Ginkgo Bioworks Holdings, Inc. (DNA) Q1 2021 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Zymergen First Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Niraj Javeri. Please go ahead.

Thank you. Earlier today, Zymergen released preliminary financial results for the quarter ended March 31st, 2021. If you haven't received this news release, for if you'd like to be added the Company's distribution list, please send an email to investors@zymergen.com. Joining me today from Zymergen are Josh Hoffman, Co-Founder and Chief Executive Officer and Ena Singh Chief Financial Officer. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of the Federal Securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled forward-looking statements in the press release Zymergen issued today. For a more complete list and description, please see the risk factors section of the Company's IPO perspectives and in its other filings with the Securities and Exchange Commission, including the Form 10-Q for this quarter. Except as required by law; Zymergen dispenses any intention or obligation to update or revise any financial or product pipeline projections or other forward-looking statements, whether they should display information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of for live broadcast for May 24th, 2021. With that, I would like to turn the call over to Josh.

Thanks, Niraj, and I thank all of you for joining us this afternoon. I'm very pleased to welcome you to our first earnings call as a public company, to review our results for the first quarter of 2021. We completed our initial public offering in April, raising approximately $530 million in net proceeds. And I'd like to start out our call today by thanking our incredible team at Zymergen . This is an exciting milestone for our Company and it's truly a testament to our team’s collective dedication and passion. Zach, Jed and I founded this Company, with the vision to partner with nature to produce better products. And our team is making that vision a reality. On today's call, I'll start with a brief overview of our Company, for those who are new to our story. Next, I'll provide an overview of our progress, since the IPO, then I'll turn the call over to Ena for more detailed look at our financials. At Zymergen, we are biofacturers. We partner with nature, designing, manufacturing and most importantly selling products in a better way. Our biofacturing platform enabled this by combining biology, chemistry and technology in a seamless way to bring these products into people's lives. Our goal is to do this in approximately half the time and at a 10th of the cost than the traditional manufacturing. There's a simple business model, we design, develop, manufacture and sell products that solve customer challenges with superior performance. To do this, our strategy is to identify customer market needs, design and develop products to meet those needs, optimize microbes to make those products at scale and commercialize those products. We will generate revenue primarily by selling these products across multiple industries. Speed to market is critical for us and our growth will come both from the volume and the frequency of our product launches. Traditionally, materials are made from a half dozen molecular building blocks, mostly derived from petrochemicals. The companies that make petrochemical derived materials are huge but they're also old, slow and lack innovation. The way they make materials hasn't changed in decades. Biology offers a better way. At Zymergen, we replaced a chemical plant with a microbe, microscopic-engineered cell, because biomolecules are the product of billions of years of evolution and engineered cell can produce a vast array of biomolecules that do things petrochemicals can’t. Biomolecules can make adhesives as strong as a muscles grip or an optical film that is clear and thin as a Dragonfly's wing. And because the biochemistry takes place inside the cell, biofacturing happens safely in fermentation vats. Biology is Earth's greatest innovator. We built an engine that can make breakthrough products based on nature's own inventions. We believe the opportunity our biofacturing platform can addresses is massive, and represents a total market opportunity of approximately $1.2 trillion across 20 industries all of which are ripe for disruption. We estimate that electronics, consumer care and agriculture, our first markets or core verticals, represent a combined market opportunity for us of around $150 billion. Beyond these initial core verticals, we are pursuing opportunities where the market needs new materials to solve hard problems. We choose markets where biology based products have a functional advantage, can create substantial value for our customers and where we believe our novel products can be rapidly adopted by the market. Our strategy is to pursue continuous product launches, with breakthrough products that stack on top of each other over time. We currently have a pipeline of 11 products in our core verticals, including four in electronics, four in consumer care and three in agriculture. At Zymergen, biofracturing is not just a long-term goal. We're doing it today. There are five steps on the Zymergen product journey. We identify a market or customer need. We design a product to meet that need. We create the microbe or microbes that will produce the building blocks of that product. We scale production of the microbe. And finally, we commercialize the product. Doing all this requires a wide range of technological, operational and commercial capabilities, from product experts across our core and target verticals to the scientists and technologists we have, the manufacturing expertise to produce these products, to the sales and marketing functions we've built out to bring our products to market, we sell them. We have the ability to take each product in our pipeline from the first step to the last. Crucially we've proven we can develop and scale products. We identify and create biomolecules that are critical ingredients of new products. Our database has over 75,000 biomolecules. We have developed