Q2 2024 Twist Bioscience Corp Earnings Call

Participants

Angela Bitting; SVP, Corporate Affairs; Twist Bioscience Corporation

Emily Leproust; Chairman of the Board, Chief Executive Officer; Twist Bioscience Corp

Adam Laponis; Chief Financial Officer; Twist Bioscience Corp

Matt Sykes; Analyst; The Goldman Sachs Group, Inc.

Vijay Kumar; Analyst; Evercore Group L.L.C.

Steven Mah; Inc; Cowen Group, Inc.

Madeline Mollman; Analyst; William Blair & Company, L.L.C

Tom Peterson; Analyst; Baird

Presentation

Operator

Welcome to o Twist Bioscience's fiscal 2024 Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session to ask the question. During the session, you will need to press star one one on your telephone. You will then hear automated message. Advising your hand is raised to draw your question, please press star one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Angela Bitting, SVP of Corporate Affairs. Please go ahead.

Angela Bitting

Thank you, operator. Good afternoon, everyone. I would like to thank all of you for joining us today for Twist Biosciences conference call to review our fiscal 2024 second quarter financial results and business progress. We issued our financial results release after the market and the release is available at our website at www.equifax.com.
With me on today's call are Dr. Emily Leproust, CEO and Co-Founder of Twist, and Adam Laponis, CFO of Twist.
Emily will begin with a review of our recent progress on twist business. Adam will report on our financial and operational performance, and then we will come back to discuss our upcoming milestones and direction. Will then open the call for questions, we would ask that you limit your questions to only one and then re-queue as a courtesy to others on the call. 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 two weeks.
During today's presentation, we will make forward-looking statements within the meaning of the US 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 and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected in risks include those set forth in our press release, we issued earlier today as well as those more fully described in our filings with the SEC. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements, except as required by law.
We'll also discuss adjusted EBITDA, which is a financial measure that does not conform with generally accepted accounting principles. Information may be calculated differently than similar non-GAAP data presented by other companies when reported. A reconciliation between GAAP and non-GAAP financial measures will be included in our earnings estimate, which can be found at our Investor Relations website at www.twistbioscience.com.
With that, I will now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily Leproust.

