Earnings Call
Twist Bioscience Corp (TWST)
Earnings Call Transcript - TWST Q4 2020
Operator, Operator
Welcome to Twist Bioscience's Fiscal 2020 Fourth Quarter and Full Year Financial Results Conference Call. Please be advised that today's conference is being recorded. I would now like to turn the conference call over to Jim Thorburn, Chief Financial Officer.
James Thorburn, CFO
Thank you, operator. Good morning, everyone. I'd like to thank you all for joining us today for Twist Bioscience's conference call to review our fiscal 2020 fourth quarter and full year financial results and business progress. We did issue our financial results this morning, which are available at our website, 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 our recent progress on Twist business. I will report on our financial and operational performance, and Emily will discuss our upcoming milestones and direction, and we will then open the call for questions. 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 1 week. 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 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 resulting 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.
Emily Leproust, CEO
Thank you, Jim, and good morning, everyone. Fiscal year 2020 has been a transformative year for Twist. In early December of last year, we reported our results from fiscal 2019 and provided revenue guidance of $80 million to $84 million for fiscal 2020. While we withdrew our guidance given the uncertainty of the pandemic and closure of many customer sites, I'm extremely pleased to report record revenues of $90.1 million for fiscal 2020 and $32.4 million for the fourth quarter. Our strength in revenue was driven by the innovation and commitment to execution from our entire team at Twist. They worked through exceptional, uncharted circumstances to deliver great products to our customers. Against the incredibly disruptive backdrop of the COVID global pandemic, we delivered growth in our product lines and adding new products to specifically address the evolving SARS-CoV-2 virus. I'd like to note that unlike some of our peer companies, our record revenue is not a function of COVID-19 related products. In fact, while our synthetic RNA control for SARS-CoV-2 and our NGS panels to sequence the virus definitely contributed to our revenue, it is our stable synbio and NGS products with growing initial revenue from our Biopharma division that has catapulted our success this fiscal year. Illustrating our momentum, we reported record orders of almost $117 million for the full year with $42.7 million for the fourth quarter, setting the stage for growth into 2021. Diving into the business, I'd like to begin with synbio, where we reported $43.8 million in revenue for fiscal 2020. Over the course of the year, we focused on building out our product line specific to biopharmaceutical and biotech customers. We introduced new preparations of DNA specific to our customer needs on time and on budget in addition to building the capability to provide IgG antibodies at scale. DNA preps, as we call them, launched in the second quarter, and we are seeing customers engaging diligently and initial orders gaining traction. In the fourth quarter, we received initial IgG orders from our early access customers, and we expect revenue to ramp up moving into and through calendar 2021, now that the capacity is available internally while we are building the e-commerce infrastructure. In addition to products for pharma customers, we expect to launch clonal-ready gene fragments in the next month. This product will be useful for the long tail of the market for those customers who need a few genes at a time. Often, these are academic customers, who will make their own genes instead of buying them. As we look ahead into fiscal 2021, we have 2 areas of focus. The first is on what we call the Factory of the Future. This is the next evolution of our platform, which we expect to launch in 2022, and will allow us to bring additional differentiation, including a faster turnaround time for all of our products. We anticipate our Factory of the Future will double our current capacity and will serve as the second manufacturing site outside of the Bay area. We believe this facility will provide us the capacity to scale revenue to $500 million and we look forward to evolving our business to add new differentiators to unlock segments of the synbio market we cannot address today. The second focus would be around our business-to-business capabilities. Currently, we have an exceptional frictionless e-commerce system that tracks orders from initial purchase to shipment. We are now focused on building capabilities to facilitate business-to-business interactions that will expedite order placements to enable us to be an approved bundle within certain systems. For instance, currently, a customer, the University of California is required to generate a PO within their accounting system before placing an order. A B2B integration will enable these customers to place an order on our website without needing a specific PO from their institutions, removing significant barriers to order. Moving to Genomics and targeted NGS. We launched our NGS product line in 2018, and I am pleased to report that for the first time, revenue for the fiscal year is approximately equal to our synbio revenue. This is an exceptional testament to the power of our platform to disrupt established markets and offer innovative products to support our customers striving to improve health and sustainability. We expect continued growth for this product line, particularly as it is a long sales cycle, and many of our customers are using our products for clinical trials. The timing of their scale-up and the associated revenue ramp for Twist is dependent on their success in the clinic, and we're confident in the growing revenue stream, but we do expect it to remain lumpy in the near term. In fiscal 2020, with the emergence of COVID-19, we launched a new product line of synthetic controls, initially for SARS-CoV-2 and subsequently for other respiratory diseases. These controls can be used to develop and routinely ensure diagnostic tests accurately detect pathogens. This product line, as well as our COVID-19 specific panels, opened the opportunity to pursue new customers; we have now shipped controls and COVID-19 panels