Twist Bioscience Corp
NASDAQ:TWST
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Twist Bioscience Corp
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Welcome to Twist Bioscience's Fiscal 2020 Third Quarter Financial Results Conference Call. At this time all participants' lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]
I would now like to turn the conference call over to Jim Thorburn, Chief Financial Officer.
Thank you, operator. Good afternoon, everyone. I'd like to thank you all for joining us today for Twist Bioscience conference call to review our fiscal 2020 third quarter financial results and business progress. We did issue our financial results earlier today, and they are available at our website at www.twistbioscience.com. With me on today's call is Dr. Emily Leproust, CEO and Co-Founder of Twist. Emily will begin with a review of recent progress in Twist businesses. I will report on our financial and operational performance, and Emily will discuss our upcoming milestones and direction. We will then open the call up for questions. And as a reminder, this call is being recorded. The audio portion will be archived in the Investors section of our website and will be available for one week.
During today's presentation, we will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we cannot, at this time, predict the full extent of the impact of the COVID-19 pandemic and any results in business or economic impact. We disclaim any obligation to update any forward-looking statements, except as required by law.
With that, I will now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily Leproust.
Thank you, Jim, and good afternoon, everyone. I am pleased to report that we've had another record quarter with revenue of $21.2 million, resulting from strong synbio and NGS sales as well as initial revenue from biopharma partnerships. Orders for the current quarters are flat, primarily due to NGS customers temporarily pivoting from routine diagnostic testing to full laboratory focus on COVID-19 using PCR test. That being said, we continue to have an order run rate of approximately $100 million for the year. And we see significant progress for biopharma vertical with our first top 10 pharma partnership and several up and coming companies embracing our antibody discovery platform.
Turning to specific results for synbio; we reported revenues of $11.8 million with $2.8 million of that coming from Ginkgo. While a large portion of our synbio revenue stream comes from customers in the industrial chemical sector, we see an increasing opportunity with health care customers. We are focused on adding products for this market and are beginning to see the results.
In April, we launched an expansion of our clonal genes, which offers larger preparations of DNA. Although it is early days of the launch, the revenue stream is growing. Even more importantly, we see companion orders for genes coming with these bookings. Generally speaking, for every dollar of larger DNA preps order, we receive $3 to $4 of gene orders. The launch of DNA preps, which is what we call them internally, was a significant effort, taking more than a year of execution across multiple teams. Indeed, the product line requires automation of laboratory processes as well as the customization of ordering in e-commerce. And our team made the investment in infrastructure to support this product line as it allows us to become more of a one-stop shop for all synthetic DNA products.
As we expected, our gross margin did decrease this quarter, as you'll hear from Jim, largely resulting from this infrastructure investment. We believe that this investment was worthwhile to increase the stickiness of our gene business by offering a more comprehensive offering as well as providing upside to attract new customers who require this feature and can now move their business to Twist. We expect that revenue will ramp over the course of the next 12 to 24 months, becoming accretive both to the top and the bottom line. Overall, synbio orders remained strong at $14.9 million as we are beginning to see academic customers as well as European groups returning to their laboratories.
As we announced last quarter, we provided a service to our customers to shop and hold for those who wanted to design DNA while they settled in place. At this time, the vast majority of those orders have been shipped to their respective labs. We continue to evaluate different market opportunities to pursue DNA makers and support growth in the long-term of the market such as customers that need a few genes at a time rather than massive orders. We remain on track to launch our clonal-ready gene fragments towards the end of the calendar year to begin to tap this market opportunity.
Moving to genomics and targeted NGS, we reported revenue of $9.1 million for the quarter. This includes revenue from our infectious disease products for respiratory diseases as well as COVID-19, and we continue to see consistent demand for our synthetic viral controls. We currently offer seven SARS-CoV-2 controls, including one with the D614G gene mutation, which is now the dominant form of SARS-CoV-2 worldwide. We have also launched 15 additional controls for a wide range of respiratory diseases.