Emily Leproust

Thank you, Angela, and good afternoon, everyone. I am thrilled to be here today to share the remarkable achievements and outstanding performance. Our company has delivered over the past quarter. Our strong results validate the hard work, dedication and innovative spirit, but define our team at Twist. We've made significant strides in executing our growth strategy, increasing our customer base and driving towards profitability for the year. Our proprietary platform for making synthetic DNA remains at the core of our product portfolio defines our competitive advantage in all markets. It enables our flywheel for growth and a strong financial position today. Over the course of the second quarter, we continued our robust growth trajectory, increasing revenue 25% year-over-year to $75.3 million. Orders for the quarter reached a record level of over $93 million. The strong quarter was driven by growth in our 50 barrels product line, including fixed switching and bolstered by consistent strength in NGL. We reported a 41% gross margin for the quarter, an increase of 10 margin points versus the same period last year. We do see puts and takes in the margin quarter to quarter, which Adam will discuss in his remarks. That said, for the next several periods, we expect the initiatives we are taking will drive us to a gross margin above 50% by the end of fiscal 2025, so that the birth of synbio revenue increased to $29.8 million with days from orders of $44.9 million. Synbio revenue grew 24% year-over-year and 11% sequentially, but doesn't seem by your included significant blanket purchase order where customers place a single blanket order for a large amount and then orders against that you over the course of the next several quarters will receive blanket POs routinely primarily in the first quarter of the calendar year as budgets reset. That said, this level of appeal exceeds prior year significantly. We believe this increase is due to our diversified product line including expertise and consistent rapid turnaround times, both of which give our customers confidence to committed for the year. As you know, in late January, we extended our existing offering from a limited launch, including about half of our financing volumes to include all Crenlo. At the time, we began a marketing campaign and outreach to potential customers buying from competitors or mixing balance sheets, so still relatively early days with extra jeans. We are pleased with the progress to date, keeping in mind that our current quarter, our fiscal third quarter will be the first full quarter. That includes all refrigerant offerings. We want to provide a bit more color around the success today, approximately 15%, -- 15% of Kroger's revenue for the second quarter came from exports. As of March 31, we had received more than 1,500 orders by the June launch in November with more than 700 accounts purchasing is produced today this includes more than 100 net new accounts specific to equities. We define net new account as a new customer organization entirely or it can be a new shipping address at an existing location. Both counts as net new account customers receive averaging in about five to seven days, significantly faster than our standard gene turnaround time for this speed up into a premium price. We've varied this premium based on capacity is not allowed to extend the Oregon facility besides kits and bill for this product line. And I say that allow for expansion into other CGM product because we make all closings on the excess online, the increase in price premium fully drops to gross margin. At the end of February, we began differentiating the premium between academic industry customers with industry groups receiving a higher premium, their current practice.
Yes. Moving to NGS, we posted another very strong quarter as revenue grew to $40.8 million, an increase of 40% year over year with $42.5 million handle out notice this quarter. Strength for NGS portfolio came from customers who have advanced their passive into clinical studies and became commercial as well as growth in the smaller enterprise customers who are earlier in their development processes. Similar clinical customers include twist in the asset, and we applaud the incredible progress it is making for patients in rare disease cancer detection, early cancer detection and monitoring of minimal residual disease. Our panels are incorporated into a number of different sometimes competitive sets. And what we see over time is that providers are advocating this the volume of commercial pest increases with patient adoption as each state that is run requires switchgear with customers who are doing very well. Leveraging the Twist chemistry advantage and others, we need additional funding to continue scaling. The benefit of our business model is that we have diversified our revenue across many and applications with no single customer accounting for more than 10% of our revenue. In addition, we continue to add small icons that have the potential to grow significantly as the volume of the application of this brand. As of June this year, our NGS product portfolio has been focused primarily on target enrichment for the analysis of DNA RNA and mitigation. As we have said before, we want to offer our customers a complete workflow solution from the sample to the sequencer. And we are confident that our latest product solidify our leading position in the liquid biopsy animal while extending our differentiation in other areas of the workflow. Importantly, we introduced differentiated products, resin science and clinical capabilities. In February, we added an incredibly powerful cell-free DNA library prep that captures many molecules that may otherwise be missed in these assets because the sensitivity of liquid biopsy research as it begins with every breath, capturing more molecule can improve the signal-to-noise ratio and the sensitivity of that. We believe our innovative DNA library prep provides an advantage here and the initial commercial performance is very encouraging during the quarter when those technologies early access point.
Second, truly differentiated library prep, the ultra high throughput, every cryptic, we believe this is the highly differentiated product we need to equip customers using microarray to NGS panels plus sequencing with applications in AgBio engine type. We believe this is a very large market opportunity, and we expect that this growth will drive NGS tripling in the medium to long term as it requires a change in workflow for the customer from micro readers to sequencing separately focused in Europe, we don't have a CE mark portfolio of precision EX products to support the evolving regulatory landscape in that geography. This is a first foray into the regulated market, and we look forward to continued evolution in markets.
Beyond Europe, we believe our extensively regulated products will inform any future product developments driven by FDA's move to regulate laboratory-developed tests or LDTs. In the U.S., biopharma revenue was [$4.7 million] in the U.S. with other increasing to $5.8 million. We'll continue to deliver on programs with our partners across the spectrum of offerings. Importantly, we expect at least one partner to initiate human studies with an antibody discovery in twist platform within the next year. But as always, we remain focused on technology development and enablement of the sale by central archive workflow for early access in Canada 2025. Progress continues, and we see this area of our business as a valuable asset with optionality at multiple points there. As we looked at margins in fiscal Q1, we reported a strong gross margin driven primarily by mix and say they can't see it really we maintained our margin in the second quarter beating our guidance by two points, with continued strength in our NGL business as well as expansion as we look over the next 18 months.
In addition to driving revenue growth, which is the primary driver of margin. We intend to continue to focus on margin improvement initiatives, including procurement and operational excellence in sourcing and process optimization. In addition, we're in the process of negotiating contracts with suppliers and in some cases with customers willing to provide booking commitments of fixed premium pricing and equity. We believe these initiatives as well as further volume leverage of our fixed costs, enable our ability to improve our margins by several points. And we see a path to gross margin north of 50% by the end of 2025 with that, I'll turn over the call to Adam to discuss our financials.