to 841 customers as of September 30. These customers are now familiar with Twist, and we are working to sell additional products into these accounts. In addition to the controls, we now have an infectious disease product line, which we believe will be critically important going forward as we continue to fight COVID-19 while navigating ongoing outbreaks. To that end, last week, we launched the comprehensive viral panel, which screens over 3,100 viruses. Continuing to our product line expansion, we introduced our methylation solution earlier this year to our early access customers. We have provided great feedback to date. We expect to make these products available more broadly in early 2021. In addition, we intend to add multiplex indexing to our product mix, a highly technical workflow extension to our current universal dual indexes. We believe this will better support customers developing liquid biopsies and cancer diagnostics, further differentiating our product offering. We continue to focus on converting customers who are currently using SNP microarrays technology, and we've had some incredible success in this effort with a very large customer making this switch in the fourth quarter. We expect to continue our success in winning new accounts with this approach. And moving into fiscal 2021, we see a significant opportunity to pursue conversion in AgBio, where SNP microarray is very common with millions of samples processed every year. While the cost percentile is smaller than in health care, the overall volume is much larger. In addition to synbio and NGS, we see growth coming from the expansion of our OEM strategy. We strive to own the workflow upstream from sequencing and leverage the channel reach of other companies. We now have 13 different companies selling our NGS and synbio products under their brand name. And this unique strategy has allowed us to book approximately $5 million to $6 million in revenue in fiscal 2020, and it is poised to grow. Turning to our vertical market opportunities, our Biopharma business continues to excel. Over the course of fiscal 2020, we anticipated that we would sign 5 to 10 partnerships, and I'm pleased to report that we have signed 13 revenue-generating partnerships with 8, including milestones and/or royalties. 4 of them were signed during the fourth quarter of fiscal 2020, and our pipeline of opportunities remains robust. We are now beginning to deliver data for our partners, who signed in earlier this year, and our platform continues to impress. We will look for ways to share this data on associated clinics, but given the confidential nature of our partnerships, it may not be possible in all cases. And in addition, public release of this information is dependent on our partners' approval. In addition, we reported preclinical data for 3 proprietary antibodies that we discovered using our biopharma library platform. The data showed 2 of our single domain VHH Nanobodies protected against weight loss at all those levels, including the lowest dose of 1 milligram per kilogram in preclinical hamster models of SARS-CoV-2. In addition, the third IgG antibody discovered through Twist collaboration with Vanderbilt University Medical Center were found to protect against weight loss at 5 and 10 milligram per kilogram. While we may out-license these antibodies for a wide range of opportunities, the proof-of-concept validation for our ability to go from target to effective antibody data in preclinical model is helping us build a robust pipeline of potential partners in the biopharma vertical. We have demonstrated that we can monetize our biopharma platform through revenue-generating partnerships, and our next evolution is to generate antibodies against our own targets and then license them out for further development. We have identified 7 key disease targets where we believe our biopharma platform can generate differentiated antibodies. We intend to advance the development of these targets through our discovery and optimization platform, and we will be pursuing out-licensing opportunities for these antibodies over the next 18 months. Moving to data storage. Last quarter, we reported an important technical breakthrough that we believe will facilitate further miniaturization of our silicon technology. We continue to make very good progress and we are now producing synthetic DNA for data storage on 5-micron devices, spaced 10 microns apart from each other, a dimension called the pitch. This is an incredible accomplishment and an important step on our technology roadmap for DNA data storage. Right now, we are using this chip in an R&D capacity to extract volumes to demonstrate that it works. In parallel, while ensuring that it works, we already designed and have received our next silicon chip with even further miniaturization. The second chip has 300-nanometer devices on a 1-micron pitch. With each engineering and technical accomplishment, we work within a chip in an R&D capacity first to debug it. Once we have a working prototype, we then move it into the development phase while in parallel, designing the next miniaturization of the chip, taking into account our experience with each iteration. Ultimately, we plan to scale down to 150-nanometer pitch or less. Once we achieve our target chip design, we will follow the same pathway of debugging and developing. And for the final iteration, we will focus on scaling up to full commercialization. This is the same process we used for the current commercial scale silicon platform to have experience and success to build upon. In addition to our technical progress, earlier this month, we announced a significant alliance for DNA data storage, which brings together the leaders in this field to advance an industry roadmap and drive awareness and widespread adoption of this new long-term storage option. We, along with Microsoft, Western Digital, and Illumina, are founding members and several additional organizations working in this field have joined the group. It is important to note that this alliance does not change the timing of our internal technology roadmap. What it does is build consensus around the opportunity for a new storage medium, priming the market when the technology is ready for entry, and we are pleased to lead the charge. At this time, I'd like to turn the call over to Jim to review our financial results for the quarter.