During the quarter, we also launched a Twist respiratory virus research panel to detect in a single assay the most common respiratory diseases with symptoms similar to SARS-CoV-2. This includes several coronaviruses, influenzas, rhinoviruses, RSV and pneumonias. As we think about the challenges ahead, we believe it will be critical to differentiate between disease outbreaks, given the similarity of the respiratory symptoms. Our panel will help researchers with environmental monitoring and surveillance testing, while also providing insight into full sequence information to try various evolution and strain origins.
Even as revenue for NGS continues to increase, our orders in this area have been down slightly for the last two quarters sequentially. We are facing some near-term headwinds as a few key customers have pivoted their operations solely to running PCR-based test for COVID-19. In addition, our field application specialists who help our customers use our products correctly and efficiently are not able to be on site. In light of this, we are making other arrangements for our specialists to support our customers in light of the ongoing pandemic. We believe the fundamentals of our business and the markets are strong and have not changed.
The need to diagnose cancer and rare diseases has not gone away. In light of COVID-19, we believe diagnostic tools will become even more important in the medium and long term. That said, our customers who place large orders on an annual basis have some uncertainty around their business in the near term, which negatively impacts our order volumes in NGS. We absolutely believe this is a temporary situation, as routine diagnostic and ongoing surveillance of diseases will remain critically important for global health.
Similarly, we continue to see interest from consumer testing companies moving from SNP microarray-based test to NGS-based test. On Monday, Ancestry announced an exciting new Ancestry health offering that brings the power of NGS-based health information closer to the consumer. This product includes our NGS target enrichment platform and is an exciting validation of the value and benefit we bring to consumer health. Importantly, we remain responsive to market demands, adapting our platform for COVID-19 research while maintaining our focus on all of our current and future customer needs.
Turning to our vertical market opportunities. We announced a partnership with Takeda for access to Twist Biopharma's proprietary phage display library. We will work together for the discovery, validation and optimization of antibodies in Takeda's pipeline for oncology, rare diseases, neuroscience and gastroenterology. This is a significant partnership for Twist Biopharma as it is our first top 20 - actually top 10 pharma collaboration. In addition, we signed two new agreements with small innovative companies that are driving their field forward. We are collaborating with Invetx, a pioneer in protein-based therapeutics for animal health.
The role of the Twist Biopharma team will be to engineer and optimize antibodies for the treatment of serious diseases in dogs and cats. This is a huge market opportunity. And we announced a collaboration with Seismic Bio, an emerging preclinical-stage company developing bispecific antibodies that enable control activation of the immune system to fight cancer. At the beginning of the year, we said we will complete five to 10 partnerships. Year-to-date, we have in place nine revenue-generating partnerships, of which six have milestones and/or royalties including - included in the terms. Please note that we have not disclosed of all of these agreements to date.
Focusing on an internal development. Last week, we launched two new SARS-CoV-2 antibody panels designed for research use only and available through our e-commerce portal. One panel includes 32 competitive antibodies against the SARS-CoV-2 ACE1 spike protein. The second panel includes 48 competitive antibodies against the human ACE2 receptor, where SARS-CoV-2 binds to enter human cells. Each panel contains human antibodies that bind with picomolar to nanomolar affinity to their target and may be useful for the development of diagnostic tests, vaccines or therapeutics antibodies. We made these antibody panels available to the wider scientific community in an effort to expedite and expand the scope of our antibody therapeutics to help combat the global impact of COVID-19.
In addition, we have further characterized and tested many of these antibodies and have identified more than 30 that are neutralizing in pseudo-viral testing. We also have live virus neutralization assays in process at three different sites and are awaiting results. Taken together, our progress in securing partnerships and our rapid discovery of antibodies in response to COVID-19 has set up our biopharma team for future success. Our results, going from SARS-CoV-2 sequence to competitive antibodies and now to pseudo-virus neutralization and characterization have validated the speed and accuracy of our platform, opening doors to additional partners and growth for this business area.
We continue to demonstrate that our cutting-edge approach adds value for small and large companies alike. We bring something unique to antibody discovery that is generating a milestone and royalty stream for the future. More broadly, we are evaluating different targets that could benefit from our internal discovery and optimization in view of out-licensing or spinning out future assets.
