in calendar year 2016 and growing at approximately 20% annually, according to market research provided by Kalorama Information, a division of marketresearch.com. This market estimate represents the NGS target enrichment products which are limited solely to the RUO component of target enrichment and library preparation and does not include the full in vitro diagnostic workflow.
While most of the current laws and regulations concerning synthetic biology relate to the end products produced using synthetic biology, this may change.FDA. For example, in December 2010, the Presidential Commission for the Study of Bioethical Issues recommended that the federal government oversee, but not regulate, synthetic biology research. The Presidential Commission also recommended that the federal government lead an ongoing review of developments in the synthetic biology field and that the federal government conduct a reasonable risk assessment before the field release of synthetic organisms.
While
regulatory authorities before commercialization.
a 510(k) is required, the manufacturer must submit to the FDA a premarket notification submission demonstrating that the device is “substantially equivalent” to: (i) a device that was legally marketed prior to May 28, 1976, for which PMA approval is not required, (ii) a legally marketed device that has been reclassified from Class III to Class II or Class I, or (iii) another legally marketed, similar device that has been cleared through the 510(k) process.
In
In November 2013, the FDA issued final guidance indicating that merely including the RUO labeling statement will not necessarily render the device exempt from FDA premarket clearance, approval, or other regulatory requirements if the totality of circumstances surrounding the distribution of the product indicate that the manufacturer intended its IVDs for diagnostic use. Such circumstances may include, but are not limited to, the product’s advertising, labeling, or promotion, or the manufacturer’s assistance of a clinical laboratory in validating or verifying a test that incorporates products labeled RUO. We do not believeThis uncertainty exists even if such use by our customers occurs without our consent. If the FDA or other regulatory authorities assert that any of these circumstances apply to our current product portfolio.
While we believe that none
International sales of medical devices are subject to foreign government regulations, which vary substantially from country to country. Outsideregulatory clearance or approval, our business, financial condition, or results of operations could be adversely affected.
the EU requirements.
To the extent that we may possess, use, or transfer any material considered a select agent or toxin under FSAP prospectively, we would seek to register with FSAP and obtain all necessary permits for possession, transfer, importation, or any other regulated activity.
Given the evolving nature of our industry, legislative bodies or regulatory authorities may adopt additional regulation or expand existing regulation to include our service. Changes to the current regulatory framework, including the imposition of additional or new regulations, could arise at any time, and we may be unable to obtain or maintain comparable regulatory approval or clearance of our service, if required. These regulations and restrictions may materially and adversely affect our business, financial condition, and results of operations.
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The risks and uncertainties described below are not the only ones we face. Additional risk and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. If any of the events or circumstances described in the following risk factors actually occur, our business, operating results, financial condition, cash flows, and prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
We were incorporated in February 2013 and began commercial operations in April 2016. Prior to engaging in commercial operations, we focused on research and development of DNA synthesis. Our revenuesfinancial results for the fiscal years ended September 30, 2019, 2018year 2022 have not been significantly affected by COVID-19 outbreaks due to variants of the virus that continue to appear, impacts from COVID-19 may, in the future, adversely affect our operations, supply chains, distribution systems and 2017, were $54.4 million, $25.4 millioncustomer demand, including as a result of impacts associated with preventive and $10.8 million, respectively. Weprecautionary measures that we, other businesses and governments have taken and may never achieve commercial success, andtake in the future. Some of the risks we have limited historical financial data uponexperienced and/or may experience in the future as a result of impacts from COVID-19 include:
drive adoption•The effectiveness of our products;
attract and retain customers for our products;
anticipate and adaptsales teams may be negatively impacted by the lack of or reduction in travel resulting in their reduced ability to changesengage with decision-makers.
focus our researchthose locations and development efforts in areas that generate returns on these efforts;
maintain and develop strategic relationships with suppliers to acquire necessary materials and equipment for the productionability of our employees to access their places of work to produce products, on appropriate timelines, or at all;
implement an effective marketing strategy to promote awareness ofsignificantly hamper our products with potential customers;
scale
avoid infringementcombination of third-party intellectual property;
obtain licensesthese impacts over an extended period of time. Any of these impacts would have an adverse effect on commercially reasonable terms to third-party intellectual property, as needed;
obtain validour business, financial condition and enforceable patents that give us a competitive advantage;
protect our proprietary technology;
provide appropriate levelsresults of customer training and support for our products; and
attract, retain and motivate qualified personnel.
operations. In addition, a high percentage of our expenses have been and will continueability to raise capital in the future may also be fixed. Accordingly, if we do not generate revenue as and when anticipated, our losses may be greater than expected and our operating results will suffer. You should consider the risks and difficulties frequently encountered by companies like ours in new and rapidly evolving markets when making a decision to invest in our common stock.
negatively affected.
In addition, inflationary pressure could adversely impact our financial results by increasing operating costs. We willmay not fully offset these cost increases by raising prices for our products and services, which could result in downward pressure on our margins. Further, our clients may choose to reduce their business with us if we increase our pricing.
collaborations. Such financing may result in dilution to stockholders, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
Such financing may result in dilution to stockholders, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business.
•the number and characteristics of any additional products or manufacturing processes we develop or acquire to serve new or existing markets;
•the scope, progress, results and costs of researching and developing future products or improvements to existing products or manufacturing processes;
•the cost of manufacturing our DNA synthesis equipment and tools, our NGS sample preparation kits, and any future products we successfully commercialize;
•our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;
•the costs of expanding our sales and marketing capabilities in the United States and in other geographies, including China;
•any lawsuits related to our products or commenced against us including the costs associated with our current litigation with Agilent Technologies, Inc. (Agilent);
•the expenses needed to attract and retain skilled personnel;
•the costs associated with being a public company;
•the timing, receipt and amount of sales of, or royalties on, any future approved products, if any.
•delay, limit, reduce or terminate our manufacturing, research and development activities; or
•delay, limit, reduce or terminate our establishment of salesmarketing and marketingsales capabilities or other activities that may be necessary to generate revenue and achieve profitability.
manufacturing costs, declining product quality, deteriorating customer service, and slower responses to competitive challenges. A failure in any one of these areas could make it difficult for us to meet market expectations for our products, and could damage our reputation and the prospects for our business.
The estimates of market opportunity and forecasts of market growth included in this Form10-K may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.
Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. For example, several of the reports rely on discussions with industry thought leaders, employ projections of future applications of synthetic biology and next generation sequencing technology in majorend-user market segments and by technology type, and incorporate data from secondary sources such as company websites as well as industry, trade and government publications. The estimates and forecasts in this Form10-K relating to the size and expected growth of our market may prove to be inaccurate. Even if the market in which we compete meets the size estimates and growth forecasted in this Form10-K, our business could fail to grow at the rate we anticipate, if at all.
widespread market acceptance by delivering both our current product offerings and new products and technologies atlow-cost, low cost, with high-quality, reliable turn-aroundturn around times and throughput, superiore-commerce services and effective technical support. We cannot guarantee that our efforts to provide these key requirements will be consistently acceptable to, and meet the performance expectations of, our customers and potential customers. If we are unable to successfully attract and retain customers, our business, financial position and results of operations would be negatively impacted.
Internet
business could be adversely affected. Cyberattacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position.
In addition, the costs related to significant security breaches or disruptions could be material and exceed the limits of the cybersecurity insurance we maintain against such risks. As a result of any cyber incident, we could incur significant legal and financial exposure and reputational damages that could have a material adverse effect on our business.
Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in thisthe “Risk factors” section in this Form10-K could result in the actual operating results being different from our guidance, and the differences may be adverse and material.
antibody optimization solution,platform, in adjacent businesses such as pharmaceutical biologics drug discovery and digital data storage in DNA. There can be no assurance that we can continue to utilize our antibody libraries to accelerate the lead identification and lead optimization steps of antibody discovery or to discover more effective antibody drugs. In addition, our technology may not develop in a way that allows data storage in DNA to become cost competitive with traditional data storage media or in a way that otherwise enables us to address the markets opportunities that we believe exist. If we are unable to expand into adjacent addressable markets, our business, financial position and results of operations could be negatively impacted.
•the allocation of available resources to make purchases;
•funding from government sources;
•funding from research grants;
•the spending priorities among various types of research equipment;
•policies regarding capital expenditures during recessionary periods;
•political climate or macroeconomic conditions, andincluding economic downturns or market uncertainty or reduced spending in response to emergency situations, such as the political climate;
•healthcare legislative reform measures, such as the Inflation Reduction Act of 2022;
We have limited experience in sales and the marketing of our products.
sales and marketing teams have considerable industry experience and have engaged in marketing activities for our products, in the future we must expand our sales, marketing, distribution and customer support capabilities with the appropriate technical expertise to effectively market our products. Furthermore, it takes six to nine months to recruit, onboard and ramp sales personnel to full capability. To perform sales, marketing, distribution and customer support successfully, we will face a number of risks, including that:
•we may not be able to attract, retain and manage the sales, marketing and service forceworkforce necessary to publicize and gain broader market acceptance of our technology;
•the time and cost of establishing a specialized sales, marketing and service force for a particular product or service, which may be difficult to justify in light of the revenue generated;
•our sales, marketing and service force may be unable to initiate and execute successful commercialization activities with respect to new products or markets we may seek to enter.
We and our chief executive officer are currently involved in litigation with Agilent in which Agilent has alleged a claim of trade secret misappropriation against Twist Bioscience and trade secret misappropriation and other related claims against our chief executive officer, and an adverse result could harm our business and results of operations.
We and our chief executive officer are currently involved in litigation with Agilent in which Agilent has alleged a claim of trade secret misappropriation against our Company and trade secret misappropriation and other related claims against our chief executive officer and also against two other individuals: a current Company employee and a former Company employee. This litigation with Agilent could result in significant expense. Agilent has considerable resources available to it; we, on the other hand, are an early-stage commercial company with comparatively few resources available to us to engage in costly and protracted litigation. Intellectual property infringement claims asserted against us could be costly to defend and could limit our ability to use some technologies in the future. They will be time consuming, will divert our chief executive officer’s, management’s and scientific personnel’s attention, may be used by Agilent in an effort to generate negative publicity with our customers and investors, and may result in liability for substantial damages. For example, we have incurred and anticipate that we will continue to incur significant expense and substantial time in defending against our current intellectual property infringement dispute with Agilent. In another example, we have incurred and anticipate that we will continue to incur significant expense and substantial time in preparing and prosecuting counterclaims alleged against Agilent. We anticipate that Agilent may use litigation, including filing amended or new complaints, other court filings, public statements and press releases, regardless of merit in an attempt to disrupt our business and create uncertainty about our future prospects, which could create volatility in the trading price of our common stock or damage to our reputation in the marketplace.
An adverse judgment in the Agilent proceeding could require us to pay damages, attorneys’ fees, costs and expenses, or result in injunctive relief, or generate negative publicity, any of which could materially adversely affect our business, financial condition, results of operations and prospects. For more information on our current legal and regulatory proceedings, see the section of this Form10-K captioned “Legal proceedings.” And for other risks related to our intellectual property, see the section of this Form10-K captioned “Risks related to our intellectual property.” We may also in the future be involved with other litigation. We expect that the number of such claims may increase as our scale and the level of competition in our industry segments grows.
We depend on one single-source supplier for a critical component for our DNA synthesis process. The loss of this supplier or its failure to supply us with the necessary component on a timely basis, could cause delays in the future capacity of our DNA synthesis process and adversely affect our business.
with a new supplier on commercially
•our supplier may cease or reduce production or deliveries, raise prices or renegotiate terms;
•we may be unable to locate a suitable replacement on acceptable terms or on a timely basis, if at all;
•if there is a disruption to our single-source supplier’s operations, and if we are unable to enter into arrangements with alternative suppliers, we will have no other means of completing our synthesis process until they restore the affected facilities or we or they procure alternative manufacturing facilities or sources of supply;
•delays caused by supply issues may harm our reputation, frustrate our customers and cause them to turn to our competitors for future projects; and
•our ability to progress our DNA synthesis products could be materially and adversely impacted if the single-source supplier upon which we rely were to experience a significant business challenge, disruption or failure due to issues such as financial difficulties or bankruptcy, issues relating to other customers such as regulatory or quality compliance issues, or other financial, legal, regulatory, operational or reputational issues.
limited number of large customers.
Our credit facility contains restrictions that limit our flexibility in operating our business.
In September 2017, we entered into an amended and restated loan and security agreement with Silicon Valley Bank (SVB). Our credit facility contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things:
sell, transfer, lease or otherwise dispose of our assets;
create, incur or assume additional indebtedness;
engage in certain changes in business, management, control, or business location
encumber or permit liens on certain of our assets;
make restricted payments, including paying dividends on, repurchasing or making distributions with respect to our common stock;
make specified investments (including loans and advances);
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets or acquire other entities;
make or permit any payment on any subordinated debt; and
enter into certain transactions with our affiliates.
Our incurrence of this debt, and any future increases in our aggregate level of debt, may adversely affect our operating results and financial condition by, among other things:
increasing our vulnerability to downturns in our business, to competitive pressures and to adverse economic and industry conditions;
requiring the dedication of an increased portion of our expected cash flows from operations to service our indebtedness, thereby reducing the amount of expected cash flows available for other purposes, including capital expenditures, acquisitions and dividends; and
limiting our flexibility in planning for, or reacting to, changes in our business and our industry.
A breach of any of these covenants could result in a default under our credit facility. Upon the occurrence of an event of default under our credit facility, SVB could elect to declare all amounts outstanding under our credit facility to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under our credit facility could proceed against the collateral granted to them to secure such indebtedness. We have pledged substantially all of our assets, other than our intellectual property, as collateral under our credit facility.
We depend on the continuing efforts of our senior management team and other key personnel. If we lose members of our senior management team or other key personnel or are unable to successfully retain, recruit and train qualified researchers, engineering and other personnel, our ability to develop our products could be harmed, and we may be unable to achieve our goals.
In the future, we
became a wholly owned subsidiary. This acquisition allowed us to add software design capabilities for oure-commerce ordering system. However, to date,While historically we have not successfully concluded othercompleted many acquisitions, we closed a business acquisition in the first quarter of 2022 and we are pursuingcontinuing to pursue opportunities in the life sciences industry that complement and expand our synthetic DNA product and our other products in both local and markets both locally and internationally.international markets. If we identify suitable
We require that our employees review our Code of Business Conduct and Ethics, our Anti-Money Laundering Policy and our Anti-Corruption Policy on an annual basis.
interact more frequently with foreign officials, including regulatory authorities. Expanded programs to maintain compliance with such laws will be costly and may not be effective. Any interactions with any such parties or individuals where compensation is provided that are found to be in violation of such laws could result in substantial fines and penalties and could materially harm our business. Furthermore, any finding of a violation under one country’s laws may increase the likelihood that we will be prosecuted and be found to have violated another country’s laws. IfWe require that our employees annually certify that they understand and will comply with our Code of Business Conduct and Ethics Policy, our Anti-Money Laundering Policy, our Anti-Corruption Policy as well as the UK Modern Slavery Act of 2015. Even so, if our business practices outside the United States are found to be in violation of the FCPA, UK Anti-Bribery Act, antitrust or other similar laws, we may be subject to significant civil and criminal penalties which could have a material adverse effect on our financial condition and results of operations.
Adverse conditions in the global economy and disruption of financial markets may significantly harm our revenue, profitability and results of operations.
The global economy has a significant impact on our business and volatility and disruption of financial markets could limit our customers’ ability to obtain adequate financing or credit to purchase and pay for our products in a timely manner or to maintain operations, which could result in a decrease in sales volume that could harm our results of operations. General concerns about the fundamental soundness of domestic and international economies may also cause our customers to reduce their purchases. Changes in banking, monetary and fiscal policies to address liquidity and increase credit availability may not be effective. Significant government investment and allocation of resources to assist the economic recovery of sectors which do not include our customers may reduce the resources available for government grants and related funding for life sciences research and development. Continuation or further deterioration of these financial and macroeconomic conditions could significantly harm our sales, profitability and results of operations.
biotechnology companies, such as Fair Journey/Iontas, (human phage display libraries, human phage display library focused on ion channels), Adimab, (human synthetic yeast display libraries), andZymeworks, Distributed Bio (human synthetic phage display library, lead optimization libraries).(owned by Charles River), Ablexis, Specifica, OmniAb and AbCellera Biologics Inc. In the emerging field of DNA digital data storage, we compete with Catalog Technologies, Inc., ETH Zurich, Helixworks, Iridia, Inc., North Shore BioRoswell, Seagate, Microsoft, Genscript, Molecular Assemblies, Ansa Biotechnologies, various academic institutions, and Roswell.other emerging competitors. We may not be successful in maintaining our competitive position for a number of reasons. Some of our current competitors, as well as many of our potential competitors, have significant name recognition, substantial intellectual property portfolios, longer operating histories, greater resources to invest in new technologies, substantial experience in new product development and manufacturing capabilities and more established distribution channels to deliver products to customers than we do. These competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. Our competitors may develop disruptive technologies or products that are comparable or superior to our technologies and products. In light of these advantages, even though we believe our technology is superior to the products offerings of our competitors, current or potential customers might accept competitive products in lieu of purchasing our products. Increased competition is likely to result in continued pricing pressures, which could harm our sales, profitability or market share. Our failure to continue competing effectively or winingwinning additional business with our existing customers could materially and adversely affect our business, financial condition or results of operations.
pressures and if we are unable to pass on any cost increase to our customers, our business, financial position and results of operations could be adversely affected.
business operations, as well as environmental damage resulting in costlyclean-up and liabilities under applicable laws and regulations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. While our property insurance policy provides limited coverage in the event of contamination from hazardous and biological products and the resulting cleanup costs, we do not currently have any additional insurance coverage for legal liability for claims arising from the handling, storage or disposal of hazardous materials. Accordingly, in the event of contamination or injury, we could be liable for damages or penalized with fines in an amount exceeding our resources and our operations could be suspended or otherwise adversely affected.
control in a number of jurisdictions. The failure to satisfy export control criteria or obtain necessary clearances could delay or prevent the shipment of products, which could adversely affect our revenues and profitability. Moreover, the life sciences industry, which is currently the primary market for our technology, has historically been heavily regulated. There are, for example, laws in several jurisdictions restricting research in genetic engineering, which can operate to narrow our markets. Given the
Further, in
Similarly, even though our products and services are not currently covered and reimbursed by third-party payors, including government healthcare programs such as Medicare and Medicaid, to the extent our products or related applications become eligible for coverage and reimbursement by such payors, we could be subject to healthcare fraud and abuse laws of both the federal government and the states in which we conduct our business. Because of the breadth of these laws and the narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, imprisonment, and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results.
Many countries have laws and regulations that could affect our products.products and which could limit our ability to sell our products in those countries. The number and scope of these requirements are increasing. Unlike many of our competitors, this is an area where we do not have expertise. We may not be able to obtain regulatory approvals in such countries or may incur significant costs in obtaining or maintaining foreign regulatory approvals.
For example, the European Union, or EU, is transitioning from the existing European Directive 98/79/EC on in vitro diagnostic medical devices, or IVD Directive (IVDD), to the In Vitro Diagnostic Device Regulation (EU) 2017/746, or IVDR, which imposes stricter requirements for the marketing and sale of medical devices, including in the area of clinical evaluation requirements, quality systems and post-market surveillance. The IVDR became effective in May 2022 for certain device types while extending the transition periods for other devices, depending on the device type. It is likely that we will be impacted by this new regulation, either directly as a manufacturer of IVDs, or indirectly as a supplier to customers who are placing IVDs in the EU market for clinical or diagnostic use. Complying with the requirements of the IVDR may require us to incur significant expenditures. Failure to meet these requirements could adversely impact our business in the EU and other regions that tie their product registrations or chemical regulations to the EU requirements.
If we experience a significant disruption in, or breach in security of, our information technology systems, or if we fail to implement new systems and software successfully, our business could be adversely affected.
We rely on several centralized information technology systems throughout our company to provide products, keep financial records, process orders, manage inventory, process shipments to customers and operate other critical functions. Our information technology systems may be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, computer viruses, attacks by computer hackers, telecommunication failures, user errors, catastrophes or other unforeseen events. Our information technology systems also may experience interruptions, delays or cessations of service or produce errors in connection with system integration, software upgrades or system migration work that takes place from time to time. If we were to experience a prolonged system disruption in the information technology systems that involve our interactions with customers or suppliers, including negatively impacting our order fulfillment and order entry on oure-commerce platform, it could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business. In addition, security breaches of our information technology systems could result in the misappropriation or unauthorized disclosure of confidential information belonging to us or to our employees, partners, customers or suppliers, which could result in our suffering significant financial or reputational damage. Further, such a breach may require notification to governmental agencies, the media or individuals pursuant to various federal and state privacy and security laws. We would also be exposed to a risk of litigation and potential liability, which could materially adversely affect our business, results of operations and financial condition.
A
Our facilities in California are located near known earthquake faults,Natural disasters, public health crises, political crises, and the occurrence of an earthquakeother catastrophic events or other catastrophic disaster could causeevents outside of our control may damage to our facilities or the facilities of third parties on which we depend and equipment, which could require usimpact our ability to cease or curtail operations.
sell products.
Furthermore, our in vivo antibody discovery services involve mice. In the past, vivarium sites have been shut down by animal activists, and any disturbance or shut down at the site where our in vivo antibody discovery work is being conducted could disrupt our business operations or harm our reputation.
Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
Ensuring
frequently. To ensure the level of segregation of duties customary for a U.S. public company and the requirement to produce timely financial information has created a need for additional resources within the accounting and finance functions. Consequently, we have hired additional resources in the accounting and finance function and continue to reassess the sufficiency of finance personnel in response to these increasing demands and expectations.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, canindependent registered public accounting firm provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company will have been detected.
Commencing with our fiscal year ending September 30, 2019, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management toan attestation report on the effectiveness of our internal control over financial reporting in this Annual Report on Form 10-K, among other additional requirements. Effective internal controls are necessary for us to provide reliable financial reports and to help prevent fraud, and our Form10-K filing for that year, as required by Section 404management and other personnel devote a substantial amount of the Sarbanes Oxley Act. Iftime to these compliance requirements. These rules and regulations also increase our legal and financial compliance costs and make some activities more time-consuming and costly.
We are an emerging growth company and smaller reporting company,securities may be negatively affected, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors.
We are an “emerging growth company” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we willcould be subject to sanctions or investigation by regulatory authorities, such as the same newSEC or revised accounting standards as other public companies that are not “emerging growth companies.”
For as long as we continue to be an emerging growth company, we intend to take advantage of certain other exemptions from various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the closing of our initial public offering; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
We are also a “smaller reporting company,” meaning that the market value of our stock held bynon-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700 million and our annual revenue is less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held bynon-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held bynon-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
The requirements of being a public company may strain our resources divertand require a substantial amount of management’s attention and affect our ability to attract and retain qualified board members.
attention.
Several patent applications covering our technologies have been filed recently. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patent, or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or, if applicable in the future, licensed to us could deprive us of rights necessary for the practice of our technologies or the successful commercialization of products that we may develop. Since patent applications in the U.S.United States and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our technologies or products. Furthermore, an interference proceeding can be provoked by a third party or instituted by the U.S. Patent and Trademark Office ("USPTO"), or the USPTO,European Patent Office ("EPO"), to determine who was the first to invent any of the subject matter covered by the patent claims of our applications.
For example, on March 3, 2021, our European Patent No. 3030682 which relates to polynucleotide synthesis was opposed by an anonymous third party. An oral hearing was held at the EPO on November 10, 2022, where the EPO initially revoked
Moreover, the United States Leahy-Smith American Invents Act, enacted in September 2011, brought significant changes to the U.S. patent system, including a change from a “first to invent” system to a “first to file” system. Under a “first to file” system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier. Other changes affect the way the patent applications are prosecuted, redefine prior art, and may affect patent litigation. The USPTO developed new regulations and procedures to govern the administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act became effective on March 16, 2013. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, which could have a material adverse effect on our business and financial condition.
We cannot be certain that the steps we have taken will prevent unauthorized use or unauthorized reverse engineering of our technology. In addition, competitors may be able to design alternative methods or devices that avoid infringement of our patents. To the extent our intellectual property, including licensed intellectual property, offers inadequate protection, or is found to be invalid or unenforceable, we are exposed to a greater risk of direct competition. If our intellectual property does not provide adequate protection against our competitors’ products, our competitive position could be adversely affected, as could our business. Both the patent application process and the process of managing patent disputes can be time consuming and expensive.
Any inability to meaningfully protect our intellectual property could result in competitors offering products or technologies that incorporate our products or technologies, which could reduce demand for our products or technologies.
We cannot predict the breadth
we may not develop additional proprietary products and technologies that are patentable;
the patents of others may have an adverse effect on our business; and
we apply for patents covering our products and technologies and uses thereof, as we deem appropriate. However, we may fail to apply for patents on important products and technologies in a timely fashion or at all.
We may not be able to protect our intellectual property rights throughout the world.
Certain countries in Europe and developing countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we may have limited remedies if any of our patents are infringed or if we are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. If we are unable to prevent unauthorized material disclosure of the intellectual property related to our technologies to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.
We may also be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. Other than the currently pending litigation filed by Agilent, described under the captions “Business—Legal proceedings” and “Risk factors—We and our chief executive officer are currently involved in litigation with Agilent in which Agilent has alleged a claim of trade secret misappropriation against Twist Bioscience and trade secret misappropriation and other related claims against our chief executive officer, and an adverse result could harm our business and results of operations”, no legal claims against us are currently pending. Some of our employees were previously employed at universities or biotechnology or biopharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. A loss of key research personnel or their work product could hamper our ability to commercialize, or prevent us from commercializing, our products and technologies. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and distraction to management and other employees.
To determine the priority of inventions, we may have to initiate and participate in interference proceedings declared by the USPTO that could result in substantial legal fees and could substantially affect the scope of our patent protection. Also, our intellectual property may be subject to significant administrative and litigation proceedings such as invalidity, unenforceability,re-examination and opposition proceedings against our patents. Whether merited or not, we may additionally face allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including patents held by our competitors or bynon-practicing entities. If we fail to identify and correctly interpret relevant patents, we may be subject to infringement claims. We may also face allegations that our employees have misappropriated the intellectual property rights of their former employers or other third parties. The outcome of any litigation or other proceeding is inherently uncertain and the results might not be favorable to us. For more information on our current legal and regulatory proceedings, see the section of this Form10-K captioned “Legal proceedings.”
In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness ornon-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on certain aspects of our platform technology. Such a loss of patent protection could have a material and adverse effect on our business, financial condition, results of operations and prospects.
Patent infringement suits can be expensive, lengthy and disruptive to business operations.operations and the outcome following legal assertions of invalidity and unenforceability is unpredictable. We could incur substantial costs and divert the attention of our management and technical personnel in prosecuting or defending against any claims and may harm our reputation. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. There can be no assurance that we will prevail in any suit initiated against us by third parties, successfully settle or otherwise resolve patent infringement claims. If we are unable to successfully settle claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in marketing our technologies and products. Furthermore, parties making claims against us may be able to obtain injunctive or other relief, which could block our ability to develop, commercialize and sell products, and could result in the award of substantial damages against us, including treble damages and attorneys’ fees and costs in the event that we are found to be a willful infringer of third party patents.
In addition, our agreements with some of our suppliers, distributors, customers and other entities with whom we do business may require us to defend or indemnify these parties to the extent they become involved in infringement claims against us, including the claims described above. We could also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships. If we are required or agree to defend or indemnify any of these third parties in connection with any infringement claims, we could incur significant costs and expenses that could adversely affect our business, operating results, or financial condition.
to establish name recognition based on our trademarks, then our marketing abilities may be materially adversely impacted.
