Earnings Call Transcript - TWST Q4 2025

Operator, Operator

Welcome to Twist Biosciences' fourth quarter financial results conference call for 2025. Please note this call is being recorded. I will now hand it over to Angela Bitting, Senior Vice President of Corporate Affairs. Please proceed.

Angela Bitting, Senior Vice President of Corporate Affairs

Thank you, operator. Good morning, everyone. I would like to thank you for joining us for Twist Bioscience conference call to review our fiscal 2025 fourth quarter and full year financial results and business progress. We issued our financial results press release before the market, and it is available at our website at www.twistbioscience.com. With me on the call today are Dr. Emily Leproust, CEO and Co-Founder of Twist; Adam Laponis, CFO of Twist; and Dr. Patrick Finn, President and COO of Twist. Today, we will discuss our business progress, financial and operational performance as well as growth opportunities. We will then open the call for questions. We ask that you limit your questions to one and then requeue as a courtesy to others on the call. This call is being recorded. The audio portion will be archived in the Investors section of our website and will be available for 2 weeks. During today's presentation, we will make forward-looking statements within the meaning of the U.S. 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 our press release we issued earlier today as well as 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 disclaim any obligation to update any forward-looking statements, except as required by law. We'll also discuss adjusted EBITDA, a financial measure that does not conform with generally accepted accounting principles. Information may be calculated differently than similar non-GAAP data presented by other companies. When reported, a reconciliation between GAAP and non-GAAP financial measures will be included in our earnings documents, which can be found on the Investors section of our website. With that, I will now turn the call over to our CEO and Co-Founder, Dr. Emily Leproust.