Now, I'll move to data storage. Last year, we reported that we were pursuing the fabrication of our first silicon chip, specifically for data storage. As we shared before, it takes 18 months for the design-build-test cycles on a chip in the semiconductor industry. Though we did not expect to have an update on DNA data storage, we recently made some important technical breakthroughs that we believe will facilitate further miniaturization of our silicon technology. And overall, we remain on track with the internal goals we have set for ourselves.
Finally, in June, we completed a follow-on financing of our common stock, adding more than $107 million to our balance sheet. We appreciate our committed and supportive investors who showed overwhelming demand for our stock.
At this time, I'd like to turn the call over to Jim to review our financial results for the quarter.
All right. Thank you, Emily. As Emily highlighted, we had a very strong quarter. I would like to thank all our employees for delivering again in a challenging environment. I'll now touch on some of the key highlights for the quarter.
Revenue was $21.2 million. That's a sequential growth of 10%, up in excess of 50% year-over-year. We were $24.7 million in orders, which is a slight increase in this challenging environment. Both synbio and NGS revenue grew sequentially. Our Ginkgo business is doing well with $2.8 million of revenue in the quarter. And year-to-date, Ginkgo revenue is now just under $9 million, $8.9 million.
Our results for the quarter also highlight the strength of our platform as our non-Ginkgo business scaled from $15.3 million of revenue in quarter two million to $18.4 million due to strong growth in both NGS and synbio as well as revenue from our COVID-19-related products and interest in our antibodies. We're demonstrating the capability of our silicon-based DNA synthesis platform to tap into new revenue opportunities, and we continue to build our customer base. During the third quarter, we served in excess of 1,300 customers with more than 1,900 customers served year-to-date. Our biopharma orders were approximately $1.1 million, and we continue to make progress in securing more biopharma partnership deals.
Now let's unpack some of the details on the orders. Orders were $24.7 million in quarter three as compared to $24.6 million in quarter two. This represents year-on-year growth of approximately 36% and is a terrific outcome based on the uncertainty in the environment.
Now, quickly touching synbio. Our synbio product orders, defined as genes, libraries and oligo pools were $14.9 million for the quarter, include Ginkgo orders of $3.1 million. Our gene business is doing extremely well with orders of $12.3 million, showing strength in EMEA and the U.S. markets, primarily from industrial biotech, academic and the pharma segments.
Now, quickly covering biopharma. Our biopharma bookings were $1.1 million for the quarter, which bring our year-to-date bookings to $2.6 million. The third quarter was our most successful in terms of bookings and formalizing our antibody development partnerships. At the beginning of the fiscal year, we outlined we'll secure between five and 10 partnerships, as Emily noted, and we were tracking to do exactly that. During the quarter, we signed three new antibody discovery partnerships and expanding the agreement with a current customer.
As Emily mentioned, we've now signed total nine agreements with six generating milestones and/or royalties. In general, our antibody development partnerships require Twist to provide rapid, on-demand, high affinity antibodies based on one or more targets provided by the customer. These agreements have three elements to the program. One is we are licensed, and we then also utilize our libraries, which is a panel of synthetic antibody phage display libraries derived only from sequences that exist in the human body; two, we'll also work to discover, validate and optimize new antibody candidates; and three, the customer pays Twist technology licensing fees, and increasingly, we received project milestones, fees for completion of various Twist activities and development milestones as our customers progress and commercialize the products. In many cases, we also receive royalties on any products coming out of the partnership.
We're seeing our overall pipeline of biopharma opportunities growing, which is also leading to more opportunities for us to leverage our platform advantage and tap into new revenue streams. These deals demonstrate the quality, power, scale and flexibility of our platform, as validated by the number of COVID hits from our libraries, from our own libraries.
Our NGS product orders in the quarter were $8.7 million as it compared to $9.8 million in quarter two. As we have highlighted, the orders for NGS can fluctuate quarter-to-quarter, but I'd like to note that our year-to-date bookings are approximately $30 million for NGS. Our pipeline of opportunities continues to scale. We've seen an increase in the number of customers as well as increased engagement with current and potential customers. We received orders from over 620 customers in the third quarter, up from 253 customer accounts in the previous quarter. So in the quarter, we saw more opportunities with a higher number of lower-value purchase orders. And another positive is our pipeline of our larger NGS opportunities continues to scale, and we're now tracking 132 opportunities progressing through the pilot, validation and adoption phases with 47 adopting, up from 43.