Risks related to doing business in China
The People’s Republic of China, or the PRC, government has the ability to exercise significant influence and control over our proposed wholly owned foreign entity in China.
The PRC plays a significant role in regulating industrial development by imposing business regulations. It also exercises significant control over the country’s economic growth through the allocation of resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.
Additional factors that we may experience in connection with setting up operations in China that may adversely affect our business and results of operations include:
our inability to enforce or obtain a remedy under our agreements;
PRC restrictions on foreign investment that could impair our ability to conduct our business or acquire or contract with other entities in the future;
restrictions on currency exchange that may limit our ability to use cash flow most effectively or to repatriate our investments;
fluctuations in currency values;
increased challenges of defending our intellectual property;
cultural, language and managerial differences that may reduce our overall performance; and
political instability in China.
We may not be able to enforce our rights in China.
China’s legal and judicial system may negatively impact foreign investors. The legal system in China is evolving rapidly, and the enforcement of laws is inconsistent. It may be impossible to obtain swift and equitable enforcement of laws or enforcement of the judgment of one court by a court of another jurisdiction. China’s legal system is based on civil law or written statutes and a decision by one judge does not set a legal precedent that must be followed by judges in other cases. In addition, the interpretation of Chinese laws may vary to reflect domestic political changes.
There are substantial uncertainties regarding the interpretation and application to our business of PRC laws and regulations, since many of the rules and regulations that companies face in China are not made public. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on the proposed business of our wholly foreign owned entity.
China is a developing nation governed by aone-party communist government and susceptible to political, economic, and social upheaval that could disrupt the economy.
China is a developing country governed by aone-party government. China is also a country with an extremely large population, wide income gaps between rich and poor and between urban and rural residents, minority ethnic and religious populations, and growing access to information about the different social, economic, and political systems found in other countries. China has also experienced extremely rapid economic growth over the last decade, and its legal and regulatory systems have had to change rapidly to accommodate this growth. If China experiences political or economic upheaval, labor disruptions or other organized protests, nationalization of private businesses, civil strife, strikes, acts of war and insurrections, this may disrupt China’s economy and could materially and adversely affect the financial performance of our proposed wholly foreign owned entity.
If relations between China and the U.S. deteriorate, our business in the United States and China may be materially and adversely affected.
The relationship between China and the U.S. is subject to periodic tension. Relations may also be compromised if the U.S. becomes a more active advocate of Taiwan or pressures the PRC government regarding its monetary, economic or social policies. Changes in political conditions in China and changes in the state ofChina-U.S. relations are difficult to predict and could adversely affect the operations or financial condition of our proposed wholly owned foreign owned entity. In addition, because of our involvement in the Chinese market, any deterioration in political or trade relations might cause a public perception in the U.S. or elsewhere that might cause our products to become less attractive. A proposed enhancement of U.S. export controls is expected to apply to U.S. technology exports to China and Chinese companies, in addition to a more stringent review of foreign investment in U.S. technology companies by the Committee on Foreign Investment in the United States. We cannot predict what effect any changes inChina-U.S. relations may have on our ability to access capital or effectively do business in China, including through the proposed business of our proposed wholly foreign owned entity.
Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.
The PRC government imposes controls on the convertibility of the Chinese currency, Renminbi, into foreign currencies and, in certain cases, the remittance of currency out of China. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, in practice sometimes payment of current account items may be subject to delay and other restrictions. Furthermore, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
In light of the flood of capital outflows of China in 2016 due to the weakening Renminbi, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement including overseas direct investment.
More restrictions and substantial vetting process are put in place by SAFE to regulate cross-border transactions falling under the capital account. The PRC government may at its discretion further restrict access in the future to foreign currencies for current account transactions. Therefore, if we receive revenues in Renminbi by our proposed wholly foreign owned entity or otherwise, due to China’s foreign exchange control, such revenues may not be converted to foreign currency and remitted out of China in a timely manner.
Risks relating to owning our common stock
The market price of our common stock is likely to be volatile and could fluctuate or decline, resulting in a substantial loss of your investment.
The market price of our common stock could be subject to wide fluctuations in response to, among other things, the factors described in this “Risk factors” section or otherwise, and other factors beyond our control, such as fluctuations in the valuations of companies perceived by investors to be comparable to us.
Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market fluctuations, as well as general economic, systemic, political and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock.
Factors that could cause the market price of our common stock to fluctuate significantly include:
actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual results;
announcements of technological innovations by us or our competitors;
overall conditions in our industry and the markets in which we operate;
addition or loss of significant customers, or other developments with respect to significant customers;
changes in laws or regulations applicable to our products;
actual or anticipated changes in our growth rate relative to our competitors;
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
additions or departures of key personnel;
competition from existing products or new products that may emerge;
issuance of new or updated research or reports by securities analysts;
fluctuations in the valuation of companies perceived by investors to be comparable to us;
disputes or other developments related to proprietary rights, including patents, litigation matters including the Agilent litigation, and our ability to obtain intellectual property protection for our technologies;
announcement or expectation of additional financing efforts;
sales of our common stock by us or our stockholders;
share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
the expiration of contractuallock-up agreements with our executive officers, directors and stockholders; and
general economic and market conditions.
In the past, many companies that have experienced volatility in the market price of their stock have become subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.
If securities or industry analysts do not publish research or reports about our business or publish negative reports about our business, our share price and trading volume could decline.
The trading market for our common stock will depend on the research and reports that securities or industry analysts publish about us or our business and we will not have any control over such analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause the stock price of our common stock to decline.
In the future, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner, we determine from time to time. We also expect to issue common stock to employees and directors pursuant to our equity incentive plans. If we sell common stock, convertible securities or other equity securities in subsequent transactions, or common stock is issued pursuant to equity incentive plans, investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our common stock.
We have never paid dividends on our capital stock and we do not intend to pay dividends for the foreseeable future. Consequently, any gains from an investment in our common stock will likely depend on whether the price of our common stock increases.
discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after any price appreciation which may never occur, as the only way to realize any future gains on their investments. Furthermore, we are party to a credit agreement with Silicon Valley BankSVB which contains negative covenants that limit our ability to pay dividends. For more information, see the section of this Form10-K captioned “Management’s discussion and analysis of financial condition and results of operation—Liquidity and capital resources.” For more information regarding the negative covenants in our loan and security agreement with Silicon Valley Bank, see “Risk factors—Our credit facility contains restrictions that limit our flexibility in operating our business.”
Bank.
•providing for a classified board of directors with staggered, three-year terms;
•authorizing our board of directors to issue preferred stock with voting or other rights or preferences that could discourage a takeover attempt or delay changes in control;
•prohibiting cumulative voting in the election of directors;
•providing that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
•prohibiting stockholder action by written consent;
•limiting the persons who may call special meetings of stockholders; and
•requiring advance notification of stockholder nominations and proposals.
Insiders have substantial control over us and will be able to influence corporate matters.
As of September 30, 2019, our directors and executive officers and their affiliates beneficially own, in the aggregate, approximately 27.2% of our outstanding capital stock. As a result, these stockholders will be able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit stockholders’ ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of the DGCL, our amended and restated bylaws and our indemnification agreements that we have entered into with our directors and officers provide that:
We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;
We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;
We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;
We will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification;
The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and
We may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Act. Our exclusive forum provision will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.
For example, on December 19, 2018, Additionally, while the Delaware Supreme Court recently determined that choice of Chancery offorum provisions for actions arising under the State of Delaware issued an opinionSecurities Act are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against us, our directors, officers, or other employees in Sciabacucchi v. Salzberg, C.A.No. 2017-0931-JTL, invalidating provisions a venue other than in the certificates of incorporation of Delaware companies that purport to designate federal district courts asof the United States of America. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum in which a stockholder could bring a claim under the Securities Act. The Courtprovisions of Chancery held that a Delaware corporation can only use its constitutive documents to bind a plaintiff to a particular forum where the claim involves rights or relationships established by or under Delaware’s corporate law. In light of theSciabacucchi decision, we do not currently intend to enforce our federal forum selection provision unless theSciabacucchi decision is appealed and the Supreme Court for the State of Delaware reverses the decision. If the Supreme Court for the State of Delaware affirms the Delaware Chancery Court’s decision, we intend to seek approval by our stockholders to amend the amended and restated certificate of incorporation, and this may require significant additional costs associated with resolving such action in other jurisdictions.
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evolving investor or stakeholder expectations and standards, or which are perceived to have not responded appropriately, may suffer from reputational damage and result in the business, financial condition and/or stock price of a company being materially and adversely affected. Further, this increased focus on ESG issues may result in new regulations and/or third-party requirements that could adversely impact our business, or certain shareholders reducing or eliminating their holdings of our stock. Additionally, an allegation or perception that we have not taken sufficient action in these areas could negatively harm our reputation.
Principal Facilities | Approximate Square Footage | Lease Expiration | Use | Owned or | ||||||||
San Francisco, CA | 4,940 | 2019 | R&D and Manufacturing | Leased | ||||||||
San Francisco, CA | 10,750 | 2020 | General & Administration | Leased | ||||||||
South San Francisco, CA | 60,963 | 2026 | General & Administration, R&D and Manufacturing | Leased | ||||||||
Carlsbad, CA | 2,496 | 2020 | Sales & Marketing | Leased | ||||||||
Tel Aviv, IL | 9,332 | 2022 | R&D | Leased | ||||||||
Guangzhou, China | 11,583 | 2024 | R&D and Manufacturing | Leased |
Principal Facilities | Approximate Square Footage | Lease Expiration | Use | Owned or Leased | ||||||||||||||||||||||
Wilsonville, Oregon | 211,995 | 2044 | General & Administration and Manufacturing | Leased | ||||||||||||||||||||||
South San Francisco, CA | 91,791 | 2028 | General & Administration, R&D and Manufacturing | Leased | ||||||||||||||||||||||
Brisbane, CA | 24,786 | 2026 | Warehouse facility | Leased | ||||||||||||||||||||||
Quincy, Massachusetts | 21,657 | 2032 | General & Administration, R&D and Manufacturing | Leased | ||||||||||||||||||||||
Canton, Massachusetts | 12,158 | 2025 | R&D and Manufacturing | Leased | ||||||||||||||||||||||
Guangzhou, China | 11,583 | 2024 | Office Space & Biopharma Services facility | Leased | ||||||||||||||||||||||
Tel Aviv, Israel | 9,332 | 2024 | R&D (software development ) | Leased | ||||||||||||||||||||||
Carlsbad, CA | 4,710 | 2023 | Sales & Marketing | Leased | ||||||||||||||||||||||
Shanghai, China | 2,067 | 2022 | Sales & Marketing | Leased | ||||||||||||||||||||||
Singapore | 1,353 | 2025 | Sales & Marketing | Leased |
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On February 3, 2016, Agilent filed a lawsuit against us and our Chief Executive Officer, Dr. Emily Leproust, in the Superior Court of California, Santa Clara County, or the Court. The complaint also names Does 1 through 20, which
obligations against Dr. Leproust; (2) alleged breach of a duty of loyalty against Dr. Leproust; and (3) alleged misappropriation of trade secrets under the California Uniform Trade Secrets Act, or CUTSA, against all defendants.
On August 22, 2018, Agilent filed a motion for leave to amend its complaint, including to add two individuals as defendants. On September 12, 2018, Agilent filed a supplemental declaration in support of its motion to amend, which attached a new, proposed Second Amended Complaint that revised certain allegations in paragraph 2 of the document. On September 28, 2018, Agilent filed a motion for a protective order seeking to impose limits on the defendants’ discovery in the case. The Company and Dr. Leproust opposed both motions.
On December 7, 2018, the Court granted Agilent’s motion to amend its complaint, permitting Agilent to file its Second Amended Complaint. This new complaint, filed on December 13, 2018, adds amended allegations against the Company and Dr. Leproust, and also sets forth new claims for breach of contract and trade secret misappropriation against two individuals: a current employee and a former employee. However, the Court denied Agilent’s motion for a protective order and did not set any limits on discovery.
In addition, on December 7, 2018, the Court held a case management conference and set the trial to start on February 24, 2020. On January 22, 2019, the Court issued an Order appointing the Honorable W. James Ware (Ret.) as Discovery Referee.
Agilent’s specific allegations against the Company and Dr. Leproust are set forth in its second amended complaint, which maintains the same set of claims against the Company and Dr. Leproust as the superseded first amended complaint. With regard to the misappropriation claim, Agilent alleges, among other things, that the Company and Dr. Leproust misappropriated trade secrets relating to Agilent’s oligonucleotide synthesis technology and used those secrets to develop Twist’s technology and identify personnel to hire from Agilent. With regard to the breach of loyalty claim, Agilent alleges, among other things, that Dr. Leproust improperly withheld strategic business and technological plans from Agilent and diverted those plans to Twist instead. With regard to the breach of contract claim, Agilent alleges, among other things, that Dr. Leproust violated her contractual obligations under her employment agreement with Agilent, including by failing to disclose the aforementioned plans and by soliciting one or more Agilent employees to terminate their employment within two years of her resignation.
Agilent’s requested relief, in its second amended complaint, includes: compensatory damages; injunctive relief; punitive and/or statutory exemplary damages; a constructive trust upon allegedly misappropriated assets and gains derived from alleged breaches of agreements; and its attorneys’ fees and costs.
On January 29, 2019, the Company and Dr. Leproust filed a demurrer and motion to strike Agilent’s second amended complaint, challenging each of Agilent’s claims. First, the Company and Dr. Leproust asserted that Agilent’s breach of contract claim is antithetical to California law and public policy favoring employee mobility. Second, the Company and Dr. Leproust asserted that California precedent requires that Agilent’s duty of loyalty claim be dismissed. Third, the Company and Dr. Leproust asserted that Agilent’s trade secret misappropriation claims must be dismissed for failure to identify any harm.
That same day, the Company and Dr. Leproust filed a cross-complaint, asserting six counterclaims against Agilent and Does1-10 for (1) declaration of no trade secret misappropriation; (2) declaration of no breach of contract; (3) declaration of no breach of duty of loyalty; (4) defamation, defamation per se, libel, libel per se, slander, and slander per se; (5) intentional interference with prospective economic advantage; and (6) unlawful and unfair competition. The Company and Dr. Leproust also filed their answer and affirmative defenses to Agilent’s second amended complaint. The answer to Agilent’s second amended complaint responded to Agilent’s allegations and asserted numerous affirmative defenses and furthermore denies Agilent’s claims have merit or entitle it to any relief.
On March 4, 2019, Agilent filed a demurrer and motion to strike challenging all six claims alleged in the Company’s cross-complaint filed on January 29, 2019. The Company and Dr. Leproust opposed Agilent’s motions.
On May 10, 2019, the Court issued its ruling denying Agilent’s demurrer and motion to strike the Company’s cross-complaint. In addition, the Court issued its ruling denying the Company’s demurrer and motion to strike certain allegations associated with Agilent’s breach of contract claim, but granted the Company’s motion to strike breach of contract allegations relating to thenon-solicitation provision in Agilent’s employment contract.
On May 16, 2019, Agilent filed its notice of appeal of the Court’s May 10, 2019 ruling denying Agilent’s motion to strike. On May 22, 2019, Agilent sought ex parte relief from the Court to stay all proceedings related to both the Company’s cross-claims and Agilent’s affirmative claims. The Court stayed proceedings relating to the Company’s cross-claims, which was not opposed by the Company, but denied Agilent’s request for a discovery stay related to Agilent’s affirmative claims. Agilent then filed a noticed motion seeking to stay proceedings related to its affirmative claims on June 14, 2019, and following a hearing on June 28, 2019, the Court denied Agilent’s motion. Agilent has not appealed this ruling.
The parties, including the Company and Dr. Leproust, have since been conducting fact and expert discovery, with the latter set to close on December 16, 2019.
Trial remains set for February 24, 2020.
We and Dr. Leproust currently believe that we have substantial and meritorious defenses to Agilent’s claims and intend to vigorously defend our position, including through the trial and appellate stages if necessary. The outcome of any litigation, however, is inherently uncertain and there can be no assurance that the outcome of the case or the costs of litigation, regardless of outcome, will not have a material adverse effect on our business.
From time to time, the Company posts case updates detailing relevant developments in its ongoing litigation with Agilent at the following website:https://investors.twistbioscience.com/agilent-v-twist-litigation.
We may also be subject to various other legal proceedings and claims arising in the ordinary course of business. Although occasional adverse decisions or settlements may occur, management believes that the final disposition of such matters will not have a material adverse effect on our business, financial position, results of operations or cash flows.
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* | $100.00 invested on October 31, 2018 in stock or index, including reinvestment of dividends. |
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Twist Bioscience Corporation | $ | 165.00 | $ | 166.00 | $ | 207.00 | $ | 171.00 | $ | 150.00 | $ | 218.00 | $ | 324.00 | $ | 400.00 | ||||||||||||||||||||||||||||||||||
Nasdaq Composite Index | 91.00 | 106.00 | 110.00 | 109.00 | 123.00 | 105.00 | 138.00 | 153.00 | ||||||||||||||||||||||||||||||||||||||||||
Nasdaq Biotechnology Index | 93.00 | 107.00 | 105.00 | 95.00 | 116.00 | 104.00 | 131.00 | 130.00 |
12/31/2020 | 3/31/2021 | 6/30/2021 | 9/30/2021 | 12/31/2021 | 3/31/2022 | 6/30/2022 | 9/30/2022 | |||||||||||||||||||||||||||||||||||||||||||
Twist Bioscience Corporation | $ | 1,009.00 | $ | 885.00 | $ | 952.00 | $ | 879.00 | $ | 553.00 | $ | 353.00 | $ | 250.00 | $ | 252.00 | ||||||||||||||||||||||||||||||||||
Nasdaq Composite Index | 176.00 | 181.00 | 199.00 | 198.00 | 214.00 | 195.00 | 151.00 | 145.00 | ||||||||||||||||||||||||||||||||||||||||||
Nasdaq Biotechnology Index | 145.00 | 144.00 | 157.00 | 155.00 | 144.00 | 127.00 | 114.00 | 115.00 |
Securities authorized for issuance under equity compensation plans
Equity compensation plan information
The following table presents information as
Plan | Shares issuable upon exercise of outstanding plan options, warrants and rights (a) | Weighted- average exercise price of outstanding options, warrants and rights (b) | Shares remaining available for future issuance under plan (excluding those reflected in column (a))(c) | |||||||||
Equity compensation plan approved by security holders(1)(2) | 3,550,445 | $ | 15.99 | 1,576,956 | (2) | |||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 3,550,445 | $ | 15.99 | 1,576,956 | ||||||||
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Sales of unregistered securities
Use of proceeds from public offering of common stock.
On October 30, 2018, our registration statement on FormS-1 (RegistrationNo. 333-227672) was declared effective by the SEC for our initial public offering pursuant to which we registered an aggregate of 5,000,000 shares of our common stock at an initial public offering price of $14.00 per share for an aggregate price of $70.0 million. Sale of an additional 750,000 shares was registered upon exercise of the underwriters’ option to purchase additional shares at an offering price of $14.00 per share for an aggregate price of approximately $10.5 million. The underwriters of the offering were J.P. Morgan Securities LLC, Cowen and Company, LLC, Allen & Company LLC, and Robert W. Baird & Co Incorporated. We paid the underwriters of our initial public offering underwriting discounts and commissions totaling $5.6 million, also, we incurred $5.3 million in offering costs. Thus, the net offering proceeds, after deducting underwriting discounts and offering expenses, were $69.6 million.
On May 9, 2019, we completed an underwritten public offering of common stock. A total of 4,312,500 shares were offered and sold at a price of $21.00 per share, and the Company received net proceeds of $84.3 million. The underwriters of the offering were J.P. Morgan Securities LLC, Cowen and Company, LLC, Evercore Group LLC, and Robert W. Baird & Co Incorporated. We paid the underwriters an underwriting discount and commission totaling $5.4 million, and we incurred offering expenses of $0.9 million.
We have begun using and intend to use the net proceeds from these offerings primarily to (i) improve and update our platform and core technologies, (ii) expand our sales and marketing capabilities in the U.S. and other geographies, including China, (iii) continue to expand in the pharmaceutical biologics drug discovery and DNA data storage markets, (iv) establish our operations in China, and (v) for working capital and general corporate purposes. While we have no current agreements, commitments or understandings for any specific strategic acquisitions orin-licenses at this time, we may use a portion of the net proceeds for these purposes.
Year ended September 30, | ||||||||||||
(in thousands, except share and per share data) | 2019 | 2018 | 2017 | |||||||||
Consolidated statements of operations and comprehensive loss data: | ||||||||||||
Revenues | $ | 54,385 | $ | 25,427 | $ | 10,767 | ||||||
Operating expenses: | ||||||||||||
Cost of revenues | 47,426 | 32,189 | 24,020 | |||||||||
Research and development | 35,683 | 20,347 | 19,169 | |||||||||
Selling, general and administrative | 80,126 | 43,450 | 26,060 | |||||||||
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Total operating expenses | 163,235 | 95,986 | 69,249 | |||||||||
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Loss from operations | (108,850 | ) | (70,559 | ) | (58,482 | ) | ||||||
Interest income | 3,032 | 999 | 412 | |||||||||
Interest expense | (1,294 | ) | (1,313 | ) | (905 | ) | ||||||
Other income (expense), net | (265 | ) | (121 | ) | (55 | ) | ||||||
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Loss before income taxes | (107,377 | ) | (70,994 | ) | (59,030 | ) | ||||||
Provision for income taxes | (292 | ) | (242 | ) | (280 | ) | ||||||
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Net loss attributable to common stockholders | $ | (107,669 | ) | $ | (71,236 | ) | $ | (59,310 | ) | |||
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Other comprehensive loss | ||||||||||||
Change in unrealized gain (loss) on investments | 49 | — | (9 | ) | ||||||||
Foreign currency translation adjustment | 45 | 54 | 33 | |||||||||
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Comprehensive loss | $ | (107,575 | ) | $ | (71,182 | ) | $ | (59,286 | ) | |||
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Net loss per share attributable to common stockholders—basic and diluted | $ | (3.92 | ) | $ | (25.51 | ) | $ | (24.49 | ) | |||
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September 30, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Consolidated balance sheet data: | ||||||||||||
Cash, cash equivalents, and short-term investments | $ | 138,107 | $ | 80,757 | $ | 62,204 | ||||||
Working capital | 129,781 | 77,134 | 58,392 | |||||||||
Total assets | 186,994 | 115,791 | 85,657 | |||||||||
Total liabilities | 34,912 | 26,730 | 19,382 | |||||||||
Redeemable convertible preferred stock | — | 290,483 | 199,633 | |||||||||
Additionalpaid-in capital | 470,425 | 9,346 | 6,228 | |||||||||
Accumulated deficit | (318,524 | ) | (210,855 | ) | (139,619 | ) | ||||||
Total stockholders’ equity (deficit) | 152,082 | (201,422 | ) | (133,358 | ) |
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condition. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this Form10-K. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk factors” and elsewhere in this Form10-K. The last day of our fiscal year is September 30, and we refer to our fiscal year ended September 30, 20172020 as fiscal 2017year 2020 or 2017,2020, September 30, 20182021 as fiscal 2018year 2021 or 20182021 and our fiscal year ended September 30, 20192022 as fiscal 2019year 2022 or 2019.
2022.
In fiscal 2017, we served 286 customers including $0.3
In fiscal 2018, we served 717 customers, and sales to the industrial chemicals sector, the academic research sector, the agricultural sector and the healthcare sector accounted for 59%, 23%, 2% and 16% of the total $25.4 million revenues for the year ended September 30, 2018. Sales to Ginkgo Bioworks amounted to $8.72022, $132.3 million or 34% and sales to customers other than Ginkgo Bioworks was $16.7 million, or 66%, forin the year ended September 30, 2018; an increase2021 and $90.1 million in revenue of 101% and 160%, respectively, as compared to the year ended September 30, 2017.
In fiscal 2019, we served 1,305 customers,2020, while incurring net losses of $217.9 million, $152.1 million and sales to$139.9 million in the industrial chemicals sector, healthcare sector, the academic research sector, and the agricultural sector accounted for 40%, 32%, 26% and 2% of the total $54.4 million revenues for the yearyears ended September 30, 2019. Sales2022, 2021 and 2020, respectively. Since our inception, we have incurred significant operating losses and have accumulated net deficit of $828.4 million. To support our growth, we have increased our number of employees and increased investment in our manufacturing capabilities. Our ability to Ginkgo Bioworks amountedgenerate product revenue sufficient to $9.2 million, or 17%achieve profitability will depend heavily on the success of our total revenueexisting products and development and commercialization of additional products in fiscal 2019.
We have leveraged the versatility of our platform to expand our product portfolio into other markets in which we believe we have a competitive advantage. In February 2018, we launched an innovative and comprehensive preparation kit for next generation sequencing at the Advances in Genome Biology and Technology conference. In February 2019, we announced an expansion of next generation sequencing product offerings including Twist Fast Hybridization and wash kits. Our kit leverages our platform to precisely synthesize oligo pools and uniformly amplify the desired target DNA segments, accelerating the hybridization process and considerably improving the accuracy of the downstream sequencing analysis. We have also commercialized a custom DNA library solution which enables more effectivesynthetic biology industry, biologic drug discoveryindustry or the data storage industry.
39% in 2021.
On October 30, 2018, our registration statement on FormS-1 was declared effective by the SEC, and our shares began trading on the NASDAQ Global Stock Market on October 31, 2018. A total
As of September 30, 2019, we had $138.1 million cash, cash equivalents and short-term investments. We believe that our existing cash and cash equivalents will be sufficient to fund our planned operating expenses, capital expenditure requirements and debt service payments for at least one year from the issuance of these consolidated financial statements. However, the Company may need to obtain additional financing to fund operations beyond this period, and there can be no assurance that the Company will be successful in raising additional financing on terms which are acceptablefourth quarter due to the Company. We have based these estimates on assumptions that may prove to be wrong,seasonal slowdown caused by summer vacations and we could exhaust our available capital resources sooner than we expect. See “Liquidity and capital resources.”
See Item 1. Business above for additional information regarding our business, products, competitive market and regulatory matters.
Since commercially launching our product in April 2016, orders from customers have rapidly increased. Commencing with our Beta Access program, we believe we have successfully achieved industry-leading volumes of synthetic DNA orders. In 2018, we launched oure-commerce platform to enable customers to conveniently order our products online. These steps have contributed to triple digit order growth over the last three years, which is illustrated in the table below.
Year ended September 30, | ||||||||||||
(in thousands, except percentages) | 2019 | 2018 | 2017 | |||||||||
Customers other than Ginkgo Bioworks | $ | 62,159 | $ | 30,347 | $ | 10,228 | ||||||
Percentage change from prior year | 105 | % | 197 | % | (NM | ) |
(NM)—Not meaningful
Year ended September 30, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Order value | $ | 69,947 | $ | 39,372 | $ | 17,557 |
Year ended September 30, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
Order value | $ | 226,435 | $ | 159,545 | $ | 116,717 |
of new customers. We define a new customer as a customer who, as a separate legal entity or person, has not had multiple purchases in the current fiscal year. We define a repeat customer as any customer who, as a separate legal entity or person, has purchased products or services from us more than once in the current fiscal year.
The table below represents sales to individual customers. We shipped products to 286 customers in fiscal 2017, 717 customers in fiscal 2018 and 1,305 customers in fiscal 2019.