James Thorburn, CFO
Okay. Thank you, Emily. As Emily noted, we have delivered another very strong quarter in what continues to be an uncertain environment due to the COVID pandemic disruption. I would like to thank all our Twisters for another terrific quarter and an outstanding year of progress. Our orders for the fiscal year achieved a record $116.7 million, and revenue was $90.1 million, and our gross margin scaled to 31.8% for the year. We believe it is important to have a strong balance sheet in these uncertain times, and we concluded the year with approximately $290 million in cash and short-term investments, and we exited the year with strong operational results. Our revenue for the quarter was $32.4 million, we booked $42.7 million in orders. Our Biopharma business is doing really well with an additional 4 revenue-generating agreements in the fourth quarter, and we also had record NGS revenue and orders. Our gross margin is notable in the fourth quarter with positive 46%, and we grew our customer base to approximately 2,200 from 1,300 in the previous fiscal year. Now let me share with you more details on our orders for the fourth quarter. Our NGS orders were $23.6 million, and we received orders from approximately 600 NGS customers with the top 10 accounts placing orders of approximately $15 million in the fourth quarter. For the full year, our NGS orders were approximately $54 million, and that's comparable to $28 million in fiscal 2019. So we're making a lot of progress in NGS, and our larger opportunity customers contributed about $34 million of the total FY '20 NGS orders. Our pipeline for our larger opportunities continues to scale, and we are now tracking 150 accounts, up from 132 accounts we noted on our August earnings call, with 55 adopted, an increase from 47 in the previous quarter. Now turning to synbio. Our synbio orders, which includes orders from genes, libraries, and oligo pools from Ginkgo, were $16.2 million in quarter 4 and brings our total synbio orders for the year to approximately $58 million. That’s a 40% year-over-year growth. For the year, total gene orders grew from approximately $33 million in fiscal '19 to $47 million in fiscal '20, and Ginkgo orders increased from $8 million to approximately $12 million. Please note that Ginkgo accounted for about 10% of our total orders for the year. Now to Biopharma. Biopharma orders in quarter 4 were $2.9 million, and we signed 4 additional revenue-generating partnerships, bringing the total up to 13, with 8 of those including milestones and/or royalties. Biopharma orders for the year were $5.2 million, and we're looking very strong heading into fiscal '21, with future upside for milestones and royalties. In terms of our segment orders, we saw the academic segment pick up in Q4 with orders of $8.5 million as compared to $5.4 million in quarter 3, with a large order of approximately $2 million from one institution, which will be billed over the next couple of years, contributing to our growth. Our Healthcare segment recorded strong bookings in the quarter, with $23.6 million due to strong orders in NGS, Biopharma partnerships, and continued progress in expanding into large pharma. Industrial biotech bookings for the quarter were $8.8 million, which included Ginkgo bookings of $3.5 million. Please note, we provide orders not to directly translate into revenue, but more to provide a trend line for each group. We also anticipate both NGS and Ginkgo orders to be lumpy quarter-to-quarter. Now moving from orders to revenue. We reported revenue of $32.4 million in quarter 4, and that's another record quarter for Twist. Our NGS product revenue for the quarter climbed to $20.2 million, and for the year grew from $21 million in fiscal '19 to $44 million in fiscal '20. As expected, the second half of the year was very strong for NGS products, and $9 million was booked and billed to 1 customer in quarter 4. This is a customer we have worked closely with for a number of years, and is another confirmation of the transition from SNP microarray to NGS. And also note in our original FY '20 revenue projections, we anticipated approximately $3 million of this order to come in during Q4, and so while lumpy, it is less so than seen on the surface. Now touching on synbio. Our synbio product revenue for the quarter was $11 million, which is down sequentially from $11.8 million in the previous quarter; however, Ginkgo declined from $2.8 million to $1.8 million sequentially, and that's mainly due to the timing of the projects. Our Q4 gene revenue was $8.6 million versus $9.6 million in quarter 3; that's mainly due to Ginkgo, as noted earlier, and revenue declined due to the summer impact of EMEA. For FY '20, our synbio business was approximately $44 million versus $33 million in FY '19, with Ginkgo revenue for the year at $10.7 million versus $9.2 million in the previous fiscal year. And Ginkgo now accounts for approximately 12% of our revenue in fiscal 2020. Our gene business is doing extremely well. We shipped approximately 339,000 genes in the year, compared to 288,000 last year. Our gene revenue grew from $26.7 million in FY '19 to $35.2 million in FY '20, an increase of approximately 32%. It's worth highlighting that revenues from longer genes, which are 3.2 and 5 kb in FY '20, climbed to $14 million, up from $9 million in FY '19. Our preps, which we launched in April, right in the middle of the pandemic, continue to scale nicely, and we billed approximately $1 million for the year. Now Biopharma. Our revenue for the quarter was $1.3 million as a result of rapid antibody discovery project activities which include timing, screening, and high-throughput IgG purification. We are very excited about the progress we're making, and highlight that our biopharma revenue rose to $2.4 million for fiscal '20. I will briefly cover the regional progress. U.S. revenue grew to $59.2 million in FY '20 from $36.9 million in fiscal '19. EMEA revenue grew to $25.8 million in fiscal '20 versus $14.7 million in fiscal '19, another year of terrific growth in EMEA, which now accounts for 29% of our worldwide business. APAC revenue for the year was $5.1 million versus $2.8 million in fiscal '19. In terms of how we're doing by industry, the industrial biotech revenue was $29 million for fiscal '20, which is approximately 32% of our business. Healthcare is now our largest segment and accounts for 44% of our business with revenue of $40 million in fiscal '20 compared to $17.4 million in fiscal 2019. This growth is primarily due to the success in NGS, Biopharma, and continued success in penetrating large pharma. Academic revenue in fiscal '20 was $19.6 