Adam Laponis

Thank you, Emily. Revenue for the second quarter increased to $75.3 million, growth of 25% year over year and approximately 5% sequentially. Orders increased substantially to $93.2 million. Strong orders driven by a significant blanket purchase orders expected to be used over the next three quarters. This includes approximately $21 million for synbio, $9 million for NGS. As Emily said, gross margin came in higher than expected at 41% for the second quarter of fiscal 2024. During the second quarter, we shipped to 2,253 customers. We ended the quarter with cash, cash equivalents and short-term investments of approximately $292 million.
Taking a deeper dive into revenue, synbio revenue increased to $29.8 million, a growth of 24% year over year with orders increasing the $44.9 million. We shipped 193,000 genes in the quarter. Synthetic genes revenue, which includes both core genes, gene fragments and IgG increased to approximately $22.4 million, a growth of approximately 24% year over year, approximately $15.6 million or 52% of our synbio revenue was from clonal genes for $2.2 million in revenue coming from express genes within the synbio Enbrel, our oil coal revenue increased to $3.9 million in DNA libraries. Revenue increased to $2.5 million year over year growth of 19% to 25%, correct. NGS revenue for the second quarter grew to approximately $40.8 million compared to $29 million in the second quarter of fiscal 2023, an increase of 40% year over year. For the quarter, revenue from our top 10 NGS customers accounting for approximately 36% of revenue and orders increased to $42.5 million, which we anticipate sets the stage for further NGS growth. We served 558 NGS customers in the quarter with 138 having adopted R-PA for biopharma. Revenue was $4.7 million with orders increasing to $5.8 million. We had 67 active programs at the end of March 2024, and we started 34 new programs during the quarter.
Looking at revenue by industry healthcare revenue rose to $40.9 million in the second quarter of 2024 compared to $33.8 million for the same period of fiscal 2023, reflecting the increased uptake of our products by pharma, biotech and diagnostic company. Industrial Chemical revenue rose to $20.3 million in the second quarter, up from $14.4 million in the same period of fiscal 2020 through strong growth year over year. Academic revenue was $13.7 million in the second quarter of 2024, up from $11.1 million in the same period, but fiscal 2023, the growth coming from both synbio and NGS customers.
Looking geographically, America's revenue increased to approximately $45.9 million in the second quarter compared to $34.9 million in the same period of fiscal '23. Growth of 32% year over year. Emea revenue rose to $22.3 million in the second quarter versus $18.8 million in the same period of fiscal 2023 growth of 19% year over year. Ipaq revenue increased to $7.2 million in the second quarter compared to $6.5 million in the same period of fiscal 2023 growth of 11% year over year. China revenue was $1.4 million, a small percent of our total revenue for the quarter. Our gross margin for the second quarter increased to 41.0%. We saw strength from express genes, revenue lifting margins, offset by a contracted synbio customer who placed and received a large order within the discount terms in Q2, our NGS offerings continue to have strong gross margin performance. However, we did see and expect to continue to see puts and takes in the gross margin based on contracted customer mix for margin fluctuates based on the individual customer orders in a given quarter.
Finally, I am encouraged by the enterprise-wide focus on gross margin improvement initiatives and also expect these initiatives will take multiple quarters to result in a material impact.
In total.
Operating expenses for the second quarter were $124.2 million compared with $121.8 million in the same period of 2023. Breaking this down, cost of revenues increased to $44.4 million in the second quarter of 2024 compared with $41.7 million in the same period of fiscal 2023, primarily due to higher product volume as well as increased depreciation and amortization expense, mostly due to the build-out of our new manufacturing facility in Wilsonville, Oregon R&D decreased to $24.1 million compared with $27.4 million in the same period of fiscal 2023, primarily due to the reduction in headcount as well as lab support. SG&A was $55.6 million in the second quarter compared with $54 million. The increase was driven largely by stock-based compensation and bonus accrual. Catch-up of the business is performing above