Earnings Call Transcript - DNA Q2 2025

Daniel Waid Marshall, Senior Manager of Communications and Ownership

Good evening. I'm Daniel Marshall, Senior Manager of Communications and Ownership. I'm joined by Jason Kelly, our Co-Founder and CEO; and our new CFO, Steve Coen. Thanks, as always, for joining us. We're looking forward to updating you on our progress. As a reminder, during the presentation today, we'll be making forward-looking statements, which involve risks and uncertainties. Please refer to our filings with the SEC to learn more about these risks and uncertainties, including our most recent 10-K. Today, in addition to updating you on the quarter results, we're going to provide updates on our path towards adjusted EBITDA breakeven and dive deeper into the new deals and launches in Ginkgo's Tools businesses, which continue to establish themselves as critical tools in AI-powered bioengineering. As usual, we'll end with a Q&A session, and I'll take questions from analysts, investors and the public. You can submit those questions to us in advance via #Ginkgoresults or e-mail investors@ginkgobioworks.com. All right. Over to you, Jason.

Jason Kelly, Co-Founder and CEO

Thank you, Daniel. We always begin with our mission at Ginkgo, which is to simplify the engineering of biology. Our goals remain consistent with what I've shared in previous earnings calls. We aim to achieve adjusted EBITDA breakeven by the close of 2026, while ensuring we have a sufficient cash margin of safety. I will provide an update on that shortly. We are focused on reducing costs while serving our existing clients, and importantly, we are transitioning from a Research & Development solutions provider into the life science tools sector. You can expect to hear more about this in our strategic discussion today. Before we get into that, I want to address the importance of maintaining a cash margin of safety and our efforts to cut costs. Our quarterly numbers reflect our progress, and I'm pleased to share that we have reached our goal of $250 million in annual run rate cost savings by the third quarter of 2025 a quarter ahead of schedule. This milestone involved considerable effort from the team at Ginkgo, and I want to express my gratitude and congratulations to them for achieving this ahead of time. It is crucial for our strategy, as reaching this target early allows us to hold onto $474 million in cash and cash equivalents without any bank debt. This cash position contributes to our margin of safety, and controls our burn rate, meaning we can strategically engage with capital markets when necessary, rather than when we feel pressured to do so. Additionally, this enables us to shift our focus from solely cost cutting to how we plan to grow the business into 2026. You'll hear more from me on this in the strategic portion of our call. I would now like to pass it over to Steve to go over the numbers. I want to extend my congratulations to Steve, our new CFO. We mentioned this when we made the announcement, but Steve has been with the company for two years and has closely collaborated with Mark, particularly in recent months, which made for a seamless transition. We are very fortunate to have Steve in the CFO role, and I'll turn it over to him now to discuss the financials.

Steven P. Coen, CFO

Thanks, Jason. I'll start with the Cell Engineering business. Cell Engineering revenue was $39 million in the second quarter of 2025, up 8% compared to the second quarter of 2024. In the second quarter of 2025, we supported a total of 120 revenue-generating programs. This represents a 10% increase year-over-year. Turning to Biosecurity. Our Biosecurity business generated $10 million of revenue in the second quarter of 2025 at a segment gross margin of 18%. As a reminder, segment gross margin excludes stock-based compensation. Turning to the next slide. It is important to note that our net loss includes a number of noncash and other nonrecurring items as detailed more fully in our financial statements. Because of these noncash and other nonrecurring items, we believe adjusted EBITDA is more indicative of our profitability. A full reconciliation between segment operating loss, adjusted EBITDA and GAAP loss or GAAP net loss can be found in the appendix. Now that we've completed a year of restructuring, you can see the very substantial cost reductions and improvements in profitability compared to the first quarter of 2024. In the second quarter of 2025, Cell Engineering R&D expenses decreased 63% from $84 million in the second quarter of 2024 to $31 million in the second quarter of 2025. Cell Engineering G&A expense decreased 57% from $33 million in the second quarter of 2024 to $14 million in the second quarter of 2025. These decreases were all driven by our restructuring efforts. The significant improvement in Cell Engineering segment operating loss in the second quarter of 2025 compared to the same prior year period was due to the previously discussed drivers of improved revenue and reduced operating expenses. Biosecurity segment operating loss was impacted by the timing of programs in the second quarter. Moving further down the page, you'll note that total adjusted EBITDA in the second quarter of 2025 was negative $28 million, which was improved from negative $99 million in the second quarter of 2024, a 72% improvement. We show adjusted EBITDA at the segment level to show the relative profitability of each. The principal difference between segment operating loss and total adjusted EBITDA in the second quarter relates to the carrying cost of excess lease space, which you can see was $12 million in the second quarter of this year. This cost represents the base rent and other charges relating to lease space, which we are not occupying, net of sublease income. This is a cash operating cost that is not related to driving revenue right now and can be potentially mitigated through subleasing. And finally, cash burn in the second quarter of 2025 was $38 million, down from $110 million in the second quarter of 2024. The significant decrease in cash burn was a direct result of the restructuring. Now turning to guidance. In the terms of the outlook for the full year, we are reaffirming our total revenue guidance for 2025 totaling $167 million to $187 million with Cell Engineering revenue to be $117 million to $137 million and Biosecurity revenue expected to be at least $40 million. In conclusion, we're pleased with the substantial improvements in cash burn and cost reductions when looking back over the past year, where we achieved our targeted $250 million run rate cost takeout 3 months earlier than planned. In the third quarter, we will continue to execute against our core objectives while navigating continued uncertainty in the macro environment. And with that, I'll hand it back to you, Jason.