Emily Leproust, CEO and Co-Founder

Thank you, Angela, and good morning, everyone. Today, our team delivered a record quarter with $99 million in revenue, exceeding our guidance. This represents an increase of 17% year-over-year and our 11th quarter of consecutive growth. For the year, we reported $376.6 million in revenue, growth of 20% over fiscal 2024. Gross margin for the quarter came in at 51.3%. For the year, gross margin was 50.7% compared to 42.6% for fiscal 2024, demonstrating the leverage of fixed costs with higher volume and reflecting our focus over the last 2 years on continuous margin improvement. I'd like to underscore that over the course of fiscal 2025, we grew our business 20%, leveraging our proprietary silicon chip-based technology platform to deliver high-quality products and services rapidly to our growing customer base. Importantly, through the addition of new products and solutions, we expanded our market share with an eye towards addressing new serviceable market in the year ahead. Our commitment to commercial excellence continues to ensure we meet and exceed our customers' expectations. Today, with our differentiated manufacturing technology, our innovative R&D for the continuous introduction of new products, our base of more than 3,800 customers across multiple industries, our hundreds of SKUs having a wide range of diverse applications and an increasing market share in multiple markets, we're operating with incredible execution and financial discipline. And with adjusted EBITDA breakeven within our reach by the end of fiscal 2026, this year, we focus on setting the stage for future growth acceleration. Turning to our results. SynBio revenue came in at $39.5 million, up 17% year-over-year. Our growth in SynBio continues to be led by the Express portfolio, which remains best-in-class in terms of price, turnaround time and scalability. Two years after launch, our customers have come to depend on the rapid turnaround time, high quality and exceptional experience they receive from Twist as their new normal and what they expect regularly. We have decreased the turnaround time for gene fragments, clono genes, high-throughput DNA preps and high-throughput IgG proteins, and we now run assays and provide antibody characterization data as part of our offering for many customers. One area of substantial growth for SynBio and Biopharma offerings came from customers choosing Twist to power their therapeutics discovery initiatives, both traditional drug discovery and AI-enabled discovery because our platform delivers precision, scale and speed at enabling economics. While traditional discovery continues to be a focus of many customers, the rapid expansion of AI-enabled drug discovery creates powerful new opportunities and amplifies the value of our technology. Recently, this AI-driven discovery fueled significant growth for Twist. In fiscal 2025, orders from customers working on AI discovery projects grew more than $25 million versus fiscal 2024. These projects primarily fall into the SynBio and Biopharma bucket today and a customer pursuing AI-enabled discovery delivered our single largest purchase order to date. And the emergence of dozens of new organizations across pharma, biotech and big tech, pursuing new discovery approaches expands the market opportunity for SynBio and Biopharma groups today. Rapidly, as we have moved further up the value chain from fragment to genes to prep to protein to delivering characterization data and beyond, the strategic connection between our SynBio and Biopharma groups tightens. More customers now leverage both products and services to accelerate discovery and identify breakthrough therapeutics. This growing convergence highlights the power of our integrated platforms and reinforces Twist's unique position to serve the full spectrum of innovation and discovery with more products and services to facilitate this growing opportunity coming in the months ahead. Over the last several years, our product introductions are focused on pharma and biotech customers pursuing therapeutic discovery as well as academic research. As we analyze the future market opportunities, we believe this continues to be the right areas of focus for additional tools and services. Moving forward, we have a robust road map and planned product introductions to augment our portfolio that we believe will continue to drive revenue growth in 2026 and in the future. Turning to NGS. We reported revenues of $53 million, growth of 16% year-over-year, driven largely by continued commercial success from our diagnostic customers' clinical assays. Our NGS products are an integral component within many commercial diagnostic workflows. Recall that we provide tools for customers offering tests for therapy selection, liquid biopsy, comprehensive genomic profiling, rare disease, noninvasive parental testing and progression genetics. In addition, we continue to support minimal residual disease customers with several of these groups targeting commercial launch in late 2026 and planning commercial scaling into 2027. And we are beginning to see conversion of the microarray to FlexPrep sequencing workflow. Introduced about a year ago, we believe this product provides significant potential growth opportunities, both for population genetics and AgBio applications. During the quarter, we had 2 significant population genetic wins with the funnel growing in serviceable opportunity for the $500 million market that uses SNP microarray technology today. Customers in both segments run millions of samples. So once converted, the business is bulky. We have maintained our sequencing agnostic strategy throughout our NGS product portfolio with all sequencing platforms. While the majority of our customer continues to use the Illumina platform, and we have an active OEM agreement with Illumina, we also see growing interest in other platforms. To this end, we announced an advancement of our agreement with Element Biosciences last month that enables us to gain exclusive access to Element's new Trinity Freestyle workflow, facilitating the use of Twist, a full lineup of library prep for the IVT system. Together, Element and Twist shortens the workflow from sample to sequencer from more than 20 hours down to 5 hours, a true time savings. In addition, we are powering the gene by gene population genetics test that runs on the Illumina Genomics sequencing platform. This complements our work with PacBio, Oxford Nanopore and others. We continue to see traction building for RNA-Seq workflows, having customers who offer diagnostic tests as well as labs offering clinical services with growth expected across all areas of our NGS portfolio in 2026. Looking at Biopharma Services, we reported $6.4 million in revenue, an increase of 22% year-over-year. Importantly, orders of approximately $11.5 million for the fourth quarter of fiscal '25 reflect a large order that spans both SynBio and Biopharma from a key account that we do not expect to repeat every quarter. More customers now partner with Twist across the full design, build, test and learn cycle for developability assays and characterization data. This trend continues to grow, especially among AI-driven drug discovery companies. Many of these customers operate without a wet lab and rely on Twist to execute the critical experiments that bring their designs to life. We help them move fast, generate robust data and advance programs with great confidence. We see much more integration between our SynBio and Biopharma businesses as customers increasingly use both our products and services to power their discovery pipelines. To capture this opportunity, we aligned our sales organizations to deepen collaboration and fully leverage the synergies between the two. We also received valuable feedback from investors that our SynBio and Biopharma names for revenue grouping were unclear. Reflecting on this progress and feedback, we will combine SynBio and Biopharma revenue for reporting going forward under the term DNA synthesis and protein solutions, indicating synthesis and manufacturing of sequences for DNA, RNA, protein and data for customers going through design, build, test, learn cycle. DNA synthesis and protein solutions more accurately represents our customer base, and we intend to provide additional insight into industry groupings that better reflects how we serve a broad range of customers. Our NGS tools will now be called NGS applications as its products and services facilitate DNA reading, sequencing workflows. Beginning in the first quarter of fiscal '26, we will be breaking out industry groupings into therapeutics, diagnostics, industry and applied markets as well as academics and government. In addition, something that is underappreciated about Twist is a number of organizations that buy products from Twist and then resell them under a different brand name. As such, we will also share global supply partner revenue encompassing distributor and OEM partners as part of our industry breakdown. These new groupings enhance transparency and better align with how our business operates, providing investor insight into our strong growth engine. I would now like to turn the call over to Paddy for commentary on our growth initiatives for 2026.