forecast at this time operating expenses included approximately $7 million for data stores. Stock-based compensation for the quarter was approximately $13.8 million. Depreciation and amortization were $8.3 million for the quarter. Net loss attributable to common stockholders was $45.5 million or $0.79 per share for the second quarter of 2024 compared to a net loss of $59.2 million or $1.4 per share for the same period of fiscal 2023. Cash flow from operating activities continues to improve and we are driving the breakeven for the six months ended March 31, 2024, net cash used in operating activities was $42.4 million compared to $98.4 million for the equivalent six-month period in 2023.
Moving forward, we will also provide adjusted EBITDA, a non-GAAP measure reconciliation between the GAAP and non-GAAP financial measures will be included in our earnings deck, which can be found on our Investor Relations website.
Looking back in time for the second quarter of fiscal 2023, adjusted EBITDA loss was approximately $46 million in the second quarter fiscal 2024, adjusted EBITDA loss was approximately $27 million for the fourth quarter of fiscal 2024. We see a path to an adjusted EBITDA loss of less and $20 million.
Turning to guidance for fiscal 2024, we now expect total revenue to increase by $12 million across the range to approximately $300 million to $304 million, anticipated growth of 22% to 24% year over year increased synbio revenue of $118 million to $120 million, an increase across the range with a year-over-year growth anticipated to be 20% to 22% for NGS revenue of $162 million to $164 million, an increase of $12 million across the range and anticipated growth of 31% to 33% year over year. Biopharma revenue of approximately $20 million, a decrease of $4 million from prior guidance and 13% year over year. We are increasing our expected gross margin of approximately 41.5% to 42% for the year. We are reducing our expected loss from operations before taxes to approximately $183 million to $188 million a decrease compared with prior guidance of $189 million to $194 million for CapEx is still projected to be approximately $15 million for fiscal 2024, unchanged from prior guide. We project ending cash of more than $245 million at the end of fiscal 2024. For the third quarter of fiscal 2024 we expect overall revenue of approximately $77 million synbio revenue increasing to approximately $31 million with the full launch of express genes portfolio NGS revenue of approximately $41 million on track with our increased annual guidance, biopharma revenue of approximately $5 million. Gross margin for the third quarter at 41% to 42% for the fourth quarter. We expect overall revenue in the range of $77 million to $80 million. Gross margin for the fourth quarter of 43% to 44%.
In summary, I'm encouraged by the progress and an enterprise-wide focus on financial discipline that I've seen during my first quarter with 12, we will continue to maintain financial discipline throughout the organization and make progress on a path to profitability.
With that, I'll turn the call back to Emily.

Emily Leproust

Thank you, Adam. In closing, we are very confident in the continued impact and growth opportunities generated from our proprietary DNA synthesis platform. Our growing customer base by increasing revenue profile are defining Pro portfolio and of course, exceptional entry progressively move the needle for customers across multiple. I also had the privilege of talking to our customers listening to all the drug, groundbreaking scientific advancements in wide ranging fields from healthcare to chemicals to academia type bio and more and their product twist plays an important role in facilitating between and we are only getting started. We are enabling our customers to produce proteins that target and destroy cancer cells to create new diagnostic tools that detect it early and accurately to make compounds that are more sustainable and it's less expensive to name only a few obligations. We manufactured in two locations, one in California and one in Oregon with a global commercial starting to deliver superior service to autofocus. As we look ahead, we are more excited than ever about the vast potential that lies before us without kicking ass emerging world-class teams and less of your strategy, we are poised to capitalize on the immense opportunities that lay ahead in synthetic biology, NGS, biopharma and data storage. I'm incredibly proud of what's been accomplished, and I am confident that our best days are yet to come.
Let's open up the call for questions. Operator?