As highlighted, we've seen a robust growth in our funnel. Our year-to-date NGS bookings, as mentioned, are about $30 million with revenue $24 million, and we anticipate the revenue will pick up in line with our customer activities. And we expect to see additional opportunities with SNP microarray conversion to NGS plus NovaSeq as well as new product introductions.
Now, let me quickly cover the geographies. Overall, geography performance is great for the third quarter, and most regions were flat with previous quarters, which is actually incredible based on the environment. EMEA did well with orders flat, although NGS was down. APAC, we saw orders truly flat to $1 million. And American orders were just under $15 million. So overall, a great geographic performance. As we highlighted on all our other calls, we provide orders not to directly translate into revenue for the following quarter, but more to provide a trend line for each product group.
Now, progressing on to revenue; I'll give more revenue details. Quarter three revenue was $21.2 million, up sequentially from $19.3 million. NGS product revenue was $9.1 million as compared to approximately $7.7 million last quarter. Although there's a lot of uncertainty, we're doing well, expanding our NGS customer base. We shipped to almost 600 NGS customers during the quarter as compared to approximately 340 in the previous quarter and are well positioned to scale the business going forward. In summary, NGS is doing well, and we continue to execute on our business plan.
And now turning to synbio. We had a greater quarter - great quarter as synbio revenue was $11.8 million, up from $11 million in quarter two, with gene revenue increasing from $9.1 million to $9.6 million. Note that the Ginkgo revenue in quarter two was very robust, $3.9 million, and declined to $2.8 million, in line with the contract. And this decline was reflected in gene shipments, which fell from approximately 88,000 in quarter two to 83,000 in quarter three. This highlights we had a very strong quarter with the non-Ginkgo customer base as revenues scaled approximately 30% sequentially from $5.2 million to $6.8 million. As Emily noted earlier, we're seeing the benefit of launching our DNA prep products and approximately 50% of our gene revenue in quarter three was from longer genes, i.e. genes over 1.8 kb.
Quickly touching biopharma. Revenue for the quarter was $0.3 million and reflects the timing of our antibody optimization projects. In terms of global expansion, revenue from Americas in quarter three was approximately $13.6 million as compared to $12.1 million in the previous quarter. EMEA revenue of $6.4 million as compared to $6.2 million; and APAC revenue actually scaled to $1.2 million from $0.9 million in Q2, highlighting recovery in APAC. In terms of segment revenue, healthcare was strong for the quarter with revenue of $8.6 million, up from $5.8 million in quarter two, i.e., sequential growth of approximately 48%. Academic revenue declined modestly to $4.6 million from $5.5 million, reflecting the impact of COVID. Industrial chemicals was flat at $7.7 million with strong non-Ginkgo customer contribution.
Now moving down to P&L, gross margins. Our gross margin for the third quarter was 22%, which is impacted by our scale-up of our DNA preps for clonal genes. This resulted in unabsorbed capacity. We are very encouraged by the initial market response and will continue to scale and utilize capacity. We believe this will be a very important investment for future growth as we've been able to go after a larger share of pharma wallet for their platform. COVID shelter-in-place compensation was $0.9 million in the cost of revenues in the June quarter. And when we normalize for the shelter-in-place compensation, our gross margin would be approximately 26.4%. Depreciation, a stock-based comp and cost of revenue, was $0.9 million in quarter three.
In terms of our operating expense, R&D was $10.4 million compared to $10.6 million in quarter two. The quarter three R&D spend reflects $1.5 million offset to R&D expenses for the IARPA grant funds received from the June quarter. This is the non-diluted funding we've been talking about previously. Gross R&D spend in quarter three was $11.9 million versus $10.6 million after the IARPA and primarily due to the sequential increase in investment in our antibody and NGS product activity as well as $0.3 million in shelter-in-place compensation.