Patrick Finn, President and COO

Thanks, Emily. As we close fiscal 2025, it's remarkable what we have achieved in the last year, and I'm even more excited about what is to come. While my comments during earnings throughout the last year focused on margin initiatives, we have now crossed the important threshold of 50% margin, almost a 20 margin points increase over the last 2 years. We expect to continue to remain above 50% margin moving forward. And this year, my remarks will focus on our growth plans. Today, I'd like to talk about a remarkable and differentiated product introduction for our NGS product line aimed at empowering our customers in an area of increasing importance for cancer diagnosis, monitoring and treatment. I'm pleased to share that we're in the final stages of optimizing an express product for minimal residual disease, or MRD, which we expect to introduce commercially in early calendar 2026. As you know, MRD for therapy selection, cancer monitoring and early treatment of recurrence offers tremendous promise. We already work with many MRD customers providing library prep and target enrichment panels for tumor-informed and tumor-naive panels as well as whole genome sequencing approaches. And we continue to hear from customers developing tumor-informed assays that they gain better sensitivity and specificity using hundreds or thousands of sequences specific to a patient's tumor. The data presented at recent medical meetings back up these beliefs. Importantly, recent studies also show that physicians desire the capability to sequence the cancers present and have a test in hand for a patient with cancer within a 4-week window. While we currently manufacture enrichment panels within about 5 business days, we hear the desire for delivery of a tumor-informed panel as fast as 12 hours. Using our proprietary DNA synthesis platform, we developed a process to do just that, manufacture and ship an individualized panel as fast as 12 hours after receiving the sequence data. Our MRD Express solution provides the speed and simplicity of a tumor-naive test while maintaining the precision and sensitivity of a tumor-informed assay, something not possible using any other method of DNA synthesis. Taking a step back and looking at the broader implications, we all know family and friends and maybe many of you personally impacted by a cancer diagnosis. In the midst of the storm, turnaround time is critically important, both to determine treatment and create a personalized panel to monitor recurrence of disease. At Twist, we believe it's our responsibility to respond rapidly, potentially offering a path to enable reduced treatment time or pursue therapy at an earlier stage of disease. This higher calling motivates all of our Twisters to go above and beyond for our customers to play a role in transforming cancer into a manageable chronic condition. On the business side, we believe Twist MRD Express has the ability to support our customers in changing the diagnostic and treatment paradigm, lowering the operational barrier of entry for personalized MRD. We enable this shift through our synthesis platform along with automation, delivering personalized panels in a time line equivalent to tumor-naive workflow. We believe our connection to the customer, our ability to turn a customized panel in as few as 12 hours, all underpinned by our proprietary platform, will enable increasing availability of tumor-informed cancer assays. On top of this, we have the capacity today to serve these markets, future-proofing customer supply chain constraints and vulnerabilities. With that, I'll turn the call over to Adam to discuss our financials.