Jason Kelly, Co-Founder and CEO

Thanks, Steve. The 3 topics we're going to cover today in the deep dive are our continued restructuring and the cost takeout. And then in sections 2 and 3, I want to go through automation and datapoints and our newly launched reagent product, which are really our 3 big motions into the life science tools space. So really excited about this today. Okay, so let's dive in. So first, I mentioned this already. I'm really excited to see these numbers, that $250 million cost reduction, getting that done ahead of schedule is very strategically important for the company. So the whole reason we've been focusing on this, and the team has put in an absolutely enormous amount of work and pain around this is we wanted to be able to do this motion of moving into the life science tools space with a margin of safety. In other words, with enough cash in the bank and no bank debt to allow us to not be forced to take money from people who don't want to or raise in circumstances where we weren't happy. And so having that large cash balance relative to our cash burn is really a critical piece of putting us in a good position when and if we engage with capital markets. And so really happy that we're there on that. You can see here our burn rate getting down to $28 million, if you go to the next slide of adjusted EBITDA for this quarter. So really, again, a testament to the team and strategically important to Ginkgo. Okay. All right. So now I want to talk a little bit about our automation and datapoints offerings, and then we'll talk at the end about reagents. So to give you some macro context, and I spoke about this before, but Ginkgo's business over the last decade has really been what we call solutions. So in other words, selling to the Head of R&D of a large company or the CEO of a small or midsized company and basically being an outsourced research team, Ginkgo scientists using Ginkgo tools to deliver them a research product. Right? That was the Solutions business. Last year, about a year ago, alongside a restructuring in the company, we started to offer Ginkgo's tools and services that we had previously had in-house just for our scientists, directly to the scientists at our customers. And that has been going really, really well. And so again, I want to give a little more context on that. So if you go to the next slide, you can see on the Y-axis here, we have what I'll say is like our customization and technical risk we're taking for the customer. So when that is high, like it is in research solutions, in other words, we'll have a big milestone that will only get paid if we're technically successful, the customer is willing to give us downstream value share. In other words, a share of the future value of their products, either a royalty or success-based milestones like that technical milestone that I mentioned and so on. That's really in exchange for the level of customization and risk we're taking. So as we go down that Y-axis, we go to the right-hand side of this chart where we're not able to get royalties and downstream value share. So that's a downside, okay? But the upside is we're selling something much more off the rack. In other words, a more standard scalable product to the customer. And if you go to the next slide, what we're seeing here is the Solutions business has that big upside, it takes a while to get to it. So I think there's a really nice complement here where our tools, offerings are able to give us near-term revenue, smaller batches, wider customer set, opening new markets. We're going to talk about the reagents. This first kit is a $2,000 kit, scientists can order it with a credit card. So that is really allowing us to have a faster cycle time going to market. It's a good complement for the Solutions business and it's the right time to do it. I'm going to discuss our automation offering and then move on to our datapoints, which are more in line with traditional CRO offerings, and finally, reagents. When I engage with customers about automation, I like to present a slide illustrating that Ginkgo, besides selling automation, has been utilizing and developing automation for the past decade through our solution partnerships. This Solutions business significantly enhances our life science tools. We stand out among life science tool vendors by primarily engaging in high-end science with our tools over the past decade, equipping us with extensive knowledge of existing market solutions, what is effective, and what is not. We have developed numerous in-house tools to address gaps that current vendors don't cover, which makes our tools business particularly compelling. Upon launching these tools, they fit into market needs since if there weren't a gap, we would have already purchased similar products from life science tool manufacturers. Looking at the current industry landscape, the primary challenge we observe is the increasing demand for greater output without an increase in R&D resources. This demand stems from various factors, including economic pressures in the industry over the last several years due to rising interest rates, as well as competition from biotech firms in countries like China, which have lower labor and infrastructure costs. The question is how to tackle this challenge? Historically, over 95% of research in sciences and commercial biotech and agriculture occurs at the lab bench, which is labor-intensive. Every lab bench, as shown in my slide, typically looks similar: there's a lot of manual work involving pipettes. Having undergone extensive lab work myself, I understand the variability of hand-based research—while diverse, it operates at low throughput and does not become more cost-effective at higher volumes. Unlike large-scale manufacturing like automobiles or semiconductors, where costs decrease with increased production, lab research remains consistently expensive since it is primarily manual. Therefore, the obvious solution appears to be automating these processes. Recently, even President Trump emphasized the need for automation in research in his AI Action Plan, suggesting that the federal government should