microbial strain to produce a large number of them. We run over 25 programs with partners, including some of the largest companies in the world. Based on our work today, we believe that for approximately $50 million, we can bring a product to market in about five years. We have reliably discovered genomic edits that improves the performance of microbial production, even though many of those edits are in part of the genome and the humans barely understand. We scaled up fermentation from lab scale to hundreds of liters, to tens of hundreds of thousands liters. We can and have produced biomolecules at industrial scale. We've proven our platform works. Our partners have sold over $1.3 billion of products using microbes that we've developed and engineered. Moving to our product pipeline, our first core vertical is electronics. We're initially focused on optical films with a range of usages. In 2019, this market opportunity was estimated to be around $25 billion#. Hyaline, our first product is a transparent film, used in devices across the display stack for a range of applications with adjacent usages as well, such as in flexible printed electronics. We're very excited about Hyaline and so far, customer market feedback during the product qualification phase has been positive. We're currently in the 6 to 18 month qualification process with multiple customers, including sampling and discussions on commercial terms. As customers are moving through the qualification process, we expect to have product sales later in 2021. In addition, we're on track to convert to a fermentation based molecule in 2022. Next year, we're targeting launch of a second film product, which has a different chemistry and a range of different usages. 2023 we plan to introduce a third product in this vertical, an optical film for foldable electronic devices. As with our other film products, this product will have usages across multiple applications areas such as insulation for 5G antennas and transparent heaters and more. Beyond films, we're currently developing a bio-based adhesive product in our electronics vertical, which will have distinctive features for components assembly in smartphones and surface mounting of vehicle electronics. In all we expect our market opportunity in electronics is around $59 billion. In our consumer care vertical, our first product will be ZYM0201, a naturally derived insect repellent. Every year, an estimated one-third of the U.S. population use repellents containing the chemical DEET, to protect them from insect borne illnesses. DEET is a nerve neuro toxin and consumers face the unappealing choice of applying it or being subject to various insect borne diseases. We plan to [Indiscernible] insect repellent in 2023 and are in the process of scaling production, branding and developing a distribution plan. Beyond ZYM0201, we have three additional consumer care products in development, including a naturally derived UV protectant and a Silicone free film former. Film formers are the chemicals used in personal products, shampoos, lotions, and the like; they give these products the texture consumers have come to expect. However, the current Silicone basements have a number of problematic end-of-life properties. Unlike ZYM0201, our consumer care products address the increasingly stringent regulatory backdrop, along with meeting customer demand for better products made without harmful ingredients. Agriculture is our third core vertical and is a market that needs economic, stainable solutions to address a diverse array of problems that are increasing in urgency, because of climate change and population growth. Biofacturing can provide natural products with gene-level precision to address these challenges, achieving levels of effectiveness and specificity, not possible with traditional chemistry and being compliant with evolving regulations that aim to phase out legacy products that harm the environment. We're developing our first agricultural product ZYM0301 with a partner. It's an alternative to synthetic nitrogen fertilizer, helping to improve crop nutrient uptake and thereby increasing farmer yields. Beyond this ZYM0302 targets specific crop pests and ZYM0303 is a crop specific herbicide. Both would increase grower profits through their efficacy and application requirements compared to on-market products. Well we're excited about the products currently in our pipeline, and this is just the start. Consumers are demanding products with better performance, sustainability and safety. By overcoming the challenges of discovering and scaling products to market with biology, a biofacturing platform can seize this massive market opportunity. We plan to expand beyond our core verticals and enter new markets through partnerships with industry leaders. We currently have several of these efforts underway and look forward to sharing announcements regarding progress in the coming quarters. We continue to make progress since we completed our IPO four weeks ago, at the end of April. Key drivers of our success over the long-term will be both a volume and frequency of product launches as well as our ability to enter new markets. And the foundation of all of this will be contingent on continuing to grow our incredibly talented team. And I'm excited to welcome Aindrea Campbell as our new Chief Manufacturing Officer. Aindrea comes to us with over two decades of experience leading multi-billion dollar manufacturing teams, at world-class brands, first at Ford and most recently as the Senior Director of iPad Operations at Apple. Aindrea's experience across manufacturing, procurement and supply chain will be instrumental as we continue to scale our production capabilities for commercial markets. We we’ve a mission driven culture at Zymergen that inspires our commitment to each other, to our customers to achieve things that have never been done before. As we continue to invest heavily across our platform, we are committed to retaining these core values that we believe are critical to our long-term success. And with that I will now turn the call over to Ena for more detail on our financials. Ena?