million, compared to $13.8 million in fiscal '19. Agricultural revenue was $1.4 million versus $1.2 million in the previous fiscal year. Now moving down the P&L. Our gross margin for the quarter was $14.9 million, or 46% of revenue. For the year, our gross margin was 31.8% of revenue, up from 12.8% in fiscal '19. The increase in our margin reflects the impact of scaling our revenues, leveraging our fixed costs, and the benefits of a higher mix of NGS products and terrific execution by our organization. Our operating expenses, excluding cost of revenue for the fourth quarter increased to approximately $39 million, bringing our total operating expenses, excluding the Agilent litigation settlement, to $146 million compared to approximately $116 million in fiscal '19. In terms of year-on-year comparison, R&D for the year increased to $43 million from $35.7 million in FY '19, due to increased investment in our resources. We increased our headcount from 102 to 130. Note that FY '20 includes $2.5 million in offset expenses for the IARPA grant. In terms of SG&A, this increased to $103.3 million from $88.1 million in FY '19, primarily associated with investment in our commercial organization. We've scaled our organization from 122 heads in sales and marketing to 166. We also had increased commissions associated with higher revenue, and stock-based comp increased by $5 million from FY '19 to FY '20 in SG&A. Our net loss for the quarter was $24.3 million, down from a $28.2 million loss in the previous quarter, mainly due to the higher gross margins associated with scaling our revenue. Note stock-based comp for Q4 was $5.1 million compared to $4.1 million in quarter 3, and depreciation in quarter 4 was $1.9 million, up from $1.7 million in Q3, as we brought on the new writers. For the year, our net loss was approximately $140 million, including $22.5 million for the litigation settlement with Agilent, booked in quarter 1, approximately $17 million for stock-based compensation, and approximately $7 million for depreciation. CapEx was approximately $10 million for the year, with major investments for capacity expansion, primarily for new writers and lab equipment. I will now cover our outlook for fiscal '21. We're positioning the company for strong growth in FY '22 and beyond. Although there's a great deal of short-term uncertainty and challenges as the pandemic keeps evolving, our view is FY '21 will be a dynamic year. Our revenue guidance for '21 is in the range of $110 million to $118 million. This includes Ginkgo revenue in the range of $11 million to $12 million for the year. Non-Ginkgo synbio is estimated to be in the range of $41 million to $44 million for the year. NGS revenue is estimated to be in the range of $54 million to $58 million, and Biopharma revenue is expected to be approximately $4 million for the year. Our gross margin guidance for the year is approximately 32%, and will scale from 27% in quarter 1 to 37% in quarter 4. Our margin, as always, is influenced by mix and also impacted by new capacity utilization as we launch new products such as IgG and scale our DNA preps. We're targeting very large growing markets and expanding significantly faster in those markets. We have demonstrated our platform scales and demonstrated our ability to tap into additional revenue streams. We're optimistic about the opportunity ahead and continue to invest for growth and build our moat. As such, we're stepping up our investment in innovation in fiscal '21. Operating expenses, which includes R&D and SG&A, were approximately $174 million for the year. We are stepping up to the plate and increasing our investment in R&D to approximately $60 million in fiscal '21, up from $43 million in fiscal '20. In addition to increasing our core synbio and NGS resources, we're increasing our DNA storage investment to approximately $15 million in R&D and Biopharma investment to $12 million in fiscal '21. Note the DNA storage investment in FY '20 was about $3 million. Our net loss guidance for the year is expected to be in the range of $136 million to $141 million, including stock-based comp of $20 million and depreciation of $7 million. CapEx guidance for the year is $30 million, which includes expansion into our new facility, as Emily highlighted. As we're well through our December quarter, we're projecting our revenue in the December quarter to be in the range of $25 million to $26 million. In summary, we view our outlook to be prudent for fiscal '21. Fiscal '21 will be a dynamic year, and we're stepping up to the plate and pursuing large, growing markets and investing for our long-term success. And with that, I'll turn the call back to Emily.
Emily Leproust, CEO
Thank you, Jim. In summary, we achieved an amazing quarter and year bringing light into the challenges of 2020. We beat our pre-COVID-19 revenue expectations, delivering exceptional products, and more importantly, service to our customers throughout the global pandemic. 2020 has tested our people, our plans, and our resilience, and I am extremely pleased to say that as an organization, we have risen to the challenge. In a tough context, we are like MacGyver. We use the tools we have, we create those we do not, and we always, always persevere. Looking into fiscal 2021 for synbio, we expect continued growth and diversification of our revenue stream, ramping pharma-focused products, including DNA preps and IgG, launch of our clonal-ready gene fragment, B2B solutions to allow us to capture specific multisite institutions, and a significant investment in our Factory of the Future to prepare for strong growth in 2022 and beyond. For NGS, we expect continuous revenue growth and customer ramping production, full launch of methylation solutions, technical addition of UMIs, continued conversion of SNP microarrays to Twist sequencing, particularly in AgBio, and an expanded OEM strategy. For Biopharma, we will continue to sign partnerships to expand our technology base and generate revenue, and we will also begin to advance our internal pipeline of antibodies, pursuing out-licensing opportunities over the next 18 months. For DNA data storage, we will continue to drive our engineering roadmap towards further miniaturization. In addition, we will execute on our agreement with IARPA and begin to pave the way for market adoption of this new storage medium. As COVID-19 cases are escalating rapidly around the world, we do not know what fiscal 2021 will bring but we do know that we will face it head-on and navigate through it. We have an incredible team of Twisters driven to make a broader impact through the power of our platform. With that, let's turn the call for questions.