invest in automated, cloud-enabled labs. The aim is to enhance lab efficiency by making it more akin to data centers, which are scalable and more accessible. Historically, automation challenges in the industry have been significant. On one axis of my automation chart, we have "mix," which refers to output variations. In a low-mix setting, like an auto plant, the workflow involves repetitive tasks, whereas a high-mix environment resembles a busy chef in a restaurant dealing with a variety of orders. This high-mix scenario is very much like scientists at lab benches today. They work with a common set of tools and equipment but across a diverse range of tasks. Established companies in the industry offer substantial products to support this work at the bench, but scalability remains a challenge. On the other hand, low-mix environments, typically involving high throughput, utilize automation work cells for repetitive protocols. While these work cells are effective for certain tasks, their flexibility is limited, making it difficult to adapt to diverse high-mix outputs if they only validate processes for one or two protocols. Our aim at Ginkgo is to bridge this gap, achieving high mix and high throughput using our reconfigurable automation technology, including carts and integrated software. For context, consider our reconfigurable automation carts, developed at Ginkgo over the past decade. These carts allow for specific lab equipment integration, featuring robotic arms and tracks to facilitate sample movement. Once integrated with our software, these carts can operate like a standardized unit, significantly increasing flexibility and scalability in lab operations. We can connect multiple pieces of equipment, dramatically enhancing workflow. We've successfully utilized our automation in various applications, including next-generation sequencing prep, where we developed a high-throughput protocol for protein quantification by leveraging existing equipment. This flexibility in our setup allows us to easily incorporate new protocols without incurring hefty costs, contrasting with the million-dollar investment often required for traditional work cells. Ultimately, our vision aligns with the direction of government initiatives promoting cloud-enabled labs. We recently announced a project involving a substantial setup for the Pacific Northwest National Labs, demonstrating our capability to assemble a significant number of instruments into a cohesive automated system—believed to be the largest automated anaerobic system globally. The potential for these solutions is vast, and we envision a future where up to hundreds of instruments are functioning within a single setup, maximizing protocol flexibility and cost-effectiveness. This level of automation is essential for advancing AI-enabled science beyond the limitations of manual lab work. Additionally, while I won't delve deeply into our software capabilities today, we are engaging in fascinating lab-in-the-loop AI applications that enhance our robotics interaction, which I look forward to sharing more about in the future. We'd love to share it with you. And we have the whole both — obviously, the hardware I spoke a lot about today. But importantly, the software stack, the modern APIs, cloud-based software, everything that makes that all really feasible. MCP servers accessed all these equipment. So if you're really ahead of AI looking to bring that into your biotech company, you should give us a call, both for the hardware and the software layer. So that's much I want to say about automation, but I really see that as being extremely strategic for Ginkgo going into 2026. And as we've gotten our costs more under control, you're going to hear me go more in this direction, right? It's going to be more about what can we invest in for growth in the future. And one of those big areas is going to be automation in AI. Beyond that, I want to talk about our push into the CRO services market, we call this Ginkgo Datapoints. We have a number of different services now, perturbation response profiling, specialized high throughput screening, antibody developability, which I've talked about before, but we just launched our small molecule developability or ADME service. And you can do lots of different things with these services. They are available. Just to be clear, there's no royalty. There's no milestone. It's just like engaging with a CRO like a WuXi or whoever fee-for-service basis; you own all the IP and data as the customer. But we're able to do this at very large scale because of our automation expertise. And so one of the things I'm really excited about, we announced this in the press release of the ADME service, is if you have a quote from another vendor in the CRO space, like, for example, a Chinese vendor and you want to onshore that back here to the United States, just send us a quote. We're happy to meet it. And that goes for ADME, but generally, you should send us the quote anyway. We're happy to see it across any of our services and meet vendors. And so please do keep that in mind if you're looking at datapoints. This is why I'm excited about datapoints in the long run. I think it is exciting to go after the traditional CRO market. I think there's good business there. It's also not that high throughput. A lot of what places like WuXi have done has basically gotten cheaper hands at the bench and then offered that as a service. So like that buys us whatever, 40% cost reduction on the big problem of reducing R&D and getting scalability, but then it kind of runs out because it's just not getting cheaper. I think, across the board, if we want to get cheaper, the answer is automation. And so Ginkgo has been doing this work really in an automated fashion, and that allows some unique offerings to customers. So I'll just highlight this funnel here, where this is traditional drug discovery. You're going to identify a target; then you're going to run some high throughput screening maybe on a robotic setup, maybe in some sort of pooled assay in the lab, either way, you're going to screen a bunch of lab work to pick a few hits. And then you're