Thanks Josh. Total revenue for the first quarter of 2021 was $3.7 million, all relating to R&D service agreements and collaboration revenue. This represents a 26% increase over the same quarter in 2020 and was primarily driven by the impact of new and acquired contracts, offset by a decrease in revenue from contracts ending in 2020. Total operating expenses for the first quarter of 2021 were $87.1 million, a 33% increase from $65.6 million in the first quarter of 2020. The increase was primarily attributable to an increase in R&D activities in the continued development of the highly in-production process, as well as the cost associated with becoming a Public Company. I would like to highlight that we plan to continue to increase our investments in R&D, Sales and Marketing as well as G&A as we scale the Company. We also expect our ongoing operating expenses to increase as we continue to incur Public Company costs that we did not previously have prior to our IPO in April. R&D expenses for the first quarter of 2021 were $39.8 million, compared to $21.8 million in the first quarter of 2020. This is primarily due to an increase in resources, focused on our product development along with further investments in new products for our pipeline, including the continued development of Hyaline We expect R&D expenses will continue to increase in absolute dollars as we invest in growing our product pipeline and further improving our biofacturing platform. Sales and marketing expenses for the first quarter of 2021 was $6.9 million compared to $5.5 million in the first quarter of 2020. The increase was primarily due to an increase in customer and brand marketing activities. We expect sales and marketing expenses will continue to increase in absolute dollars as we invest in activities to commercialize products. General and administrative expenses for the first quarter of 2021 were $19.3 million compared to $13.7 million in the first quarter of 2020. This increase was primarily driven by fees associated with becoming a Public Company and increased headcount and an increase in facilities costs as we continue to expand our footprint. We expect general and administrative expenses will continue to increase in absolute dollars as we support our operations as a Public Company and additional facilities costs as we expand our office and lab space. Net loss in the first quarter of 2021 was $84.6 million compared to $65.3 million in the first quarter of 2020. we ended the first quarter of 2021 with approximately $121 million in cash and cash equivalents. Subsequent to quarter end, we completed our IPO in April, 2021, raising approximately $575 million of gross proceeds, resulting in $530 million of net proceeds. We also wanted to note that in our second quarter, we closed on the acquisition of Lodo therapeutics, a New York based Company with technology that is complementary to our existing metagenomic platform. This acquisition increases on molecular and genomics libraries and accelerates our natural product discovery capabilities across our business. We believe this is going to be an exciting year for Zymergen and we are really just getting started. As Josh mentioned, our business model is to sell products and our strategy is to pursue continuous product launches. Key drivers of our success over the long term will be both, the volume and frequency of product launches as well as our ability to enter new markets. We currently have a pipeline of 11 products in our core verticals, including four in electronics, four in consumer care and three in agriculture. We expect to launch a second commercial product in 2022 and two additional products in 2023. Over the long-term, we will target at least three new product launches every year, across markets. Our plan focuses on products that we estimate will generate average annual revenue of $100 million to $300 million and to one such scale we'll generate combined long-term gross margins of approximately 50% and combined long-term EBITDA margins of approximately 20%. In 2021, we will continue to invest across all areas of our business, including production capacity and our commercial operations as we continue with the commercial rollout of Hyaline. With biofacturing, we are committed to transforming what is possible, by partnering with nature to make better products in a better way. And with that, I would like to turn the call back over to Josh, fo closing comments. Josh?