SG&A costs for the quarter were $22.5 million, which is a decline from $27.2 million in quarter two, reflecting a reduction in legal litigation expense. We did continue to invest in our commercial organization and have increased to 161 heads, up sequentially by 16, as we position ourselves for growth in FY '21. Our net loss for the quarter was $28.2 million, which includes stock-based compensation of $4.1 million and depreciation of $1.7 million.
In summary, we ended the quarter with $311.8 million in cash and equivalents and have invested about $8 million year-to-date in capex. During the quarter, we proved out the parallel platform. We launched our DNA products. We launched - which allowed us to capture more gene business. Our NGS pipeline continues to grow and will receive our first IARPA funding. Our biopharma investment is starting to pay off as we close more partnerships and responded to the pandemic by releasing controls and infectious disease panels. We invested in expanding our organizational capabilities and support general employees through the pandemic challenge by providing additional compensation and PPE, which positions us to scale and continue to leverage our platform, tap into new revenue streams and have a strengthened balance sheet to support our growth investments.
And with that, I will now turn the call back to Emily.
Thank you, Jim. In summary, we delivered stellar third quarter results, particularly in light of the impact of the coronavirus pandemic. And we are positioned to finish our fiscal year strong. We continue to pursue new opportunities where our technology platform can be leveraged for important research like COVID-19. In addition, we are delivering an increasing number of products for health care, industrial, chemical, diagnostics, agriculture and academic researchers worldwide. Looking ahead, for synbio, we expect continued revenue growth and diversification of customers.
We anticipate increasing revenue for our DNA preps offering as well as the companion clonal genes. We intend to launch our IgG offering for health care as well as our clonal-ready gene fragments for the long tail of the market. For NGS, we will continue to support our customers in COVID-19 and respiratory disease research, while providing products for ongoing testing. At the same time, we will continue to pursue longer-term conversions of customers currently using SNP microarrays. For biopharma, we have now signed nine revenue-generating partnerships of our expected five to 10, six with milestones and our royalties.
We anticipate additional collaborations that showcase our proprietary antibody discovery and optimization technology, while we continue to advance our internally generated competitive antibody candidates for COVID-19 as well as several other disease areas. In data storage, we continue to execute on our agreement through IARPA and expect to continue the development cycle to drive the cost of DNA data storage down through technology advancement. It has been an exceptionally busy and productive quarter across all areas of our business.
Consistent with last quarter, we are not providing financial guidance for the rest of the fiscal year due to the unpredictable impact, both positive and negative, of the ongoing COVID-19 global pandemic on our results of operations. We anticipate continued growth, but we do not anticipate dramatic increases or decreases in revenue as a result of COVID-19 for our fiscal year fourth quarter. COVID-19 remains a societal challenge worldwide, particularly in the United States. But we have delivered solid growth in all areas of our business. At West, the majority of our employees are entering their fifth month of working from home and continue to demonstrate a very high level of commitment and productivity to drive the business forward.
For our employees that are working in the labs, we began weekly COVID-19 testing to ensure the safety of our employees and the continued supply of DNA products to our customers. These are difficult times. I am proud of our team who continues to embrace the challenges with grit and innovative solutions. Together, we have made incredible strides, and I know this it's just the beginning.
With that, let's open up the call for questions. Operator?
[Operator Instructions] Our first question comes from Doug Schenkel with Cowen. Your line is now open.
Hey guys, this is Subbu on for Doug. It seems like things have held up for you pretty well, all things considered. How much of this total revenue is COVID-related revenue? Any one-time dynamics? And how should we think about sustainability moving forward?
Subbu, it's Jim. Yes, things held up really well in the quarter. Bookings, as we noted, were almost $25 million. We're not - we don't break out our COVID direct revenue. But I would note, the number of customers have increased. NGS, a number of large customers we're tracking in the funnel in NGS continues to scale. We're having a lot more customer conversations. That's driven by the value of our platform and the benefits our customers and see more sequencing costs and also in terms of cycle time. On the synbio side, our non-Ginkgo synbio business increased. And that's a very healthy time as well. Overall, company is doing well in terms of COVID and responding to the opportunities.