Year ended September 30, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Percentage of revenue from repeat customers | 97 | % | 97 | % | 63 | % | ||||||
Percentage of revenue from new customers | 3 | % | 3 | % | 37 | % |
Year ended September 30, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
Number of customers | 3,300 | 2,900 | 2,200 | |||||||||||||||||
Revenue from repeat customers | 98 | % | 98 | % | 97 | % |
Year ended September 30, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Revenues | $ | 54,385 | $ | 25,427 | $ | 10,767 | ||||||
Loss from operations | (108,850 | ) | (70,559 | ) | (58,482 | ) | ||||||
Net loss attributable to common stockholders | (107,669 | ) | (71,236 | ) | (59,310 | ) |
Year ended September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
Revenues | $ | 203,565 | $ | 132,333 | $ | 90,100 | ||||||||||||||
Loss from operations | (234,776) | (152,726) | (140,079) | |||||||||||||||||
Net loss attributable to common stockholders | (217,863) | (152,098) | (139,931) |
Year ended September 30, | ||||||||||||||||||||||||
(in thousands, except percentages) | 2019 | % | 2018 | % | 2017 | % | ||||||||||||||||||
United States | $ | 35,936 | 66 | % | $ | 17,662 | 69 | % | $ | 8,243 | 77 | % | ||||||||||||
EMEA | 14,692 | 27 | % | 6,557 | 26 | % | 2,023 | 19 | % | |||||||||||||||
APAC | 2,761 | 5 | % | 1,001 | 4 | % | 274 | 2 | % | |||||||||||||||
North America | 996 | 2 | % | 207 | 1 | % | 227 | 2 | % | |||||||||||||||
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Total revenues | $ | 54,385 | 100 | % | $ | 25,427 | 100 | % | $ | 10,767 | 100 | % | ||||||||||||
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Year ended September 30, (in thousands, except percentages) 2022 % 2021 % 2020 % Americas $ 122,473 61% $ 77,909 59% $ 59,164 65% EMEA 62,078 30% 44,124 33% 25,821 29% APAC 19,014 9% 10,300 8% 5,115 6% Total revenues $ 203,565 100% $ 132,333 100% $ 90,100 100%
Year ended September 30, | ||||||||||||||||||||||||
(in thousands, except percentages) | 2019 | % | 2018 | % | 2017 | % | ||||||||||||||||||
Synthetic genes | $ | 26,712 | 49 | % | $ | 17,986 | 71 | % | $ | 8,122 | 75 | % | ||||||||||||
Oligo pools | 4,594 | 8 | % | 3,002 | 12 | % | 2,056 | 19 | % | |||||||||||||||
DNA libraries | 2,036 | 4 | % | 1,771 | 7 | % | 517 | 5 | % | |||||||||||||||
NGS tools | 21,043 | 39 | % | 2,668 | 10 | % | 72 | 1 | % | |||||||||||||||
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Total revenues | $ | 54,385 | 100 | % | $ | 25,427 | 100 | % | $ | 10,767 | 100 | % | ||||||||||||
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Year ended September 30, | ||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | % | 2021 | % | 2020 | % | ||||||||||||||||||||||||||||||||
Synthetic genes | $ | 61,509 | 30% | $ | 38,964 | 30% | $ | 35,192 | 39% | |||||||||||||||||||||||||||||
Oligo pools | 12,424 | 6% | 8,039 | 6% | 4,545 | 5% | ||||||||||||||||||||||||||||||||
DNA libraries | 6,149 | 3% | 5,678 | 4% | 3,965 | 4% | ||||||||||||||||||||||||||||||||
Antibody discovery | 24,171 | 12% | 6,985 | 5% | 2,383 | 3% | ||||||||||||||||||||||||||||||||
NGS tools | 99,312 | 49% | 72,667 | 55% | 44,015 | 49% | ||||||||||||||||||||||||||||||||
Total revenues | $ | 203,565 | 100% | $ | 132,333 | 100% | $ | 90,100 | 100% |
Year ended September 30, | ||||||||||||||||||||||||
(in thousands, except percentages) | 2019 | % | 2018 | % | 2017 | % | ||||||||||||||||||
Industrial chemicals | $ | 21,927 | 40 | % | $ | 14,912 | 59 | % | $ | 6,702 | 62 | % | ||||||||||||
Academic research | 13,835 | 26 | % | 5,813 | 23 | % | 2,709 | 25 | % | |||||||||||||||
Healthcare | 17,424 | 32 | % | 4,212 | 16 | % | 1,226 | 12 | % | |||||||||||||||
Agriculture | 1,199 | 2 | % | 490 | 2 | % | 130 | 1 | % | |||||||||||||||
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Total revenues | $ | 54,385 | 100 | % | $ | 25,427 | 100 | % | $ | 10,767 | 100 | % | ||||||||||||
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Year ended September 30, | ||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | % | 2021 | % | 2020 | % | ||||||||||||||||||||||||||||||||
Industrial chemicals/materials | $ | 57,940 | 28% | $ | 34,475 | 26% | $ | 29,054 | 32% | |||||||||||||||||||||||||||||
Academic research | 37,097 | 18% | 25,299 | 19% | 19,642 | 22% | ||||||||||||||||||||||||||||||||
Healthcare | 106,363 | 52% | 71,241 | 54% | 40,036 | 44% | ||||||||||||||||||||||||||||||||
Food/agriculture | 2,165 | 1% | 1,318 | 1% | 1,368 | 2% | ||||||||||||||||||||||||||||||||
Total revenues | $ | 203,565 | 100% | $ | 132,333 | 100% | $ | 90,100 | 100% |
Customer revenues equal to
Year ended September 30, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Customer A | 17 | % | 34 | % | 40 | % |
One customerour revenue for the fiscal year ended September 30, 2020.
September 30, | ||||||||
2019 | 2018 | |||||||
Customer A | 13 | % | 27 | % |
of September 30, 2022 and 2021.
Year ended September 30, | ||||||||||||
(in thousands, except shipments) | 2019 | 2018 | 2017 | |||||||||
Number of genes shipped | 288,424 | 247,102 | 125,462 | |||||||||
Number of shipments | 17,734 | 6,138 | 1,749 |
Year ended September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
Number of genes shipped | 558 | 372 | 339 |
expensed equipment and consumables, laboratory supplies, consulting costs, depreciation, of capitalized equipment, production overhead costs, and allocations of ITinformation technology (“IT”), maintenance and facility costs. Personnel costs consist of salaries, employee benefit costs, bonuses, and stock-based compensation expenses. We expect that our cost of revenues will increase as we increasevary with changes in our revenues with new product developments.
Other operating expenses
Our operating expenses are classified in the following categories: and our revenue mix.
Research and development
which was paid in December 2021.
Year ended September 30, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Revenues | $ | 54,385 | $ | 25,427 | $ | 10,767 | ||||||
Operating expenses: | ||||||||||||
Cost of revenues | 47,426 | 32,189 | 24,020 | |||||||||
Research and development | 35,683 | 20,347 | 19,169 | |||||||||
Selling, general and administrative | 80,126 | 43,450 | 26,060 | |||||||||
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Total operating expenses | 163,235 | 95,986 | 69,249 | |||||||||
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Loss from operations | (108,850 | ) | (70,559 | ) | (58,482 | ) | ||||||
Interest income | 3,032 | 999 | 412 | |||||||||
Interest expense | (1,294 | ) | (1,313 | ) | (905 | ) | ||||||
Other income (expense), net | (265 | ) | (121 | ) | (55 | ) | ||||||
Provision for income taxes | (292 | ) | (242 | ) | (280 | ) | ||||||
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Net loss attributable to common stockholders | $ | (107,669 | ) | $ | (71,236 | ) | $ | (59,310 | ) | |||
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Year ended September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
Revenues | $ | 203,565 | $ | 132,333 | $ | 90,100 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of revenues | 119,330 | 80,620 | 61,406 | |||||||||||||||||
Research and development | 120,307 | 69,072 | 43,006 | |||||||||||||||||
Selling, general and administrative | 212,949 | 135,901 | 103,267 | |||||||||||||||||
Change in fair value of contingent considerations and holdbacks | (14,245) | (534) | — | |||||||||||||||||
Litigation settlement | — | — | 22,500 | |||||||||||||||||
Total operating expenses | $ | 438,341 | $ | 285,059 | $ | 230,179 | ||||||||||||||
Loss from operations | $ | (234,776) | $ | (152,726) | $ | (140,079) | ||||||||||||||
Interest income | 3,062 | 435 | 1,499 | |||||||||||||||||
Interest expense | (80) | (367) | (787) | |||||||||||||||||
Gain on deconsolidation of a subsidiary | 4,607 | — | — | |||||||||||||||||
Other income (expense), net | (1,087) | (1,370) | (182) | |||||||||||||||||
Benefit from (provision for) income taxes | 10,411 | 1,930 | (382) | |||||||||||||||||
Net loss attributable to common stockholders | $ | (217,863) | $ | (152,098) | $ | (139,931) |
2020
Year ended September 30, | Change | |||||||||||||||||||||||||||
(in thousands, except percentages) | 2019 | 2018 | 2017 | 2019-2018 | 2018-2017 | |||||||||||||||||||||||
Revenues | $ | 54,385 | $ | 25,427 | $ | 10,767 | $ | 28,958 | 114 | % | $ | 14,660 | 136 | % |
Year ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | 2020 | 2022-2021 | 2021-2020 | |||||||||||||||||||||||||||||||||||||||
Revenues | $ | 203,565 | $ | 132,333 | $ | 90,100 | $ | 71,232 | 54% | $ | 42,233 | 47% |
Our antibody services revenue grew year over year as a result of Abveris acquisition and an increase in the Twist Antibody discovery project revenue.
from $6.5 million to $16.7 million and revenue from Ginkgo Bioworks increased $4.4 million, an increaseA discussion of 102% from $4.3 million to $8.7 million compared toour revenues for the prior year ended September 30, 2017. Revenue2020 can be found on page 54 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2021 filed with the SEC on November 23, 2021, or our 2021 Annual Report.
Year ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | 2020 | 2022-2021 | 2021-2020 | |||||||||||||||||||||||||||||||||||||||
Cost of revenues | $ | 119,330 | $ | 80,620 | $ | 61,406 | $ | 38,710 | 48% | $ | 19,214 | 31% |
Revenue The favorable change in cost of revenues as a percentage to total revenues was mainly due to an increase in volume of product sold and change in the mix of products sold during the current year.
Cost of revenues
Year ended September 30, | Change | |||||||||||||||||||||||||||
(in thousands, except percentages) | 2019 | 2018 | 2017 | 2019-2018 | 2018-2017 | |||||||||||||||||||||||
Cost of revenues | $ | 47,426 | $ | 32,189 | $ | 24,020 | $ | 15,237 | 47 | % | $ | 8,169 | 34 | % |
In the year ended September 30, 2019, total cost of revenue increased by $15.2$19.2 million, to $47.4 million from $32.2 million in the prior year.or 31%. The increase was primarily due to higher consumption of reagents and production materials of $6.9 million associated withan increase in the increased product shipments and higher revenue. Payroll and stock compensation related expense increase of $7.7 million, facilities and information technology costs increased by $2.0 million including facilities move expenses of $0.4 million.
In the year ended September 30, 2018, total cost of revenue increased by $8.2 million from $24.0 million to $32.2 million from the prior year. The increase was primarily due to payroll and stock compensation related expense increase of $3.6 million, increase of consumption of reagents and production materials costs of $2.8$9.6 million consultingassociated with increased product shipments. The increase in personnel costs of $5.3 million was due to increased expenses related to supporting new product portfolio launches and outsidean increase in volume of products shipped. Outside services increase of $0.9increased by $1.5 million, depreciation increased by $1.1 million and facilitiesinformation technology costs increased by $1.6 million. Our cost increase of $0.9 million over prior year.
Inrevenues represented 61% and 68% of total revenues for the year ended September 30, 2017, total2021 and 2020, respectively. The favorable change in cost of revenues increasedas a percentage of total revenues was mainly due to $24.0 million from $9.4 millionan increase in volume of product sold and change in the mix of products sold during the current year.
our 2021 Annual Report.
Year ended September 30, | Change | |||||||||||||||||||||||||||
(in thousands, except percentages) | 2019 | 2018 | 2017 | 2019-2018 | 2018-2017 | |||||||||||||||||||||||
Research and development | $ | 35,683 | $ | 20,347 | $ | 19,169 | $ | 15,336 | 75 | % | $ | 1,178 | 6 | % |
Year ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | 2020 | 2022-2021 | 2021-2020 | |||||||||||||||||||||||||||||||||||||||
Research and development | $ | 120,307 | $ | 69,072 | $ | 43,006 | $ | 51,235 | 74% | $ | 26,066 | 61% |
Year ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | 2020 | 2022-2021 | 2021-2020 | |||||||||||||||||||||||||||||||||||||||
Selling, general and administrative | $ | 212,949 | $ | 135,901 | $ | 103,267 | $ | 77,048 | 57% | $ | 32,634 | 32% |
Fortotal selling, general and administrative expenses for the year ended September 30, 2018, research and development expenses increased from $19.12022 are Wilsonville costs, comprised of personnel costs of $6.0 million, to $20.3facilities costs of $4.6 million, an increaseoutside services of 6%. The increase was driven primarily from an increase in personnel related costs$2.2 million, laboratory supplies of $1.3 million subcontracting services increase of $0.5 million and other increases for $0.1 million offset by decreasecosts of prototype supplies of ($0.8)$1.8 million. The R&D group hired full time staffing and used less materials in research. In addition, there were $0.3 million in payments from DARPA received during the 2018 fiscal year.
Research and development expenses increased by $0.9 million or 5% from $18.2 million in the year ended September 30, 2016 to $19.2 million in the year ended September 30, 2017. This was primarily due to increased development activities for new product offerings, materials costs, and information technology and facilities costs. In fiscal 2017, information technology and facilities costs increased by $0.9 million compared to fiscal 2016, primarily due to the signing of lease agreements for additional facilities located in San Francisco and South San Francisco. Additional research and development expenses of $3.4 million were also incurred in fiscal 2017 in connection with the acquisition of Genome Compiler Corporation in the prior fiscal year. In fiscal 2016, we received $2.4 million DARPA payments, whereas in fiscal 2017 there were no DARPA payments to offset expenses. In fiscal 2017, laboratory materials used in research and development increased $0.5 million from $2.7 million to $3.2 million and allocations from facilities and information technology increased $0.9 million.
Selling, general and administrative expenses
Year ended September 30, | Change | |||||||||||||||||||||||||||
(in thousands, except percentages) | 2019 | 2018 | 2017 | 2019-2018 | 2018-2017 | |||||||||||||||||||||||
Selling, general and administrative | $ | 80,126 | $ | 43,450 | $ | 26,060 | $ | 36,676 | 84 | % | $ | 17,390 | 67 | % |
Selling, general and administrative expenses increased by $17.4 million, or 67%, from $26.1 million in the year ended September 30, 2017 to $43.5 million in the year ended September 30, 2018, primarily due to increases in payroll expenses related to increased headcount, advertising and marketing expenses, professional and legal expenses, stock compensation expenses and information technology related charges. Salaries and related costs increased by $8.2 million in fiscal 2018, as a result of increased headcount in our commercial organization, which included $11.7 million higher of stock-based compensation expenses and $2.5 million higher of sales department. In addition, professionalcommission. Outside services, expensesincluding audit costs, COVID-19 testing costs and advisory services, increased by $4.7$11.0 million, depreciation expense increased by $1.8 million, merger & acquisition costs increased by $1.4 million, computer software costs increased by $1.0 million and rent expense increased by $1.9 million, mainly due to commercial expansion of our products and setting up our infrastructure to become a public company. Our marketing related activities increased $1.7 million and remaining increases all relate to commercialization of sales group or corporate development towards preparation of going public.
Selling,Wilsonville facility lease expense. The increase in selling, general and administrative expenses increasedwas offset by $7.8a decrease of $11.8 million or 43%in legal expenses as our litigation with Agilent Technologies, Inc. (“Agilent”) concluded on February 6, 2020, a decrease of $3.0 million in consulting costs and a decrease of $1.2 million in travel costs.
Year ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | 2020 | 2022-2021 | 2021-2020 | |||||||||||||||||||||||||||||||||||||||
Change in fair value of contingent considerations and holdbacks | $ | (14,245) | $ | (534) | $ | — | $ | (13,711) | 2568 | % | $ | (534) | 100 | % |
Year ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | 2020 | 2022-2021 | 2021-2020 | |||||||||||||||||||||||||||||||||||||||
Interest income | $ | 3,062 | $ | 435 | $ | 1,499 | $ | 2,627 | 604 | % | $ | (1,064) | (71) | % | ||||||||||||||||||||||||||||||
Interest expense | (80) | (367) | (787) | 287 | (78) | % | 420 | (53) | % | |||||||||||||||||||||||||||||||||||
Other income (expense) | (1,087) | (1,370) | (182) | 283 | (21)% | (1,188) | 653 | % | ||||||||||||||||||||||||||||||||||||
Total interest, and other income (expense), net | $ | 1,895 | $ | (1,302) | $ | 530 | $ | 3,197 | 505 | % | $ | (1,832) | 528 | % |
Interest, and other income (expense), net
Year ended September 30, | Change | |||||||||||||||||||||||||||
(in thousands, except percentages) | 2019 | 2018 | 2017 | 2019-2018 | 2018-2017 | |||||||||||||||||||||||
Interest income | $ | 3,032 | $ | 999 | $ | 412 | $ | 2,033 | 204 | % | $ | 587 | 142 | % | ||||||||||||||
Interest expense | (1,294 | ) | (1,313 | ) | (905 | ) | 19 | (1 | )% | (408 | ) | 45 | % | |||||||||||||||
Other income (expense) | (265 | ) | (121 | ) | (55 | ) | (144 | ) | 119 | % | (66 | ) | 120 | % | ||||||||||||||
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Total interest, and other income (expense), net | $ | 1,473 | $ | (435 | ) | $ | (548 | ) | $ | 1,908 | (439 | )% | $ | 113 | (21 | )% | ||||||||||||
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Interest income was $3.0 million in the year ended September 30, 2019, $1.0 million in the year ended September 30, 2018 and2022, $0.4 million in the year ended September 30, 2017,2021 and $1.5 million in the year ended September 30, 2020, resulting from our short-term investments. Interest expense was $1.3$0.1 million in fiscal 2019, $1.3year 2022, $0.4 million in fiscal 2018year 2021 and $0.9$0.8 million in fiscal 2017year 2020 mainly due to the reduction in the amount of debt outstanding under our credit facility with Silicon Valley Bank. Other expense was $1.1 million in fiscal year 2022, $1.4 million in fiscal year 2021 and $0.2 million in fiscal year 2020, mainly due to one-time costs not related to our outstanding debt.
Provisionnormal business activities.
Year ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | 2020 | 2022-2021 | 2021-2020 | |||||||||||||||||||||||||||||||||||||||
Gain on deconsolidation of a subsidiary | 4,607 | — | — | $ | 4,607 | 100 | % | $ | — | — | % |
Year ended September 30, | Change | |||||||||||||||||||||||||||
(in thousands, except percentages) | 2019 | 2018 | 2017 | 2019-2018 | 2018-2017 | |||||||||||||||||||||||
Provision for income taxes | $ | (292 | ) | $ | (242 | ) | $ | (280 | ) | $ | (50 | ) | 21 | % | $ | 38 | (14 | )% |
Year ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | 2020 | 2022-2021 | 2021-2020 | |||||||||||||||||||||||||||||||||||||||
Benefit from (provision for) income taxes | $ | 10,411 | $ | 1,930 | $ | (382) | $ | 8,481 | 439 | % | $ | 2,312 | (605)% |
Quarterly Results
Preferred stock financings
As of September 30, 2019, we had raised $290.5 million in net proceeds from the sale of our equity securities, including the sale of 10,326,454 shares of our Series D redeemable convertible preferred stock from January 2016 through September 2018 at a purchase price of $21.24 per share for gross proceeds of $219.4 million. On March 19, 2018Loan and May 29, 2018, we issued 2,353,544 and 941,417 shares of Series D redeemable convertible preferred stock for an aggregate purchase price of approximately $50.0 million and $20.0 million, respectively. On July 2, 2018 and July 3, 2018, we issued 517,778 and 47,070 shares of Series D redeemable convertible preferred stock for an aggregate purchase price of $11.0 million and $1.0 million, respectively.
Debt financings
Security Agreement
was paid in full in December 2021.
In addition, we obtained a revolving facility from SVB in September 2017 as part of the Fourth Loan and the facility which allows us to borrow up to $10.0 million. The principal amount outstanding under the revolving line accrues interest at a floating per annum rate equal to one percentage point (1.00%) above the prime rate, which interest shall be payable monthly. The amounts available under the revolving line are limited by an advance rate which is a percentage of our account receivables balance. As of September 30, 2019, we have not borrowed against the $10 million revolving facility.
Our credit facilities contain customary representations and warranties and customary affirmative and negative covenants applicable to us and our subsidiaries, including, among other things, restrictions on changes in business, management, ownership or business locations, indebtedness, encumbrances, investments, mergers or acquisitions, dispositions, maintenance of collateral accounts, prepayment of other indebtedness, distributions and transactions with affiliates. The credit facilities contain customary events of default subject in certain cases to grace periods and notice requirements, including (a) failure to pay principal, interest and other obligations when due, (b) material misrepresentations, (c) breach of covenants, conditions or agreements in the credit facilities, (d) default under material indebtedness, (e) certain bankruptcy events, (f) a material adverse change; (g) attachment, levy or restraint on business, (h) default with respect to subordinated debt, (i) cross default under our credit facilities, and (j) government approvals being revoked. As part of the Fourth Loan, all rights, title and interest to our personal property with the exception of our intellectual property, have been pledged as collateral, including cash and cash equivalents, short-term investments, accounts receivable, contractual rights to payment, license agreements, general intangibles, inventory and equipment. We were in compliance with all covenants under the loan and security agreement as of September 30, 2019.
Future maturities of the loan as of September 30, 2019 are as follows:
(in thousands) | Principal | Interest | Total | |||||||||
Years ending September 30, | ||||||||||||
2020 | 3,333 | 486 | 3,819 | |||||||||
2021 | 3,333 | 214 | 3,547 | |||||||||
2022 | 834 | 11 | 845 | |||||||||
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7,500 | 711 | 8,211 | ||||||||||
Less: Interest | (711 | ) | ||||||||||
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Total amount of loan principal | 7,500 | |||||||||||
Less unamortized debt discount | (269 | ) | ||||||||||
Add accretion of final payment fee | 502 | |||||||||||
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$ | 7,733 | |||||||||||
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Capital resources
As of September 30, 2019,2022, we had cash, cash equivalents and short-term investments of $138.1$505.0 million. On October 30, 2018, our registration statement on FormS-1 was declared effective by the SEC and our shares began trading on the NASDAQ Global Stock Market on October 31, 2018. A total of 5,750,000 shares were offered and sold at a price of $14.00 per share. As a result of the IPO, the Company received $69.6 million in net proceeds, after deducting underwriting discounts and commissions of $5.6 million and offering expenses of $5.3 million payable by the Company.
In May 2019, we completed an underwritten public offering of common stock. A total of 4,312,500 shares were offered and sold at a price of $21.00 per share, and the Company received net proceeds of $84.3 million, after deducting an underwriting discount and commission totaling $5.4 million, and we incurred offering expenses of $0.9 million.
Cash flows
Year ended September 30, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Net cash used in operating activities | $ | (87,937 | ) | $ | (66,164 | ) | $ | (51,301 | ) | |||
Net cash provided by (used in) investing activities | (104,810 | ) | 27,306 | (9,990 | ) | |||||||
Net cash provided by financing activities | 158,578 | 88,822 | 63,802 |
Year ended | ||||||||||||||||||||
September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
Net cash used in operating activities | $ | (124,385) | $ | (112,244) | $ | (142,255) | ||||||||||||||
Net cash provided by (used in) investing activities | (232,930) | 156,155 | (114,650) | |||||||||||||||||
Net cash provided by financing activities | 270,534 | 329,182 | 303,732 |
The change in operating assets and liabilities was mainly due to increases in account receivable of $9.6 million, inventory of $7.5 million, prepaid expenses and other current assets of $2.6 million, accounts payable of $7.4 million, accrued expenses of $2.3 million, accrued compensation of $4.9 million, offset by decreases in other non-current assets of $7.3 million, and other liabilities of $7.4 million.
Net cash used in operating activities was $51.3 million in fiscal 2017 and consisted primarily of a net loss of $59.3 million adjusted fornon-cash items including depreciation and amortization expenses of $5.0 million, stock-based compensation expense of $1.9 million, a The change in operating assets and liabilities was mainly due to increase in inventory of $0.1$19.5 million, other non-current assets of $4.7 million, accounts receivable of $2.2 million and adecrease in accounts payable of $8.5 million and accrued compensation of $7.4 million.
our 2021 Annual Report.
computers of $101.9 million, new business acquired of $8.2 million and deconsolidation of Revelar of $5.8 million.
In fiscal 2017, our investing activities used net cash of $10.0 million. The use of net cash resulted primarily from the net impact of purchases and maturity of investments of $183.7 million and purchases of laboratory property, equipment and computers.
computers of $27.1 million.
common stock for income tax withholdings.
Netour net cash provided by financing activities was $63.8 million infor the fiscal 2017, which consistedyear 2020 can be found on page 59 of $65.6 million from the issuanceour 2021 Annual Report.
Set forth below is information concerning our contractual commitments and obligations as of September 30, 2019:
(in thousands) | Total | Less than 1 Year | Years 2-3 | Years 4-5 | After 5 Years | |||||||||||||||
Contractual obligations | ||||||||||||||||||||
Future minimum operating lease payments | $ | 40,719 | $ | 6,671 | $ | 11,888 | $ | 12,093 | $ | 10,067 | ||||||||||
Long-term debt obligations | 8,937 | 3,820 | 5,117 | — | — | |||||||||||||||
Purchase commitments | 13,686 | 12,871 | 714 | 67 | 34 | |||||||||||||||
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Total | $ | 63,342 | $ | 23,362 | $ | 17,719 | $ | 12,160 | $ | 10,101 | ||||||||||
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In September 2016,
In March 2018,lease commencement date, the total future minimum lease payments under the agreement were $13.2 million.
3 years.
Revenue recognition
Effective October 1, 2017, we elected to early adopt the requirements of ASC 606 – Revenue from Contracts with Customers using the full retrospective method. We evaluated the impact on revenues, loss from operations, net loss attributable to common stockholders and basic and diluted earnings per share for all periods presented and concluded that there was no material impact on our consolidated financial statements for all periods presented.
synthetic DNA that was manufactured and shipped to the customer.
We recognize revenue at a point in time when control of the products is transferred to the customer. Management applies judgment in evaluating when a customer obtains control of the promised good which is generally when the product is delivered to the customer. Our customer contracts generally include a standard assurance warranty to guarantee that our products comply with agreed specifications. We reduce revenue by the amount of expected returns which have been insignificant.
We have elected the practical expedient of not disclosing the consideration allocated to remaining performance obligations and an explanation of when those amounts are expected to be recognized as revenue since the duration of our contracts is less than one year.
The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied as of September 30, 2022 was $4.5 million.
We state our revenues net of any taxes collected from customers that are required to be remitted to various government agencies. The amount of taxes collected from customers and payable to governmental entities is included on the balance sheet as part of “Accrued expenses and other current liabilities.”
Income tax
In preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our audited consolidated balance sheets. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance. A valuation allowance reduces our deferred tax assets to the amount that management estimates is more likely than not to be realized. In determining the amount of the valuation allowance, we consider income over recent years, estimated future taxable income, feasible tax planning strategies and other factors in each taxing jurisdiction in which we operate. If we determine that it is more likely than not that we will not realize all or a portion of our remaining deferred tax assets, then we will increase our valuation allowance with a charge to income tax expense. Conversely, if we determine that it is likely that we will ultimately be able to utilize all or a portion of the deferred tax assets for which a valuation allowance has been provided, then the related portion of the valuation allowance will reduce income tax expense. Significant management judgment is required in determining our provision for income taxes and potential tax exposures, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to establish a valuation allowance, which could materially impact our financial position and results of operations. Our ability to utilize our deferred tax assets and the need for a related valuation allowance are monitored on an ongoing basis.