Question and Answer Session

Operator

Thank you. And as a reminder, if you would like to ask a question, please press star one one on your telephone. Also, we ask that you wait for your name and company to be announced before we proceed with your question.
Our first question today is coming from Matt Sykes of Goldman Sachs. Your line is open.

Matt Sykes

Good afternoon. Only out of And Angela, I Congrats on the quarter. Maybe I could just start out on on margins. Can you obviously beat gross margins this quarter? It looks like on the back of NGS, but a small contribution from express genes of like $2.2 million I'm sorry, expect most of that beat was from NGS, but as the year progresses and express jeans continue to grow. Could you just give us a sense for the contribution of margin expansion from express genes, maybe either providing some expectations for expression revenue growth or volumes for the balance of the year and what contribution and margin expansion is already in that guide from express genes specifically?

Adam Laponis

Okay, Matt, thanks for the question. This is Adam. I'm happy to give you some of the quantitative on this, and we can jump in with color as well.
First, we are very excited about the Express team launched this quarter and then remember when we launched it here in late January with the full offering when it was still only a partial quarter. So we expect in the Q three here that we're currently in the end of June will be our first quarter for Crestwood. We have not broken out the exact data, our express genes volume in the guide. We do see that contributing to the gross margin, sequential improvements we have in our guide and it did it did help with the movement we saw this quarter, but we're still early days and we continue to use the yes, some of the testing we're doing day-to-day in terms of pricing and we're what we're monitoring and watching it. But we have not broken that out.

Matt Sykes

Got it. And then just on the ingestibles business, just hearing from some of your competitors in that space that are having some challenges, it seems as if given your results you're continuing to take share there. Could you maybe just help us understand for context sort of what the market share opportunity is in the industrials business for you? And what is sort of the runway that you have for accelerating growth, either given the market structure, your current penetration in share and what it could be?
Thanks.

Emily Leproust

Yes, thank you, Matt. This is Emily. You're correct, but we are definitely taking market share and it's not an accident. It's based on the and the innovation that we've built into the product from the quality of our panel that reduces the cost of sequencing and to expanding to other applications are an installation. So the fact that we now offer a full workflow solution from the sample to sequencer And finally and very importantly, AM and the U.S. being a supply chain partner to help our customers as we go so far, the vast majority of the majority of our revenue come from liquid biopsy applications.
And in terms of the market potential for liquid biopsy, it's really big. We are only at the at the beginning of liquid biopsy adoption. And as the adoption of those test ramps as liquid biopsy on the munis U.S. market as a whole growth, our goal is to is to be able to capture about 10% of the COGS of all of our customers. So we believe that there is a lot of room to grow in liquid biopsy for the other markets, some mRNA and we are well, it's very early days. The pilots and the initial tests are encouraging them for us for the capture of the ag-bio market. It is currently being done on microarrays and where we want to move it to twist plus sequencing, we think that that market alone could be $500 million. So a lot of opportunity for us. And again, it's not an excellent space on the differentiation of the products and the commercial balance that we deploy.

Matt Sykes

Great. Thanks, Emily.

Operator

Thank you. One moment for question and our next question will be coming from Vijay Kumar of Evercore. Your line is open.

Vijay Kumar

Hey, guys. Thanks for taking my question and congrats on a good print here. Emily, maybe my first one here on out the orders here. That's a big big number, up 45%. Were there any one-timers? Was there any pull forward or maybe just characterize the order trends to have as the quarter progressed?