Operator, Operator
Our first question comes from Tycho Peterson with JPMorgan.
Tycho Peterson, Analyst
I'll start with the guidance. You are coming in a bit below the Street here at the high end. I understand you want to be conservative. So maybe Emily, can you just talk about where you see the conservatism baked in the guidance? I know you're talking about $4 million in biopharma contributions and milestones. Could there be upside there? And then on Ginkgo, that does imply, at midpoint, a decent deceleration, actually down about 11%. So can you maybe just talk to the dynamics there and what would be driving that to decline double digits?
Emily Leproust, CEO
Yes. Thank you, Tycho. Good morning. Indeed, we are prudent. I will let Jim give you more details around this question.
James Thorburn, CFO
Yes. Hi, Tycho, this is Jim. Yes, I mean, we came off a very strong quarter 4. As usual, we want to be prudent and really give guidance that is meaningful and thoughtful. So we've built up, particularly on NGS, our revenue by customer, understand where the customers are in terms of converting through the pilot and scale-up in adoption phase. We see potential opportunity there. Ginkgo, we have a 4-year contract. We're about 2.5 years into the contract, and as Ginkgo's business is lumpy, we want to be mindful of the challenges that we're all going to face over the next year. So we believe we pitched our business very conservatively. We see upside with synbio. We continue to make progress on large pharma. We see upside in terms of IgG. We also are doing well on scaling our DNA preps. But as we stand back, the pandemic is raging here in the U.S., and we want to make sure that we calibrate our focus for the future, which has continued to grow for FY '22 and beyond, invest strongly in FY '21 and position us when we're going to get to the other side of this pandemic.
Tycho Peterson, Analyst
Okay. But Jim, just so we're clear because Ginkgo as a company is obviously growing very quickly, but the 11% decline, you're just saying that's lumpiness in relation to that part of the guidance?
James Thorburn, CFO
Yes, that's just lumpiness in that part of guidance. We have a 4-year contract, which is scaling. The minimum has actually come in above the 11% to 12%. But based on what we're seeing, we just want to be measured in our forecast. It's not a reflection of Ginkgo's business, but a reflection of our conservatism.
Tycho Peterson, Analyst
Okay. And then Emily, on the COVID antibodies, I know you talked in the press release about either developing these on your own or partnering. I'm just curious about how you're thinking about that opportunity. We've seen some of your peers like Adaptive with the Amgen deal, that Amgen chose not to move forward with that. So what's your view of the potential to partner up on the COVID antibodies? And would you potentially do all 3 internally if you couldn't find a pharma partner?
Emily Leproust, CEO
Thank you. Great question. So from the beginning, the idea was to use the light of COVID to generate some data that we could leverage in a marketing approach. The data that we've had from COVID has been useful, including some of the deals we have in Biopharma and in making sure that the funnel is full. That being said, if there are opportunities to license it out, we will pursue it. However, we did start late. We started at the end of March when everybody started looking for COVID antibodies in early January. In addition, COVID is not hard to target. The benefit of our platform, which is able to find antibodies against ancillary targets is not fully applicable. So that being said, we now have really positive data in a preclinical animal model. So that is good. And we've always said that if we license one of those antibodies, it will be an upside for us. We're still in execution with a number of groups, but this probably is not a big drive for us to do it ourselves. I don't think we are set up to go and do clinical work with those antibodies ourselves. However, it's still possible that someone could license one of them out. Even if that does not happen, the market impact and the benefit of those antibodies to give us credibility and help us in our commercial endeavors for Biopharma has been very, very positive.
Tycho Peterson, Analyst
Okay. And then before I hop off, 2 quick ones. You had an NGS one-timer in the quarter. Can you maybe just talk to that? Was that maybe stockpiling? And then separately, on the Microsoft, Illumina data storage announcement, other milestones we should be paying attention to for 2021 for you guys?
James Thorburn, CFO
I mean, sorry, Emily.
Emily Leproust, CEO
Go ahead.
James Thorburn, CFO
Yes, Tycho, on NGS, the $9 million is not stockpiling. The $9 million is one large customer we've been working with for over 3 years. We had originally anticipated that we would ship about $3 million in Q4 and $6 million in FY '21. They came back in and basically wanted to do all the product in one lot. They're actually using that right now. So we're very optimistic. This is SNP microarray to NGS conversion and we're very optimistic about seeing some more large orders coming in the future for us.
Emily Leproust, CEO
And then on the data storage on the alliance, we don't yet have the details of future public announcements for the alliance. That is the work that the alliance will work together on. Again, the idea of the alliance is to help prepare the market such that when there is a product available, the market is already primed. There will definitely be activities in that market preparation. In parallel, our technical work is going full steam ahead. So that is a milestone that we are in full control of. We may not be able to give a substantial update every quarter, but I would anticipate that over 2021, there should be more updates on the technical side.
Operator, Operator
Our next question comes from Doug Schenkel with Cowen.