Thank you Ena. A new biological century, demands we replace the way products and materials are made. Through biofacturing, Zymergen is leading way to this inevitable future, nature's molecular catalog at the fingertips. We're designing high-performance solutions that are beyond the reach of conventional manufacturing. We believe we go from molecule-to-market in half the time and one 10th the cost of traditional methods and our platform is getting smarter and faster all the time. We found Zymergen to create an economically vibrant, environmentally sustainable future through biology. The demand for material solutions to our big problems -- big problems has never been greater. I'm so excited about what's ahead for Zymergen and I look forward to updating you on our progress. I think we're ready to take questions

[Operator Instructions] Our first question comes from the line of Doug Schenkel from Cowen. Your line is now open

Good afternoon and thank you for taking my questions. I want to ask about really two topics first non-fermented Hyaline and then second progress towards fermented Hyaline. Starting on the first topic as you continue to advance through the qualification process with customers; how is your preparation for scaling production of non-fermented Hyaline progressing and relatedly we are looking for product revenue as a sign of progress with your qualification initiatives. Should we expect product revenue in the second quarter? And then on the second topic fermented Hyaline, first, are you on track for a 2022 product launch? Second, what are the key milestones you were targeting or we should watch for over the course of this year. And then third, is there any concern among existing and potential partners about your ability to maintain the specs of Hyaline as you move from a non-fermented to a fermented product? Thank you.

Okay, a lot of questions there Doug. Let me try and get through them. First, we are on track. We continue to manufacture non-fermentation based highly in our supply chain in Japan and are on track to qualify our supply chain – U.S. supply chain in 2021, giving us sufficient capacity for all the film we expect to - Number one. Number two on fermentation based supply; we continue to be on track for 2022 drop in, as we indicated. And we have continued to demonstrate equivalent performance and I've heard no customer anxiety or concern about this time. I think, did I get you on all the operations?

I want to just…

Yeah, I think he got everything other than…

It's probably Ena's question. Ena, Do you want us to have product revenue in the Q2 model or would you prefer that's not the second half?

I was going to get. I'll let you take that. Ena go.

So Doug we're still expecting product revenue later in 2021. We're still going through our 6 to 18 months process application with customers and not expecting any product revenue until later in 2021.

Okay, alright. Thank you very much.

Thank you. Our next question comes from the line of Tycho Peterson from JP Morgan. Your line is now open.

Guys a quick follow ups on Hyaline, in the past, I think you have given us an update on the number of customers evaluating. I think you talked about two customers in the approval stage and maybe nine or so in late stage of evaluation. So can you just maybe talk a little bit about where your customers are in evaluation process, any impact on the semiconductor shortage in terms of kind of timelines to order? And then, in most cases are they just evaluating Hyaline or we can talk to some customers in diligence process that we're evaluating multiple films from you guys, so how many of more actually evaluating more than one film at this point?

Yeah, so what I would say is that as Ena indicated, we continue to - customers continue to work with us on the 6-month to 18-month customer qualification process. And that process is progressing in-line with our expectations. We continue to build our pipeline of customers. And so while we're not talking about specific numbers, we continue to strengthen the pipeline, number one. Number two, we do see that because of the breadth of different usage and it's important to understand in our films portfolio, these don't cannibalize each other. You certainly see excitement from the customers about multiple films in our portfolio. And so we are seeing folks who are trialing especially ZYM0107 alongside Hyaline given the expected launch next year. And then lastly, we are not today seeing delays because of the semiconductor shortage, but we are sufficiently upstream that – that we wouldn't, but right now it's not causing us to have concern.

And then a follow-up to Doug's question on the fermentation because that came up a lot during the IPO discussions. How did you get customers comfortable with your ability to transition over to fermentation molecule and ultimately scale that up?