Emily Leproust

Yes, Greg, great question. Thank you. So some time you all put out two types of orders. Are those that are that are actionable today, meaning if you're there, the PO comes is the sequence. And in synbio it gets made in five days in NGS and gets made in a few weeks get shipped. We book the revenue on. And one thing that was that was a bit particular hard this quarter is we got a bigger number of the second kind of orders, which are blanket PO orders. So those are the come from customers where they can have a budget and they decide at the beginning of the beginning of the year, they decide where they're going to spend that budget with which company. And so the blanket PO gets gets provided, gives us a sense of volume that's coming. And then as the researcher design, the sequence that they want this and there's a sequence, the others are really there would produce again ship and the group revenue. And so what happened this quarter is we had more blanket PO orders that we typically have had in the first quarter of the calendar year. I think that's a reflection of the fact that in our first quarter, so in calendar Q4, some customers have tested extra genes in our Q2 cash can Canada, Q1 more customers have tested this Regine. And as they've received those genes on time, basically that are expressed genes do well, what it says on the level. I think we've we've we have and the confidence of those those companies and they've been willing to come to give us their blanket piano, meaning that giving us they're confident that they will order from us in the rest of the year. So I think that's the dynamic that we see that we see. It's a reflection of the strength of our offering.

Vijay Kumar

Yes, that's fantastic. And then Adam, maybe just back to that question. So you don't think there's anything one-off, these are underlying trends and that's what's driving the sequential gross margins in 3Q and 4Q that's a pretty meaningful step in gross margin for Q4.

Adam Laponis

Hi, this is Adam. It's a great question and I think the it's fair to say that this is not there was not a onetime, but also to break from our historical behavior that oftentimes some of our larger customers do put in blanket purchase orders the beginning of the year, we're seeing a larger volume of that this year. So I think there's there is it's a vote of confidence, but certainly I'd expect sequentially to occur every quarter because the nature of the calendar year we're focused that business in terms of both moving forward, both in terms of the growth in the business, I mean the increase in the guide of about $12 million in the midpoint up from where we were before for the year, as well as the expansion of gross margin both full year and sequentially. And this does play as a tailwind. I think we talk a lot about express genes, and we talk a lot about NGL mix driving that margin. But the number one driver for margin for us is to continue that growth in volume.

Vijay Kumar

Fantastic, guys. Thank you.

Operator

Thank you. One moment for the next question. And our next question will be coming from Steve Moss of TD count and your line is open.

Steven Mah

Great. Congrats on the quarter and thanks for the questions. I've got a three-part question on express genes. So first, so now that you have another quarter of experience, can you give us a sense for the customer feedback on the dynamic pricing? And I know on the last call you also talked about there's a push by larger accounts wanting to trade on the dynamic pricing for a sort of like a fixed subscription like pricing model? And then second, can you give us a sense on how the increased marketing effort on Express chains how that's going.
And then third, on the 100 net new accounts ordering express genes, what's the profile of that customer? Is that academia, pharma, biotech or for mix? Thank you.

Emily Leproust

Again, I think you said, Greg, great question. In terms of the customer feedback, and we haven't had any negative feedback from the premium premium pricing. I think people understand that we've made a significant investment. The primary differentiation is fairly strong. Again, the performance is such that it does what it says on the label for that firm.
That's all positive. And at the same time customers who several customers would like to have predictability in. So they have been very willing to provide the volume commitment in action for premium pricing. And some of that was reflected in the in the strong blanket POs that we have, which we have gotten. So I think that, yes, on your first question and second question on the margin. So we are not, as Adam mentioned earlier, we are not breaking out margin for X region at this time. The one thing that I'll reiterate is whatever is that average premium pricing increase of 100% of that increase drops to the gross margin line. So we we anticipate that it will actually be a component of gross margin improvement over time.
And then last question on the 100 net new accounts, it is a mix which is which was really great to see have a good mix, of course, big pharma customers as well as smaller from my customers and the not surprising, but very good to see slow. A lot of academic groups have been have been testing and ordering and reordering. And obviously, we look at the average size of an order from a pharma company, it is bigger than from AM and from an academic group. But but I think I'd say that the majority of the net new account where academic groups. And so it's great to see that where we are penetrating not only the industrial companies, which would have been more predict with a slow academic group.