Doug Schenkel, Analyst
I just want to start with a couple of questions on what I would call end market outlook questions. So one is on pharma, one is on data storage, and then I want to follow up with a couple of financial questions. So starting on pharma, I may have missed it. So you talked about in your prepared remarks, the fact that heading into 2020, you were looking for a total of 7 to 8 biopharma partners. I think you got to 13, if I took that down correctly in my notes. With that in mind, as we think about 2021 pharma revenue guidance of $4 million, I'm just wondering what's driving that? How much of that is milestones, product sales collaboration? Essentially, what are the components of the $4 million? And then what's the importance of the new partners to that number, especially some of the more recent ones?
Emily Leproust, CEO
Thank you, Doug. Yes. At the beginning of the year, we guided 5 to 10 partnerships, and we ended up at 13 paid partnerships. In addition to upfront payments where we get paid, it's important for us to start accumulating milestones and royalties, so that we can stack them. 8 of those partnerships included milestones and/or royalties. To answer your question, when we announced an order number, that is the upfront payment part of the business. That is the bond that we know we would get for sure. Even though that payment is received upfront before we start the work, we actually book the revenue as the work gets done. And so the revenue next year will be the upfront payments that we booked as orders last year, and then as we do the work, we can conduct it into revenue. So I'll say 2 things. One is that it takes some time to do drug discovery. Even though one of our key attributes is that we are fast, in addition to being able to target hard-to-drug, it's not a 30-day thing. There is a process that we're running in-house. When we get to the end of the process, we would have converted the full upfront payment from booking to revenue. That's where the $4 million reflects. As we sign more partners this year, some of that work may be completed in '21, which may increase the revenue. If not, it's going to be revenue that we capture in '22. The second thing I'd say is that in addition to the upfront payments that we do report on every quarter, either as orders or revenue, we are stacking up milestones and royalties, which we believe will provide the majority of the economic value. Unfortunately, we're not in control of when that happens. Some partners may be motivated to grow very fast, but may slow things down as programs inside the company change. There may even be some assets where the partner decides to completely abandon it for business reasons and nothing to do with our antibodies. The more partnerships we sign with more milestones and royalties means that the sooner we get one of the Twist antibodies into the clinic, and the sooner we stop collecting those milestone revenues. However, we're not going to guide on if and when that happens, so when that happens, that will be upside.
Doug Schenkel, Analyst
No. That's helpful because you're probably saying things in a much less eloquent way, but probably saying the same thing in a different way. That the $4 million is essentially all but locked in based on what you have contracted and booked already. It's just predicated on your assumption of when certain work is going to be done, and to the extent that any of that's accelerated or there were surprised milestones or you added additional partners that would be upside to your target. If I'm understanding correctly.
Emily Leproust, CEO
Yes.
Doug Schenkel, Analyst
Okay. And then on data storage, I just want to clarify a couple of things, and this may reveal a little bit of my ignorance on this topic. In your prepared remarks, you indicated that you achieved significant milestones on the DNA storage roadmap to miniaturize the silicon platform technology down to 150-nanometer pitch or less. You also indicated that you can consistently synthesize DNA using 5-micron devices, a 10-micron pitch and that you fabricated the new R&D stage silicon chip with 300-nanometer devices on a 1-micron pitch chip. I don't believe I've heard you talk about pitch before, nor do I recall you delineating between different device types as recently as the Analyst Day when you talked about this, you really focused on reducing feature sizes. So I guess the question is, I'm just wondering what the significance of what you described in your prepared remarks is and what this means in terms of timelines to actual product and revenue?
Emily Leproust, CEO
Yes. Thank you for the question. I'm happy to clarify. You're correct that we have been talking about feature size. The current platform we use today has a feature size of 15 microns. That means that the dimension on the silicon chip where we code DNA is spaced at 50 microns. To lower the cost of writing DNA, we have to make that feature size smaller. We said that we go to 1-micron feature size and then 10 micron. Additionally, you need to know how far away the next feature is, because if we reduce the feature size from 50 to 1 micron but the next feature is still 70 micron away, we're actually not lowering cost. You need both. You need to reduce the feature size and reduce the pitch so that on the sensor face of silicon, you get more DNA sequences. That was always our intent. We are not changing anything. It was always the roadmap. We're just providing a little bit more information to get more credibility about the benefits of our achievements. We are both shrinking the size of the device and packing them closer together because you need both those factors to lower costs. Basically, there's no change on our side, but we are providing a bit more information to the Street.
Doug Schenkel, Analyst
Okay. And then maybe just a couple more financially focused questions. You're essentially guiding to, if I'm doing the quick math right, a 40% increase in R&D investment in 2021. I know Jim, in his prepared remarks, broke down the priority areas for investment. I'm just wondering how we should measure success for this investment and over what time period? And kind of a similar question on the CapEx front. I believe that you talked about, I think it's $30 million in CapEx investment this year, including the investment in the Factory for the Future. If you could just talk about what the expected timeline and magnitude of returns that you're targeting on that investment.
James Thorburn, CFO
Yes. Thanks, Doug. We came off of quarter 4, and while the bookings were hot, they did include $9 million of orders on NGS from one customer. We continue to see our customer base expand, particularly on the NGS side. We are seeing lots of opportunities because of our product strength. As we step back, we did increase the R&D investment, going from $43 million to roughly $60 million. We're stepping up both NGS and synbio core investment. We’re also increasing the data storage investment to about $15 million in '21, which is longer term, but we are seeing the ecosystem for data storage increase. In terms of the core business, we were asked a number of times to give guidance for the year. The challenge we've had is giving guidance in the middle of the pandemic. So we believe we get prudent guidance out there. We're really looking at FY '22. We're investing in the Factory of the Future, which will come online sometime in '22, but that's also positioning us for '23 and to open up the larger market opportunity in synbio with a rapid turnaround time. We believe we can tap into new revenue streams from the platform, and we're seeing the IgG and DNA prep scale. We do need continuity in another factory outside the Bay Area. Thus, we're looking at how we position ourselves to get to $500 million.