Yes, it's a great question. Look, as we've talked about, we started our company with R&D service contracts. And as part of this R&D service contracts and I think we talked about, now we've done 25 of them. We did a number of contracts on late-stage development and scale up and have a very successful record of scaling straight. So microbes that we've engineered have gone into production and have sold over 1.5 partners over $1.3 billion of products. So from a technical -- as a technical risk, our customers were in no way concern that we are going to be able to - unable to deliver against that. And the customers love the fact, right, that we have a dual source of raw material for their products, right. So for them, they are very, very comfortable about it and they had lots of confidence based on our track record that we are going to be able to do so. It's also important to understand - sorry, I'm sorry.

Okay. And then the - no go ahead, Josh.

It's also important to understand we've made the film with the fermentation based monomer, we've qualified the fermentation based process monomer into our production process; we have validated the film and this is, in a sense - there is no risk if that makes sense.

Yes, that's helpful. Maybe shifting over to Consumer, ZYM0201, I know that's not till 2023, but other things we should be paying attention to in the back half of this year or next year as you do the evaluation and development?

I don't think there's anything in the back half of this year. And I think you might ask that question again six months from now and I might have a different answer, but right now there's nothing I'd suggest you should be paying attention to.

Okay. And last one, there's been a lot of capital coming into the space, obviously some big specs, not just Ginkgo, but Benson Hill did one as well. I'm just curious, has any of this changed your view on competitive dynamics given how much capital kind of coming into the this -- in biospace right now.

We continue to pay attention to what's happening in the market, but look, we have a simple business model, right. We sell products, right, that are - that compete and win on the unique performance that's available because we're able to access a large and proprietary library of biomolecules. This is a vertically integrated market that has required us to build and operate and demonstrate capabilities from product design, scale up, and commercialization. That allows us to reliably target what we've estimated a $1.2 trillion market opportunity and that's plenty large enough for us to build an enormous business. It's obviously the case that in a market this big, there going to be other companies with other business models and I think that the market opportunity is certainly large enough to allow others to be successful as well as us. What I would say is, for us, our success is going to be the ability for us to continue to meet customer demands and there is a lot of customer demand, and be able to rapidly get products from customer dreams to customer - to shipping and receiving with the customer, right. That's what's going to determine success for us. And our ability to do that is I think we feel great about. Ena, would you add anything?

The only thing I'd highlight a little there is our success in the long term, right, and we've said this few times before, is driven by both the volume and frequency of product launches as well as our ability to continue to prosecute against that broader market opportunity as we enter new industries in the future.

Our next question comes from the line of Matt Sykes from Goldman Sachs. Your line is now open.

Just kind of along the lines of the competitive landscape, as Tycho mentioned, we meant - we talked to a lot of your customers who are in the evaluation phase for Hyaline and some of your film products. And at that time they had mentioned the clear advantages in terms of costs and also performance of your products versus the incumbents, but just given there's probably a greater awareness Zymergen in general, has there been any feedbacks from those customers as you speaking to them that some of the incumbent competitors have actually responded on price? It's probably way too early, I understand, but I'm just wondering if there's been any kind of awareness or response from those incumbent competitors?

We have not heard from customers anything of - anything similar, right. We think - and partly we think it's probably maybe too earlier - too early, excuse me. But it's also important to understand that the core value proposition that we offer to our customers and which they are evaluating on is differentiated performance, right. And our conviction that our product offers differentiated performance remains very strong, right. And so the price, because this is a non-commodity market, right, this is a feature driven market where our ability to provide performance that our customers are going to need to delight their customers, right, we - our conviction there remains very, very strong.

Got it. Thanks for that. And then just - again, I know the Consumer Care market is still in development, but as you guys ramp up the - sort of spend for that, whether it's marketing, sales and just in preparation for the commercial launch over the next couple of years, should we expect a similar cost trend for the consumer care market? Or given that it's largely consumer facing and slightly different than films, will there be you think a higher cost in terms of whether it's marketing your sales or other aspects to launching in the Consumer Care market?

