8-K: Twist Bioscience Spins Out DNA Data Storage Unit, Reports Strong Q2 Results

Twist Bioscience spun out its DNA data storage division into Atlas Data Storage, securing $155 million in funding, while also reporting a 23% increase in Q2 revenue and raising full-year guidance.

Summary

• Twist Bioscience has spun out its DNA data storage application as an independent company named Atlas Data Storage.
• Atlas Data Storage secured approximately $155 million in investments from various firms.
• Twist received $2.5 million in cash at closing, shares representing 24% of Atlas's fully diluted capital stock, a $2 million secured promissory note, up to $75 million in milestone payments, and royalties on future sales.
• Twist reported a 23% increase in revenue for the second quarter of fiscal year 2025, reaching $92.8 million.
• Gross margin improved to 49.6% in Q2 2025, compared to 41.0% in Q2 2024.
• The company expects full-year revenue to be in the range of $372 million to $379 million.
• Twist anticipates achieving adjusted EBITDA breakeven by the end of fiscal year 2026.
• The company shipped products to approximately 2,431 customers and approximately 227,000 genes during the second quarter of fiscal 2025.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong revenue growth, improved gross margins, and a strategic spin-out that unlocks value. The company is on track to achieve profitability sooner than expected, and the DNA data storage division has attracted significant investment.

Positives

• The spin-out of the DNA data storage division allows Twist to focus on its core life sciences business.
• The $155 million investment in Atlas Data Storage validates the potential of DNA data storage technology.
• Twist retains a minority ownership stake in Atlas and will benefit from future milestone payments and royalties.
• Revenue growth is strong across all segments: SynBio, NGS, and Biopharma.
• Gross margin improvement indicates increased efficiency and profitability.
• The company is accelerating its timeline to achieve adjusted EBITDA breakeven.

Negatives

• Net loss attributable to common stockholders for the second quarter of fiscal 2025 was $39.3 million.
• Selling, general and administrative expenses increased to $63.7 million for the second quarter of fiscal 2025.

Risks

• The ability of Atlas to successfully develop and commercialize DNA data storage technology is uncertain.
• Market acceptance of DNA data storage products and services is not guaranteed.
• Competition from other data storage providers could impact Atlas's success.
• The company's forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially.

Future Outlook

Twist expects full-year 2025 revenue to be in the range of $372 million to $379 million and anticipates achieving adjusted EBITDA breakeven by the end of fiscal 2026.

Management Comments

• Emily M. Leproust, Ph.D., CEO and co-founder of Twist Bioscience, stated that the spin-out of Atlas Data Storage will allow Twist to accelerate its journey toward profitability.
• Dr. Leproust noted the company's ninth consecutive quarter of sequential growth and record performance across revenue, gross margin, and adjusted EBITDA.
• Varun Mehta, CEO of Atlas Data Storage, believes that operating as an independent company will allow Atlas to focus solely on bringing DNA data storage from technology to commercialization.

Industry Context

The spin-out of the DNA data storage division reflects a growing interest in DNA as a viable long-term data storage solution, with potential advantages in terms of density and durability compared to traditional storage methods. The involvement of prominent investors like ARCH Venture Partners and Bezos Expeditions underscores the perceived potential of this technology.

Comparison to Industry Standards

• It's difficult to directly compare Twist's DNA data storage spin-out to industry standards as it's a relatively nascent field.
• However, companies like Microsoft and Illumina are also exploring DNA data storage, indicating a broader industry interest.
• The $155 million seed funding for Atlas Data Storage is a significant investment, suggesting strong confidence from investors compared to other early-stage ventures in the space.
• Twist's overall revenue growth and gross margin improvements are positive indicators compared to other synthetic biology companies, such as Ginkgo Bioworks and Amyris, though their business models differ.

Management Changes

Related Party Transactions

• The Contribution Agreement, License Agreement, and MES Software License Agreement between Twist Bioscience and Atlas Data Storage constitute related party transactions due to Twist's minority ownership in Atlas and the involvement of Twist's CEO on Atlas's board.

Stakeholder Impact

• Shareholders will benefit from the increased focus and potential value creation from both Twist and Atlas.
• Employees of the DNA data storage division will transition to Atlas Data Storage.
• Customers of Twist will continue to receive synthetic DNA products and services.
• Atlas Data Storage will focus on serving customers in the data storage market.

Next Steps

• Twist will file the Contribution Agreement, License Agreement, and MES Software License Agreement as exhibits to its Quarterly Report on Form 10-Q for the quarter ending June 30, 2025.
• Atlas Data Storage will focus on developing and commercializing DNA data storage technology.
• Twist will continue to focus on its core life sciences business and drive towards adjusted EBITDA breakeven.

Key Dates

Keywords

Twist Bioscience, DNA data storage, Atlas Data Storage, Spin-out, Financial results, Revenue, Gross margin, EBITDA, SynBio, NGS, Biopharma