going to take those hits into a much more expensive series of experiments in order to validate if they're good drugs, all right? And it's those set of more expensive experiments that we've been focusing on trying to make high throughput on our automation at Ginkgo and offer as a service through datapoints. And what's exciting about that, for example, say, antibody developability, you find these binders, which you can do at a high throughput, really cheap. But then you got developability and it's expensive. Is it soluble? Is it immunogenic? These are things that you have to do these more expensive experiments. And so you only try them on your top hits and you kind of cross your fingers. What we are able to do with our throughput is let you apply those developability assays back much earlier in your hit finding so that you look at a much wider range of potential candidates against not just whether they bind but also are they developable. And if you generate enough of this data, maybe we can even have computational models and AI that can predict developability. And so that's where we're seeing a lot of excitement. That's kind of our niche to get off the ground in the CRO space. And this is the DPMTA, the design, predict, make, test, analyze cycle in pharmaceuticals. We're really focusing on scaling up that test step for these high complexity assays. And I think that's something we're very, very good at, at Ginkgo. So you should expect us to launch more products. And this is just that ADME service, kind of start to finish, project scoping, chemical library and so on. I will highlight we're using Echo MS, Echo mass spec, to do that sort of high quality, but also high throughput. Actually, that's what allows us to get costs that can really compete with doing it with low-cost labor overseas. All right. Last but not least, I want to talk about reagents. I'm super excited about this. I'm always excited when I see Ginkgo move into a new market area because if we do pick up traction there, there's sort of a lot of clear vistas in front of you to get into. So this is our first reagent product. And just to understand kind of the theory here. Again, over the last decade, Ginkgo has been a big, big consumer of life science tools. We have bought various services. We have bought a ton of equipment like those custom workcells I mentioned, and we bought a lot of reagents. And where we can get something great on the market, we'll use it. But what we found is there are certain gaps in areas that were important, maybe very important to us for our cell engineering that weren't widely available or the products weren't really up to our level that we needed on the market. And so in those areas, over the last decade, we developed our own stuff. We just never sold it to anyone because it was part of our solutions offering, and we kind of wanted to keep it proprietary. So what's really fun here in reagents is we're getting to launch a bunch of these, what had previously been in-house assets at Ginkgo. And in fact, we had Ginkgo employees who left, went to other companies and were like, 'Hey, will you just like give me that reagent or thing we used to have at Ginkgo because I want it.' And so we heard that enough times that we decided we might as well try to sell it. And so this is our first product, the cell-free protein synthesis. So cell-free protein synthesis is basically instead of, if you want to produce a lot of protein, taking your gene of interest and moving it into a live cell like an E. coli or a yeast, and then growing that live cell, producing the protein and extracting it. Instead, you start with the live cells like the E. coli, you grow a bunch up, you pop them open, you take the contents out, you make that into your reagent. Then you add the DNA straight to that reagent mix, and it's got all the components of the cell; it's just not alive. And so it will make protein. Now there's some downside that the cell keeps everything in a little, small container, so it had like a high density, which is helpful for production. But you don't have this extra step of growing the cells and everything else. So for a number of applications, cell-free really does stand out, and we had a lot of those applications at Ginkgo. So our product here has twice the yields for half the cost compared to market leaders for certain protein constructs, and you can get a $2,000, you can get a 10 ml kit, which is a great offer on the market today. In fact, we launched this just last week. We've already got some early sales, which makes me very excited. But importantly, we also had like a free sample. So we have over 100 people have requested samples. And what I think is just — I wanted to highlight was a large fraction of that was actually in the academic research market. This is a market that Ginkgo has basically never sold anything to until selling a kit recently because we haven't had anything to offer. They're obviously not going to outsource research to us. That's really like all they do for a living. So our Solutions business never made sense. And then we had a certain scale of CRO services with datapoints that were really pointed at the commercial market. So I'm pretty excited to see this. I think the academic research market has been a huge market for life science tools companies like the sequencing companies and companies like Thermo Fisher. So us being able to get into that market here with reagents is very exciting. Okay. So that was kind of what I want to walk through. Again, big takeaways. We're coming in a quarter early on that cost takeout target. That's very strategically important. We've done that with a good amount of cash and margin of safety still in the bank, that $474 million in cash equivalents and no bank debt. That sets us up very well to look to the future, and we are doing that. So you'll see and hear more from us on the life science tool space, I shared some of that today, but expect Ginkgo to really be focused on growing into 2026 from here on out. So super excited to hear your questions, and thanks very much for your time.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