Steven Mah

Okay, great. Maybe just a quick follow-up on that. Did you mention that you had a different pricing structure for academic versus industry?
Thank you.

Emily Leproust

So yes, in the middle of the quarter. So in the beginning, it was the same premium pricing for academic and industry. And then in the middle of the quarter, we are we've started to have a bifurcation where the premium vacated Munich was not as strong as well for some industry, which is a standard practice. So I'll say that we are more now in the standard practice than we used to be.

Steven Mah

Okay, great. Thank you.

Operator

Thank you. One moment while we prepare for the next question and the next question will be coming from Matt Larew of William Blair. Your line is open.

Madeline Mollman

And this is Madeline Mollman on for Matt Larew. I wanted to touch a little bit on biopharma. I noticed like the biopharma still was an area that the guide came down. And I know you've mentioned previously that you are in the process of onboarding your new BD hires. It takes about six months to get fully ramped. Can you talk a little bit about where the BD hires are in the process and how much of that ramping contributed to the change in biopharma guidance?

Adam Laponis

Yes. Thank you for the question, Tom. We have a full team at this point in terms of headcount, maybe not fully ramped yet, but we have a full team. I travel quite a bit with them with that team. And it's very clear that the market is there. There's no market headwinds at all. And the but the the technology, the product and service offering that we have is extremely strong with in vivo in vitro in silico. So in my mind, Victory is certain, but the timing, we're still working on it. So we were just doing all the right thing. Now we're focusing on activity, building the funnel and the others for this quarter at $5.8 million were encouraging. And so now we just have to do it again and in and grow this business. And it is the smallest business of the company. It is right now the business that that has the lowest growth, but it has all the characteristics of a very strong business, very strong Swiss business, which is high differentiation of the services. And as we come as we connect with more customers convert more customer. I'm very confident that we can do really well.

Madeline Mollman

Great. Thank you. And then I think you said the expressed genes were 15% of clonal genes revenue for the quarter. Can you give any color on sort of on a monthly basis how expressed genes as a proportion of clonal genes has trended? And that includes if you can into this quarter as current quarter as well as.

Adam Laponis

Sure, this is Adam. I'm happy to talk about what we're seeing since launch. We've seen sequential increases in the Express team business pretty much consistently month over month, partly due to the fact that we did the full commercial launch in late January this year. So you would expect that natural step-up there is also the eight or so. As Emily mentioned earlier in the call, some of the larger institutional customers when they are, they were high volume. So a couple of orders can have an impact especially early on, but we are seeing that sequential step up month-over-month.

Madeline Mollman

Great. Thank you so much.

Operator

Thank you. One moment for the next question. And our next question will come in from Tom Peterson of Baird. Your line is open.

Tom Peterson

Hi, everyone. Congrats on the quarter and thanks for taking my questions. I just want to first start on Express and some of the metrics that you provided here, whether it be percentage of clonal genes or some of these customer conversions or new account wins? How are you defining what medium term success looks like for the Express jeans offering? And if you could share any sort of target that you're looking for and over the medium term, it's going to be helpful?

Emily Leproust

I think in general for us, success is the three numbers of revenue gross margin. And so we do have internal targets for all of the product lines at all times. And what are the strengths of the Company and the fact that we have a very differentiated, very diversed type of customers, thousands of them are working on these diverse types of applications. And so on really it's all of the above product lines that contribute to the to the great results. And I can be sure that we are pushing the team to leverage not only extrusions, but all of the high differentiated products, but we have.