Okay. And we saw the news on Ancestry and you highlighted it in your presentation as well. Is it reasonable to say that them switching to NGS, a significant role was played by your NGS kit? And does this shorten the customer conversion cycle of validation and then production. Additionally, with the surge of liquid biopsy-based testing, you are well positioned to offer your NGS customers; so one would hope for a faster ramp. Are we thinking about this right?
So on your first question, we are very excited with the launch of the Ancestry health products. And we have previously said that Ancestry was one of the two microarray to NGS conversion that we've had so far. And we believe that our platform is especially well suited to enable that transition where we enable companies to have more genomic information at a cost that is the same or lower. And so this is the first NGS consumer-based product that I know in the U.S. And so we're very excited that this is the platform that enables this. Then you had a question about liquid biopsy, would you mind repeating what the question was?
Yes. Because the liquid biopsy testing is increasing and increasingly getting adopted, you are well positioned to offer your NGS kits to these companies. So one would hope for a faster ramp. Are we thinking about this right?
Yes, yes. So liquid biopsy is definitely a target area for our products. In liquid biopsy, you have to sequence really. You have to go sometimes 50,000 times coverage almost. And so when your sequence is deep, the uniformity of the capture is extremely important because any small uniformity is amplified 50,000 times. And so our probe's uniformity offers an advantage at low depth of coverage for a rare disease or you needed to study exploration. But if you have to sequence deeper, we are - we have even more of an advantage. So our view is that the deeper the sequencing, the more beneficial our platform is. And so some of the companies that gene tracks and report every quarter on progress from pilot to production. Some of those are liquid biopsy companies. And we think that they are switching to us, thanks to the uniformity that we provide, which turns into a lower cost per sample for them.
Got it. And one last one. What other products are you coming to launch for the rest of the year besides IgG?
So for the rest of the fiscal year - sorry, for the rest of the calendar year, we talked about clonal-ready gene fragment for synbio. And I don't think we've disclosed any product launch yet for NGS.
Great. Thank you, guys.
Thank you.
Thank you. Our next question comes from Catherine Schulte with Baird. Your line is now open.
Hey guys, this is actually Tom [ph] on for Catherine. I was just wondering if you could speak to any particular revenue trends throughout the quarter. If things sort of were slower in April and then ramp throughout the year? And then any insight into July would be appreciated, just sort of given some of the regional flare-ups we've seen at least here in the states. Just curious if you guys had seen anything, any sort of pauses in some of the momentum?
No. In fact, I mean revenue trends actually during the quarter are fairly consistent. And the - in terms of any forward-looking statements, can make that. But just highlight that our bookings, 24.7% was another good quarter. Our synbio business, I just repeat some of the comments made earlier where synbio business is doing well. There's a lot of positives in the biopharma side. I mean, particularly, we've announced a number of new partnerships. We're seeing a lot of interest in our discovery platform. And we continue to scale our customer base.
I think what is most encouraging for myself, tracking the number, is the number of larger opportunities we're seeing in NGS. And that continues to be a really good, strong sign. The DNA preps we launched during the quarter had a positive impact in terms of attracting more gene business. We're offering a broader portfolio for our customers and offering a one-stop shop for them, which makes it easier for their supply chain management, and we're a terrific partner to work with.
Great. That's appreciated color. Pivoting to the biopharma side of things. If I look back on the original guidance you guys provided, I mean, five to 10 pharma partnerships. You guys are already at the high end through that. I think you had spoken to $1 million in revenue on the full year guide. You guys have clipped that as well. I mean, just sort of if I think to where you guys were thinking coming into the year, I mean, what's driving the outperformance? Is it just the platform validation? Is it - on the revenue side, is it just more of the upfront than you guys were expecting? I'd just love to get some color on sort of where you're sitting relative to those initial expectations?
Yes. No, thank you for the question. So we - when we set the guidance, we - so we were toward the beginning of the year. And this year was a transition year from last year being where we gather the data. And this year, where we turn those data sets into an early business success. So we had some view into the funnel. And the fact that we are towards the high end shows that we've been quite successful at closing that channel. And the effort that we've done around COVID has really shown a light on the power of a biopharma platform. And we're quite pleased with that.
Great. And one more, if I could sneak in. We had seen that Ginkgo had received some funding through an NIH program to develop additional COVID testing capacity. Are you guys supporting Ginkgo in this workflow specifically? Do you have any insight there?