Furthermore, computation of our tax liabilities involves examining uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on thetwo-step process as prescribed by the authoritative guidance provided by FASB. The first step is to evaluate the tax position to determine whether there is sufficient available evidence to indicate if it is more likely than not that the position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step requires us to measure and determine the approximate amount of the tax benefit at the largest amount that is more than 50% likely of being realized upon ultimate settlement with the tax authorities. It is inherently difficult and requires significant judgment to estimate such amounts, as this requires us to determine the probability of various possible outcomes. We reexamine these uncertain tax positions on a quarterly basis. This reassessment is based on various factors during the period including, but not limited to, changes in worldwide tax laws and treaties, changes in facts or circumstances, effectively settled issues under audit and any new audit activity. A change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period.
We have granted performance-based stock units (PSUs) and performance stock options (PSOs) to executive officers and senior level employees. We value PSUs using a grant date fair value equal to the closing share price of our common stock on the date of grant and the probability of the achievement of the performance condition.
•Expected Term. Our expected term represents the period that our stock-based awards are expected |
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For options grantedto non-employee consultants,be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term), as we do not have sufficient historical data to use any other method to estimate expected term.
reporting unit requires significant judgment and involves the use of significant estimates and assumptions. We test goodwill for impairment in our fourth quarter each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of the reporting unit with goodwill is less than its carrying value. When this qualitative assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is considered not impaired and we are not required to perform the goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the fair value of the reporting unit. When this qualitative assessment concludes that it is more likely than not that the fair value is below the carrying value, goodwill is tested for impairment by determining the fair value of the reporting unit and comparing it to the carrying value of the net assets assigned to the reporting unit. If the fair value of the reporting unit exceeds its carrying value, goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its fair value, we would record an impairment loss up to the
difference between the carrying value and implied fair value. For 2022, our qualitative assessment indicated that the fair value of our reporting unit substantially exceeded the carrying value and that a quantitative assessment was unnecessary.
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Interest rates risk
related to changes in interest rates. We had cash, and cash equivalents totaling $46.7 million and $80.8marketable securities of $505.0 million as of September 30, 2019 and 2018, respectively. We had short-term investments totaling $91.4 million as2022, which consisted primarily of September 30, 2019 and none as of September 30, 2018. Our cash and cash equivalents consist of cash in bank accounts and money market funds and short-term investments consistmarketable securities, largely composed of U.S. government agency bonds, corporate bonds, and commercial paper. investment grade, short to intermediate term fixed income securities.
Foreign currency exchange rate risk
Substantially all of our revenues and operating expenses are denominated in U.S. dollars. Therefore, we do not believe that our exposure to foreign currency exchange risk is material to our business, financial condition or results of operations. IfFor example, a significant portionhypothetical 10% relative change in interest rates during any of the periods presented would not have a material impact on our consolidated financial statements.
Valuation of intangible assets acquired in a business combination | ||||||||
Description of the Matter | As described in Note 14, on December 1, 2021, the Company acquired all of the outstanding stock of AbX Biologics, Inc. (“Abveris”), which was accounted for as a business combination using the acquisition method of accounting. The acquired intangible assets principally consisted of developed technology and customer relationships, which had estimated acquisition-date fair values of $30.9 million and $14.7 million, respectively. Auditing the acquisition date fair values of the acquired developed technology and customer relationships was complex due to the significant judgment required in estimating their fair values. In particular, the fair value estimates required the use of valuation methodologies that were sensitive to significant assumptions (e.g., projected revenue growth rates, including forecasted selling prices and unit volumes, and discount rates applied to each intangible asset), which were affected by expected future market or economic conditions. | |||||||
How We Addressed the Matter in Our Audit | We tested controls that address the risks of material misstatement relating to the valuation of the intangible assets which were primarily comprised of developed technology and customer relationships. For example, we tested controls over management’s review of the significant assumptions, such as the acquired business’s projected revenue growth rates, including forecasted selling prices and unit volumes, and the discount rate applied to each intangible asset. To test the estimated fair value of the acquired developed technology and customer relationship intangible assets, our audit procedures included, among others, assessing the appropriateness of the valuation methodologies and testing the significant assumptions discussed above and the completeness and accuracy of the underlying data used by the Company. For example, we evaluated the reasonableness of assumptions used to determine the projected revenue growth rates by comparing the forecasted assumptions to historical performance, projected industry growth rates, and other factors considered by management in developing the model. We involved our valuation specialist to assist in evaluating the valuation methodologies and discount rates used to value the developed technology and customer relationships. We also performed sensitivity analyses to evaluate the changes in the fair value of the acquired developed technology and customer relationship intangible assets that would result from changes in the significant assumptions. |
December 12, 2019
(In thousands, except share and per share data) | September 30, 2019 | September 30, 2018 | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 46,735 | $ | 80,757 | ||||
Short-term investments | 91,372 | — | ||||||
Accounts receivable, net | 12,104 | 5,419 | ||||||
Inventories | 7,330 | 6,028 | ||||||
Prepaid expenses and other current assets | 2,594 | 3,467 | ||||||
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Total current assets | $ | 160,135 | $ | 95,671 | ||||
Property and equipment, net | 20,835 | 12,331 | ||||||
Goodwill | 1,138 | 1,138 | ||||||
Intangible assets, net | 508 | 712 | ||||||
Restricted cash,non-current | 579 | 579 | ||||||
Othernon-current assets | 3,799 | 5,360 | ||||||
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Total assets | $ | 186,994 | $ | 115,791 | ||||
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Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 9,760 | $ | 7,531 | ||||
Accrued expenses | 5,965 | 2,166 | ||||||
Accrued compensation | 10,479 | 5,401 | ||||||
Current portion of long-term debt | 3,333 | 2,500 | ||||||
Other current liabilities | 817 | 939 | ||||||
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Total current liabilities | $ | 30,354 | $ | 18,537 | ||||
Redeemable convertible preferred stock warrant liability | — | 631 | ||||||
Long-term debt, net of current portion | 4,400 | 7,218 | ||||||
Othernon-current liabilities | 158 | 344 | ||||||
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Total liabilities | $ | 34,912 | $ | 26,730 | ||||
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Commitments and contingencies (Note 7) | ||||||||
Redeemable convertible preferred stock | ||||||||
Series A redeemable convertible preferred stock, $0.00001 par value—no shares and 2,854,576 shares authorized as of September 30, 2019 and 2018; no shares and 2,817,723 shares issued and outstanding as of September 30, 2019 and 2018. | $ | — | $ | 9,141 | ||||
Series B redeemable convertible preferred stock, $0.00001 par value—no shares and 3,331,878 shares authorized as of September 30, 2019 and 2018; no shares and 3,315,645 shares issued and outstanding as of September 30, 2019 and 2018. | — | 25,900 | ||||||
Series C redeemable convertible preferred stock, $0.00001 par value—no shares and 2,510,354 shares authorized as of September 30, 2019 and 2018; no shares and 2,491,483 shares issued and outstanding as of September 30, 2019 and 2018. | — | 36,726 | ||||||
Series D redeemable convertible preferred stock, $0.00001 par value—no shares and 10,475,252 shares authorized as of September 30, 2019 and 2018, respectively; no shares and 10,326,454 shares issued and outstanding as of September 30, 2019 and 2018, respectively. | — | 218,716 | ||||||
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Total redeemable convertible preferred stock | $ | — | $ | 290,483 | ||||
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Stockholders’ equity (deficit) | ||||||||
Preferred stock, $0.00001 par value—10,000,000 shares and no shares authorized as of September 30, 2019 and 2018, respectively; no shares issued or outstanding as of September 30, 2019 and 2018, respectively. | $ | — | $ | — | ||||
Common stock, $0.00001 par value—100,000,000 and 21,210,000 shares authorized at September 30, 2019 and 2018, respectively; 32,872,675 and 3,206,048 shares issued and outstanding at September 30, 2019 and 2018, respectively. | — | — | ||||||
Additionalpaid-in capital | 470,425 | 9,346 | ||||||
Accumulated other comprehensive income | 181 | 87 | ||||||
Accumulated deficit | (318,524 | ) | (210,855 | ) | ||||
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Total stockholders’ equity (deficit) | $ | 152,082 | $ | (201,422 | ) | |||
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Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) | $ | 186,994 | $ | 115,791 | ||||
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(In thousands except per share data) | September 30, 2022 | September 30, 2021 | ||||||||||||
Assets | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 378,687 | $ | 465,829 | ||||||||||
Short-term investments | 126,281 | 12,034 | ||||||||||||
Accounts receivable, net | 40,294 | 28,549 | ||||||||||||
Inventories | 39,307 | 31,800 | ||||||||||||
Prepaid expenses and other current assets | 11,914 | 8,283 | ||||||||||||
Total current assets | $ | 596,483 | $ | 546,495 | ||||||||||
Property and equipment, net | 139,441 | 44,122 | ||||||||||||
Operating lease right-of-use assets | 74,948 | 61,580 | ||||||||||||
Goodwill | 85,811 | 22,434 | ||||||||||||
Intangible assets, net | 59,738 | 18,262 | ||||||||||||
Restricted cash, non-current | 1,572 | 1,530 | ||||||||||||
Other non-current assets | 3,385 | 7,674 | ||||||||||||
Total assets | $ | 961,378 | $ | 702,097 | ||||||||||
Liabilities and stockholders’ equity | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 20,092 | $ | 14,900 | ||||||||||
Accrued expenses | 10,169 | 6,437 | ||||||||||||
Accrued compensation | 27,023 | 22,327 | ||||||||||||
Current portion of operating lease liability | 13,642 | 8,213 | ||||||||||||
Current portion of long-term debt | — | 1,552 | ||||||||||||
Other current liabilities | 19,737 | 9,623 | ||||||||||||
Total current liabilities | $ | 90,663 | $ | 63,052 | ||||||||||
Operating lease liability, net of current portion | 81,270 | 53,156 | ||||||||||||
Other non-current liabilities | 60 | 5,068 | ||||||||||||
Total liabilities | $ | 171,993 | $ | 121,276 | ||||||||||
Commitments and contingencies (Note 7) | ||||||||||||||
Stockholders’ equity | ||||||||||||||
Common stock, $0.00001 par value — 100,000 and 100,000 shares authorized at September 30, 2022 and 2021, respectively; 56,523 and 49,499 shares issued and outstanding at September 30, 2022 and 2021, respectively | $ | — | $ | — | ||||||||||
Additional paid-in capital | 1,619,644 | 1,190,828 | ||||||||||||
Accumulated other comprehensive (loss)/income | (1,843) | 546 | ||||||||||||
Accumulated deficit | (828,416) | (610,553) | ||||||||||||
Total stockholders’ equity | $ | 789,385 | $ | 580,821 | ||||||||||
Total liabilities and stockholders’ equity | $ | 961,378 | $ | 702,097 |
Year ended September 30, | ||||||||||||
(In thousands, except share and per share data) | 2019 | 2018 | 2017 | |||||||||
Revenues | $ | 54,385 | $ | 25,427 | $ | 10,767 | ||||||
Operating expenses: | ||||||||||||
Cost of revenues | $ | 47,426 | $ | 32,189 | $ | 24,020 | ||||||
Research and development | 35,683 | 20,347 | 19,169 | |||||||||
Selling, general and administrative | 80,126 | 43,450 | 26,060 | |||||||||
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| |||||||
Total operating expenses | $ | 163,235 | $ | 95,986 | $ | 69,249 | ||||||
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| |||||||
Loss from operations | $ | (108,850 | ) | $ | (70,559 | ) | $ | (58,482 | ) | |||
Interest income | 3,032 | 999 | 412 | |||||||||
Interest expense | (1,294 | ) | (1,313 | ) | (905 | ) | ||||||
Other income (expense), net | (265 | ) | (121 | ) | (55 | ) | ||||||
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| |||||||
Loss before income taxes | $ | (107,377 | ) | $ | (70,994 | ) | $ | (59,030 | ) | |||
Provision for income taxes | (292 | ) | (242 | ) | (280 | ) | ||||||
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Net loss attributable to common stockholders | $ | (107,669 | ) | $ | (71,236 | ) | $ | (59,310 | ) | |||
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| |||||||
Other comprehensive loss: | ||||||||||||
Change in unrealized gain (loss) on investments | $ | 49 | $ | — | $ | (9 | ) | |||||
Foreign currency translation adjustment | 45 | 54 | 33 | |||||||||
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Comprehensive loss | $ | (107,575 | ) | $ | (71,182 | ) | $ | (59,286 | ) | |||
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Net loss per share attributable to common stockholders—basic and diluted | $ | (3.92 | ) | $ | (25.51 | ) | $ | (24.49 | ) | |||
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Weighted average shares used in computing net loss per share attributable to common stockholders—basic and diluted | 27,461,844 | 2,792,743 | 2,422,243 | |||||||||
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Year ended September 30, | ||||||||||||||||||||
(In thousands, except per share data) | 2022 | 2021 | 2020 | |||||||||||||||||
Revenues | $ | 203,565 | $ | 132,333 | $ | 90,100 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of revenues | $ | 119,330 | $ | 80,620 | $ | 61,406 | ||||||||||||||
Research and development | 120,307 | 69,072 | 43,006 | |||||||||||||||||
Selling, general and administrative | 212,949 | 135,901 | 103,267 | |||||||||||||||||
Change in fair value of contingent considerations and holdbacks | (14,245) | (534) | — | |||||||||||||||||
Litigation settlement | — | — | 22,500 | |||||||||||||||||
Total operating expenses | $ | 438,341 | $ | 285,059 | $ | 230,179 | ||||||||||||||
Loss from operations | $ | (234,776) | $ | (152,726) | $ | (140,079) | ||||||||||||||
Interest income | 3,062 | 435 | 1,499 | |||||||||||||||||
Interest expense | (80) | (367) | (787) | |||||||||||||||||
Gain on deconsolidation of subsidiary | 4,607 | — | — | |||||||||||||||||
Other income (expense), net | (1,087) | (1,370) | (182) | |||||||||||||||||
Loss before income taxes | $ | (228,274) | $ | (154,028) | $ | (139,549) | ||||||||||||||
Benefit from (provision for) income taxes | 10,411 | 1,930 | (382) | |||||||||||||||||
Net loss attributable to common stockholders | $ | (217,863) | $ | (152,098) | $ | (139,931) | ||||||||||||||
Other comprehensive loss: | ||||||||||||||||||||
Change in unrealized gain (loss) on investments | $ | (1,594) | $ | (14) | $ | (34) | ||||||||||||||
Foreign currency translation adjustment | (795) | 473 | (60) | |||||||||||||||||
Comprehensive loss | $ | (220,252) | $ | (151,639) | $ | (140,025) | ||||||||||||||
Net loss per share attributable to common stockholders—basic and diluted | $ | (4.04) | $ | (3.15) | $ | (3.57) | ||||||||||||||
Weighted average shares used in computing net loss per share attributable to common stockholders—basic and diluted | 53,885 | 48,251 | 39,190 |
Series A convertible preferred stock | Series B convertible preferred stock | Series C convertible preferred stock | Series D convertible preferred stock | Common stock | Additional paid-in capital | Accumulated other comprehensive income | Accumulated deficit | Total stockholders’ equity (deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share data) | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
Balances as of September 30, 2016 | 2,817,723 | $ | 9,141 | 3,315,645 | $ | 25,900 | 2,491,483 | $ | 36,726 | 2,938,714 | $ | 62,270 | 3,146,233 | $ | — | $ | 3,689 | $ | 9 | $ | (80,309 | ) | $ | (76,611 | ) | |||||||||||||||||||||||||||||||
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Issuance of Series D redeemable convertible preferred stock, net of financing costs of $165 | — | — | — | — | — | — | 3,095,375 | 65,596 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Vesting of restricted common stock issued to member of the Board of Directors | — | — | — | — | — | — | — | — | — | — | 4 | — | — | 4 | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | — | — | — | 32,586 | — | 162 | — | — | 162 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock warrants | — | — | — | — | — | — | — | — | — | — | 486 | — | — | 486 | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | — | — | 1,887 | — | — | 1,887 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | — | — | — | — | 24 | — | 24 | ||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | — | — | (59,310 | ) | (59,310 | ) | ||||||||||||||||||||||||||||||||||||||||
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Balances as of September 30, 2017 | 2,817,723 | $ | 9,141 | 3,315,645 | $ | 25,900 | 2,491,483 | $ | 36,726 | 6,034,089 | $ | 127,866 | 3,178,819 | $ | — | $ | 6,228 | $ | 33 | $ | (139,619 | ) | $ | (133,358 | ) | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Issuance of Series D redeemable convertible preferred stock, net of financing costs of $339 | — | — | — | — | — | — | 4,292,365 | 90,850 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | — | — | — | 62,862 | — | 215 | — | — | 215 | ||||||||||||||||||||||||||||||||||||||||||
Repurchase of early exercised stock options | — | — | — | — | — | — | — | — | (9,639 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Forfeiture of restricted common stock | — | — | — | — | — | — | — | — | (21,146 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | — | — | 2,961 | — | — | 2,961 | ||||||||||||||||||||||||||||||||||||||||||
Treasury stock purchase | (4,848 | ) | — | (58 | ) | — | — | (58 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | — | �� | — | — | — | 54 | — | 54 | |||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | — | — | (71,236 | ) | (71,236 | ) | ||||||||||||||||||||||||||||||||||||||||
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Balances as of September 30, 2018 | 2,817,723 | $ | 9,141 | 3,315,645 | $ | 25,900 | 2,491,483 | $ | 36,726 | 10,326,454 | $ | 218,716 | 3,206,048 | $ | — | $ | 9,346 | $ | 87 | $ | (210,855 | ) | $ | (201,422 | ) | |||||||||||||||||||||||||||||||
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Issuance of common stock in public offerings, net of underwriting discounts, commissions and offering expenses of $17,210 | — | — | — | — | — | — | — | — | 10,062,500 | — | 153,852 | — | — | 153,852 | ||||||||||||||||||||||||||||||||||||||||||
Vesting of restricted stock units | — | — | — | — | — | — | — | — | 8,352 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Issuance of shares under the employee stock purchase plan | — | — | — | — | — | — | — | — | 219,144 | — | 2,700 | — | — | 2,700 | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | — | — | — | 331,205 | — | 2,264 | — | — | 2,264 | ||||||||||||||||||||||||||||||||||||||||||
Conversion of redeemable convertible preferred stock warrant liability to equity | — | — | — | — | — | — | — | — | — | — | 631 | — | — | 631 | ||||||||||||||||||||||||||||||||||||||||||
Conversion of redeemable convertible preferred stock to common stock | (2,817,723 | ) | (9,141 | ) | (3,315,645 | ) | (25,900 | ) | (2,491,483 | ) | (36,726 | ) | (10,326,454 | ) | (218,716 | ) | 18,951,305 | — | 290,462 | — | — | 290,462 | ||||||||||||||||||||||||||||||||||
Repurchase of early exercised stock options | — | — | — | — | — | — | — | — | (442 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | — | — | 11,170 | — | — | 11,170 | ||||||||||||||||||||||||||||||||||||||||||
Net exercise of stock warrants | — | — | — | — | — | — | — | — | 94,563 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | — | — | — | — | 94 | — | 94 | ||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | — | — | (107,669 | ) | (107,669 | ) | ||||||||||||||||||||||||||||||||||||||||
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Balances as of September 30, 2019 | — | $ | — | — | $ | — | — | $ | — | — | $ | — | 32,872,675 | $ | — | $ | 470,425 | $ | 181 | $ | (318,524 | ) | $ | 152,082 | ||||||||||||||||||||||||||||||||
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Common stock | Additional paid-in capital | Accumulated other comprehensive income | Accumulated deficit | Total stockholders' equity | ||||||||||||||||||||||||||||||||||
(In thousands) | Shares | Amount | ||||||||||||||||||||||||||||||||||||
Balances as of September 30, 2019 | 32,873 | $ | — | $ | 470,425 | $ | 181 | $ | (318,524) | $ | 152,082 | |||||||||||||||||||||||||||
Issuance of common stock in public offerings, net of underwriting discounts, commissions and offering expenses of $18,916 | 11,064 | — | 295,563 | — | — | 295,563 | ||||||||||||||||||||||||||||||||
Vesting of restricted stock units | 178 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Issuance of shares under the employee stock purchase plan | 126 | — | 3,428 | — | — | 3,428 | ||||||||||||||||||||||||||||||||
Exercise of stock options | 915 | — | 10,539 | — | — | 10,539 | ||||||||||||||||||||||||||||||||
Repurchase of early exercised stock options | (2) | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 17,096 | — | — | 17,096 | ||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (94) | — | (94) | ||||||||||||||||||||||||||||||||
Repurchase of common stock for income tax withholdings | (71) | — | (2,421) | — | — | (2,421) | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | (139,931) | (139,931) | ||||||||||||||||||||||||||||||||
Balances as of September 30, 2020 | 45,083 | $ | — | $ | 794,630 | $ | 87 | $ | (458,455) | $ | 336,262 | |||||||||||||||||||||||||||
Issuance of common stock in public offerings, net of underwriting discounts, commissions and offering expenses of $21,139 | 3,136 | — | 323,861 | — | — | 323,861 | ||||||||||||||||||||||||||||||||
Vesting of restricted stock units | 237 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Issuance of shares under the employee stock purchase plan | 74 | — | 4,944 | — | — | 4,944 | ||||||||||||||||||||||||||||||||
Exercise of stock options | 804 | — | 14,471 | — | — | 14,471 | ||||||||||||||||||||||||||||||||
Repurchase of early exercised stock options | (2) | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Business acquisition | 237 | — | 26,773 | — | — | 26,773 | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 36,998 | — | — | 36,998 | ||||||||||||||||||||||||||||||||
Net exercise of stock warrants | 22 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 459 | — | 459 | ||||||||||||||||||||||||||||||||
Repurchase of common stock for income tax withholdings | (92) | — | (10,849) | — | — | (10,849) | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | (152,098) | (152,098) | ||||||||||||||||||||||||||||||||
Balances as of September 30, 2021 | 49,499 | $ | — | $ | 1,190,828 | $ | 546 | $ | (610,553) | $ | 580,821 | |||||||||||||||||||||||||||
Issuance of common stock in public offering, net of underwriting discounts and commissions and offering expenses of $17,678 | 5,227 | — | 269,822 | — | — | 269,822 | ||||||||||||||||||||||||||||||||
Vesting of restricted stock units | 365 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Issuance of shares under the employee stock purchase plan | 97 | — | 4,010 | — | — | 4,010 | ||||||||||||||||||||||||||||||||
Exercise of stock options | 486 | — | 5,952 | — | — | 5,952 | ||||||||||||||||||||||||||||||||
Business acquisition | 988 | — | 77,122 | — | — | 77,122 | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 79,664 | — | — | 79,664 | ||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (2,389) | — | (2,389) | ||||||||||||||||||||||||||||||||
Repurchase of common stock for income tax withholdings | (139) | — | (7,754) | — | — | (7,754) | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | (217,863) | (217,863) | ||||||||||||||||||||||||||||||||
Balances as of September 30, 2022 | 56,523 | $ | — | $ | 1,619,644 | $ | (1,843) | $ | (828,416) | $ | 789,385 |
Year ended September 30, | ||||||||||||
(in thousands) | 2019 | 2018(1) | 2017(1) | |||||||||
Cash flows from operating activities | ||||||||||||
Net loss | $ | (107,669 | ) | $ | (71,236 | ) | $ | (59,310 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||
Depreciation and amortization | 6,111 | 5,727 | 5,021 | |||||||||
Loss on disposal of property and equipment | 189 | 55 | 507 | |||||||||
Stock-based compensation | 11,170 | 2,961 | 1,891 | |||||||||
Discount accretion on investment securities | (1,249 | ) | — | — | ||||||||
Non-cash interest expense | 233 | 254 | 363 | |||||||||
Change in fair value of redeemable convertible preferred stock warrant liability | — | (13 | ) | 261 | ||||||||
Amortization of debt discount | 282 | 308 | 95 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable, net | (6,685 | ) | (3,073 | ) | (1,623 | ) | ||||||
Inventories | (1,302 | ) | (4,202 | ) | (599 | ) | ||||||
Prepaid expenses and other current assets | 746 | (1,760 | ) | (324 | ) | |||||||
Othernon-current assets | (2,064 | ) | (812 | ) | (481 | ) | ||||||
Accounts payable | 3,278 | 3,759 | 560 | |||||||||
Accrued expenses | 4,210 | (114 | ) | 621 | ||||||||
Accrued compensation | 5,060 | 1,932 | 1,067 | |||||||||
Other liabilities | (247 | ) | 50 | 650 | ||||||||
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| |||||||
Net cash used in operating activities | (87,937 | ) | (66,164 | ) | (51,301 | ) | ||||||
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| |||||||
Cash flows from investing activities | ||||||||||||
Purchases of property and equipment | (14,757 | ) | (3,688 | ) | (6,594 | ) | ||||||
Proceeds from sale of property and equipment | 21 | 17 | 266 | |||||||||
Purchases of investments | (177,574 | ) | (3,523 | ) | (40,587 | ) | ||||||
Maturity of investments | 87,500 | 34,500 | 36,925 | |||||||||
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| |||||||
Net cash provided by (used in) investing activities | (104,810 | ) | 27,306 | (9,990 | ) | |||||||
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| |||||||
Cash flows from financing activities | ||||||||||||
Proceeds from exercise of stock options | 2,170 | 331 | 205 | |||||||||
Proceeds from public offerings, net of underwriting discounts, commissions and offering expenses | 156,208 | — | — | |||||||||
Proceeds from issuance of Series D redeemable convertible preferred stock, net of issuance costs | — | 90,850 | 65,596 | |||||||||
Proceeds from issuance under employee stock purchase plan | 2,700 | — | — | |||||||||
Payments of deferred offering costs | — | (2,359 | ) | — | ||||||||
Borrowings of long-term debt | — | — | 2,174 | |||||||||
Repayments of long-term debt | (2,500 | ) | — | (4,173 | ) | |||||||
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| |||||||
Net cash provided by financing activities | 158,578 | 88,822 | 63,802 | |||||||||
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| |||||||
Effect of exchange rates on cash, cash equivalents and restricted cash | 30 | — | — | |||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (34,139 | ) | 49,964 | 2,511 | ||||||||
Cash, cash equivalents, and restricted cash at beginning of year | 81,537 | 31,573 | 29,062 | |||||||||
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| |||||||
Cash, cash equivalents, and restricted cash at end of year | $ | 47,398 | $ | 81,537 | $ | 31,573 | ||||||
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| |||||||
Supplemental disclosure of cash flow information | ||||||||||||
Interest paid | $ | 779 | $ | 751 | $ | 702 | ||||||
Income taxes paid, net of refunds | 291 | 179 | 6 | |||||||||
Non-cash investing and financing activities | ||||||||||||
Property and equipment additions included in accrued expenses and accounts payable | $ | 170 | $ | 344 | $ | 285 | ||||||
Fair value of warrants issued in connection with debt | — | — | 486 | |||||||||
Deferred offering costs included in accounts payable and accrued expenses | — | 1,308 | — | |||||||||
Conversion of redeemable convertible preferred stock warrant liability to equity | 631 | — | — | |||||||||
Conversion of redeemable convertible preferred stock to common stock | 290,462 | — | — |
|
Year ended September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Net loss | $ | (217,863) | $ | (152,098) | $ | (139,931) | ||||||||||||||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||||||||||
Depreciation and amortization | 16,514 | 9,750 | 6,677 | |||||||||||||||||
Non-cash lease expense, net of tenant improvement allowance | 20,127 | 2,243 | (1,043) | |||||||||||||||||
Gain on deconsolidation of Revelar | (4,607) | — | — | |||||||||||||||||
Loss on disposal of property and equipment | — | 2 | — | |||||||||||||||||
Stock-based compensation | 79,664 | 36,998 | 17,096 | |||||||||||||||||
Discount (premium) accretion on investment securities | 1,315 | 593 | (214) | |||||||||||||||||
Realized gain on investments | — | (5) | — | |||||||||||||||||
Allowance for doubtful accounts | (11) | 40 | — | |||||||||||||||||
Change in fair value of contingent considerations and holdbacks | (14,245) | (534) | — | |||||||||||||||||
Non-cash interest expense | 3 | 67 | 152 | |||||||||||||||||
Amortization of debt discount | 4 | 81 | 184 | |||||||||||||||||
Write off property and equipment | 70 | — | — | |||||||||||||||||
Changes in assets and liabilities: | ||||||||||||||||||||
Accounts receivable, net | (9,622) | (2,202) | (14,272) | |||||||||||||||||
Inventories | (7,536) | (19,489) | (4,956) | |||||||||||||||||
Prepaid expenses and other current assets | (2,551) | (2,058) | (3,683) | |||||||||||||||||
Other non-current assets | 7,273 | (4,653) | (554) | |||||||||||||||||
Accounts payable | 7,383 | 8,542 | (5,506) | |||||||||||||||||
Accrued expenses | 2,269 | 3,115 | (2,648) | |||||||||||||||||
Accrued compensation | 4,852 | 7,392 | 4,465 | |||||||||||||||||
Other liabilities | (7,424) | (28) | 1,978 | |||||||||||||||||
Net cash used in operating activities | (124,385) | (112,244) | (142,255) | |||||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Purchases of property and equipment | (101,857) | (27,061) | (9,868) | |||||||||||||||||
Business acquisition, net of cash acquired | (8,160) | (483) | — | |||||||||||||||||
Deconsolidation of cash and cash equivalent relating to Revelar | (5,755) | — | — | |||||||||||||||||
Purchases of investments | (217,639) | (58,795) | (202,882) | |||||||||||||||||
Proceeds from maturity of investments | 100,481 | 242,494 | 98,100 | |||||||||||||||||
Net cash provided by (used in) investing activities | (232,930) | 156,155 | (114,650) | |||||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from exercise of stock options | 6,014 | 14,559 | 10,495 | |||||||||||||||||
Proceeds from public offerings, net of underwriting discounts, commissions and offering expenses | 269,822 | 323,861 | 295,563 | |||||||||||||||||
Proceeds from issuance under employee stock purchase plan | 4,010 | 4,944 | 3,428 | |||||||||||||||||
Repayments of long-term debt | (1,558) | (3,333) | (3,333) | |||||||||||||||||
Repurchases of common stock for income tax withholding | (7,754) | (10,849) | (2,421) | |||||||||||||||||
Net cash provided by financing activities | 270,534 | 329,182 | 303,732 | |||||||||||||||||
Effect of exchange rates on cash, cash equivalents and restricted cash | (319) | 20 | 21 | |||||||||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (87,100) | 373,113 | 46,848 | |||||||||||||||||
Cash, cash equivalents, and restricted cash at beginning of year | 467,359 | 94,246 | 47,398 | |||||||||||||||||
Cash, cash equivalents, and restricted cash at end of year | $ | 380,259 | $ | 467,359 | $ | 94,246 | ||||||||||||||
Supplemental disclosure of cash flow information | ||||||||||||||||||||
Interest paid | $ | 9 | $ | 167 | $ | 438 | ||||||||||||||
Income taxes paid, net of refunds | 246 | 101 | 172 | |||||||||||||||||
Non-cash investing and financing activities | ||||||||||||||||||||
Property and equipment additions included in accrued expenses and accounts payable | $ | 6,297 | $ | 2,011 | $ | 1,333 | ||||||||||||||
Operating lease right-of-use assets obtained in exchange for operating lease liabilities | 21,367 | 33,617 | 3,718 | |||||||||||||||||
Issuance of common stock in connection with the business acquisition | 77,122 | 26,773 | — |
The
If the Company requires but is unable to obtain additional funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.