Adam Laponis, CFO

Thank you, Paddy. Revenue for the fourth quarter increased to $99 million, growth of 17% year-over-year and approximately 3% sequentially. For fiscal 2025, revenue increased to $376.6 million, growth of 20% year-over-year. Gross margin came in at 51.3% for the fourth quarter of fiscal 2025, with the margin for full year of 50.7%, an increase of 8 margin points versus fiscal 2024, with approximately 90% of revenue growth in FY '25 dropping to the gross margin line, supported by our continuous process improvement efforts. Taking a deeper dive into revenue. SynBio revenue increased to $39.5 million, growth of 17% year-over-year. For the full year, SynBio revenue increased to $145 million compared to $123.5 million in fiscal 2024, an increase of 17%. NGS revenue for the fourth quarter grew approximately $53 million compared to $45.5 million in the fourth quarter of fiscal 2024, an increase of 16% year-over-year. For the quarter, revenue from our top 10 NGS customers accounted for approximately 39% of NGS revenue. For fiscal 2025, NGS revenue increased to $208.1 million, growth of 23% year-over-year. We served 588 NGS customers in the quarter with 159 having adopted our products. For Biopharma, revenue was $6.4 million for the quarter, growth of 22% over the same period of fiscal '24, with orders of $11.5 million. We had 84 active programs as of the end of September 2025, and we started 47 new programs during the quarter. Compared to last quarter, these programs are more substantive as we see a shift to AI discovery-driven projects. For fiscal 2025, revenue was $23.5 million, growth of 15%. Looking geographically, Americas revenue increased to approximately $57.3 million in the fourth quarter compared to $52.7 million in the same period of fiscal 2024, growth of 9% year-over-year. For the fiscal year, the Americas accounted for 60% of revenue. EMEA revenue rose to $34.6 million in the fourth quarter versus $25.5 million in the same period of fiscal 2024, exceptional growth of 35% year-over-year. For the fiscal year, EMEA represented 33% of revenue. APAC revenue increased to $7.2 million in the fourth quarter compared to $6.5 million in the same period of fiscal '24, an increase of 9% year-over-year. APAC accounted for 7% of our revenue in fiscal 2025. China continues to be a relatively small portion of our revenue at approximately 1% of total revenue for fiscal 2025. Moving down the P&L, operating expenses, excluding cost of revenues for the fourth quarter were $80.8 million compared with $74.3 million in the same period of 2024. Operating expenses, excluding cost of revenues for fiscal 2025 were $327.3 million, which marks our third consecutive year of relatively flat operating expenses, excluding cost of revenues. Looking at our progress and our path to profitability. For the fourth quarter of fiscal 2025, adjusted EBITDA was a loss of approximately $7.8 million, an improvement of $9.2 million versus the fourth quarter of fiscal '24. For fiscal '25, adjusted EBITDA was a loss of approximately $46.9 million, an improvement of approximately $46.6 million versus fiscal 2024. Cash flow from operating activities continues to improve, and we are driving to breakeven. For the 12 months ended September 30, 2025, net cash used in operating activities was $47.6 million compared to $64.1 million for the equivalent 12-month period in 2024. Capital expenditures in fiscal 2025 were $28 million, reflecting our investment in growth for fiscal 2026 and beyond. We ended the fiscal year with cash, cash equivalents and short-term investments of approximately $232.4 million. As Emily mentioned, beginning next quarter, we will provide new revenue by industry for the following categories that increased clarity around our key customer groups and transparency on how we are progressing as follows: Therapeutics customers, which include both large pharma and early-stage biotech, diagnostics customers who use our products to deliver a clinical report for a patient; industrial and applied customers, including agricultural bio; academic research and government customers; global supply partners, which will include distributor and OEM partners servicing customers across a variety of industries. We believe these new categories will provide added color and metrics for investors to track our progress in reaching different end markets and customer segments. We do intend to share a retrospective view on the new industry group performance in our fiscal first quarter reporting. Turning to guidance for fiscal 2026. We expect total revenues of $425 million to $435 million, growth of approximately 13% to 15.5% year-over-year. For our DNA Synthesis and Protein Solutions Group, we expect revenue of $194 million to $199 million, growth of 15% to 18% over fiscal 2025, reflecting strong demand from our AI discovery customers. For our NGS Applications Group, we expect revenue of $231 million to $236 million, growth of 11% to 13.5% over fiscal 2025. We see a path back to 20% growth year-over-year by Q4 as we expect a large diagnostic customer will begin ramping their commercial volume in the second quarter. As added color, our NGS forecast assumes approximately 1 to 2 points of growth for MRD in fiscal '26, with the ramp for this particular product group coming in late '26 into '27. We expect gross margin to be above 52% for fiscal 2026, and we expect to exit fiscal '26 with our fourth quarter achieving adjusted EBITDA breakeven. For the first quarter of fiscal 2026, we expect revenue of $100 million to $101 million, growth of 13% to 14% compared to the first quarter of fiscal 2025. Our guidance includes the expectation that our Q1 revenue will be impacted by a large cancer diagnostics customer who is transitioning their assay from research to commercial with a reacceleration of purchasing in the second quarter of fiscal 2026. We also see significant revenue from the record AI drug discovery order such that our 2 product groups will be relatively equivalent to the first quarter. With that, I'll turn the call back to Emily.

