Business Overview

Alpha Teknova, Inc. (Nasdaq: TKNO) is a leading producer of critical reagents for the discovery, development, and commercialization of novel therapies, vaccines, and molecular diagnostics. With over 25 years of expertise in manufacturing complex chemical formulations, Teknova has established itself as a trusted partner for a diverse array of life sciences customers, ranging from pharmaceutical and biotechnology companies to academic and government research institutions.

Teknova's Comprehensive Product Portfolio and Customer Base

Teknova was founded in 1996 and initially incorporated in California on May 30, 2000, under the name eTeknova, Inc. On January 11, 2019, the company filed a certificate of merger and merged with and into Alpha Teknova, Inc., a Delaware corporation, which continued as the surviving entity bearing the corporate name of Alpha Teknova, Inc.

The company operates in two primary product categories: Lab Essentials and Clinical Solutions. The Lab Essentials segment includes a wide range of commonly used, catalog solutions and highly customized formulations for applications in areas such as genomics and bioproduction. This category includes pre-poured media plates for cell growth and cloning, liquid cell culture media and supplements for cellular expansion, and molecular biology reagents for sample manipulation, resuspension, and purification. The Clinical Solutions segment offers products manufactured under good manufacturing practice (GMP) standards, which are used as components in the development and production of diagnostic kits, protein therapies, gene therapies, and mRNA vaccines.

Teknova's customer base is diverse, with approximately 3,000 active accounts spanning the entire life sciences continuum. In 2024, the company served 48 clinical customers, up from 34 in 2023, representing a 41% annual increase. These clinical customers include leading pharmaceutical and biotechnology companies, contract development and manufacturing organizations (CDMOs), in vitro diagnostics franchises, and academic and government research institutions.

Teknova's proprietary manufacturing processes enable the company to produce and deliver high-quality, custom, made-to-order products with short turnaround times and at scale, across all stages of its customers' product development, from early research through commercialization. The company offers three primary product types: pre-poured media plates for cell growth and cloning, liquid cell culture media and supplements for cellular expansion, and molecular biology reagents for sample manipulation, resuspension, and purification.

In June 2021, Teknova completed the initial public offering of its common stock. Prior to the IPO, the company had raised capital through private placements, including a $22.9 million registered direct offering and concurrent private placement in September 2023, and a $15.4 million private placement in July 2024. These capital raises have enabled Teknova to invest in expanding its operations and manufacturing capabilities to support the growth of its business.

Favorable Industry Trends Driving Growth

Teknova is well-positioned to capitalize on several favorable industry trends, including the expansion of the cell and gene therapy market, the development and deployment of mRNA therapies, and the growing acceptance of molecular diagnostics and genomics. The cell and gene therapy sector experienced a breakthrough year in 2024, with nine FDA approvals in the U.S. and two in the EU, and the Alliance for Regenerative Medicine estimates that the sector could see up to 24 combined approvals in the U.S. and EU in 2025.

In the mRNA space, the success of the COVID-19 vaccines has demonstrated the promise of mRNA therapies, and Teknova's expertise in providing critical reagents, such as bacterial cell culture media and specialized chromatography solutions, positions the company well to benefit from the continued growth in this market. Similarly, the global molecular diagnostics market is expected to grow from an estimated $15.9 billion in 2024 to $30.9 billion by 2035, while the global genomics market is projected to expand from $37.9 billion in 2024 to $94.9 billion by 2030, further supporting Teknova's growth prospects.

Financial Performance and Outlook

In 2024, Teknova generated total revenue of $37.7 million, up 3% from $36.7 million in 2023. Adjusting for a single large clinical solutions order of $2.7 million in 2023, total revenue growth was 11% in 2024. The company's Lab Essentials revenue, which accounts for approximately 60% of total revenue, was $28.9 million in 2024, consistent with 2023 levels. However, the company's Clinical Solutions revenue, which makes up the remaining 40% of total revenue, grew 5% in 2024 to $7.1 million, or 76% when excluding the large 2023 order.