One customer
Year ended September 30, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Customer A | 17 | % | 34 | % | 40 | % |
One customerthe Company’s revenue for the fiscal year ended September 30, 2020.
September 30, | ||||||||
2019 | 2018 | |||||||
Customer A | 13 | % | 27 | % |
Cash and cash equivalents
2021.
depreciation and amortization expense of $6.1$16.5 million, $5.5$9.8 million, and $4.8$6.7 million for the years ended September 30, 2019, 20182022, 2021 and 2017,2020, respectively. Estimated lives of property and equipment are as follows:
Laboratory equipment | 5 Years | |||||
Furniture, fixtures and other equipment | 5 Years | |||||
Computer equipment | 3 Years | |||||
Computer software | 3 Years | |||||
Leasehold improvements | Lesser of useful life or facilities’ lease |
Maintenance and repairs are charged to expense as incurred. Betterments are capitalized and depreciated through the life of the lease. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in operations in the period realized.
assets.
Leases
2020.
single lease component.
Purchased intangible assets with finite lives During its goodwill impairment review, the Company assessed qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying value, including goodwill. The qualitative factors include, but are generally amortized over their estimated useful lives usingnot limited to, industry and market considerations and the straight-line method.Company’s overall financial performance. The Company reviews intangible assetsperformed its annual assessment for goodwill impairment in the fourth quarter of the fiscal year noting no indication of impairment. There were no triggering events indicating potential for impairment whenever events or changes in
business circumstances indicate that the carrying amounts
Effective October 1, 2017, the Company elected to early adopt the requirements of Accounting Standards Codification (ASC) 606,Revenue from Contracts with Customers using the full retrospective method. The Company evaluated the impact on revenues, loss from operations, net loss attributable to common stockholders and basic and diluted earnings per share for all periods presented and concluded that there was no material impact on the Company’s consolidated financial statements for all periods presented.
synthetic DNA that was manufactured and shipped to the customer.
The Company recognizes revenue at a point in time when control of the products is transferred to the customer. Management applies judgment in evaluating when a customer obtains control of the promised good which is generally when the product is shipped or delivered to the customer. The Company’s customer contracts generally include a standard assurance warranty to guarantee that its products comply with agreed specifications. The Company reduces revenue by the amount of expected returns which have been insignificant.
The Company has elected the practical expedient to not disclose the consideration allocated to remaining performance obligations and an explanation of when those amounts are expected to be recognized as revenue since the duration of the contracts is less than one year.
Refer to Note 15
milestone-based payments. The Company doesalso enters into research and development agreements that do not have anyinclude up-front or milestone-based payments and recognizes revenue on these types of agreements based on the timing of development activities. The Company’s research and development agreements may include more than one performance obligation. At the inception of the agreement, the Company assesses whether each obligation represents a separate performance obligation or whether such obligations should be combined as a single performance obligation. The transaction price for each agreement is determined based on the amount of consideration the Company expects to be entitled to for satisfying all performance obligations within the agreement. The Company assesses the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. In agreements where the Company satisfies performance obligation(s) over time, the Company recognizes development revenue typically using an input method based on costs incurred relative to the total expected cost which determines the extent of progress toward completion. As part of the accounting for these arrangements, the Company must develop estimates and assumptions that require judgment to determine the transaction price and progress towards completion. The Company reviews its estimate of the transaction price and progress toward completion based on the best information available to recognize the cumulative progress toward completion as of the end of each reporting period and makes revisions to such estimates as necessary. Also, these research and development agreements may include license payments. The Company recognizes revenue from functional license agreements when the license is transferred to the customer and the customer is able to use and benefit from the license. Functional license has significant standalone functionality because it can be used as is for performing a specific task.
The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied as of September 30, 2022 was $4.5 million.
Redeemable convertible preferred stock warrant liability
Outstanding warrants that were related to the Company’s redeemable convertible preferred stock are classified as liabilities on the balance sheet. As the warrants to purchase redeemable convertible preferred stock were exercisable into shares of convertible preferred stock, the Company had recognized a liability for the fair value of its warrants on the consolidated balance sheets upon issuance and subsequently remeasured the liability to fair value at the end of each reporting period. In connection with the closing of our IPO, all of the outstanding warrants to purchase redeemable convertible preferred stock automatically converted to warrants to purchase common stock, which qualify for equity classification and no further measurement has been required thereafter.
Common stock warrants
Warrants to purchase the Company’s common stock issued in conjunction with debt are recorded as additionalpaid-in-capital and classified as equity on the consolidated balance sheets. During the year ended September 30, 2017, the Company recorded $0.5 million in additionalpaid-in-capital for the fair value of warrants to purchase common stock issued in connection with long-term debt. There were no common stock warrants issued during the years ended September 30, 2018 and 2019.
Stock-based compensation
The Company considered all series of its convertible preferred stock to be participating securities as they were entitled to receive noncumulative dividends prior and in preference to any dividends on shares of common stock. Due to the Company’s net losses, there was no impact on the loss per share calculation in applyingthe two-class method since the participating securities had no legal obligation to share in any losses.
Reverse stock split
In October 2018, the Company’s stockholders approved aone-for-0.101 reverse stock split of its common and redeemable convertible preferred stock which was effected on October 16, 2018. The par value of the common stock and redeemable convertible preferred stock were not adjusted as a result of the reverse stock split. Accordingly, all share and per share amounts for all periods presented in the consolidated financial statements and notes thereto have been adjusted retrospectively to reflect this reverse stock split.
liabilities and are measured using the enacted tax rates and laws that are currently in effect. Valuation allowances are established where necessary to reduce deferred tax assets to the amounts expected to be realized.
Deferred offering costs
Deferred offering costs,
Recent accounting pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)2014-09,Revenue from Contracts with Customers (Topic 606), which provides accounting guidancetax liabilities for all revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application.outside basis differences. The Company adopted the new revenuethis standard oneffective October 1, 2017, using2021. The adoption of ASU-2019 12 did not have an impact on the full retrospective method.
Company’s consolidated financial statements as of and for the year ended September 30, 2022.
The Company estimates the key change upon adoption of the standard will result in balance sheet recognition of additional lease assets and lease liabilities as of October 1, 2019, which will be based on the present value of committed lease payments which the Company expects to be consistent with the future minimum lease payments disclosed in Note 7. The Company does not expect the adoption of the new standard to have a material impact on the recognition, measurement or presentation of lease expenses within its consolidated income statements, consolidated statements of comprehensive income or consolidated statements of cash flows.
In June 2016, the FASBissued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.Instruments. The new standard requires entities to use the new “expected credit loss” impairment model for most financial assets measured at amortized cost, including trade and other receivablesand held-to-maturity debt securities, and modifies the impairment modelfor available-for-sale debt securities. The standard is effective for the Company for the fiscal years beginning after December 15, 2020,year ending September 30, 2024, including interim periods within thosethat fiscal years.year. Early application is permitted. Entity should apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, modified-retrospective approach). A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.
In August 2016,November 2021, the FASB issued ASU2016-15,Statement of Cash Flows 2021-10, Government Assistance (Topic 230)832): Classification of Certain Cash Receipts and Cash Payments, which was intended to reduce diversityDisclosures by Business Entities about Government Assistance. The amendments in practice in how certain cash receipts and payments are presented and classified inthis update require the statement of cash flows. The standard provides guidance in a number of situations including, among others, settlement ofzero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The ASU also provides guidance for classifying cash receipts and payments that have aspects of more than one class of cash flows. The Company adopted this standard effective October 1, 2018. The adoptionof ASU 2016-15 did not have an impact on the Company’s consolidated financial statements for either period presented.
In November 2016, the FASB issued ASU2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU applies to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows. The ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginning-of-period andend-of-period total amounts shown on the statement of cash flows. Further, a reconciliation between the balance sheet and statement of cash flows is required when the balance sheet includes more than one line item for cash, cash equivalents, and restricted cash. Therefore, transfers between these balances should no longer be presented as a cash flow activity. The Company adopted this standard effective October 1, 2018, utilizing the retrospective transition method to each period presented. The following table provides a reconciliation of the Company’s cash and cash equivalents, current portion of restricted cash andnon-current portion of restricted cash reported within the consolidated balance sheets that sum to the total cash, cash equivalents and restricted cash shown in the Company’s consolidated statements of cash flows for the periods presented:
September 30, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Cash and cash equivalents | 46,735 | 80,757 | 31,227 | |||||||||
Restricted cash,non-current | 579 | 579 | 202 | |||||||||
Restricted cash, current (within prepaid expenses and other current assets) | 84 | 201 | 144 | |||||||||
|
|
|
|
|
| |||||||
Total cash, cash equivalents and restricted cash | 47,398 | 81,537 | 31,573 | |||||||||
|
|
|
|
|
|
Amounts included in restricted cash primarily related to security deposits and a letter of creditannual disclosures about transactions with a financial institution, bothgovernment that are accounted for by applying a grant or contribution accounting model. The amendments in connection with office space lease agreements.
In January 2017, the FASB issued ASU2017-01, Business Combinations (Topic 805):Clarifying the Definition of a Business, clarifying the definition of a business. The ASU affects all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The Company adopted this standard effective October 1, 2018. The Company will apply the provisions of this ASU in evaluating the definition of a business for any prospective transaction from October 1, 2018.
In January 2017, the FASB issued ASU2017-04,Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the subsequent measurement of goodwill. The ASU eliminates step 2 from the goodwill impairment test, including for reporting units with a zero or negative carrying amount that fail a qualitative test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU should be applied on a prospective basis. This ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has not yet determined whether it will early adopt this ASU.
In May 2017, the FASB issued ASU2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when to account for a change to the terms or conditions of a stock-based payment award as a modification. Under ASU2017-09, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. This standard isupdate are effective for all entities within their scope for financial statements issued for annual reporting periods beginning after December 15, 2017, including interim periods2021. Early application is permitted. Entity should apply the amendments in this update either (1) prospectively to all transactions within the scope of the amendments that reporting period. The Company adopted this standard effective October 1, 2018. The adoptionof ASU 2017-09 did not have an impact on the Company’s consolidatedare reflected in financial statements for either period presented.
In August 2018,at the FASB issued ASU2018-13,Fair Value Measurement (Subtopic 820): Disclosure Framework—Changes todate of initial application and new transactions that are entered into after the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The amendments on changes in unrealized gains and losses, the range and weighted averagedate of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interiminitial application or annual period presented in the initial year of adoption. All other amendments should be applied(2) retrospectively to all periods presented upon their effective date. ASU2018-13 will be effective for the Company for the quarter ending December 31, 2020, with early adoption permitted.those transactions. The Company is currently assessingevaluating the impact that the adoption of adoptionthis standard will have on its disclosures.
consolidated financial statements.
(in thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||
Cash and cash equivalents | $ | 46,735 | $ | — | $ | — | $ | 46,735 | ||||||||
Short-term investments | 91,323 | 49 | — | 91,372 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 138,058 | $ | 49 | $ | — | $ | 138,107 | ||||||||
|
|
|
|
|
|
|
|
(in thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||||||||||||
Cash and cash equivalents | $ | 378,687 | $ | — | $ | — | $ | 378,687 | ||||||||||||||||||
Short-term investments: | ||||||||||||||||||||||||||
Commercial paper | 14,997 | — | — | 14,997 | ||||||||||||||||||||||
U.S. government treasury bills | 112,878 | — | (1,594) | 111,284 | ||||||||||||||||||||||
Total | $ | 506,562 | $ | — | $ | (1,594) | $ | 504,968 |
(in thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||
Cash and cash equivalents | $ | 80,757 | $ | — | $ | — | $ | 80,757 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 80,757 | $ | — | $ | — | $ | 80,757 | ||||||||
|
|
|
|
|
|
|
|
2021:
(in thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||||||||||||
Cash and cash equivalents | $ | 465,829 | $ | — | $ | — | $ | 465,829 | ||||||||||||||||||
Short-term investments: | ||||||||||||||||||||||||||
U.S. government treasury bills | 12,033 | 1 | — | 12,034 | ||||||||||||||||||||||
Total | $ | 477,862 | $ | 1 | $ | — | $ | 477,863 |
(in thousands) | Level 1 | Level 2 | Level 3 | Fair value | ||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 19,344 | $ | — | $ | — | $ | 19,344 | ||||||||
Money market funds | 27,390 | — | — | 27,390 | ||||||||||||
Corporate bonds | — | 8,530 | — | 8,530 | ||||||||||||
Commercial paper | — | 28,361 | — | 28,361 | ||||||||||||
U.S. government treasury bills | 54,482 | — | — | 54,482 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Total | $ | 101,216 | $ | 36,891 | $ | — | $ | 138,107 | ||||||||
|
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|
|
|
|
|
(in thousands) | Level 1 | Level 2 | Level 3 | Fair value | ||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||
Money market funds | $ | 316,805 | $ | — | $ | — | $ | 316,805 | ||||||||||||||||||
Commercial paper | — | 14,997 | — | 14,997 | ||||||||||||||||||||||
U.S. government treasury bills | 111,284 | — | — | 111,284 | ||||||||||||||||||||||
Total financial assets | $ | 428,089 | $ | 14,997 | $ | — | $ | 443,086 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||
Contingent consideration and indemnity holdback | $ | — | $ | 9,592 | $ | 2,100 | $ | 11,692 | ||||||||||||||||||
Total financial liabilities | $ | — | $ | 9,592 | $ | 2,100 | $ | 11,692 |
(in thousands) | Level 1 | Level 2 | Level 3 | Fair value | ||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 46,823 | $ | — | $ | — | $ | 46,823 | ||||||||
Money market funds | 33,934 | — | — | 33,934 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Total | $ | 80,757 | $ | — | $ | — | $ | 80,757 | ||||||||
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|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Redeemable convertible preferred stock warrant liability | $ | — | $ | — | $ | 631 | $ | 631 | ||||||||
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|
|
(in thousands) | Level 1 | Level 2 | Level 3 | Fair value | ||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||
Money market funds | $ | 430,438 | $ | — | $ | — | $ | 430,438 | ||||||||||||||||||
U.S. government treasury bills | 12,034 | — | — | 12,034 | ||||||||||||||||||||||
Total financial assets | $ | 442,472 | $ | — | $ | — | $ | 442,472 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||
Contingent consideration and indemnity holdback | $ | — | $ | 9,856 | $ | — | $ | 9,856 | ||||||||||||||||||
Total financial liabilities | $ | — | $ | 9,856 | $ | — | $ | 9,856 |
Redeemable convertible preferred stock warrants
2022, the Company’s contingent consideration related to its Abveris acquisition is categorized as Level 3 within the fair value hierarchy. Contingent consideration is classified as a liability and is remeasured to an estimated fair value at each reporting date until the contingency is resolved. Contingent consideration has been recorded at
September 30, | December 1, | |||||||||||||
Contingent consideration | 2022 | 2021 | ||||||||||||
Stock price | $ | 35.24 | $ | 87.06 | ||||||||||
Equity volatility | 93.7 | % | 81.3 | % | ||||||||||
Risk-free interest rate | 3.9 | % | 0.4 | % | ||||||||||
Revenue volatility | 30.2 | % | 21.9 | % | ||||||||||
(in thousands) | Series A | Series B | Series C | Series D | Total | |||||||||||||||
Redeemable convertible preferred stock warrant liability: | ||||||||||||||||||||
Fair value as of September 30, 2016 | $ | 184 | $ | 57 | $ | 108 | $ | 34 | $ | 383 | ||||||||||
Change in fair value recorded in other income (expense), net | 147 | 53 | 44 | 17 | 261 | |||||||||||||||
|
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|
|
|
|
| |||||||||||
Fair value as of September 30, 2017 | $ | 331 | $ | 110 | $ | 152 | $ | 51 | $ | 644 | ||||||||||
Change in fair value recorded in other income (expense), net | 34 | (16 | ) | (22 | ) | (9 | ) | (13 | ) | |||||||||||
|
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|
|
|
|
|
|
| |||||||||||
Fair value as of September 30, 2018 | $ | 365 | $ | 94 | $ | 130 | $ | 42 | $ | 631 | ||||||||||
Conversion of redeemable convertible preferred stock warrants to common stock warrants | (365 | ) | (94 | ) | (130 | ) | (42 | ) | (631 | ) | ||||||||||
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| |||||||||||
Fair value as of September 30, 2019 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|
|
(in thousands) | Total | |||||||
Balance as of September 30, 2021 | $ | — | ||||||
Contingent consideration – additions | 8,500 | |||||||
Change in fair value | (6,400) | |||||||
Balance as of September 30, 2022 | $ | 2,100 |
September 30, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Trade Receivables | $ | 11,085 | $ | 5,439 | ||||
Other Receivables | 1,313 | 75 | ||||||
Allowance for Doubtful Accounts | (294 | ) | (95 | ) | ||||
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|
|
| |||||
Accounts Receivable, net | $ | 12,104 | $ | 5,419 | ||||
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|
|
|
September 30, | ||||||||||||||
(in thousands) | 2022 | 2021 | ||||||||||||
Trade Receivables | $ | 35,706 | $ | 26,549 | ||||||||||
Other Receivables | 4,822 | 2,337 | ||||||||||||
Allowance for doubtful accounts | (234) | (337) | ||||||||||||
Accounts Receivable, net | $ | 40,294 | $ | 28,549 |
September 30, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Raw Materials | $ | 4,900 | $ | 2,988 | ||||
Work-in-process | 1,157 | 2,273 | ||||||
Finished Goods | 1,273 | 767 | ||||||
|
|
|
| |||||
$ | 7,330 | $ | 6,028 | |||||
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|
|
September 30, | ||||||||||||||
(in thousands) | 2022 | 2021 | ||||||||||||
Raw Materials | $ | 28,787 | $ | 18,778 | ||||||||||
Work-in-process | 2,866 | 4,837 | ||||||||||||
Finished Goods | 7,654 | 8,185 | ||||||||||||
$ | 39,307 | $ | 31,800 |
September 30, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Laboratory equipment | $ | 26,021 | $ | 18,865 | ||||
Furniture, fixtures and other equipment | 1,760 | 613 | ||||||
Computer equipment | 2,777 | 2,137 | ||||||
Computer software | 3,507 | 3,094 | ||||||
Leasehold improvements | 3,772 | 3,340 | ||||||
Construction in progress | 5,991 | 1,534 | ||||||
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|
| |||||
43,828 | 29,583 | |||||||
Less: Accumulated depreciation and amortization | (22,993 | ) | (17,252 | ) | ||||
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|
| |||||
$ | 20,835 | $ | 12,331 | |||||
|
|
|
|
September 30, | ||||||||||||||
(in thousands) | 2022 | 2021 | ||||||||||||
Laboratory equipment | $ | 62,285 | $ | 48,439 | ||||||||||
Furniture, fixtures and other equipment | 2,332 | 2,195 | ||||||||||||
Computer equipment | 2,815 | 2,977 | ||||||||||||
Computer software | 1,693 | 3,899 | ||||||||||||
Leasehold improvements | 14,371 | 5,066 | ||||||||||||
Construction in progress | 87,723 | 16,968 | ||||||||||||
171,218 | 79,544 | |||||||||||||
Less: Accumulated depreciation and amortization | (31,777) | (35,422) | ||||||||||||
$ | 139,441 | $ | 44,122 |
September 30, | ||||||||||||||
(in thousands) | 2022 | 2021 | ||||||||||||
Convertible note receivable | $ | — | $ | 3,021 | ||||||||||
Other non-current assets | 3,385 | 4,653 | ||||||||||||
$ | 3,385 | $ | 7,674 |
September 30, | ||||||||||||||
(in thousands) | 2022 | 2021 | ||||||||||||
Contingent consideration | $ | 2,100 | $ | 5,186 | ||||||||||
Indemnity holdbacks | 9,592 | — | ||||||||||||
Income and sales taxes payable | 3,661 | 2,440 | ||||||||||||
Deferred revenue | 3,476 | 1,088 | ||||||||||||
Other current liabilities | 908 | 909 | ||||||||||||
$ | 19,737 | $ | 9,623 |
September 30, | ||||||||||||||
(in thousands) | 2022 | 2021 | ||||||||||||
Holdback | $ | — | $ | 4,671 | ||||||||||
Other non current liabilities | 60 | 397 | ||||||||||||
$ | 60 | $ | 5,068 |
There were no changes to
2022, 2021 and 2020, respectively.
(in thousands) | September 30, | |||||||||||||
2022 | 2021 | |||||||||||||
Balance at beginning of year | 22,434 | 1,138 | ||||||||||||
Business acquisition – additions (see Note 14) | 61,768 | 21,538 | ||||||||||||
Remeasurement adjustments to the deferred tax assets | 1,609 | (242) | ||||||||||||
Balance at end of year | $ | 85,811 | $ | 22,434 |
September 30, 2019 | ||||||||||||||||
(in thousands, except for years) | Useful lives in years | Gross carrying amount | Accumulated amortization | Net book value | ||||||||||||
Developed Technology | 6 | $ | 1,220 | $ | (712 | ) | $ | 508 | ||||||||
Tradenames & Trademarks | 2 | 20 | (20 | ) | — | |||||||||||
|
|
|
|
|
| |||||||||||
Total indefinite-lived intangible assets | $ | 1,240 | $ | (732 | ) | $ | 508 | |||||||||
|
|
|
|
|
|
September 30, 2018 | ||||||||||||||||
(in thousands, except for years) | Useful lives in years | Gross carrying amount | Accumulated amortization | Net book value | ||||||||||||
Developed Technology | 6 | $ | 1,220 | $ | (508 | ) | $ | 712 | ||||||||
Tradenames & Trademarks | 2 | 20 | (20 | ) | — | |||||||||||
|
|
|
|
|
| |||||||||||
Total indefinite-lived intangible assets | $ | 1,240 | $ | (528 | ) | $ | 712 | |||||||||
|
|
|
|
|
|
September 30, 2022 | ||||||||||||||||||||||||||
(in thousands, except for years) | Weighted average Amortization period in years | Gross carrying amount | Accumulated amortization | Net book value | ||||||||||||||||||||||
Developed Technology | 11 | $ | 50,020 | $ | (4,375) | $ | 45,645 | |||||||||||||||||||
Customer Relationships | 11 | 15,210 | (1,767) | 13,443 | ||||||||||||||||||||||
Tradenames & Trademarks | 3 | 900 | (250) | 650 | ||||||||||||||||||||||
Total finite-lived intangible assets | $ | 66,130 | $ | (6,392) | $ | 59,738 |
September 30, 2021 | ||||||||||||||||||||||||||
(in thousands, except for years) | Weighted average Amortization period in years | Gross carrying amount | Accumulated amortization | Net book value | ||||||||||||||||||||||
Developed Technology | 16 | $ | 19,120 | $ | (1,361) | $ | 17,759 | |||||||||||||||||||
Tradenames & Trademarks | 2 | 20 | (20) | — | ||||||||||||||||||||||
Customer Relationships | 1.5 | 510 | (7) | 503 | ||||||||||||||||||||||
Total finite-lived intangible assets | $ | 19,650 | $ | (1,388) | $ | 18,262 |
Years ending September 30, | ||||
2020 | 203 | |||
2021 | 203 | |||
2022 | 102 | |||
|
| |||
$508 | ||||
|
|
Years ending September 30, | ||||||||
2023 | $ | 5,255 | ||||||
2024 | 5,170 | |||||||
2025 | 4,920 | |||||||
2026 | 4,870 | |||||||
2027 | 4,320 | |||||||
Thereafter | 35,203 | |||||||
$ | 59,738 |
The Company’s credit facilities contain customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries, including, among other things, restrictions on changes in business, management, ownership or business locations, indebtedness, encumbrances, investments, mergers or acquisitions, dispositions, maintenance of collateral accounts, prepayment of other indebtedness, distributions and transactions with affiliates. The credit facilities contain customary events of default subject in certain cases to grace periods and notice requirements, including (a) failure to pay principal, interest and other obligations when due, (b) material misrepresentations, (c) breach of covenants, conditions or agreements in the credit facilities, (d) default under material indebtedness, (e) certain bankruptcy events, (f) a material adverse change; (g) attachment, levy or restraint on business, (h) default with respect to subordinated debt, (i) cross defaultborrowings under the Company’s credit facilities, and (j) government approvals being revoked. As of September 30, 2017, all rights, title and interest to the Company’s personal property with the exception of the Company’s intellectual property, have been pledged as collateral, including cash and cash equivalents, short-term investments, accounts receivable, contractual rights to payment, license agreements, general intangibles, inventory and equipment. revolving loan facility which expired on December 31, 2021.