Emily Leproust, CEO and Co-Founder

Thank you, Adam. Our team executed exceptionally well throughout 2025, delivering strong results and building the foundation for what comes next. At Twist, we often say for a strong finish, we go again. We see substantial opportunity ahead across all our markets. Staying close to our customers continues to be our greatest competitive advantage. It allows us to anticipate emerging needs and identify the next set of products that would move the needle for growth. Like our customers, we have an abundance of ideas and a disciplined approach to prioritization. Over the past 2 years, we deliberately focused on gross margin expansion and with gross margins now above 50%, we have successfully positioned the business for continued profitable growth. As we reallocate R&D resources towards growth, we're investing in innovation that we believe will drive sustained top line acceleration. Our road map remains robust and well sequenced to deliver growth over the next several years. Looking forward, we expect balanced growth across our DNA synthesis and Protein Solutions and NGS applications with some normal quarterly variation. We're advancing new products that support customers leveraging AI and drug discovery as well as those using traditional therapeutics development methods. Fiscal 2026 is about translating our margin strength into durable revenue growth. We know where we need to go, and we are already on our way. With that, let's open the call for questions. Operator?

Operator, Operator

One moment for our first question, which comes from Catherine Schulte with Baird.

Catherine Schulte, Analyst

Maybe first on gross margins. Guidance for the fiscal year implies, I think, low 60s incremental margins off of '25. So it would be in that 75% to 80% range if we did it off of '24. But I think the expectation was you'd flow more of the '25 upside through. So I guess the question is, is this pricing driven? Do you have some manufacturing investments that you're making? And when do we get back to the kind of 75% to 80% incrementals?

Adam Laponis, CFO

Catherine, this is Adam. Thanks for the question. Very much encouraged by the progress of the team over the last 2 years. The 20% growth in gross margin has been extraordinary. While we expect to continue to see the 75% to 80% on average, we are lapping some tough comps, particularly given what we saw in Q3 of this year. For the last quarter, we dropped, I think it was over 80% of gross revenue growth dropped to the gross margin line. And generally, I'd expect that to continue to hold in the future. And if you look at that 2-year metric, it absolutely will, but there will be some noise. And I'd say it is more around the specific customer mix that we see in any given quarter that drives it more than anything else. But we expect it to continue to expand. That said, we will continue to focus on revenue growth as well as gross margin and optimize for the gross profit.

Catherine Schulte, Analyst

Okay. Great. And then for NGS, I think that guide came in a little bit below Street for fiscal '26. Can you just talk through the drivers there and maybe get a little more granular on the expectations for that customer ramping that moving into production. And I think the guide implies 11% to 13% or 14% growth for NGS. How should we think about long-term growth for that business? Is this kind of the new baseline that we should be thinking about?

Adam Laponis, CFO

I'm happy to take that one. In terms of growth for NGS, we're very excited about the prospects. We mentioned it on the call last quarter that we have a customer transitioning from their verification and validation that there would be an air pocket in Q4, and that would continue through Q1. We expect that, that customer will ramp as well as other customers. A couple of points of commentary and color that we provided. We expect to be back to 20% growth by fourth quarter in the NGS business as well as we expect to continue to see growth from MRD and other new product introductions. And we've assumed about 1% to 2% of overall growth from the MRD business products in 2026.