Operator, Operator
And our next question comes from Catherine Schulte with Baird.
Catherine Schulte, Analyst
Congrats on a great finish to your fiscal year. First, maybe, Jim, to your last comment around guiding in the middle of the pandemic. I guess, what are your assumptions in terms of COVID duration and severity? I'm just curious to get a sense for how you're thinking about that in terms of the impact on your core customers. And then how long you're assuming the COVID-related product contributions will continue?
James Thorburn, CFO
So a couple of comments. If we had a crystal ball, I think FY '21 is going to be dynamic. Everybody else has a crystal ball for what's happening with COVID. All we know is during the last 6 months, we've adapted as a company. We continue to adapt in terms of the environment. As we go forward next year, our goal is to continue to build our customer base and launch new products. We're really looking through '21. Who knows when all the vaccines are going to be distributed? We think '22 and '23 are going to be strong years for us. We are positioning for those years. It was interesting that our decision-making back in February and March when COVID hit had lots of questions regarding what should we do? Should we cut back on employee salaries? Should we really be conservative? What we did was become more aggressive. We stepped up our investment. We gave our employees shelter-in-place compensation during March, April, May, and June. I think that's worked to our advantage for this coming year.
Catherine Schulte, Analyst
All right. Great. And then Emily, you mentioned the new Factory of the Future will allow you to address different areas of synbio that you can't today. Can you just elaborate on those opportunities and what the top priorities will be for that factory?
Emily Leproust, CEO
Yes, thank you for the question. The synbio market is not one size fits all. We already built a platform that is very flexible, and we can make very custom DNA. People can get their DNA in different vectors, in different tubes. They can be tried, they can have it in buffer. We can normalize. So there are many options. For any customer that is very, very high throughput, that means 100 genes or more. Our scale wins here and we do well in that segment. There is a segment where we can't participate, and it is the ultra-fast DNA synthesis segment. Right now, we sell DNA in 11 to 15 days that are on time. Anything below 10 days that are on time, we cannot sell, and we see that this market is poised for growth, especially since speed is important for partners like biopharma. An investment to speed could be transformative for us in synbio.
Catherine Schulte, Analyst
Okay. Got it. And then in terms of advancing your internal pipeline of antibodies, what would you view as a successful outcome in terms of the number of candidates you're able to out-license in fiscal '21?
Emily Leproust, CEO
Yes. Looking ahead, what we want to do is, from the targets we are pursuing, develop and optimize antibodies as quickly as possible. We found we need to do a bit of preclinical development to convince partners to look deeper at the antibody, which is something CROs can do well. We find partners, like in the case of our COVID antibodies, to generate functional data in preclinical animal models. Success for us would be to license antibodies at that stage, which should yield better economics than when we sign a partnership with an upfront payment because, in this case, we are taking a bit more risk. We have chosen the first 7 key targets, which are hot targets. We expect substantial ROI on our investment and the credibility it brings.
Operator, Operator
Our next question comes from Vijay Kumar with Evercore ISI.
Vijay Kumar, Analyst
I have three questions. First, Jim, regarding the guidance, at a high level, you grew 65% during the pandemic year. Even without the one-time revenue from Q4, your revenue growth was over 50%. The guidance indicates that you're expecting low 30s for top line growth in 2021. Is this a result of a larger revenue base, or can you provide some context on why revenue growth might slow down?
James Thorburn, CFO
Vijay, thanks for the question. Stepping back, if you look at FY '20, we did have $9 million from one customer that came in at the end of FY '20. Initially, we had forecasted that would be $3 million in FY '20 and $6 million in '21. If you take that $6 million out of our FY '20, you bring it down to $84 million. If you put that on top of what we originally forecasted, you're in the mid-120s. The NGS business is lumpy. The $9 million is a significant win for the company. We're thrilled to book and ship it in one quarter. We see opportunities ahead of us. It's very difficult to project the timing of those opportunities. That’s why we are projecting the NGS numbers of about $54 million or $50 million in FY '21.
Vijay Kumar, Analyst
Understood. And when you think about the revenue base ramping up, when do you think gross margins could normalize into the 60% sort of target that you guys have?
James Thorburn, CFO
We hit 46%. We've proven our business model. When we set our financial guidance up for the year, we were talking about 32% gross margin for the year; we hit that gross margin for the year, albeit with additional costs associated with shelter-in-place compensation. As we go forward, we're still seeing a good 60% gross margin range. It may depend on mix; it depends on capacity utilization. We've proven we can get close to 50% gross margin. As we continue to scale the new factory at $500 million, we're positioning ourselves for strong gross margins and upside revenue, and we should be able to deliver that 60% gross margin range.