Great. Thanks, Jason. As usual, I'll start with a question from the public and remind the analysts on the line that if they'd like to ask a question, to please raise their hands on Zoom, and I'll call on you and open up your line. Thanks, everyone. All right. Getting started. We'll start with a question from x.com, I confess I'm not sure how to pronounce it, so I'll read the whole username out for you, YEPINY471. And so this question is about automation. Could you please share whether Ginkgo Automation is expected to become a primary driver of the company's revenue? And I ask if Ginkgo is considering acquiring additional companies in the near future. Could you elaborate on the strategic significance of Ginkgo RNA solutions for the company?

Jason Kelly, Co-Founder and CEO

Sure. I can take that one. So yes, it's good to get a question about automation. Obviously, I spent a lot of time about this on the earnings call. I do think automation is going to be a huge part of our future business. And I tried to convey this idea that what we're really trying to solve for with our technology is general purpose automation, right? And the market for general purpose automation we think, ultimately, is something like the market for the lab bench, right? The lab bench has been the general purpose kind of like platform for doing laboratory work. And there's obviously lots of ways to sell things into the lab benches, reagents, consumables, benchtop equipment, services and so on. And so the real question is, are we able technologically to make automation as general as a lab bench or even somewhere along that arc? If so, then yes, it will be the majority of our business in the future if we can pull that off because the lab bench has been such a huge market in the life science tools space. So that's what we're going to see. I'm certainly optimistic that we could pull that off. But yes, absolutely, like automation, writ large, when it is that generic, absolutely would be, I think, ultimately, that the majority of the revenue of the company would flow through something like that automated bench. You asked about acquisitions also. We don't have anything immediately planned. It's a tough market for life science right now, life science tools in particular as well. So there are things kind of popping up on the market all the time. If something was a really great fit and a good opportunity, you might see us do it, but nothing immediately planned. And then, well, the last thing was RNA solutions. Is that right?