So Ginkgo, we can't really share the details. I'd just highlight we had another good quarter with Ginkgo. Once again, year-to-date revenue is about $9 million. We're on track in terms of our contract. And we always work closely with our friends at Ginkgo. We have a great partnership, but we don't disclose the actual details of what we're actually working on.
Understood. Thanks for the color, guys.
Okay.
Thank you. Our next question comes from Luke Sergott with Evercore ISI. Your line is now open.
Hey, guys. How are you?
Good. And you?
I'm great. How are you?
We're also good here. So, can we start off on the NGS testing of - for COVID? There's been a lot of talk about pulling the samples. Is this something that where you guys could play and actually help drive the cost down or help this test be adopted for COVID testing?
That's a great question. So if you have a human sample and you just sequence that, it's going to be very expensive to read the virus because the virus RNA is going to be diluted with genetic material of the human host. And so it's thousands of dollars per patient. So that's why you have to do some kind of enrichment where you pull out the virus material away from the human so that you focus on the human. And so we provide products for that, and you have to do a library prep and then you have to do a capture. In terms of what pooling helps you to do is if you have 1,000 samples, instead of doing a 1,000 library prep and then 1,000 capture, if you prove 10 or 100 samples at the time, it mimics the number of library prep, meaning pipetting steps that you have to do. So long answer to your question, but the answer is going into the Twist protocol, the entrant has to be genetic material. So whether it's one sample or 100 samples that have been pooled, the protocol works the same. So our protocols are, I would say, compatible from day one for a pool sample going in.
That being said, I will point out that we have a little bit of an advantage over other protocols because our capture itself is pooled. So even if you don't pull the sample upfront after the capture, we have a protocol where you can make the prep libraries together into one capture, and we enable up to 16 clicks. So our capture is already pooled and we can do that because of the very nice uniformity. So there's two levels of pooling available.
Okay. And so, I guess just the labs that are looking into doing the pool testing and doing NGS-based testing, are they - are you starting to work with them? Or is this something that you just are having conversations with?
So our kits are available. I think we launched our COVID kit, I believe, end of March. And then a couple of weeks ago, we launched our respiratory panel where we have 15 different respiratory viruses that you can extract and sequence. So those kits are available for research. And yes, if you want to pull the sample upfront, you can call us, but it's actually quite simple. You just blend the sample and extract 50 nanogram that goes into the protocol. The difficulty is that - the workflow is easy, but then you have to deconvert it later if you have one positive. You have to deconvert it later.
Okay. All right, that's great. And then on the biopharma side, you guys have been landing a lot of these companies on the platform. Have you guys had any interest on - from existing conversations on licensing from those - from these new partners? I know that you're not going to talk about any conversations that you're having outside of those partners.
We try to be diligent in reporting deals. And as you know, some of those deals take time. So we probably said as much as we're able to say at this point today.
That's fair enough, fair enough. And then lastly here, you were talking about the margin dynamics and ex shelter-in-place payments of - you had 26% gross margin. Is that kind of the pace we should expect going forward in 4Q, Jim?
Yes. So the - yes, so the non-GAAP gross margin was 26.4%; obviously, not going to give any forward forecast projections. We step back, we continue to scale the business as we scale the business to leverage our fixed cost. We were impacted last quarter by shelter in place. And also, we had some inefficiencies as we launched our DNA prep business. Our view is as we scale the business, leverage our fixed cost, continue to launch particularly NGS and synbio products, we're still targeting with 50% to 60% gross margin in the future. This year, I think our average gross margin year-to-date would be - non-GAAP is about 26%. This is a frame of reference.
Okay, that's helpful. That's all from me. Thanks.
Thank you.
Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Dr. Emily Leproust for any closing remarks.
Thank you, operator, and thank you all for joining us today. As we move into the final quarter of our fiscal year, we look forward to keeping you apprised of our progress. We continue to realize the power of our silicon-based technology platform to ride the future through synthetic DNA, improving both health and the sustainability of the planet. Please take care - take good care of yourself, stay safe, socially distance and wear a mask. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.