Future maturities of the Fourth Loan as of September 30, 2019 are as follows:
(in thousands) | Principal | Interest | Total | |||||||||
Years ending September 30, | ||||||||||||
2020 | $ | 3,333 | 486 | $ | 3,819 | |||||||
2021 | 3,333 | 214 | 3,547 | |||||||||
2022 | 834 | 11 | 845 | |||||||||
|
|
|
|
|
| |||||||
7,500 | 711 | 8,211 | ||||||||||
Less: Interest | (711 | ) | ||||||||||
|
| |||||||||||
Total amount of loan principal | 7,500 | |||||||||||
Less unamortized debt discount | (269 | ) | ||||||||||
Add: accretion of final payment fee | 502 | |||||||||||
|
| |||||||||||
$ | 7,733 | |||||||||||
|
|
Litigation
In February 2016, a complaint was filed
The Company believes that the complaint is without merit, and intends to continue vigorously defending itself. The Company is currently unable to predict the ultimate outcome of this matter or estimate a reasonably possible loss or range of loss, and no amounts have been accrued in the consolidated financial statements.
any claims.
Future minimum Our lease payments under allnon-cancelableconsist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms, as
(in thousands) | September 30, 2022 | |||||||
Assets: | ||||||||
Operating lease right-of-use-assets | $ | 74,948 | ||||||
Current liabilities: | ||||||||
Current portion of operating lease liabilities | $ | 13,642 | ||||||
Noncurrent liabilities: | ||||||||
Operating lease liabilities, net of current portion | $ | 81,270 |
(in thousands) | Operating leases | |||
Years ending September 30: | ||||
2020 | $ | 6,671 | ||
2021 | 5,909 | |||
2022 | 5,979 | |||
2023 | 6,064 | |||
2024 | 6,029 | |||
Thereafter | 10,067 | |||
|
| |||
Total minimum lease payments | $ | 40,719 | ||
|
|
Rent
(in thousands) | Operating leases | |||||||
Years ending September 30 : | ||||||||
2023 | $ | 14,734 | ||||||
2024 | 14,153 | |||||||
2025 | 14,005 | |||||||
2026 | 12,550 | |||||||
2027 | 7,205 | |||||||
Thereafter | 90,072 | |||||||
Total minimum lease payments | $ | 152,719 | ||||||
Less: imputed interest | (57,807) | |||||||
Total operating lease liabilities | $ | 94,912 | ||||||
Less: current portion | (13,642) | |||||||
Operating lease liabilities, net of current portion | $ | 81,270 |
Prepaidlease agreement, an approximate $0.6 million irrevocable letter of credit was provided as a security deposit. The Company will pay an initial annual base rent was $1.6of approximately $1.2 million, aswhich is subject to scheduled 2% annual increases, plus certain operating expenses. The Company has the right to sublease the facility, subject to landlord consent. The lease commenced on March 3, 2022. As of September 30, 2019. There was no prepaid rent aslease commencement date, the total future minimum lease payments under the agreement were $13.2 million.
and with lease terms ranging from 2.0 to 4.0 years.
2022, 2021 and 2020. During the year ended September 30, 2018,2022, the Company purchased raw materials fromentered into a service agreement with a related party investor infor the amounttotal consideration of $2.3$0.1 million. Payable balances
During the yearyears ended September 30, 2017, the Company sold 170,085 shares of Series D redeemable convertible preferred stock to a related party. The Company also purchased raw materials from a related party investor in the amount of $2.0 million. Payable balances2022 and cash receipts and receivable balances with the related party were immaterial as of September 30, 2017.
9. Income taxes
2021, respectively. The Company recorded provisionprovisions for income taxes of $0.3$0.4 million for the year ended September 30, 2019, $0.2 million2020.
Year ended September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
US | (231,659) | (149,533) | (138,016) | |||||||||||||||||
Foreign | 3,385 | (4,495) | (1,533) | |||||||||||||||||
Total | (228,274) | (154,028) | (139,549) |
The significant components of the Company’s deferred tax assets2022, 2021, and liabilities2020 are as follows:
September 30, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Net operating loss carryforwards | $ | 73,341 | $ | 49,801 | ||||
Research and development credit carryforwards | 6,831 | 4,621 | ||||||
Other | 4,553 | 1,919 | ||||||
|
|
|
| |||||
Gross deferred tax assets | 84,725 | 56,341 | ||||||
Less: Valuation allowance | (84,598 | ) | (56,158 | ) | ||||
|
|
|
| |||||
Net deferred tax assets | 127 | 183 | ||||||
|
|
|
| |||||
Fixed assets | (1 | ) | (1 | ) | ||||
Intangible assets | (126 | ) | (182 | ) | ||||
|
|
|
| |||||
Gross deferred tax liabilities | (127 | ) | (183 | ) | ||||
|
|
|
| |||||
Total net deferred tax asset | $ | — | $ | — | ||||
|
|
|
|
Year ended September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
Current | ||||||||||||||||||||
Federal | — | — | — | |||||||||||||||||
State | (1) | (29) | 0 | |||||||||||||||||
Foreign | 767 | 108 | 382 | |||||||||||||||||
Total current | 766 | 79 | 382 | |||||||||||||||||
Deferred | ||||||||||||||||||||
Federal | (9,765) | (2,268) | — | |||||||||||||||||
State | (1,412) | 259 | — | |||||||||||||||||
Foreign | — | — | — | |||||||||||||||||
Total deferred | (11,177) | (2,009) | — | |||||||||||||||||
Total (benefit)/provision | (10,411) | (1,930) | 382 |
Year ended September 30, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Tax expense computed at the federal statutory rate | 21 | % | 24 | % | 35 | % | ||||||
Change in valuation allowance | (22 | )% | 4 | % | (35 | )% | ||||||
Research and development credit benefit | 1 | % | 1 | % | 1 | % | ||||||
Change in federal tax rate | — | (28 | )% | — | ||||||||
Other expenses | — | (1 | )% | (1 | )% | |||||||
|
|
|
|
|
| |||||||
Total income tax expense | — | % | — | % | — | % | ||||||
|
|
|
|
|
|
rate for the years ended September 30, 2022, 2021, and 2020:
Year ended September 30, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
Tax expense computed at the federal statutory rate | 21 | % | 21 | % | 21 | % | ||||||||||||||
Change in valuation allowance | (13) | % | (33) | % | (25) | % | ||||||||||||||
Research and development credit benefit | 4 | % | 3 | % | 1 | % | ||||||||||||||
Business combination | (4) | % | (2) | % | — | |||||||||||||||
Stock-based compensation | (1) | % | 12 | % | 3 | % | ||||||||||||||
Change in fair value of contingent consideration and holdbacks | (1) | % | — | % | — | % | ||||||||||||||
Gain on deconsolidation of variable interest entity | (1) | % | — | % | — | % | ||||||||||||||
Total income tax expense | 5 | % | 1 | % | — | % |
September 30, | ||||||||||||||
(in thousands) | 2022 | 2021 | ||||||||||||
Net operating loss carryforwards | $ | 191,337 | $ | 163,782 | ||||||||||
Research and development credit carryforwards | 35,109 | 20,163 | ||||||||||||
Operating lease liability | 23,118 | 14,890 | ||||||||||||
Stock-based compensation | 13,138 | 6,737 | ||||||||||||
Other | 11,541 | 4,894 | ||||||||||||
Gross deferred tax assets | 274,243 | 210,466 | ||||||||||||
Less: Valuation allowance | (240,660) | (190,428) | ||||||||||||
Net deferred tax assets | 33,583 | 20,038 | ||||||||||||
Fixed assets | (1,169) | (785) | ||||||||||||
Operating lease right-of-use asset | (17,986) | (14,893) | ||||||||||||
Intangible assets | (14,428) | (4,360) | ||||||||||||
Gross deferred tax liabilities | (33,583) | (20,038) | ||||||||||||
Total net deferred tax asset | $ | — | $ | — |
2021. The valuation allowance was $240.7 million and $190.4 million as of September 30, 2022 and 2021, respectively. The change in the valuation allowance was mainly due to an increase in the net operating loss and research and development credits during the fiscal year 2022.
year 2024.
The aggregate changes in the balance of gross unrecognized tax benefits are as follows:
(in thousands) | Federal and state | |||
Balance as of September 30, 2016 | 822 | |||
Increases related to tax positions taken during 2017 | 562 | |||
Increases related to tax positions in prior years | 241 | |||
|
| |||
Balance as of September 30, 2017 | 1,625 | |||
Increases related to tax positions taken during 2018 | 624 | |||
|
| |||
Balance as of September 30, 2018 | $ | 2,249 | ||
Increases related to tax positions taken during 2019 | 1,042 | |||
|
| |||
Balance as of September 30, 2019 | $ | 3,291 | ||
|
|
(in thousands) | Federal and state | |||||||
Balance as of September 30, 2019 | $ | 3,291 | ||||||
Increases related to tax positions taken during 2020 | 1,409 | |||||||
Balance as of September 30, 2020 | $ | 4,700 | ||||||
Increases related to tax positions taken during 2021 | 2,737 | |||||||
Balance as of September 30, 2021 | $ | 7,437 | ||||||
Increases related to tax positions taken during 2022 | 5,082 | |||||||
Increases related to tax positions taken in the prior year | $ | 864 | ||||||
Balance as of September 30, 2022 | $ | 13,383 |
rate, respectively.
2021.
10. Warrants
In connection with its long-term debt agreements, the Company issued warrants for its redeemable convertible preferred stock and common stock as follows:
(in thousands, except share and per share data) | Number of shares underlying warrants | |||||||||||||||
September 30, 2019 | Issuance date | Expiration date | Exercise price per share | |||||||||||||
Warrant class/series: | ||||||||||||||||
Common stock warrants | 18,854 | December 22, 2015 | December 22, 2025 | $ | 14.85 | |||||||||||
Common stock warrants | 7,531 | March 28, 2016 | March 28, 2026 | $ | 21.24 | |||||||||||
|
| |||||||||||||||
Total common stock warrants | 26,385 | |||||||||||||||
|
|
(in thousands, except share and per share data) | Number of shares underlying warrants | Fair value | ||||||||||||||||||
September 30, 2018 | Issuance date | Expiration date | Exercise price per share | |||||||||||||||||
Warrant class/series: | ||||||||||||||||||||
Series A | 36,838 | $ | 365 | October 8, 2013 | October 8, 2023 | $ | 3.26 | |||||||||||||
Series B | 16,221 | 94 | September 2, 2014 | September 2, 2024 | $ | 7.84 | ||||||||||||||
Series C | 18,854 | 130 | December 22, 2015 | December 22, 2025 | $ | 14.85 | ||||||||||||||
Series D | 7,531 | 42 | March 28, 2016 | March 28, 2026 | $ | 21.24 | ||||||||||||||
|
|
|
| |||||||||||||||||
Total preferred stock warrants | 79,444 | $ | 631 | |||||||||||||||||
|
|
|
| |||||||||||||||||
Common stock warrants | 64,127 | $ | 486 | September 6, 2017 | September 6, 2027 | $ | 6.24 | |||||||||||||
|
|
|
|
In October 2018, each warrant to purchase redeemable convertible preferred stock was converted to a warrant to purchase common stock immediately prior to the completionpotential impact of the IPO. In November 2018, a total of 68,901 warrants were net exercised; 36,838 warrants with an exercise price of $3.26 per common share and 32,063 warrants with an exercise price of $6.24 per common share. The transactions were a cashless exercise for a net 57,122 common shares issued byIRA on the Company. In July 2019, a total of 32,064 warrants with an exercise price of $6.24 per common share were net exercised for a net 25,422 common shares issued by the Company. In September 2019, a total of 16,221 warrants with an exercise price of $7.84 per common share were net exercised for a net 12,019 common shares issued by the Company.
11. Redeemable convertible preferred stock
In October 2018, each share of Series A, Series B, Series C, and Series D redeemable convertible preferred stock was converted into common stock immediately prior to the completion of the IPO.
12. Company's financial statements.
The fair value of the shares of common stock underlying the Company’s stock options has historically been determined by management and approved by the board of directors. Prior to the Company’s IPO, management and the board of directors determined the fair value of the common stock at the time of grant of any options by considering a number of objective and subjective factors, including valuations performed by an independent third-party specialists, valuations of comparable companies, operating and financial performance, the lack of liquidity of the common stock, recent private stock sale transactions and general and industry-specific economic
outlooks. Valuations performed by third-party valuation specialists were completed and used the methodologies, approaches, and assumptions consistent with the AICPA, Accounting and Valuation Guide:Valuation of Privately-Held-Company Equity Securities Issued as Compensation and Company specific factors.
As of September 30, 2019,2022, the Company had reserved sufficient shares of common stock with a par value of $0.00001 per share for issuance upon conversion of preferred stock and exercise of outstanding stock options and warrants.options. Each share of common stock is entitled to one vote. The holders of shares of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subjectdirectors.
13. Stock option plan
The Company received total net proceeds from the offering of $269.8 million, net of underwriting discounts and commissions and offering expenses.
As of September 30, 2022, a total of 1,142,937 shares of the Company’s common stock have been reserved for issuance under the 2018 Plan.
(In thousands, except per share data) | Shares | Weighted average grant date fair value per share | ||||||||||||
Nonvested shares at October 1, 2021 | 697 | $ | 73.27 | |||||||||||
Granted | 1,430 | $ | 67.30 | |||||||||||
Vested/Issued | (377) | 72.00 | ||||||||||||
Forfeited | (184) | 77.23 | ||||||||||||
Nonvested shares at September 30, 2022 | 1,566 | $ | 67.66 |
(In thousands, except per share data) | Shares | Weighted average grant date fair value per share | ||||||||||||
Nonvested shares at October 1, 2021 | 10 | $ | 128.49 | |||||||||||
Granted | 621 | $ | 78.81 | |||||||||||
Vested/Issued | (14) | 34.35 | ||||||||||||
Forfeited | (88) | 85.40 | ||||||||||||
Nonvested shares at September 30, 2022 | 529 | $ | 79.60 |
(In thousands, except per share data) | Shares | Weighted average exercise price per share | Weighted average remaining contractual term (years) | Aggregate intrinsic value | ||||||||||||||||||||||
Outstanding at October 1, 2021 | 2,875 | $ | 22.83 | 7.11 | $ | 242,291 | ||||||||||||||||||||
Granted | 223 | $ | 24.03 | 9.21 | $ | — | ||||||||||||||||||||
Forfeited | (161) | 35.79 | — | — | ||||||||||||||||||||||
Exercised | (484) | 12.42 | — | $ | 31,918 | |||||||||||||||||||||
Outstanding at September 30, 2022 | 2,453 | $ | 24.67 | 6.33 | $ | 33,447 | ||||||||||||||||||||
Nonvested at September 30, 2022 | 581 | $ | 32.61 | 7.20 | 5,435 | |||||||||||||||||||||
Exercisable | 1,872 | $ | 22.20 | 6.05 | $ | 28,012 | ||||||||||||||||||||
Year ended September 30, | ||||||||||||||||||||
2022 | ||||||||||||||||||||
Expected term (years) | 6.0 | |||||||||||||||||||
Expected volatility | 70.7 | % | ||||||||||||||||||
Risk-free interest rate | 1.4 | % | ||||||||||||||||||
Dividend yield | —% |
Year ended September 30, | ||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||
Expected term (years) | 6.1 | 6.2 | ||||||||||||||||||
Expected volatility | 64.4 | % | 62.1 | % | ||||||||||||||||
Risk-free interest rate | 1.0 | % | 1.3 | % | ||||||||||||||||
Dividend yield | —% | —% |
(In thousands, except per share data) | Shares | Weighted average exercise price per share | Weighted average remaining contractual term (years) | Aggregate intrinsic value | ||||||||||||||||||||||
Outstanding and nonvested at October 1, 2021 | 256 | $ | 70.62 | 8.94 | $ | 9,331 | ||||||||||||||||||||
Granted | 75 | $ | 31.29 | 9.57 | — | |||||||||||||||||||||
Forfeited | (19) | 67.85 | — | — | ||||||||||||||||||||||
Vested | (19) | 31.29 | — | — | ||||||||||||||||||||||
Nonvested at September 30, 2022 | 293 | $ | 63.27 | 8.25 | $ | 222 | ||||||||||||||||||||
Exercisable | 19 | 31.29 | 9.57 | 74 | ||||||||||||||||||||||
Outstanding at September 30, 2022 | 312 | $ | 61.35 | 8.33 | $ | 296 |
Year ended September 30, | ||||||||||||||||||||
2022 | ||||||||||||||||||||
Expected term (years) | 5.9 | |||||||||||||||||||
Expected volatility | 70.9% | |||||||||||||||||||
Risk-free interest rate | 2.8% | |||||||||||||||||||
Dividend yield | —% |
Year ended September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
Cost of revenues | $ | 4,587 | $ | 2,678 | $ | 1,290 | ||||||||||||||
Research and development | 19,541 | 10,166 | 3,346 | |||||||||||||||||
Selling, general and administrative | 54,905 | 24,154 | 12,460 | |||||||||||||||||
Total stock-based compensation | $ | 79,033 | $ | 36,998 | $ | 17,096 |
(In thousands) | Shares available | |||||||
Outstanding at September 30, 2021 | 355 | |||||||
Additional shares authorized | 249 | |||||||
Shares issued during the period | (97) | |||||||
Outstanding at September 30, 2022 | 507 |
Activity under401(k) Savings Plan
Shares available | Options outstanding | Weighted average exercise price per share | Weighted average remaining contractual term (years) | Aggregate intrinsic value | ||||||||||||||||
Outstanding at September 30, 2016 | 470,623 | 1,033,612 | $ | 4.93 | 8.81 | $ | 1,343,301 | |||||||||||||
Additional shares authorized | 1,035,414 | — | — | |||||||||||||||||
Stock options granted | (857,082 | ) | 857,082 | 8.61 | ||||||||||||||||
Stock options exercised | — | (32,586 | ) | 5.54 | ||||||||||||||||
Stock options forfeited | 38,384 | (38,384 | ) | 5.54 | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Outstanding at September 30, 2017 | 687,339 | 1,819,724 | $ | 6.63 | 9.14 | $ | 7,147,115 | |||||||||||||
Additional shares authorized | 905,786 | — | — | |||||||||||||||||
Stock options granted | (951,310 | ) | 951,310 | 10.96 | ||||||||||||||||
Stock options exercised | — | (62,862 | ) | 5.37 | ||||||||||||||||
Stock options forfeited | 187,687 | (187,687 | ) | 7.73 | ||||||||||||||||
Early exercised options repurchased | 9,639 | — | ||||||||||||||||||
Forfeiture of restricted common stock | 21,146 | — | — | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Outstanding at September 30, 2018 | 860,287 | 2,520,485 | $ | 8.22 | 8.38 | $ | 11,482,909 | |||||||||||||
Additional shares authorized | 2,494,700 | — | — | |||||||||||||||||
Stock options granted | (1,685,625 | ) | 1,685,625 | 25.53 | ||||||||||||||||
Stock options exercised | — | (331,205 | ) | 6.67 | ||||||||||||||||
Stock options forfeited | 324,460 | (324,460 | ) | 14.75 | ||||||||||||||||
Restricted stock units granted | (500,132 | ) | — | — | ||||||||||||||||
Early exercised options repurchased | 442 | — | — | |||||||||||||||||
Forfeiture of restricted stock units | 26,743 | — | — | |||||||||||||||||
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Outstanding at September 30, 2019 | 1,520,875 | 3,550,445 | $ | 15.99 | 8.25 | $ | 31,997,934 | |||||||||||||
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Vested or expected to vest at September 30, 2019 | 3,550,445 | $ | 15.99 | 8.25 | $ | 31,997,934 | ||||||||||||||
Vested and exercisable at September 30, 2019 | 1,243,634 | $ | 7.77 | 7.01 | $ | 20,125,913 | ||||||||||||||
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considered a performance condition, and the effects of that performance condition are not reflected in the grant date fair value of the awards. The Company used the stock price as of December 1, 2021 for the fair value of restricted shares.
Restricted Stock Units
Restricted stock primarily consists of restricted stock unit awards (RSUs) which have been granted to employees. The value of an RSU award is based on the Company’s stock price on the date of grant. The shares underlying the RSU awards are not issued until the RSUs vest. Upon vesting, each RSU converts into one share of the Company’s common stock.
Activity with respect to the Company’s restricted stock units during the year ended September 30, 2019 was as follows:
(in thousands, except share and per share data) | Number of Shares | Weighted average grant date fair value per share | Weighted average remaining contractual term (years) | Aggregate Intrinsic Value | ||||||||||||
Outstanding at September 30, 2018 | — | $ | — | — | $ | — | ||||||||||
Restricted stock units granted | 500,132 | 26.12 | 3.87 | 13,059,488 | ||||||||||||
Restricted stock units vested | (11,019 | ) | 24.69 | — | — | |||||||||||
Restricted stock units forfeited | (26,743 | ) | 25.92 | — | — | |||||||||||
Outstanding at September 30, 2019 | 462,370 | 26.16 | 3.91 | 8,959,223 | ||||||||||||
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Expected to vest at September 30, 2019 | 462,370 | $ | 26.16 | 3.91 | $ | 8,959,223 | ||||||||||
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As of September 30, 2019, there was $10.2 million of total unrecognized compensation cost related to these issuances that is expected to be recognized over a weighted average period of 3.99 years.
Stock-based compensation
Total stock-based compensation expense recognized was as follows:
Year ended September 30, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Cost of revenues | $ | 1,345 | $ | 376 | $ | 202 | ||||||
Research and development | 2,378 | 705 | 575 | |||||||||
Selling, general and administrative | 7,447 | 1,880 | 1,114 | |||||||||
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Total stock-based compensation | $ | 11,170 | $ | 2,961 | $ | 1,891 | ||||||
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The Company uses the Black-Scholes option pricing model to calculate the grant date fair value of a stock option. The Black-Scholes model requires various assumptions, including the fair value of the Company’s common stock, expected term, expected dividend yield and expected volatility.
The expected volatility of the Company’s stock options is estimated from the historical volatility of selected public companies with comparable characteristics to it, including similarity in size and lines of business. The expected term of stock options represents the period that the Company’s stock-options are expected to be outstanding before being exercised. The risk-free interest rate is based on the implied yield currently available on U.S. treasury notes with terms approximately equal to the expected life of the option. The expected dividend rate is zero as the Company currently has no history or expectation of declaring cash dividends on the Company’s common stock.
The fair value of options granted during the years ended September 30, 2019, 2018 and 2017, respectively, were calculated using the weighted average assumptions set forth below:
Year ended September 30, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Expected term (years) | 6.41 | 6.25 | 6.25 | |||||||||
Expected volatility | 60.2 | % | 66.3 | % | 65.5 | % | ||||||
Risk-free interest rate | 2.72 | % | 2.65 | % | 2.02 | % | ||||||
Dividend yield | 0 | % | 0 | % | �� | 0 | % |
Weighted average grant date fair value of options granted during the years ended September 30, 2019, 2018 and 2017 was $15.06, $7.08 and $6.63, respectively.
Shares subject to repurchase
The Company has a right of repurchase with respect to unvested shares issued upon early exercise of options at an amount equal to the original exercise price of each unvested share being repurchased. The Company’s right to repurchase these shares lapses pursuant to the vesting schedule of the original grant, which is generally 25% on the first anniversary of the original grant and ratably on a monthly basis over the remaining 36 months. As of September 30, 2019, 38,157 shares remain subject to the Company’s right of repurchase.
14.
Year ended September 30, | ||||||||||||
(in thousands, except share and per share data) | 2019 | 2018 | 2017 | |||||||||
Numerator: | ||||||||||||
Net loss attributable to common stockholders | $ | (107,669 | ) | $ | (71,236 | ) | $ | (59,310 | ) | |||
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Denominator: | ||||||||||||
Weighted-average shares used in computing net loss per share, basic and diluted | 27,461,844 | 2,792,743 | 2,422,243 | |||||||||
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Net loss per share attributable to common stockholders, basic and diluted | $ | (3.92 | ) | $ | (25.51 | ) | $ | (24.49 | ) | |||
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Year ended September 30, | ||||||||||||||||||||
(in thousands, except per share data) | 2022 | 2021 | 2020 | |||||||||||||||||
Numerator: | ||||||||||||||||||||
Net loss attributable to common stockholders | $ | (217,863) | $ | (152,098) | $ | (139,931) | ||||||||||||||
Denominator: | ||||||||||||||||||||
Weighted-average shares used in computing net loss per share, basic and diluted | 53,885 | 48,251 | 39,190 | |||||||||||||||||
Net loss per share attributable to common stockholders, basic and diluted | $ | (4.04) | $ | (3.15) | $ | (3.57) |
Year ended September 30, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Shares subject to options to purchase common stock | 3,550,445 | 2,520,485 | 1,819,724 | |||||||||
Unvested restricted shares of common stock | 23,861 | 96,750 | 513,766 | |||||||||
Unvested restricted stock units | 462,370 | — | — | |||||||||
Unvested shares of common stock issued upon early exercise of stock options | 38,157 | 74,142 | 44,698 | |||||||||
Shares subject to employee stock purchase plan | 76,335 | — | — | |||||||||
Shares subject to warrants to purchase common stock | 26,385 | 64,127 | 64,127 | |||||||||
Shares subject to warrants to purchase redeemable convertible preferred stock | — | 79,444 | 79,444 | |||||||||
Shares of redeemable convertible preferred stock | — | 18,951,305 | 14,658,940 | |||||||||
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Total | 4,177,553 | 21,786,253 | 17,180,699 | |||||||||
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15.
Year ended September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
Shares subject to options to purchase common stock | 2,765 | 3,131 | 3,948 | |||||||||||||||||
Unvested restricted stock units and performance stock units | 2,095 | 707 | 569 | |||||||||||||||||
Unvested shares of common stock issued upon early exercise of stock options | — | 3 | 17 | |||||||||||||||||
Shares subject to employee stock purchase plan | 97 | 27 | 33 | |||||||||||||||||
Shares subject to warrants to purchase common stock | — | — | 26 | |||||||||||||||||
Total | 4,957 | 3,868 | 4,593 |
Year ended September 30, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
United States | $ | 35,936 | $ | 17,662 | $ | 8,243 | ||||||
EMEA | 14,692 | 6,557 | 2,023 | |||||||||
APAC | 2,761 | 1,001 | 274 | |||||||||
North America | 996 | 207 | 227 | |||||||||
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Total | $ | 54,385 | $ | 25,427 | $ | 10,767 | ||||||
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Year ended September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
Americas | $ | 122,473 | $ | 77,909 | $ | 59,164 | ||||||||||||||
EMEA | 62,078 | 44,124 | 25,821 | |||||||||||||||||
APAC | 19,014 | 10,300 | 5,115 | |||||||||||||||||
Total | $ | 203,565 | $ | 132,333 | $ | 90,100 |
Year ended September 30, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Synthetic genes | $ | 26,712 | $ | 17,986 | $ | 8,122 | ||||||
Oligo pools | 4,594 | 3,002 | 2,056 | |||||||||
DNA libraries | 2,036 | 1,771 | 517 | |||||||||
NGS tools | 21,043 | 2,668 | 72 | |||||||||
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Total | $ | 54,385 | $ | 25,427 | $ | 10,767 | ||||||
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Revenues
Year ended September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
Synthetic genes | $ | 61,509 | $ | 38,964 | $ | 35,192 | ||||||||||||||
Oligo pools | 12,424 | 8,039 | 4,545 | |||||||||||||||||
DNA libraries | 6,149 | 5,678 | 3,965 | |||||||||||||||||
Antibody discovery | 24,171 | 6,985 | 2,383 | |||||||||||||||||
NGS tools | 99,312 | 72,667 | 44,015 | |||||||||||||||||
Total | $ | 203,565 | $ | 132,333 | $ | 90,100 |
Year ended September 30, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Industrial chemicals | $ | 21,927 | $ | 14,912 | $ | 6,702 | ||||||
Academic research | 13,835 | 5,813 | 2,709 | |||||||||
Healthcare | 17,424 | 4,212 | 1,226 | |||||||||
Agricultural | 1,199 | 490 | 130 | |||||||||
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Total revenues | $ | 54,385 | $ | 25,427 | $ | 10,767 | ||||||
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industry.