Daniel Waid Marshall, Senior Manager of Communications and Ownership

Yes, RNA solutions.

Jason Kelly, Co-Founder and CEO

Yes, we recently announced a product called RNA solutions. This initiative leverages our expertise in the solution space. A solutions project typically involves a customer outsourcing an entire research and development partnership, which can last anywhere from six months to three years. Our scientists utilize all available tools at Ginkgo to achieve a scientific result for the customer, which could be a better drug candidate or a new agricultural product, among others. Within this work, we have a range of capabilities, some of which we can convert into reagents, hardware products, or services. RNA solutions is an example of us providing a service derived from our RNA discovery work, which includes partnerships with companies like Pfizer. This service is essentially an off-the-shelf option for customers, and I'm looking forward to seeing its development. I believe there will be more offerings like this from our Solutions business at Ginkgo, so expect to see additional initiatives in this area.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

And for our callers, you can just raise your hand and I'll open your line. I have another e-mail question, which I can get to in the meantime while we're waiting. So this is from Brendan with TD Cowen. There's 2 questions.

Jason Kelly, Co-Founder and CEO

Folks, there's like a whole bunch of earnings calls today. So we had some folks tell us that they were not going to be able to make it. So we apologize for scheduling it on top of everyone else. But yes, go ahead. It'd be great to hear from Brendan.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

Sure, sure, yes. Okay. So the first question is, could you provide some more color into your ADME data generation software? And are you planning to develop any of your own models on the generated ADME data as a separate build-out for customers? And how does the meter beat pricing work in terms of licensing over the course of a contract's lifetime? And are you pushing the service to any partners that house their own RAC systems?

Jason Kelly, Co-Founder and CEO

Sure. I'll address the questions in reverse order, starting with the RAC systems. I'm excited about demonstrating our capabilities through our service offerings on the RAC hardware at Ginkgo in Boston. If a customer prefers to keep that infrastructure in-house, there could be various reasons for their choice, such as wanting to use the technology on a proprietary cell line they prefer not to have leave their facilities. We will have already proven that technology on the RAC modular automation hardware. The great aspect of this hardware is that I can install those systems at your location, and the protocols should function the same as they do for us. This is an advantage of Ginkgo having a bio lab where we run our own automation and provide high-throughput services, allowing us to easily transfer those services to your site if you choose. There's a significant opportunity for us to offer work as a service, demonstrate its value, and install RACs that can perform that work, which can lead to future business with a customer. We are flexible; whatever works best for our biopharma, bio ag, and industrial biotech customers is acceptable, whether they choose to operate in-house or utilize our services. Therefore, you can expect to see an integration of automation and data points in the future. Regarding the meter beat, the concept is straightforward. There's a perception that CRO services in China are significantly cheaper, and removing them could be detrimental. We aim to eliminate that concern by providing CRO services at competitive prices in the U.S. This way, there is no reason to avoid onshore solutions. The objective of the meter beat is to signal to the industry that there will be providers in the United States that can match the pricing of overseas CROs like WuXi.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

And how does that beat work in terms of licensing?

Jason Kelly, Co-Founder and CEO

Yes, there are individuals working on this issue, including some start-ups focused on liver toxicity and other areas. The main concept is that if you generate a significant amount of data, such as ADME data related to the developability of small molecules, you could potentially transform that data into an AI model for customers to use in drug design from the outset. I think it's a promising idea, but the business model for that hasn't been clearly established in the biopharma industry, which often mirrors software development. There have been some examples of drug modeling companies that have achieved moderate success, but it's generally challenging to sustain a pure software service model. I believe there's an opportunity for this to be an additional feature we could offer, but our primary focus is on generating data that customers are willing to pay for. This data, especially for proprietary molecules and libraries, is essential to them. If we can provide that data more efficiently or at a scale that they can't manage in-house, it becomes a service they're inclined to purchase. We see that as a solid business model. Additionally, as extensive data sets are created, whether through partnerships or internally, the potential to develop models exists. We do release data sets periodically, recently making them available on platforms like Hugging Face. If you're interested in AI or high-throughput biology, I encourage you to download our data sets. They include information on antibody developability and functional genomics, featuring terabyte-sized data sets. Customers can explore this data and, if they find it useful, they can request more specifically tailored to their needs. Moving forward, we plan to continue these data releases and potentially create models based on market demand. We're also supportive of others who want to develop models using our data; we're open to collaborations that lead to extensive data set creation and successful AI models that can then be marketed. I believe this will foster an ecosystem within the market.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

Cool. There was one more question from TD Cowen, and that was about biosecurity. So on the lower biosecurity guide, are you seeing any areas that are particularly exposed to geopolitical pullback or tensions? Are there any end markets that are seeing particular exposure as well?