Vijay Kumar, Analyst
Understood. And one last one, Emily, maybe on the 7 antibody targets or disease areas you're going after. I think I heard you mention your plan or expectation is to out-license them over the next 18 months. If you managed to out-license all 7 of them, what could the revenue contribution be here in terms of upfront payments?
Emily Leproust, CEO
Thank you. We don't need to license out all 7 to be successful. Some of those are to be considered within the 18-month period. Our study was focused on hot targets today. We all remember the craze around PDL1 inhibitors. It's too late to have a PDL1 inhibitor, but there was a point when PDL1s were hot. We started by identifying the current hot targets. The ability to license some of them could yield considerable contribution; however, it will be case-by-case based on upfront payments and the majority of the upside potentially in milestones and royalties. Timing and size are somewhat uncertain, so it's outside of guidance, but our analysis indicates it could be significant.
Operator, Operator
Our next question comes from Puneet Souda with SVB Leerink.
Puneet Souda, Analyst
Yes. Emily and Jim, so first question, just wanted to clarify on the NGS order. Is there any reason you're not expecting the SNP customer that moved to NGS to continue with Twist next year? I appreciate this is significant lumpiness in the quarter, but I'm trying to understand, given the seasonal nature of it, and I assume this is a DTC and not a tissue or a liquid customer, that they should come in next year, but correct me if I'm wrong on that.
James Thorburn, CFO
Good question, Puneet. We can't really share the specifics of the engagement. All we can share is that we've been working with this customer for 3 years. We see large new emerging opportunities in this space, as we've talked about, the migration from SNP array to NGS. This validates that migration is happening, and we are seeing more opportunities. We don't want to give away our competitive situation, as people are watching us. Our view is that the customer is extremely happy with the product, and we're looking for further engagement opportunities. Timing is uncertain; we originally anticipated it as$3 million delivered in Q4 and $6 million in 21. It all came at once. They may come back at the end of next year and do the same thing, but that's too far out to predict.
Puneet Souda, Analyst
Okay, please continue. Do you have anything to add?
James Thorburn, CFO
Yes. I think the other point is that when we came out with guidance for this year, our guidance was fixed at $40 million. The transition and scaling of our large accounts is happening. Timing is a little unclear, which is why we're projecting the NGS numbers of roughly around $54 million, $50 million, or $58 million in this coming year.
Puneet Souda, Analyst
Okay. That's helpful. And my second question is on liquid biopsy. Wondering if you could provide any metrics or give us a sense of the traction you are seeing there overall, obviously, number of trials are ramping up and some of them in screening as well and across MRD and other segments of the market. I appreciate the agreement that you have with GRAIL, but wondering if you can provide something on that? And what's built into the expectations for FY '20 within NGS in that segment?
Emily Leproust, CEO
Thank you, Puneet. We are deeply engaged in the liquid biopsy market, not only in terms of the benefit of the platform we bring, it's particularly effective in liquid biopsy. As you know, in liquid biopsy, you have sequencers that are deep. The uniformity we offer benefits the sequencing cost as deeper sequencing is more crucial. Therefore, at 50,000x coverage, we become more competitive than for cancer analysis at 500x coverage and even more than for rare disease analysis at 30 or 50x coverage. The product itself is highly adapted to liquid biopsy. We can't describe what our customers do unless they disclose it themselves. We are fortunate that in the corporate mechanics of GRAIL, as they were preparing an IPO, the S1 got released, showcasing the power of the platform; we are dependent on our customers to disclose the platforms they use. While sales are going well, we can only guide to what we see. Anticipation is that when some of those clinical trials or validations are completed, and products are commercialized, volumes could be increased. That's why we're confident in the ramp, but we aren't in control of the timing. Thus we are prudent in guidance. But we believe we have a very differentiated platform particularly applicable for liquid biopsies.
Puneet Souda, Analyst
Okay. That's fair. I appreciate it. And my last question is on biopharma. This is a bit longer-term question. When you look at long-term here for the revenue you're getting currently in the upfront deals and early milestones, it appears to me that given the trial durations of 5 to 10 years for a clinical trial to actually read out after getting a lead candidate into the trial, it seems that the outcomes here are much longer term. Given that, when is the earliest we might see a Twist Biopharma lead candidate getting into a clinical trial? Do you think that can happen in 2021? Or do you think that's going to take some even longer time?
Emily Leproust, CEO
Thank you. We are very interested in getting our first antibody IND-ready from our partners. This is the first gate, and we are very motivated for 2 reasons: to collect cash and seeing an optimized Twist-developed antibody injected into a human. However, timing is outside of our hands. Once you have an antibody, you can get it in the clinic within 2 years. If you go back to the timing of our announcement, it could be within 2 years of that, but we are not in full control. We quickly deliver the antibody, but afterward, the partner takes over the reins. We focus on signing as many partners as possible to increase the speed at which one of them can go into the clinic.
Operator, Operator
And I am currently showing no further questions at this time. I would like to turn the call back over to Emily Leproust for closing remarks.
Emily Leproust, CEO
Thank you, Jeanette. And thank you all for joining us today. We remain inspired by science, and at Twist, we have an amazing team that continuously uses grit to move the company forward, to make an impact for our customers and the world. So please take good care of yourself, stay safe, socially distanced, and wear a mask. Thank you.
Operator, Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.