Puneet Souda, Analyst

Can you provide some insight into SynBio and the new segmentation? Could you elaborate on the Biopharma order? I understand it's driven by AI, but I'm trying to gauge its sustainability and momentum. What are you hearing from the customer development teams regarding the potential contribution of AI in fiscal year '26?

Patrick Finn, President and COO

Thank you for your question, Puneet. We have emphasized for several quarters the strategic importance of the biopharma business and its close relationship with our SynBio product offerings. The order we mentioned today is a clear validation of that connection. It utilizes our extensive expertise, ranging from single genes to full discovery. The role of AI in this area is significant; it enhances our throughput and scale, which are critical to supporting our offerings. We remain very optimistic about this sector and have a strong lineup of the complete Twist offerings, from individual genes to comprehensive discovery, positioning us well for future opportunities.

Brendan Smith, Analyst

I also wanted to ask a bit more about guidance for next year. I know you're not providing gross margin guidance for Q1, but can you give us an idea of your thoughts on gross margin sequentially from Q4 and throughout next year to really reach that 52% plus target for the full year 2026? Also, regarding the NGS portfolio, what insights are you hearing from customers that might influence your assumptions about the upper versus lower bounds of your guidance?

Adam Laponis, CFO

Brendan, I'm glad to answer your question. Regarding our gross margin guidance, we expect improvements throughout the year. The primary driver of our gross margin expansion will be revenue growth, as our continuous process improvements are yielding positive results. Additionally, we are investing in new capabilities to support our product initiatives and growth, with a strong emphasis on AI drug discovery and related customer support. Looking ahead, we anticipate a pathway to further gross margin expansion, not only in 2026 but extending into 2027 and beyond. Our focus remains on optimizing gross profit dollars rather than just gross margin, especially now that we are above 50% and are not focusing on past performance.

Vijay Kumar, Analyst

I had a 2-part question on NGS. NGS, I think your Q1 guidance, it looks like it's going to be down sequentially, maybe revenues up mid-singles. And I understand that Q4 had the customer transition impact, right? So why would Q1 growth be below Q4? Is there some additional timing elements on Q1 NGS? And sort of related on the MRD Express, did I hear you correctly that sensitivity on a tumor-naive assay would be as good as tumor informed? And is there any data that you highlighted? What kind of interest are you seeing in this product?

Adam Laponis, CFO

All right. Well, maybe I can start with the NGS guidance, and I'll let Paddy talk to the MRD element of it here. In terms of the NGS guidance, Vijay, thank you for the question on this. We gave the update back in Q3's call that we had a customer transitioning from commercial -- from validation to commercial ramp, and that impacted Q1, and it's going to continue to impact Q4, and we expect to see a sequential growth from that point forward for the NGS business starting in Q2. So we will continue to see that air pocket continue in Q1. And then in Q2 and beyond, we'll see the sequential growth such that by the time we get to Q4, we're expecting to be back at 20% year-over-year growth in the NGS business. I'll let Paddy talk to the MRD portion of the question first.

Patrick Finn, President and COO

Vijay, thanks for the question. I think when we look at recent medical conferences, I think you're seeing that the tumor-informed approach is leading to increased sensitivity in the assay. And that's got us excited about potential with the clinical endpoint for the patients that are going through a tough time. So we see sensitivity enhancements from tumor informed. And again, our scale and speed, we think, is really going to help enable the segment of the market that's focused on that approach.

Subhalaxmi Nambi, Analyst

Paddy, just a follow-up on that MRD. MRD Express is an exciting launch next year. Could you speak to who the end user is? It almost sounded in your description like Twist is executing the MRD assay for the physician or delivering the panel to a hospital to run in-house? Or is it the same customer as your NGS diagnostics?