Tom Peterson

Great. That's helpful. And then maybe just one on the gross margin outlook, specifically kind of that 50% plus exit rate by 2025. Given the quarterly guide for fiscal '24, how should you think about the cadence to get to that target in fiscal 25 given the 24 guidance?

Adam Laponis

No, I think that's a great question. And it's one word we internally are absolutely excited about the progress we've seen. I think we go back and you look at four quarters ago, we were at 31% gross margin to see that grow to about 41% over the last four quarters as aggressive. And you noticed it did happen over time, but it's not always perfectly linear. But I think the idea here is we do expect to see the sequential gains continue as we go into 2025 and we do expect also there will be some it won't be perfectly linear with revenue growth every quarter because some of the initiatives and I'll use the example of some of the things you're doing and process improvements on you spend the energy to make the process improvement in a given period, but then you may have inventory you need to burn through before you get the advantage of the cost savings and the impact on the P&L. So some of these things will take time, but we are encouraged by both the continued growth in the business as well as the progress on the on the process improvements that we see across the business so that we expect this sequential increase throughout 2025.

Tom Peterson

Thanks again, appreciate it.

Operator

Thanks again. One moment, sir. Next questions.
And our next question will be coming from no Puneet Souda of Leerink Partners. Your line is open.

I guess you got Michael on for Puneet. My first question has to do with the regulated diagnostics products.
You're launching. We thought FDA published their final rules for LDTO.s kind of curious any of the changes are affecting your plans for how twist is approaching their diagnostic product and if anything, incremental needs to be done?

Emily Leproust

And I think you that's a great question, and we are in great student of those routes. I think in general, we're quite encouraged with the new rules, the grandfathered in a number of entities and regulation in general I think we will probably benefit the larger players, maybe reduce fragmentation in the market. And to the extent that we are very well penetrated into a larger fleet, that's good for us from the sum, then the new test of the well required to validate the test. We have primary require more validation. And so that will probably be a tailwind for us then finally, other times as as diagnostic test needs to be modify, budgets will be a little bit harder to quantify. One of the things we provide is we make it easier to do modification. And so all in all, I think that's probably those rooms are probably benefiting in the grand scheme of things probably beneficial to us. And as you mentioned, we are we've launched a CE-marked products in Europe in the recent past. And while those exact products cannot be ported into the US going through the exercise of launching those products, it helped us build a muscle inside a company that we'll be able to to use and leverage in the U.S. with the new regulation.

Great. Thanks.
And then my second question has to do with biopharma funding. So we've seen a bit of an uptick in the first quarter. I was curious if you have any views on where that might flow through maybe some lag time. And if you've seen differences in buying activity between large and small pharma?

Adam Laponis

I'm not sure we're seeing the big differences.
I think for us, we're very focused on gaining market shares. And the last year they have been I've kind of called out customers broadly have been in a mode of tightness around funding and budget. And because of the high differentiation of our products, we've been able to gain more than our fair share in market shares. And so as we see now that you have the budgets get a little bit easier and will we be able to to to keep doing this taking more of our fair share?
I think I'm encouraged by the performance of the regions, in particular, where again, it's it does what it says on the label and it's highly differentiated. And we also have a number of products that we are planning on launching in the near term which should enable us to take more of those of those budgets. And I think the the the order volume that we had in in Q2, which is Canada, Q1, those large blanket orders on it. It's a good first step in making sure that as the biopharma budget loosen up and that would be in pole positions, two, two take advantage of them.

Great. Thank you.

Operator

Thank you. This does conclude the Q&A session for today. And I would now like to turn the call over to Emily Powers for closing remarks. Please go ahead.

Emily Leproust

Thank you for your time and attention today. Our unwavering commitment to pushing the boundaries of innovation has allowed us to unlock new opportunities and drive value for customers, shareholders and the broader scientific community, and we'll continue on our path towards profitability. We look forward to keeping you apprised of our progress.
Thank you.

Operator

This concludes today's conference call. You may all disconnect.