Year ended September 30, | ||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
Industrial chemicals/materials | $ | 57,940 | $ | 34,475 | $ | 29,054 | ||||||||||||||
Academic research | 37,097 | 25,299 | 19,642 | |||||||||||||||||
Healthcare | 106,363 | 71,241 | 40,036 | |||||||||||||||||
Food/agriculture | 2,165 | 1,318 | 1,368 | |||||||||||||||||
Total revenues | $ | 203,565 | $ | 132,333 | $ | 90,100 |
2021, respectively.
(in thousands) | December 1, 2021 | |||||||
Assets acquired | ||||||||
Cash and cash equivalents | $ | 1,306 | ||||||
Accounts receivable | 2,309 | |||||||
Other current assets and prepaid expenses | 1,654 | |||||||
Property, plant and equipment | 1,078 | |||||||
Other non-current assets | 2,970 | |||||||
Intangible assets | 46,500 | |||||||
Liabilities assumed | ||||||||
Current liabilities | 3,549 | |||||||
Non-current liabilities | 846 | |||||||
Deferred tax liability | 10,545 | |||||||
Fair value of assets acquired and liabilities assumed | $ | 40,877 | ||||||
Goodwill | 61,768 | |||||||
Total purchase price | $ | 102,645 | ||||||
Consideration transferred | ||||||||
Cash | $ | 9,467 | ||||||
Company common stock | 72,514 | |||||||
Contingent consideration | 8,500 | |||||||
Holdback liabilities | 12,838 | |||||||
Net working capital adjustment | (674) | |||||||
Fair value of purchase consideration | $ | 102,645 |
(in thousands except for years) | Estimated Weighted Average Useful Lives in Years | Estimated Fair Value | ||||||||||||
Developed technology | 14 | $ | 30,900 | |||||||||||
Customer relationships | 10 | 14,700 | ||||||||||||
Trade name | 3 | 900 | ||||||||||||
Estimated fair value of acquired intangible assets | $ | 46,500 |
(in thousands) | Contingent consideration | Holdbacks | Total | |||||||||||||||||
Balance at December 1, 2021 – acquisition date | $ | 8,500 | $ | 12,164 | $ | 20,664 | ||||||||||||||
Change in fair value during the period | (6,400) | (7,071) | (13,471) | |||||||||||||||||
Balance at September 30, 2022 | $ | 2,100 | $ | 5,093 | $ | 7,193 |
Year ended September 30, | |||||||||||||||||
(in thousands) | 2022 | 2021 | |||||||||||||||
Revenues | 206,011 | 143,632 | |||||||||||||||
Net loss attributable to common stockholders | (216,796) | (146,515) |
(in thousands) | June 14, 2021 | |||||||
Assets acquired | ||||||||
Cash and cash equivalents | $ | 7 | ||||||
Accounts receivable | 37 | |||||||
Inventories | 14 | |||||||
Intangible assets | 18,410 | |||||||
Goodwill | 21,538 | |||||||
Liabilities assumed | ||||||||
Accounts payable | 57 | |||||||
Accrued expenses | 44 | |||||||
Deferred tax liability | 2,252 | |||||||
Fair value of assets acquired and liabilities assumed | $ | 37,653 | ||||||
Consideration transferred | ||||||||
Cash | $ | 490 | ||||||
Company common stock | 26,772 | |||||||
Contingent consideration | 5,467 | |||||||
Indemnity holdback | 4,924 | |||||||
Fair value of purchase consideration | $ | 37,653 |
(in thousands, except for years) | Estimated Weighted Average Useful Lives in Years | Estimated Fair Value | ||||||||||||
Developed technology | 17 | $ | 17,900 | |||||||||||
Customer relationships | 1.5 | 510 | ||||||||||||
Estimated fair value of acquired intangible assets | $ | 18,410 |
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None.
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Our management is responsible for establishing and maintaining adequate internal control overdisagreements with accountants on accounting and financial reporting. Management,disclosure
|
material weakness in the Company’s internal control over financial reporting, we performed additional procedures to ensure that our consolidated financial statements included in Form 10-K were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Following such additional procedures, our management, including our principal executive officer and principal financial officer, has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in this Form 10-K, in conformity with GAAP.
Wethat our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
There were no changes in our internal control over financial reporting, identifiedassessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
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None.
|
The following is biographical information, as of December 12, 2019, of the ten (10) members of our board of directors:
William Banyai, Ph.D.,age 65, has served as our Chief Operating Officer and as a member of our board of directors since April 2013. Priorto co-founding Twist Bioscience, from April 2006 to March 2013, Dr. Banyai was the Vice President of Hardware Engineering at Complete Genomics Inc., a life sciences company that developed and commercialized a platform for sequencing and analyzing human genomes. Dr. Banyai was also previously a director at Glimmerglass Networks, a supplier of SDN enabled Intelligent Optical Switching and Optical Network Management solutions. Dr. Banyai holds a B.S. in Physics and an M.S. in Electrical Science from the University of Michigan, an Engineer of Electrical Engineering degree from the University of Southern California and a Ph.D. in Optical Science from the University of Arizona. Our board of directors believes that Dr. Banyai’s experience as our Chief Operating Officer and extensive executive and professional experience in the biotechnology industry, as well as his previous director experience and expertise in corporate governance, qualify him to serve as a director.
Nicolas M. Barthelemy, age 54, has served as a member of our board of directors since October 2019. Mr. Barthelemy brings over 25 years of industry experience to Twist. From September 2014 to February 2017, Mr. Barthelemy served as the President and Chief Executive Officer of Biotheranostics, Inc., a molecular diagnostics company. Previously, he served as President, Global Commercial Operations at Life Technologies Corporation, a global life sciences company, which was acquired by Thermo Fisher Scientific Inc. in February 2014. Before Life Technologies, Mr. Barthelemy was with Biogen Inc., a biotechnology company, most recently as Vice President, Manufacturing and General Manager. He began his career with Merck & Co., Inc., a pharmaceutical company, as Project Engineer, Vaccine Technology. Mr. Barthelemy currently serves as a member of the boards of directors of Fluidigm Corporation, Repligen Corporation, 908 Devices Inc. and of Biocare Medical, LLC. Mr. Barthelemy received an M.S. in chemical engineering from the University of California, Berkeley, and an engineering degree from the Ecole Superieure de Physique et Chimie Industrielles, Paris. Our board of directors believes that Mr. Barthelemy’s extensive experience in manufacturing, distributing and commercializing life science instruments, reagents and services, his knowledge of the research and clinical markets as well as his relevant director experience qualify him to serve as one of our directors.
Nelson C. Chan,age 58, has served on our board of directors since May 2019. From 2006 until 2008, Mr. Chan served as Chief Executive Officer of Magellan Navigation, Inc., a leader in the consumer, survey, GIS and OEM GPS navigation and positioning markets. From 1992 through 2006, Mr. Chan held various senior management positions at SanDisk Corporation, a leader in flash memory cards, including most recently as Executive Vice President and General Manager, Consumer Business. From 1983 to 1992, Mr. Chan held marketing and engineering positions at Chip and Technologies, Signetics, and Delco Electronics. Mr. Chan is Chairman of the board of Synaptics Incorporated, a developer of custom-designed human interface solutions, and is Chairman of the Board of Directors of Adesto Technologies Corporation, a leading provider of innovative application-specific semiconductors and embedded systems for the IoT. Mr. Chan is also a director and a member of the Audit Committee of Deckers Outdoor Corporation. Mr. Chan previously served as a director of Affymetrix, a genetic analysis company from 2010 until it was acquired in 2016 by Thermo Fisher. He also served as a director of Outerwall from 2011 (and serving as Chairman of the board from 2013) until it was acquired in September 2016 by Apollo Global Management, a private equity firm. He also served as a director of Socket Mobile from 2016 until 2019, and as a director of Silicon Laboratories, Inc. from 2007 until 2010. Mr. Chan also currently serves as a member of the board of several privately-held companies. Mr. Chan holds a B.S. degree in electrical and computer engineering from the University of California at Santa Barbara and a M.B.A. from Santa Clara University. Our board believes that Mr. Chan’s experience as the Chief Executive Officer of Magellan, his senior management positions with other leading companies, and his service as a director of multiple public and private
companies provide the requisite qualifications, skills, perspectives, and experiences that qualify him to serve on our board.
Robert Chess, age 62, has served on our board of directors since July 2014, and he was appointed as lead independent director effective as of October 30, 2018. Mr. Chess is Chairman of the board of directors of Nektar Therapeutics, a publicly traded therapeutics company. He has served on the board of Nektar Therapeutics as either CEO and/or Chairman since 1992 and has held the Chairman position since 1999. Mr. Chess has also served on the board of directors of Pharsight Corp., a publicly traded company that provides software and scientific consulting services to pharmaceutical and biotechnology companies, and CoTherix, Inc., a publicly traded biopharmaceutical company. Mr. Chess currently serves as a lecturer at the Stanford Graduate School of Business, a position he has held since 2004. Mr. Chess holds a B.S. in Engineering with Honors from the California Institute of Technology and an M.B.A. from Harvard University. Our board of directors believes that Mr. Chess brings extensive board and executive experience managing the operations of biotechnology companies, and his service on a number of public company boards provides important industry and corporate governance experience, which qualifies him to serve as one of our directors.
Keith Crandell, age 59, has served on our board of directors since October 2013. Mr. Crandell is the Managing Director of Arch Venture Corporation, a venture capital firm focused on early-stage technology companies, since 1987. Mr. Crandell is a director of several private companies and he also serves on the board of directors of Adesto Technologies Corp., a provider of low power,smart non-volatile memory products which is a publicly traded company and Quanterix, a publicly traded life science instrument company. Mr. Crandell holds a B.S. in Chemistry and Mathematics from St. Lawrence University, an M.S. in Chemistry from the University of Texas, Arlington, and an M.B.A. from the University of Chicago. Our board of directors believes that Mr. Crandell brings extensive experience in the technology industry and that his service on a number of boards provides an important perspective on operations, finance and corporate governance matters, which qualifies him to serve as one of our directors.
Frederick Craves, Ph.D., age 74, has served on our board of directors since May 2014. Dr. Craves is the Founder of Bay City Capital, one of the world’s premier life science investment firms, and has been Managing Director since its founding in September 1996. Over the course of his career, Dr. Craves has worked in executive management of a multinational pharmaceutical company and founded and managed several biotech companies. He previously served on the boards of several private and public companies, including Reliant Pharmaceuticals, Medarex Pharmaceuticals and Incyte Pharmaceuticals. His current board memberships include a lead director position on two publicly traded companies, Madrigal Pharmaceuticals, Inc., a clinical stage biopharmaceutical company, and Dermira, Inc. a dermatological biotechnology company. Dr. Craves holds a B.S. in Biology from Georgetown University, an M.S. in Biochemical Pharmacology from Wayne State University, and a Ph.D. in Pharmacology and Toxicology from the University of California, San Francisco. Our board of directors believes that in addition to his educational background, Dr. Craves brings extensive experience in the biotechnology industry and his service on a number of boards of public and private companies provides an important perspective on operations and corporate governance matters, which qualifies him to serve as one of our directors.
Jan Johannessen, age 63, has served on our board of directors since October 2018. Mr. Johannessen currently serves as an advisor to iGlobe Partners, a venture capital company. Mr. Johannessen served as Chief Operating Officer and Secretary at Conexant Systems, LLC, a semiconductor company, from May 2013 to August 2017 and also served as its Chief Financial Officer from May 2013 to May 2016 and as its Chief Executive Officer from May 2016 to August 2017. Mr. Johannessen served as Chief Financial Officer and Secretary at REC Silicon ASA, a company listed on the Oslo stock exchange from August 2008 to May 2013. He served as Interim Chief Executive Officer and President at Lattice Semiconductor Corporation, a publicly traded company, from May 2008 to August 2008 and as Chief Financial Officer and Secretary at Lattice Semiconductor Corporation from December 2003 to May 2008. Mr. Johannessen holds a B.S. in Business from the University of Houston, and a MBA in International Business from Arizona State University. Our board of directors believes that Mr. Johannessen brings extensive executive experience in the technology industry and financial and accounting expertise, which qualifies him to serve as one of our directors.
Emily M. Leproust, Ph.D., age 46, has served as our President and Chief Executive Officer and as a member of our board of directors since April 2013. She was also appointed as Chair of our board of directors effective as of October 2018. Priorto co-founding Twist, Dr. Leproust served in various positions at Agilent most recently as its Director, Applications and Chemistry R&D from February 2009 to April 2013. Dr. Leproust holds a M.Sc. in Industrial Chemistry from the Lyon School of Industrial Chemistry and a Ph.D. in Organic Chemistry from the University of Houston. Our board of directors believes that Dr. Leproust is qualified to serve as a director because of her operational and historical expertise gained from serving as our President and Chief Executive Officer, and her extensive professional and educational experience in the biotechnology industry.
Xiaoying Mai,age 32, has served on our board of directors since July 2018. Ms. Mai is an Investment Director of GF Xinde Investment Management Co. Ltd, a venture capital investment firm based in China that specializes in investing in biotechnology companies, a position she has held since June 2015. Ms. Mai previously served as a financial manager for Guangfa Securities Co., Ltd, a publicly listed company in Hong Kong from December 2012 to June 2015, where she specialized in preparing financial information for public disclosure and tax management. Ms. Mai has also served as a member of the IPSAS program-international public sector accounting standard and worked with the United Nations in 2011. Ms. Mai holds a B.A. in Business Management from the Guangdong University of Foreign Studies and a M.A. in accountancy from George Washington University. Our board of directors believes that Ms. Mai brings extensive experience in the biotechnology industry and her experience with the Asian markets will help us to expand into such markets, which qualifies her to serve as one of our directors.
Robert Ragusa,age 60, has served on our board of directors since November 2016. Mr. Ragusa is currently the Senior Vice President, Global Quality and Operations, at Illumina, Inc., a strategic commercial partner of Twist and a publicly traded corporation, where he has worked since December 2013. Prior to joining Illumina, Inc., from April 2010 to November 2013, Mr. Ragusa was Executive Vice President, Global Operations and Service at Accuray Incorporated, a radiation oncology company that develops, manufactures, sells and supports cancer treatment solutions. Mr. Ragusa holds a B.S. in Biomedical and Electrical Engineering and an M.B.A. from the University of Connecticut, and an M.S. in Biomedical and Electrical Engineering from Carnegie-Mellon University. Our board of directors believes that Mr. Ragusa brings extensive experience in important ecosystem partners and managing operations of large public companies, and this, in addition to his education in biotechnology, finance and management, qualifies him to serve as one of our directors.
Executive Officers
Our executive officers, as of December 12, 2019, their positions and their respective ages are as set forth below:
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Mark Daniels has served as our General Counsel since August 2016, as our Chief Ethics and Compliance Officer since May 1, 2017, as our Secretary since September 2018 and as our Senior Vice President and Chief Legal Officer since November 2018. Prior to joining us, from January 2013 to May 2016, Mr. Daniels was at Broadcom Corporation, a semiconductor manufacturer and producer of wireless and broadband products, where his most recent position was Vice President, Law and Deputy Chief Corporate Compliance Officer. Before that,
he spent 20 years in positions of increasing responsibility in the legal department at Amgen, Inc., a producer of biopharmaceuticals, where his last role was Vice President and Associate General Counsel. Mr. Daniels received his B.S. with honors in Industrial and Labor Relations from Cornell University and a J.D., cum laude, from Harvard Law School.
Patrick Finn, Ph.D. has served as our Vice President of Sales and Marketing since February 2015 and as our Senior Vice President of Commercial Operations since December 2018. Prior to joining us, Dr. Finn was Vice President of Sales at Enzymatics Inc., a developer, manufacturer, and marketer of enzymes for molecular biology applications, sold predominantly to manufacturers in research and diagnostic markets from January 2012 to March 2015. Dr. Finn holds a B.Sc. in Chemistry from Heriot-Watt University and a Ph.D. in Chemistry from the University of Southampton.
Paula Green has served as our Vice President of Human Resources since March 2016. Prior to joining us, Ms. Green was Vice President of Human Resources at Qiagen, N.V., a provider of sample and assay technologies for molecular diagnostics, applied testing, academic and pharmaceutical research from March 2001 to September 2015. Ms. Green holds a B.S. Organizational Behavior from the University of San Francisco.
Martin Kunz has served as our Senior Vice President of Operations since February 2019. Previously, he served as President of Eurofins Genomics US from June 2010 to January 2019. Prior to serving as President, he served as Chief Technology Officer from September 2008 to June 2010 where his focus was building IToff-shore capacity and designing a new IT systems landscape for genomics services. Preceding his time at Eurofins, he served as Chief Information Officer of Operon Biotechnologies, Inc. from September 2005 to September 2008 where he built a global information technology team and developed and deployed a CRM, ane-commerce and a business intelligence system. Prior to joining the biotech industry, he held a variety of positions at various companies throughout Switzerland, including sales, QA and business analyst. Mr. Kunz received his B.S. in Engineering from the H.F. Technology and Management School (TGZ) in Zurich, Switzerland.
Bill Peck, Ph.D. has been our Chief Technology Officer since February 2013. Priorto co-founding Twist Bioscience, Dr. Peck was the Director of Fluidic Systems at Complete Genomics Inc. from April 2008 to February 2013. Dr. Peck holds a B.Sc., M.Sc., and Ph.D. in Mechanical Engineering from the University of Alberta.
James M. Thorburn has served as our Chief Financial Officer since April 2018. Prior to joining us, Mr. Thorburn served as a member of the board of directors of IXYS Corporation, a publicly traded semiconductor company from March 2007 to January 2018. Mr. Thorburn was also Chief Sales Officerand Co-Head of International at Televerde, a demand generation and sales acceleration enterprise, from August 2014 to February 2018. Prior to Televerde, he served as interim CFO of several public and private companies including Enercore, Next Autoworks, Fisker Automotive and Numonyx. Mr. Thorburn served as Chief Executive Officer of Zilog from March 2001 until August 2006. Prior to serving as Chief Executive Officer of Zilog, Mr. Thorburn held various executive positions including Chief Operating Officer of ON Semiconductor, operating consultant with Texas Pacific Group, Chief Financial Officer at Zilog and various management positions at National Semiconductor Corporation. Mr. Thorburn holds a B.Sc. (Hons.) degree from University of Glasgow and passed the Chartered Institute of Management Accountant exams in the United Kingdom.
There are no immediate family relationships between or among any of our executive officers or directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own more than 10 percent of our common stock to file with the SEC reports of ownership regarding the common stock and other Twist equity securities. These persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely on our review of the copies of such forms furnished to
us and written representations from the directors and executive officers, we believe that all Section 16(a) filing requirements were timely met in fiscal year 2019, other than one Form 4 covering three transactions and one Form 4 covering one transaction, both filed late for Nelson Chan, and Forms 4 filed for Robert Chess, Jan Johannessen, Keith Crandell, Frederick Craves Ph.D., and Robert Ragusa, all related to yearly option grants pursuant to our director compensation policy, which were filed late.
Code of Conduct
Board Composition
Our board of directors is currently comprised of ten members. Our amended and restated bylaws permit
Our board of directors is divided into three classes, with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes of directors continuing for the remainder of their respective three-year terms. Upon the expiration of the term of a class of directors, a director in that class will be eligibleDefinitive Proxy Statement to be elected for a new three-year term at the annual meeting of stockholders in the year in which their term expires.
Our directors are divided among the three classes as follows:
the Class II directors are Messrs. Barthelemy, Crandell and Johannessen and Dr. Craves, and their terms will expire at the annual meeting of stockholders to be held in 2020;
the Class III directors are Drs. Leproust and Banyai and Mr. Chess, and their terms will expire at the annual meeting of stockholders to be held in 2021; and
the Class I directors are Messrs. Chan and Ragusa and Ms. Mai, and their terms will expire at the annual meeting of stockholders to be held in 2022.
Board and Committee Meetings
Our board held eight (8) meetings during the fiscal year ended September 30, 2019. All directors except Mr. Crandell attended at least 75% of the meetings of the board and the committees on which he or she served.
Committees of the Board
Our board has an audit committee, a compensation committee and a nominating and corporate governance committee, each of which has the composition and responsibilities described below.
Audit Committee
Our audit committee is comprised of Messrs. Barthelemy, Ragusa and Johannessen, Dr. Craves and Ms. Mai, each of whom isa non-employee member of our board of directors, with Mr. Johannessen serving as audit
committee chairperson. Our board of directors has determined that each of the members of our audit committee satisfies the requirements for independence and financial literacy under the current listing standards of the Nasdaq Stock Market and SEC rules and regulations, includingRule 10A-3. Our board of directors has also determined that Mr. Johannessen is an audit committee financial expert within the meaning of Item 407(d) ofRegulation S-K of the Securities Act. This designation is a disclosure requirement of the SEC and does not impose upon Mr. Johannessen any duties, obligations, or liabilities greater than that which would otherwise be imposed by virtue of his membership on the board or the audit committee. In addition, this designation does not affect the duties, obligations, or liabilities of any other director or audit committee member.
Our audit committee is responsible for, among other things:
selecting a qualified firm to serve as independent registered public accounting firm to audit our financial statements;
helping to ensure the independence and performance of the independent registered public accounting firm;
discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interimand year-end operating results;
developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
reviewing related party transactions;
reviewing our policies on risk assessment and risk management;
approving all audit and allpermissible non-audit services, to be performed by the independent registered public accounting firm; and
reviewing the audit committee report required by SEC rules to be included in our annual proxy statement.
Our audit committee operates under a written charter, which satisfies the applicable rules of the SEC and the listing standards of the Nasdaq Stock Market, and which is available on the investor relations section of our website at www.twistbioscience.com. All audit services to be provided to us and all permissiblenon-audit services, other than deminimis non-audit services, to be provided to us by our independent registered public accounting firm will be approved in advance by our audit committee. Our audit committee held four (4) meetings in the fiscal year ended September 30, 2019.
Compensation Committee
Our compensation committee is comprised of Messrs. Barthelemy, Chess, Crandell and Ragusa and Dr. Craves, each of whom isa non-employee member of our board of directors, with Mr. Crandell serving as compensation committee chairperson. Our board of directors has determined that each member of the compensation committee isa non-employee director, as defined pursuantto Rule 16b-3 promulgated under the Exchange Act, and each member meets the requirements for independence under the listing standards of the Nasdaq Stock Market and SEC rules and regulations. Our compensation committee is responsible for, among other things:
reviewing and approving the compensation of our chief executive officer and other executive officers;
reviewing the compensation paid to our directors and making recommendations to our board of directors;
reviewing, adopting, amending, and administering our equity incentive plans and granting awards to eligible persons and determining the terms of such awards;
reviewing, approving, amending, and terminating any change in control, severance or termination agreement, plan or arrangement for our executive officers;
reviewing in conjunction with the nominating and corporate governance committee, succession planning for our chief executive officer and other executive officers and evaluating potential successors; and
assessing whether our compensation policies and practices create risks that are reasonably likely to have a material adverse effect on us.
Our compensation committee operates under a written charter, which satisfies the applicable rules of the SEC and the listing standards of the Nasdaq Stock Market, and which is available on the investor relations section of our website at www.twistbioscience.com. Our compensation committee held six (6) meetings in the fiscal year ended September 30, 2019.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Messrs. Chan, Chess, Crandell and Johannessen, each of whom isa non-employee member of our board of directors, with Mr. Chess serving as the nominating and corporate governance committee chairperson. Our board of directors has determined that each member of our nominating and corporate governance committee meets the requirements for independence under the listing standards of the Nasdaq Stock Market and SEC rules and regulations.
Our nominating and corporate governance committee is responsible for, among other things:
identifying, evaluating and making recommendations to our board of directors regarding, nominees for election to our board of directors, and individuals to fill any vacancies on our board of directors, between meetings of our stockholders at which directors are to be elected;
identifying, evaluating and making recommendations to our board of directors regarding the chairmanship and membership of each of its committees;
considering and making recommendations to our board of directors regarding the composition of our board of directors and its committees;
assessing the effectiveness of any diversity policy our board of directors may determine to implement;
reviewing in conjunction with the compensation committee, succession planning for our chief executive officer and other executive officers and evaluating potential successors; and
reviewing and assessing the adequacy of our corporate governance guidelines and recommending any proposed changes to our board of directors.
Our nominating and corporate governance committee operates under a written charter, which satisfies the applicable listing requirements and rules of the Nasdaq Stock Market, and which is available on the investor relations section of our website at www.twistbioscience.com. Our nominating and corporate governance committee held four (4) meetings in the fiscal year ended September 30, 2019.
Our nominating and corporate governance committee is responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members), the nominating and corporate governance committee, in recommending candidates for election, and the board of directors, in approving (and, in the case of vacancies, appointing) such candidates, may take into account many factors, including, but not limited to, diversity of personal and professional background, perspective and experience; personal and professional integrity, ethics and values; experience in corporate management, operations or finance; experience relevant to our industry and with relevant social policy concerns;
experience as a board member or executive officer of another publicly held company; relevant academic expertise or other proficiency in an area of our operations; practical and mature business judgment; and any other relevant qualifications, attributes or skills.
Currently, our board of directors evaluates, each individual in the context of the board of directors as a whole, with the objective of assembling a group that can best maximize the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.
Our board of directors may from time to time establish other committees.
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Our named executive officers for fiscal 2019, which consist of our principal executive officer and the next two most highly compensated executive officers, are:
Emily M. Leproust, our President and Chief Executive Officer;
James M. Thorburn, our Chief Financial Officer; and
Patrick Finn, Senior Vice President of Commercial Operations.
Processes and Procedures for Compensation Decisions
Our compensation committee is responsible for the executive compensation programs for our executive officers and reports to the board of directors on its discussions, decisions and other actions. Historically, our Chief Executive Officer makes recommendations to our compensation committee, often attends compensation committee meetings and is involved in the determination of compensation for the respective executive officers that report to her, except that our Chief Executive Officer does not make recommendations as to her own compensation, nor does she attend the portions of compensation committee meetings at which her own compensation is discussed and determined. Our Chief Executive Officer makes recommendations to our compensation committee regarding short- and long-term compensation for all executive officers (other than herself) based on our results, an individual executive officer’s contribution toward these results and performance toward individual goal achievement. Our compensation committee then reviews these recommendations and other data and makes decisions as to each item of total compensation, and the total compensation, for the Chief Executive Officer and each other executive officer, as well as each individual compensation component. Our compensation committee is authorized to select, engage, compensate and terminate compensation consultants, legal counsel and such other advisors, as it sees fit, to assist in carrying out their responsibilities and functions, including the oversight of our overall compensation philosophy, compensation plans and benefits programs and our executive compensation programs and related policies. In the fiscal year ended September 30, 2019, our compensation committee retained the services of Compensia, Inc., an independent compensation consulting firm, to provide advice and recommendations on competitive market practices and specific compensation decisions for our executive officersand non-employee directors. Compensia provided no other services to the Company in the fiscal year ended September 30, 2019.