Patrick Finn, President and COO

Subbu, a great question, and thank you for the opportunity to clarify. Twist's role in the community is an enabler. We don't run the test. We supply our customers and our partners to enable them to drive their assays to the clinic. So again, our role will be to supply and enable them.

Subhalaxmi Nambi, Analyst

Perfect. So how will you approach pricing for the MRD Express? What are the expected margins here? And I'll hop back in the queue.

Patrick Finn, President and COO

Yes, a good question. So pricing has not been set at this point. It will go from our basic principle, Subbu, which is we're here to enable our customers at scale to truly drive their product to market. And we think with this product, in particular, truly the impact of MRD to health care. We've listened closely to the customer base. I think we understand the value to this market segment of speed and this 12-hour turnaround time. And I think our operating scale and quite frankly, derisking any vulnerabilities in supply chain is good value, and we'll share that value with our customers as we go forward and enable them to drive best-in-class differentiated assays out to the market.

Matthew Larew, Analyst

You reiterated the expectation to hit EBITDA breakeven in the fiscal fourth quarter. But obviously, the year is starting a little bit lower on the top line. Given growth is contingent on the expectation of an NGS customer ramp and MRD contribution, how much breathing room do you expect to have in the fiscal fourth quarter? And I guess how air tight are you going to hold yourselves to hitting that mark? I guess that's the first question. And the second is, Adam, just what does the guide include in terms of the macro picture, given we've seen perhaps some recent positive updates relative to your pharma and biotech customers and perhaps there may be some more certainty for your academic customers coming over the next few weeks or months?

Adam Laponis, CFO

Thank you, Matt. I prefer not to make predictions about the macro environment, so we will remain cautious and assume that conditions do not improve from where we are now. We have established our assumptions based on a relatively stable environment. Regarding growth opportunities, we expect an acceleration from our commercial customers utilizing our products. We also anticipate only 1 to 2 points of growth for the year from our MRD products. We are confident that the ramp will happen, and while timing it can be challenging, we are very excited about the potential it brings to our business now and in the future, beyond 2026.

Douglas Schenkel, Analyst

I have a few questions. Thank you for getting us started. First, regarding SynBio, you previously had an academic promotion that eliminated the Express Gene pricing premium for academic customers due to funding pressures. Is that promotion still active, and how much longer do you intend to continue it? Additionally, how should we view the price per gene in 2026 compared to 2025? On another note, there has been considerable attention on the Q1 guidance related to NGS and the sequential decrease. As you have mentioned previously, there is a pacing dynamic within NGS. Is the guidance solely based on that, or are there any changes in underlying trends or demand? Lastly, which I consider an important issue, I’m unsure if this is the appropriate discussion forum, but one challenge investors face with Twist is defining the market opportunity. In the newly titled DNA synthesis segment, what is the size of the market opportunity and what is your penetration level? Additionally, on the NGS side, regarding MRD and MCED, what is the market size, how penetrated are you, and what is the average Twist revenue per assay? Answering these questions would aid in modeling and help build more conviction in the company’s long-term growth trajectory.

Emily Leproust, CEO and Co-Founder

Thanks for the question. This is Emily Leproust. We recently had an academic promotion that allowed us to offer a standout price, which has been very successful. As we enter the new year, our pricing remains unchanged, and it's proving effective for us commercially. The growth in the number of genes in Q4 highlights this success. While we aren't confirming if this will close, we will continue as long as it's working, and it is. Regarding our Q1 guidance, it's just a pacing dynamic, and we are experiencing excitement and wins across various areas. Our performance in liquid biopsy has been strong, and the MRD bespoke capability we are introducing, with express delivery in 12 to 24 hours, should serve as a long-term catalyst. The FlexPrep launch is also showing promise in the AgBio and population generic markets, contributing to long-term strength. We've dedicated significant efforts to integrate our workflow with several sequencers, notably the Twist and Element AVITI, which significantly reduces the time from sample to sequencer. It's now possible to be on the sequencer in as little as 5 hours. We are seeing favorable developments in NGS, and despite perceptions of lower demand, it's mainly due to large customers facing temporary setbacks. We expect strong growth to return for NGS in Q4. Regarding market definition, we understand your concerns but we are exploring ways to better engage our investors about the market's potential. We are still in the early stages of penetration, and our differentiated products indicate substantial growth ahead. While we acknowledge that diagnostic companies are currently thriving, we believe we are performing exceptionally well against our competitors in the tools space. We are considering metrics like average test revenue per patient in NGS, but the variance in test costs based on complexity complicates public pricing disclosure, as it could lead to dissatisfaction among our customers. We recognize the importance of articulating our market sizing more clearly for our investors.