Jason Kelly, Co-Founder and CEO

Yes. I intended to mention this during my talk. As Steve highlighted in the numbers, we've reduced our biosecurity figures from over $50 million to over $40 million. This adjustment stems from our long-standing approach in biosecurity, where we aim to align our guidance with our available resources while maintaining a conservative stance. The current situation primarily pertains to the international side. We've encountered certain contracts that we anticipated securing by now that have not materialized. While they are not completely off the table, I prefer to adopt a more cautious perspective at this point, which reflects our overall strategy in the biosecurity markets. It's unclear whether this is a macro trend or just an anecdotal experience. However, we are noticing a heightened focus on defense technology in the U.S. I believe that there should be a dedicated entity for biodefense in the market, similar to companies like Anduril and Palantir. The specifics of how this will be established and the nature of initial contracts remain uncertain, but I feel our biosecurity business is well-positioned to engage in this space. We just need to observe how the market evolves.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

Cool. Thanks, Jason. All right. Any questions? I have another one from online, if you'd like for me to go that direction.

Jason Kelly, Co-Founder and CEO

Yes, sure. Go ahead. I'll do one more. And if no one else is there, it's busy earnings today. Go ahead.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

So this question is from Trip90501 on x.com. Regarding your target of adjusted EBITDA profitability next year, could you walk us through the key levers you're focused on to bridge the gap from today? Specifically, where do you see the most significant impact coming from? Is it increased foundry automation, AI-driven efficiencies or disciplined SG&A management?

Jason Kelly, Co-Founder and CEO

Steve, do you want to touch on that?

Steven P. Coen, CFO

I can begin by discussing some trends, Jason. If we evaluate what we achieved over the past four quarters, we've successfully reduced our cost run rate by $250 million, and we have another six quarters before reaching our target. The progress we've made in the last four quarters is expected to have a positive impact in the upcoming six as well. Furthermore, we still have additional cost-saving measures we can implement. We need to approach this strategically and holistically, similar to what we have recently accomplished, but there are still numerous opportunities for further cost reductions. Additionally, we need to focus on driving revenue. Many of our revenue drivers and our ongoing discussions hinge on solutions and contributions from our tools, and we anticipate that a lot of what Jason mentioned will translate into revenue positively. However, our biggest risk and opportunity still lies in our sublease situation, as we have a considerable amount of unused rented space. Consequently, we've excluded the expenses related to this unused space from the segment's adjusted EBITDA, given that it's not currently generating revenue. It's crucial to note that we have delivered on our commitment to reduce our operational footprint and enhance our revenue production, which we have done successfully. While we are actively marketing, the downside and associated risks come from the current softness in the Boston market and others. We're still focused on these challenges. Jason, do you have any insights on revenue drivers?

Jason Kelly, Co-Founder and CEO

No. I mean, I think the big one is just a continued shift into tools. So I think we'll watch how fast we can get to pick up on the automation in particular in datapoints. It could be very swingy, I mean we're seeing a lot of interest because of the AI work in beginning to automate labs. And I do think we have the sort of the best technology in the market for that. If you're really talking about general purpose lab automation and connecting it to AI reasoning models and this lab-in-the-loop concept and all these types of things, I really think we're well ahead on that. And so we'll see. That would be the one that's the most swinging where we could really get ahead on things. But it is a new area for us. And so I don't want to overstate it. But I'd say that's the place where I see the most like upside potential on revenue in 2026.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

Cool. Thanks, Jason. All right. I'm not seeing any other questions right now. I know folks are on other calls as well. So just a reminder that you can always reach us at investors@ginkgobioworks.com, and we'll get back to you as soon as we can. I want to thank everyone for tuning in today.

Jason Kelly, Co-Founder and CEO

Yes. I appreciate it. Thanks for the questions.