Summary Compensation Table
The following table sets forth certain information regarding the compensation of our named executive officers for the fiscal years ended September 30, 2018 and 2019:
Name and principal position | Year | Salary ($)(1) | RSU Awards ($)(2) | Option awards ($)(3) | Non-equity incentive plan compensation ($)(4) | Total ($) | ||||||||||||||||||
Emily M. Leproust, Ph.D. | 2019 | 477,042 | 3,045,398 | 4,144,965 | 458,752 | 8,126,157 | ||||||||||||||||||
President and Chief Executive Officer | 2018 | 362,250 | — | — | 162,424 | 524,674 | ||||||||||||||||||
James M. Thorburn, | 2019 | 384,167 | 1,039,793 | 1,415,209 | 213,035 | 3,052,204 | ||||||||||||||||||
Chief Financial Officer | 2018 | 134,015 | — | 1,286,756 | 70,341 | 1,491,112 | ||||||||||||||||||
Patrick Finn, | 2019 | 352,917 | 1,039,793 | 1,415,209 | 205,764 | 3,013,683 | ||||||||||||||||||
Senior Vice President of Commercial Operations(5) |
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Outstanding equity awards as of September 30, 2019
The following table provides information regarding the outstanding equity awards held by each of our named executive officers as of September 30, 2019:
Option awards(1) | Stock awards(1) | |||||||||||||||||||||||||||
Name | Grant date | Number of securities underlying unexercised options (#) exercisable(2) | Number of securities underlying unexercised options (#) unexercisable(3) | Option exercise price or per share purchase price ($)(4) | Option expiration date | Number of shares or units of stock that have not vested (#)(5) | Market value of shares or units of stock that have not vested ($)(6) | |||||||||||||||||||||
Emily M. Leproust, Ph.D. | 9/29/2015 | (7) | 100,999 | — | 5.95 | 9/28/2025 | — | — | ||||||||||||||||||||
9/29/2017 | (8) | 115,396 | 115,398 | 8.82 | 9/28/2027 | — | — | |||||||||||||||||||||
11/19/2018 | (9) | — | 266,539 | 26.66 | 11/18/2028 | — | — | |||||||||||||||||||||
11/19/2018 | (10) | — | — | — | — | 114,231 | 2,727,836 | |||||||||||||||||||||
James M. Thorburn | 6/7/2018 | (11) | 48,911 | 117,838 | 11.59 | 6/6/2028 | — | — | ||||||||||||||||||||
11/19/2018 | (12) | — | 91,004 | 26.66 | 11/18/2028 | — | — | |||||||||||||||||||||
11/19/2018 | (13) | — | — | — | — | 39,002 | 931,368 | |||||||||||||||||||||
Patrick Finn | 2/4/2015 | (14) | 60,398 | — | 1.19 | 2/3/2025 | — | — | ||||||||||||||||||||
9/29/2015 | (15) | 44,628 | — | 5.95 | 9/28/2025 | — | — | |||||||||||||||||||||
9/29/2017 | (16) | 30,214 | 30,214 | 8.82 | 9/28/2027 | — | — | |||||||||||||||||||||
11/19/2018 | (17) | — | 91,004 | 26.66 | 11/18/2028 | — | — | |||||||||||||||||||||
11/19/2018 | (18) | — | — | — | — | 39,002 | 931,368 |
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Annual Bonus
We have an annual objective-setting and review process for our named executive officers that is the basis for the determination of potential annual bonuses. Our board of directors reviews and approves both the annual objectives and the payment of annual bonuses for our executives. Each of our named executive officers is eligible for annual performance-based bonuses of up to a specific percentage of their salary, subject to approval by our board of directors or the compensation committee. The performance-based bonus is tied to a set of specified goals and strategic objectives for our named executive officers and we conduct an annual performance review to determine the attainment of such goals and objectives. Our management may propose bonus awards to our board of directors primarily based on such review process. Our board of directors or the compensation committee makes the final determination of the achievement of both the specified corporate and strategic objectives and the eligibility requirements for and the amount of such bonus awards. For the fiscal years ended September 30, 2018 and 2019, bonuses were paid out based on the satisfaction of certain revenue goals and strategic objectives.
Equity-Based Incentive Awards
Our equity-based incentive awards are designed to align our interests and the interests of our stockholders with those of our employees and consultants, including our named executive officers. Our board of directors or the compensation committee is responsible for approving equity grants to employees and consultants.
Prior to our IPO, we granted all equity incentive awards pursuant to our 2013 Plan. Following our IPO, we have and will continue to grant equity incentive awards under the terms of our 2018 Plan. The terms of our equity plans are described below under “Equity incentive plans.”
All stock options are granted with an exercise price per share that is no less than the fair market value of our common stock on the date of grant of each award. Our stock option awards generally vest over a four-year period and may be subject to acceleration of vesting and exercisability under certain termination and corporate transaction events.
In fiscal year 2019, the compensation committee granted stock options and restricted stock units to our named executive officers under the 2018 Plan to further incentivize and retain the executives. The details of those equity grants are described above under “Outstanding equity awards as of September 30, 2019.”
Employment Agreements
In connection with our IPO, we entered into an amended and restated employment agreement with each of the named executive officers, effective as of the effective time of the registration statement. These agreements providefor at-will employment and establish the named executive officer’s base salary, eligibility to participate in an incentive bonus plan and standard employee benefits.
These amended and restated employment agreements also, for the three (3) years following the effective date of the amended and restated employment agreements, provide for certain severance payments and benefitsfiled in connection with each named executive officer’s terminationthe 2023 Annual Meeting of employment under various circumstances, including in connection with a change in control of the Company. The material terms and conditions of these provisions are summarized below in “—Potential payments upon termination or change in control.” Following the date that is three (3) years from the effective date of the amended and restated employment agreements, our board of directors or compensation committee, each in its sole discretion, shall determine whether to offer the named executive officers severance pay and benefits according to terms and conditions to be determined at such time, which shall be the same generally available to similarly situated employees of the Company.
Potential Payments upon Termination or Change in Control
Involuntary Termination of Employment not in Connection with Change in Control
In the event that we terminate a named executive officer’s employment for any reason other than “cause,” death, or “disability,” or if the named executive officer resigns for “good reason,” in each case, other than in connection with or during the12-month period following, a “change in control,” such named executive officer will be eligible to receive the following severance benefits, subject to, among other things, executing a general release of claims in favor of the Company and complying with the terms of his or her confidentiality agreement:
a cash payment equal to 12 months of her then-current base salary in the case of Dr. Leproust and 6 months of their then-current base salary in the case of Mr. Thorburn and Dr. Finn, payable in installments over such period according to our regular payroll schedule; and
a pro-rata incentive bonus for the year of termination (days worked relative to 365 days) based on actual performance and paid when bonuses are normally paid.
COBRA premiums for a period of 12 months in the case of Dr. Leproust and 6 months in the case of Mr. Thorburn and Dr. Finn.
Involuntary termination of employment in connection with change in control
In the event that we terminate a named executive officer’s employment for any reason other than “cause,” death, or “disability,” or if the named executive officer resigns for “good reason,” in each case, in connection with or
during the12-month period following a “change in control,” such named executive officer will be eligible to receive the following severance benefits, subject to, among other things, executing a general release of claims in favor of the Company and complying with the terms of his or her confidentiality agreement:
a cash payment equal to 24 months of her then-current base salary in the case of Dr. Leproust and 12 months of their then-current base salary in the case of Mr. Thorburn and Dr. Finn, payable in installments over such period according to our regular payroll schedule;
a cash payment equal to two times her average bonus for the two years prior to the termination in the case of Dr. Leproust and one times in the case of Mr. Thorburn and Dr. Finn, which will bepaid pro-rata in equal installments with the cash severance;
COBRA premiums for a period of 24 months in the case of Dr. Leproust and 12 months in the case of Mr. Thorburn and Dr. Finn; and
100% immediate vesting acceleration of all of the shares of our common stock underlying any then-outstanding unvested stock options and other unvested equity awards.
Each named executive officer’s employment agreement contains a“better after-tax” provision, which provides that if any of the payments to an executive constitutes a parachute payment under Section 280G of the Code, the payments will either be (i) reduced or (ii) provided in full to the executive, whichever results in the named executive officer receiving the greater amount after taking into consideration the excise tax under Section 4999 of the Code and any interest or penalties associated with such excise tax.
As defined in each named executive officer’s employment agreement, “change in control” shall mean: (i) the consummation of a merger or consolidation of the Company or any other corporate reorganization or business combination transaction of the Company with or into another corporation, entity or person; (ii) the sale, transfer or other disposition of all or substantially all of the Company’s assets; or (iii) any transaction as a result of which any person is the “beneficial owner” (as defined in Rule13d-3 under the Securities Exchange Act of 1934 (the “Exchange Act”)), directly or indirectly, of securities of the Company representing at least fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities. For purposes of this definition, the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a parent or subsidiary and (ii) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company. A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that shall be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.
As defined in each named executive officer’s employment agreement, “cause” means the named executive officer’s (i) material breach of the employment agreement, confidentiality agreement, or any other written agreement with the Company, which breach to the extent deemed curable by the board of directors is not cured within 10 business days after written notice thereof from the Company; (ii) material failure to comply with the Company’s written policies or rules, which breach to the extent deemed curable by the board of directors is not cured within ten (10) business days after written notice thereof from the Company; (iii) repeated failure to follow reasonable and lawful instructions from the board of directors, which failure is not cured within 10 business days after written notice thereof from the Company; (iv) commission, conviction of, or a plea of “guilty” or “no contest” to, a felony under the laws of the United States or any state if such felony is work-related, impairs his or her ability to perform services for the Company in accordance with the employment agreement, or results in a loss to the Company or damage to the reputation of the Company; (v) misappropriation of funds or property of the Company; (vi) gross neglect of his or her duties; (vii) act or omission that results directly or indirectly in material financial accounting improprieties for the Company; (viii) failure to cooperate with a government investigation; or (ix) gross or willful misconduct resulting in a loss to the Company or damage to the reputation of the Company.
As defined in each named executive officer’s employment agreement, “good reason” means a resignation by the named executive officer within 90 days after one of the following conditions has come into existence without his or her written consent: (i) a material diminution in executive’s authority, duties or responsibilities; (ii) a material reduction of executive’s annual base salary; provided, however, that prior to a change in control, it shall not be “good reason” if there is a corresponding reduction in the base salaries of all other executive officers of the Company; or (iii) a material change in the geographic location at which the executive must perform services (a change in location of executive’s office will be considered material only if it increases the executive’s currentone-way commute by more than fifty miles). A condition shall not be considered “good reason” unless executive gives the Company written notice of the condition within 30 days after the condition comes into existence and the Company fails to remedy the condition within 30 days after receiving executive’s written notice.
As defined in each named executive officer’s employment agreement, “disability” means that the named executive officer is unable to perform the essential functions of his or her position, with or without reasonable accommodation, for a period of at least 120 consecutive days because of a physical or mental impairment.
Director Compensation
The following table sets forth certain information regarding the compensation ofour non-employee directors for the fiscal year ended September 30, 2019:
Name | Option awards ($)(1)(2) | Total ($) | ||||||
Nelson C. Chan | 217,767 | (3) | 217,767 | |||||
Robert Chess | 89,747 | (4) | 89,747 | |||||
Paul A. Conley | — | — | ||||||
Keith Crandell | 89,747 | (4) | 89,747 | |||||
Frederick Craves | 89,747 | (4) | 89,747 | |||||
Jan Johannessen | 429,744 | (5) | 429,744 | |||||
Xiaoying Mai | — | — | ||||||
Robert Ragusa | 89,747 | (4) | 89,747 |
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Ournon-employee director compensation policy is designed to provide the appropriate amount and form of compensation to ournon-employee directors. Under this policy, we will payour non-employee directors a cash retainer for service on the board of directors and an additional cash retainer for service on each committee on which the director is a member, which will be paid quarterly in arrears. The chairman of each committee will receive higher retainers for such service. The fees paidto non-employee directors for service on the board of directors and for service on each committee of the board of directors on which the director is a member are as follows:
Member Annual Retainer | Chairman or Lead Director Annual Retainer | |||||||
Board of Directors | $ | 40,000 | $ | 60,000 | ||||
Audit Committee | 7,000 | 16,000 | ||||||
Compensation Committee | 5,000 | 13,000 | ||||||
Nominating and Corporate Governance Committee | 5,000 | 10,000 |
In addition,each non-employee director elected to our board of directors will, upon the date of his or her initial election or appointment to bea non-employee director, be granted an option to purchase a number of shares of common stock having a grant date fair value of$340,000. One-third of the shares subject to such initial option grant will vest on each anniversary of the date of grant, subject to the director providing service through each vesting date. Further, at the close of business on the date of each annual stockholder meeting following the initial public offering, each person who is currently and has beena non-employee director for at least three (3) months will be granted an option to purchase a number of shares of common stock having a grant date fair value of $170,000. 100% of the shares subject to such annual option grant will vest in full on the earlier of theone-year anniversary of the grant date and the next annual stockholder meeting, subject to the director providing service through the vesting date. All stock option awardsto non-employee directors are made pursuant to the 2018 Plan. Notwithstanding the foregoing vesting schedules, if such director remains a service provider until immediately prior to the closing of a “change in control” (as defined in the applicable equity plan), the shares subject to his or her then-outstanding stock option that was granted pursuant to thenon-employee director compensation policy will become fully vested immediately prior to the closing of the change in control.
We will also continue to reimburseour non-employee directors for reasonable traveland out-of-pocket expenses incurred in connection with attending our board of director and committee meetings.
The non-employee director compensation program is intended to provide a total compensation package that enables us to attract and retain qualified and experienced individuals to serve as directors and to align our directors’ interests with those of our stockholders.
Compensation Committee Interlocks and Insider Participation
During fiscal 2019, our compensation committee consisted of Messrs. Chess and Crandell and Dr. Craves. None of the members of our compensation committee has at any time been one of our officers or employees. None of our executive officers currently serves, or during fiscal 2019 has served, as a member of our board of directors or the compensation committee (or other board committee performing equivalent functions) of any entity that has
one or more of its executive officers who served on our board of directors or our compensation committee during fiscal 2019. Certain members of our compensation committee are affiliated with entities that purchased our preferred stock. Please see “SecurityItem 12. Security Ownership of Certain Beneficial Owners and Management” for more information.
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The following table sets forth information regarding beneficial ownership ofManagement and Related Stockholder Matters
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We have determined beneficial ownership in accordance with the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially own, subject to community property laws where applicable. To our knowledge, no person or entity except as set forth below, is the beneficial owner of more than 5% of the voting power of our common stock as of the close of business on December 9, 2019.
Under SEC rules, the calculation of the number of shares of our common stock beneficially owned by a person and the percentage ownership of that person includes both outstanding shares of our common stock then owned as well as any shares of our common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of December 9, 2019 and shares issuable upon the settlement of RSUs held by that person that will vest within 60 days of December 9, 2019. Shares subject to those options and RSUs for a particular person are not included as outstanding, however, for the purpose of computing the percentage ownership of any other person. We have based percentage ownership of our common stock on 33,118,096 shares of our common stock outstanding as of December 9, 2019. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Twist Bioscience Corporation, 681 Gateway Boulevard, South San Francisco, California 94080.
Shares beneficially owned | ||||||||||||||||||||
Name of beneficial owner | Common stock | Options exercisable within 60 days | RSUs vesting within 60 days | Aggregate number of shares beneficially owned | % | |||||||||||||||
5% or more stockholders: | ||||||||||||||||||||
Entities affiliated with ARCH Venture Partners(1) | 3,361,568 | — | — | 3,361,568 | 10.2 | % | ||||||||||||||
Ever Alpha Fund L.P.(2) | 3,294,961 | — | — | 3,294,961 | 9.9 | % | ||||||||||||||
Illumina, Inc.(3) | 1,773,530 | — | — | 1,773,530 | 5.4 | % | ||||||||||||||
Entities affiliated with Tao Capital Partners(4) | 1,665,838 | — | — | 1,665,838 | 5.0 | % | ||||||||||||||
Named executive officers and directors: | ||||||||||||||||||||
Emily M. Leproust(5) | 726,275 | 398,427 | — | 1,124,702 | 3.4 | % | ||||||||||||||
James M. Thorburn(6) | 6,495 | 199,500 | — | 205,995 | * | |||||||||||||||
Patrick Finn(7) | 7,462 | 188,205 | — | 195,667 | * | |||||||||||||||
William Banyai(8) | 625,561 | 276,259 | — | 901,820 | 2.7 | % | ||||||||||||||
Nicolas Barthelemy | — | — | — | — | * | |||||||||||||||
Nelson C. Chan | 1,497 | 3,093 | — | 4,590 | * | |||||||||||||||
Robert Chess(9), (10) | 69,822 | 35,521 | — | 105,343 | * | |||||||||||||||
Keith Crandell(1), (10) | 3,361,568 | — | — | 3,361,568 | 10.2 | % | ||||||||||||||
Frederick B. Craves(10) | 66,771 | — | — | 66,771 | * | |||||||||||||||
Jan Johannessen(10) | — | 14,101 | — | 14,101 | * | |||||||||||||||
Xiaoying Mai(11) | — | — | — | — | * | |||||||||||||||
Robert Ragusa(3), (10) | 1,773,530 | — | — | 1,773,530 | 5.4 | % | ||||||||||||||
All directors and executive officers as a group | 7,299,965 | 1,374,328 | — | 8,674,293 | 25.1 | % |
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Policies and Procedures for Related Party Transactions
Our audit committee charter states that our audit committee is responsible for reviewing and approving in advance any related party transaction. Our board of directors adopted a written related person transaction policy setting forth the policies and procedures for the review and approval or ratification of related person transactions by the audit committee. Pursuant to the policy, all of our directors, officers and employees are required to report to the audit committee prior to entering into any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we areDefinitive Proxy Statement to be a participant, the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest, including purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person.
We believe that we have executed all of the transactions set forth under the section entitled “Certain relationships and related party transactions” on terms no less favorable to us than we could have obtained from unaffiliated third parties. It is our intention to ensure that all future transactions between us and our officers, directors and principal stockholders and their affiliates, are approved by the audit committee of our board of directors, and are on terms no less favorable to us than those that we could obtain from unaffiliated third parties.
In addition to the compensation arrangements, including employment, termination of employment and change in control arrangements, and indemnification arrangements, discussed, when required, in the sections titled “Management” and “Executive compensation” and the registration rights described in the section titled “Registration rights,” the following is a description of each transaction since October 1, 2018 and each currently proposed transaction in which:
we have been or are to be a participant;
the amount involved exceeded or will exceed the lesser of $120,000 or one percent of our total assets at the end of the last two completed fiscal years; and
any of our directors, executive officers, or holders of more than 5% of any class of our voting securities, or any immediate family member of, or person sharing the household with, any of these persons, had or will have a direct or indirect material interest.
Senior Business Advisor Agreement with Nelson C. Chan
On November 1, 2017, we entered into a Senior Business Advisor Agreement, or the Advisor Agreement, with Nelson C. Chan, who was later appointed to our board of directors as Class I director in May 2019. Pursuant to the Advisor Agreement, Mr. Chan agreed to provide data storage advisory services to us at a rate of $2,500 per month. In addition, the Advisor Agreement provided that, subject to the approval of our board of directors, Mr. Chan was entitled to receive an option to purchase 7,070 shares of our common stock (after giving effect to the reverse stock split effected in October 2018) that was not subsequently granted. Pursuant to the Advisor Agreement, we paid Mr. Chan $30,000 for his services in calendar year 2018 and $30,000 for his services in calendar year 2019. The Advisor Agreement contains confidentiality and invention-assignment provisions.
Upon Mr. Chan’s appointment to our board of directors, and to account for the grant to which he was entitled under the Advisor Agreement, Mr. Chan received a grant of an option to purchase 3,093 shares of common stock and an RSU grant of 1,497 shares on June 21, 2019, with a total value of $83,095 on the date of grant. The Advisor Agreement was amended to provide for the remainder of the grant to which Mr. Chan was originally promised, in the form of a grant in August 2020 of a RSU award for 1,925 shares of our common stock, and an option to purchase 3,978 shares of our common stock. Additionally, at the time of grant, subject to the approval of the Compensation Committee, the Advisor Agreement provides that Mr. Chan will be granted an award of restricted stock units for a number of shares of common stock determined by multiplying (x) 3,977 by (y) the excess, if any, of the closing price on the date of grant over $30.08, and then dividing the resulting total by the closing price on the date the additional award is granted. The Advisor Agreement was designed to ensure that the value of compensation to Mr. Chan would not exceed $120,000 in any rolling12-month period. The Advisor Agreement has no specific term and either party may terminate the agreement upon providing written notice.
Side letter with Ever Alpha Fund. L.P.
In March 2018, in connection with Ever Alpha Fund L.P. and certain other investors’ purchase of Series D convertible preferred stock, we entered into a side letter with Ever Alpha Fund L.P. and certain other parties pursuant to which, among other things, we have committed to using commercially reasonable efforts to invest up to $5.0 million, $10.0 million and $10.0 million over a three year periodfiled in connection with the incorporation, business and/or operations2023 Annual Meeting of a wholly owned foreign enterprise in the PRC, subjectStockholders.
with any applicable laws and regulations. The foreign enterprise will be exclusively owned and controlled by us through a subsidiary that we will wholly own, and Ever Alpha Fund L.P. will not have any direct economic, voting or other interests in this enterprise or any of our subsidiaries. Ever Alpha Fund L.P.’s interests in this enterprise are limited to its equity interest as a stockholder in the Company and its belief that expanding our manufacturing capacity and growing our sales organization in China will have a positive impact on our business and long-term value.
Director Independence
Our board of directors has undertaken a review of its composition, the composition of its committees, and the independence of each director and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based on information provided by each director concerning his or her background, employment, and affiliations, including family relationships, our board of directors has determined that each of Messrs. Barthelemy, Chan, Chess, Crandell, Ragusa and Johannessen and Dr. Craves and Ms. Mai do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable rules and regulations of the SEC, and the listing standards of the Nasdaq Stock Market. In making these determinations, our board of directors considered the current and prior relationships thateach non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock byeach non-employee director, and the transactions involving them described above in this section.
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The following table sets forth the fees for professional services rendered by PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm,filed in connection with the audits2023 Annual Meeting of Stockholders.
Fiscal 2019 | Fiscal 2018 | |||||||
Audit Fees(1) | $ | 2,118,500 | $ | 2,133,250 | ||||
Audit-Related Fees | — | — | ||||||
Tax Fees(2) | 15,000 | — | ||||||
All Other Fees(3) | 2,700 | 29,500 | ||||||
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Total Fees | $ | 2,136,200 | $ | 2,162,750 |
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Pre-Approval Policy
Under our audit committee’s policy governing our use2023 Annual Meeting of the servicesStockholders.
Form 10-K.
Exhibit Number | Description | Filed / Furnished / Incorporated by Reference from Form | Incorporated by Reference from Exhibit Number | Date Filed | ||||||||||||||||||||||
3.1 | 8-K | 3.1 | 11/7/2018 | |||||||||||||||||||||||
3.2 | 8-K | 3.1 | 11/18/2022 | |||||||||||||||||||||||
4.1 | S-1/A | 4.1 | 10/17/2018 | |||||||||||||||||||||||
4.3 | S-1 | 4.7 | 10/3/2018 | |||||||||||||||||||||||
4.4 | 10-K | 4.5 | 11/20/2020 | |||||||||||||||||||||||
+10.1 | S-1 | 10.1 | 10/3/2018 | |||||||||||||||||||||||
+10.2 | S-1/A | 10.2 | 10/17/2018 | |||||||||||||||||||||||
+10.3 | S-1/A | 10.3 | 10/17/2018 | |||||||||||||||||||||||
+10.4 | S-1 | 10.4 | 10/3/2018 | |||||||||||||||||||||||
+10.5 | S-1/A | 10.8 | 10/17/2018 | |||||||||||||||||||||||
10.6 | S-1 | 10.9 | 10/3/2018 | |||||||||||||||||||||||
Exhibit Number | Description | Filed / Furnished / Incorporated by Reference from Form | Incorporated by Reference from Exhibit Number | Date Filed | ||||||||||||||||||||||
10.7 | S-1 | 10.11 | 10/3/2018 | |||||||||||||||||||||||
10.7.1 | 10-Q | 10.2 | 5/1/2019 | |||||||||||||||||||||||
10.8* | 8-K | 10.1 | 12/22/2020 | |||||||||||||||||||||||
10.8.1* | 8-K | 10.1 | 4/16/2021 | |||||||||||||||||||||||
10.9† | S-1 | 10.14 | 10/3/2018 | |||||||||||||||||||||||
16.1 | 8-K | 16.1 | 3/9/2022 | |||||||||||||||||||||||
21.1 | Filed herewith | |||||||||||||||||||||||||
23.1 | Filed herewith | |||||||||||||||||||||||||
23.2 | Filed herewith | |||||||||||||||||||||||||
31.1 | Filed herewith | |||||||||||||||||||||||||
31.2 | Filed herewith | |||||||||||||||||||||||||
32.1 | Furnished herewith | |||||||||||||||||||||||||
32.2 | Furnished herewith |
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Exhibit Number | Description | Filed / Furnished / Incorporated by Reference from Form | Incorporated by Reference from Exhibit Number | Date Filed | ||||||||||||||||||||||
101.INS | XBRL Instance Document | Filed herewith | ||||||||||||||||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document | Filed herewith | ||||||||||||||||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith | ||||||||||||||||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith | ||||||||||||||||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed herewith | ||||||||||||||||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith | ||||||||||||||||||||||||
104 | Cover page from the Company’s Annual Report on Form 10-K for the year ended September 30, 2022, formatted in Inline XBRL |
* | Registrant has omitted schedules and exhibits pursuant to Item 601(a)(5) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of the omitted schedules and exhibits to the SEC upon request. |
† | Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment that was separately filed with the SEC. |
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Twist Bioscience Corporation | |||||||||||
By: | /s/ Emily M. Leproust | ||||||||||
Emily M. Leproust | |||||||||||
Signature | Title | Date | ||||||||||||
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/s/ Emily M. Leproust
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| November 28, 2022 | ||||||||||||
Emily M. Leproust | Chair of the Board of Directors (principal executive officer) | |||||||||||||
/s/ James M. Thorburn
| Chief Financial Officer (principal financial | |||||||||||||
James M. Thorburn | officer) | |||||||||||||
/s/
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Kevin B. Yankton | accounting officer) | |||||||||||||
/s/
| Director | |||||||||||||
William Banyai | ||||||||||||||
/s/
| Director | |||||||||||||
Nicolas Barthelemy | ||||||||||||||
/s/
| Director | |||||||||||||
Nelson C. Chan | ||||||||||||||
/s/
| Director | |||||||||||||
Robert Chess | ||||||||||||||
/s/
| Director | |||||||||||||
Keith Crandell | ||||||||||||||
/s/ Jan Johannessen | Director | November 28, 2022 | ||||||||||||
Jan Johannessen |
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/s/ Xiaoying Mai | Director | November 28, 2022 | ||||||||||||
Xiaoying Mai |
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/s/ Robert Ragusa | Director | November 28, 2022 | ||||||||||||
Robert Ragusa |
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/s/ Melissa Starovasnik | Director | November 28, 2022 | ||||||||||||
Melissa Starovasnik |
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