For the most recent fiscal year, Teknova reported an annual net income of -$26.8 million, annual operating cash flow of -$12.4 million, and annual free cash flow of -$13.5 million. In the most recent quarter, the company reported revenue of $9.3 million, net income of -$5.7 million, and a year-over-year revenue growth of 18% in Q4 2024. The slight increase in Q4 revenue was attributable to an increased number of customers, partially offset by lower average revenue per customer.

Looking ahead, Teknova expects to deliver revenue growth of 7% at the midpoint in 2025, with mid-single-digit growth in its catalog business, mid-single-digit growth in the life science tools and diagnostics segment, and at least 15% growth in its custom products sold to biopharma accounts. The company believes there is also an opportunity to expand its product portfolio through collaborations and acquisitions over the next 12 to 24 months, further driving top-line growth and margin expansion.

For 2025, Teknova is providing total revenue guidance of $39 million to $42 million. The company expects gross margins in the high 20% range in 2025, compared to a normalized mid-20% range in 2024. Teknova anticipates free cash outflow to be less than $12 million in 2025 and expects to achieve adjusted EBITDA positive in the range of $50 to $55 million in annualized revenue.

Operational Improvements and Cost-Saving Initiatives

In 2024, Teknova made significant progress in improving its operations and reducing costs. The company undertook two strategic workforce reductions, which are expected to result in annual cost savings of $6.4 million. Additionally, Teknova launched three new offerings - Build Tech, Express Tech, and RUO Plus - which improve the customer experience and contribute to the company's top and bottom lines.

These operational enhancements, coupled with the company's recent $15.4 million private placement in July 2024, have strengthened Teknova's financial position. The company's free cash flow outflow improved from $26.7 million in 2023 to $13.5 million in 2024, which was substantially better than their initial guidance of $18 million.

Liquidity

Teknova's recent capital raises, including the $22.9 million registered direct offering and concurrent private placement in September 2023, and the $15.4 million private placement in July 2024, have bolstered the company's liquidity position. These funds have allowed Teknova to invest in expanding its operations and manufacturing capabilities while also providing a buffer against potential market uncertainties.

As of December 31, 2024, the company had $3.7 million in cash and cash equivalents, $26.7 million in short-term investments, and $12.1 million in long-term debt outstanding. The company entered into a Second Amended and Restated Credit Agreement on March 3, 2025, that provides for a $23.3 million term loan and a $5 million revolving credit facility.

Teknova's debt-to-equity ratio stands at 0.36, while its current ratio is 3.82 and quick ratio is 3.21, indicating a strong liquidity position. The company derived 95.2% of its total revenue from sales to customers in the United States in 2024, consistent with 95.4% in 2023.

Risks and Challenges

While Teknova is well-positioned to capitalize on the growth opportunities in its target markets, the company is not without its risks and challenges. The life sciences industry is highly competitive, and Teknova competes with larger, well-capitalized companies that may be able to undercut prices or develop new technologies that render Teknova's products obsolete. Additionally, the company is subject to extensive laws and regulations governing the manufacture and sale of its products, which could result in costly compliance measures or enforcement actions.

Teknova also relies on a limited number of suppliers for certain raw materials, and the loss of any of these suppliers could disrupt the company's operations. Furthermore, the current macroeconomic environment, marked by high inflation and interest rates, as well as geopolitical uncertainty, could impact customer demand and Teknova's financial performance.

Conclusion

Alpha Teknova, Inc. is a well-established player in the life sciences industry, with a diverse customer base, a comprehensive product portfolio, and a strong track record of manufacturing expertise. The company is poised to benefit from favorable industry trends, such as the growth of cell and gene therapy, mRNA therapies, and molecular diagnostics. While Teknova faces some risks and challenges, its recent operational improvements, cost-saving initiatives, and enhanced financial position position the company for continued growth and success in the years ahead.