Yes, Matt. So I think the - we're not providing any guidance on a product-by-product basis as yet. What I will say is, we do expect that our sales and marketing expenses will continue to increase in absolute dollar terms as we invest in activities to commercialize future products, whether there are future film products, adhesive products, products in Consumer Care. And so we would expect our sales and marketing expenses to increase going forward in order to support those.

Okay and then just one last quick one - just on - sorry guys.

The only other thing I'd add is that our long-term blended margin is the same as we have guided to before. So approximately 50% long-term combined gross margin and approximately 20% long-term combined EBITDA margin.

Perfect, thank you for that. And then just lastly on Lodo Therapeutics, can you just talk about what that quantify the increase that - in terms of adding that genomic database to your current kind of rating assets in terms of number of genomes, et cetera, or however you want to quantify it?

It's a great question. We answered it a lot. It offers us - they had a slightly different way of sequencing and collecting the sequences and so an apples-to-apples comparison is a little bit difficult. But we do think that it increases by multiples, our dataset and really radically accelerates our natural products discovery capability. I'd be happy to figure out some way within the limits of the Reg FD and Safe Harbor to give you some details there. We just closed on the deal last week, right. We'll have a lot more detail after the Q2 I suspect.

Our next question comes from the line of Derik De Bruin from Bank of America. Your line is now open.

This is [Wolfe] on for Derik. Thanks for the questions and congrats on the offering. Kind of building right off of that conversation, would you give us some color on how you're thinking about your M&A strategy going forward? Are there any particular areas you're looking to strengthen? And then just a few follow-ups.

Yes, so the M&A strategy is pretty straightforward. We are actively looking for small to mid-size transactions that would do primarily one thing, which is to bolster our platform and help us use inorganic means to increase the speed and if we get product to market or reduce the cost of getting product to market, right. And if you look at our acquisitions to date, they've all been as part of that. We are in a field where the cutting edge is changing every day. And while we're super proud of the platform and the people who built here, we certainly know that the world outside is far larger and far smarter and has access to far more stuff than we could ever dream of. So we're going to make sure we're using M&A in an appropriate targeted way to help increase the speed of our platform. We are also open to acquisitions again similar size for pipeline products where they would be - products that would fit in our pipeline, where the company that we're buying from would have trouble commercializing them because they can't take it to the next stage from us. They can't scale the product. They can't sell certain technical issues where we have confidence in our platform could. In all cases, we're looking for acquisitions that would be - where we bring huge value to the company of the assets that we acquire. Does that answer your question?

Yes, totally. And then kind of pivoting to some more model based questions, is $3.7 million in R&D services revenue a good run rate to think that for the rest of the year? Or should we be looking at it slightly differently? And then would you also mind giving a share count for 2Q and fiscal '21?

So in terms of our R&D service revenue, Derik, some - that on our revenue, just as a reminder, these are R&D service contracts that we've signed with partners that we worked with as part of building out and validating and testing our platform. In some cases, those contracts we had a few of them that ended last year and we have some that may end through the course of this year as well. Those revenues have - part of those revenues are milestone based revenues and there is also some bonus payments that may be associated with some of those contracts. And so as you think about the R&D service contracts, there are - those revenues could be lumpy. And so just thinking about a $3.7 million run rate may not necessarily be the right we're thinking about it. We may have some more lumpiness in our R&D service revenue through the course of this year. Did that answer your question on the R&D service revenue?

Yes, absolutely. And then just if I could on share count?

Yes, on share count, it's 12.9 million is our weighted average share count as of the end of the first quarter.

Great, thank you.

And then for the ongoing one, I think we - I would ask you to take a look at our IPO prospectus, the S-1, to take into account of the new shares that were issued and then the SVP and the Stock Option Plan as well, all of which is disclosed in there. Operator Our next question comes from the line of Dan Brennan from UBS. Your line is now open.

Great, thanks for taking the questions. So I wondered on the electronics market, obviously a very large TAM and we've baked in pretty material revenue ramp over the next five years. When you think about from a high level, the opportunity for your products across both foldable and more traditional handsets and notebooks, how should we think about the ability for your products to penetrate those two broad categories?