Luke Sergott, Analyst

This is Sam on for Luke. Could you talk a little bit about the new DNA Synthesis and Protein Solutions segment and the rough split between Biopharma and synthetic genes in the '26 guide. The combined segment guide came in above Street expectations. And I'm just wondering where that's coming from and if it's driven by that large AI program.

Emily Leproust, CEO and Co-Founder

Thank you for the question. The motivation for this change was twofold. First, there seemed to be some confusion among our customers regarding SynBio, and perhaps a lack of recognition of our efforts in therapeutic discovery and development. Second, as our sales team engages with customers, we noticed there is little distinction between those purchasing DNA synthesis and those seeking proteins or characterization. This creates a seamless workflow where some customers focus on fragrances, some on genes, and others on proteins, while some want comprehensive characterization. It makes sense to merge these areas. Regarding the numbers, we might be advancing beyond initial expectations, which reflects the strong performance of the business. There are significant synergies between DNA synthesis and protein functions. A few years ago, some stakeholders questioned why we shouldn't separate Biopharma, but we understood the strategic advantage, which is now evident. The outcome isn't simply additive; it's more synergistic. In response to your inquiry about growth sources, whether from DNA or protein, the reason for combining them is that we’re uncertain and, ultimately, it doesn’t matter. The key point is that growth is occurring, and we adapt to our customers' needs, which may vary each quarter. In some quarters, customers may purchase DNA, while in others, they may choose protein. Our products are distinctive, and we succeed regardless of customer preferences, and we are eager to capture that growth.

Steven Etoch, Analyst

Maybe just a few quick ones from me. Just given this 1 to 2 points of growth from MRD, is it possible to frame up the proportion of MRD revenues in fiscal 2025? And I'll stop there and follow up in a second.

Adam Laponis, CFO

Mac, great to hear you and happy to share. What we've said in the past is our MRD business is relatively small. It's a lot of small numbers, and we are growing significantly faster than the overall business. Kind of applying that rule, it's a relatively small percentage of our overall NGS business in 2025, but it is growing much faster than the overall NGS business, and we expect that trend to continue, not just in 2026, but well beyond.

Puneet Souda, Analyst

Thanks for the follow-up again. I appreciate you providing a lot of input. But I just want to boil down to a key question. What is the real NGS underlying growth ex this large customer in the first quarter and the fiscal year '26?

Adam Laponis, CFO

Puneet, if you step back a bit and look at where we were in 2025, the overall growth of NGS being around 23% neutralizing for the growth from the one customer, it would be closer to 20%. And if you go into 2026, I'd say the same general dynamic applies as well.

Vijay Kumar, Analyst

Sorry, regarding the Q1 NGS question. Is the customer headwind worsening in Q1? Is that what is influencing the NGS assumption? We already faced the headwind in Q4, so why would it get worse sequentially?

Adam Laponis, CFO

Vijay, you're asking the right question. The air pocket from Q4 is continuing into Q1, but then it will significantly reverse as we expect the ramp to begin starting in Q2 of 2026.

Operator, Operator

And ladies and gentlemen, this concludes our Q&A session. I will pass it back to Emily Leproust for final comments.

Emily Leproust, CEO and Co-Founder

Thank you for your questions and for your continued support. With our strong execution in 2025 and a clear path to profitable growth in 2026, we remain focused on delivering differentiated products and services for our customers and sustained value for our shareholders. Thank you.

Operator, Operator

And this concludes our conference. Thank you for participating. You may now disconnect.