Yes, I mean - look, as you know, the electronics market is large and it's also ferociously demanding of new features. Consumers are constantly demanding that OEMs provide them new kinds of opportunities and well that's novel form factors like foldable displays or whether it's brighter or better screens, whether it's lower power consumption. And increasingly they are demanding greater environmental and sustainability concerns, whether that's putting less greenhouse gas out into the atmosphere or having different end of life properties, E-waste is a big problem. And when we look at the capability of our platform, a biofacturing to meet these needs, we're super excited, right. We think that because we offer an entirely novel pallet of molecules that allow us to create materials with never before seen performance and performance that traditional petrochemical companies simply can't provide, we're super excited about our ability to penetrate that over the 3, 5, 10-year period.

Great. Thanks, Josh. Maybe as a follow-up, I don't believe - I know you sell to the sub-component suppliers, you're not going directly to, for instance, the handset OEMs. But nonetheless, I don't believe the way we thought about our model that necessarily dictates you need success penetrating Samsung or Apple, but nonetheless, maybe just to ask you is that the correct implicit assumption and what would it take for you if you're not assuming successful penetration? What would it take for you actually to get your products into some of the leading handset providers?

Yes. I mean as much as it breaks my heart given how excited I am with our pipeline, we're not going to comment - can't comment on specific names in the pipeline. What I can say is that we have a go-to-market strategy in all our verticals and in Electronics as well that means that we're talking to multiple companies at multiple parts of the value chain, including those who might not be a direct customer of ours, but who are setting the terms of trade for our customers. And we're excited about - we're excited about the range of conversations we're having in Electronics. We're excited about the excitement that companies at multiple parts in value chain, including OEMs and Tier 1 suppliers and et cetera, have about our performance and we're excited about seeing how that's going to roll out into revenue over three-year and five-year period.

Great. Thanks, Josh. Maybe just - I know you talked about commercial scale up, which I think you guys feel very comfortable, you've ability to do that, in Doug's questions and in Tycho's questions, from a traditional to affirming based approach. But what would you say If we look at 12 months and 24 months from now? What are the biggest hurdles to that out of the gate success that Zymergen is expecting to have to be commercial scale up? Could be other factors, just wondering how you would characterize the biggest hurdles to your success?

Yes, I mean, look over - it's important measure that over a 12-month to 24-month period, right, our success is all about volume, frequency and quality of our product launches. And so if I looked out 24 months, let's call it, right, what I want to make sure we are doing is that we're launching the products we've told you and that we're starting to see the trajectory rate of adoption that we would expect, right. We want to make sure that ZYM - sorry the Hyaline - sorry, I got confused in the naming nomenclature, that Hyaline at that point is really starting to take off and get better down. They were starting to see exciting early success in our customer pipeline for ZYM0107. We're feeling great, 12 - 24 months now that the firm - sorry, ZYM0201 has had an effective and successful launch. And that we've managed - and this is very important, and that we managed to enter some new markets in a way that creates market opportunity that's at least as large as the three verticals we've disclosed today.

That's a good answer. That's basically was going to be my follow-up parameters by which we could evaluate you. Great. With that, I think I'll conclude. Thanks, Josh.

You're welcome. And I do think - I mean I think I'm going to come back to that, right. It's really important, like 24 months is going to be - that will be long enough for us to really evaluate the success of our early product launches, right, that will be able to evaluate the success of whether able to launch additional products on the schedule we've described to continue to grow our pipeline and that will be long enough to reasonably judge our ability to enter new markets. And that's really the key to success. Is the products we're launching, are they again over a 12-month, 24-month period? Are they performing where we expect? Are we able to launch new products? Are we able to call our shot and launch them in the timescale we say? Are we able to continue to build out our pipeline? Are we able to enter new markets? It's simple.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to CEO, Josh Hoffman for closing remarks.

Thank you. I wanted to thank everybody for dialing in today. Thanks for the questions. We're excited about the business we're building and we look forward to talking to you guys again in the quarter.

Thanks, everybody.

This concludes today's conference call. Thank you for participating. You may now disconnect.