Executive Summary / Key Takeaways

• Alpha Teknova is strategically positioning itself as a high-quality, agile provider of custom reagents for the life sciences, focusing on the high-growth biopharma and cell & gene therapy markets, leveraging proprietary manufacturing processes for speed and customization.
• Despite a challenging macro environment impacting some customer segments, the company demonstrated revenue growth in Q1 2025 and full-year 2024 (excluding a large prior-year order), driven by an increasing base of clinical customers and stabilization in core Lab Essentials.
• Aggressive cost management and investments in scalable infrastructure have significantly improved profitability metrics and free cash outflow, with management targeting Adjusted EBITDA positivity at $50-$55 million in annualized revenue and cash flow positive shortly thereafter.
• New offerings like RUO+, Express-Tek, and the Pluristics collaboration enhance the product portfolio, address customer pain points, and are expected to drive future growth and margin expansion by leveraging existing operational and commercial scale.
• With sufficient liquidity from recent capital raises and a refinanced credit facility extending maturity to 2030, Teknova believes it has the financial runway to execute its organic growth strategy and capitalize on an expected market recovery in 2025 and beyond.

The Foundation: Agility in Life Sciences Reagents

Alpha Teknova, Inc. (NASDAQ: TKNO) operates at a critical juncture within the life sciences ecosystem, providing essential reagents for the discovery, development, and commercialization of novel therapies, vaccines, and molecular diagnostics. Founded in 1996, the company built its initial success on a foundational business supplying standard laboratory reagents, achieving a historical revenue growth rate averaging around 13% annually. This trajectory continued into the period leading up to its 2021 IPO, fueled by consistent demand across a broad base of academic, government, and industry customers.

However, the company's strategic focus has evolved significantly. Recognizing the burgeoning opportunities and unique needs within the biopharmaceutical sector, particularly the dynamic fields of cell and gene therapy, Teknova has invested heavily to become a specialized provider of high-quality, custom-made reagents. This strategic pivot is centered on its proprietary manufacturing processes, designed for exceptional adaptability and configurability. Unlike larger, more standardized competitors such as Thermo Fisher Scientific (TMO) or Merck KGaA (MRK) (via MilliporeSigma), Teknova emphasizes speed and customization. This technological edge allows the company to manufacture and deliver complex, made-to-order products with significantly shorter turnaround times – often in weeks rather than months. This agility is a critical differentiator for customers in rapid development cycles, where speed to clinic and market can be paramount.

The company's business is structured around two primary categories: Lab Essentials and Clinical Solutions. Lab Essentials serves the broader Research Use Only (RUO) market with both catalog and custom products, providing a stable base. Clinical Solutions, operating under stringent Good Manufacturing Practices (GMP), targets the diagnostic and therapeutic markets, supplying critical inputs as customers scale from early research through commercialization. This segment, with its larger average order sizes and higher quality requirements, is central to Teknova's growth strategy, albeit prone to quarter-to-quarter revenue lumpiness due to customer order timing.

In the competitive landscape, Teknova occupies a niche defined by its high-quality custom manufacturing capabilities and rapid delivery. While giants like TMO and MRK offer vast catalogs and global scale, their processes may be less flexible for highly specific, low-to-mid volume custom orders needed quickly. Other competitors like Agilent Technologies (A) and Bio-Rad Laboratories (BIO) also offer reagents and tools, but Teknova's specific focus on custom media, buffers, and reagents for therapeutic development provides a distinct value proposition. Teknova's ability to onboard and support customers as they progress through clinical trials, leveraging its ISO certification and scalable GMP facility, positions it favorably against competitors who may struggle with the transition from RUO to GMP scale or lack the necessary manufacturing agility. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, the company's increasing clinical customer count suggests it is gaining traction in its target markets.

Strategic Execution and Operational Efficiency

Teknova's recent performance reflects its strategic execution amidst a challenging macro backdrop. While the biotech funding environment has caused some small and midsize customers to manage expenses conservatively, Teknova has continued to build its pipeline of clinical customers. The number of active clinical accounts spending over $5,000 annually increased from 13 in 2020 to 48 in 2024. This growing customer base, particularly in the biopharma and cell & gene therapy segments, is expected to drive future revenue growth as therapies advance through clinical phases, potentially increasing revenue per therapy by approximately thirtyfold from Phase 1 to commercialization.

To enhance its offering and address customer needs, Teknova has launched new initiatives. RUO+ provides a bridge between research and GMP grades, utilizing the same facilities and processes as GMP production but without the associated change control and documentation, facilitating a smoother transition for customers nearing clinical trials. Express-Tek offers expedited production for critical custom orders, reducing turnaround times from weeks to days – a high-margin service addressing urgent customer needs. In March 2025, a collaboration with Pluristyx was announced, making Teknova the exclusive US and Canada manufacturer and distributor of the novel PluriFreeze™ cryopreservation system. This synthetic, animal-origin-free system, particularly its low viscosity PF10 formulation, is well-suited for large-scale allogeneic cell therapy manufacturing and targets the significant homebrew market, expanding Teknova's product portfolio and market reach.

Operationally, the company has focused on leveraging its state-of-the-art Hollister, California facility, which provides the capacity to support up to approximately $200 million in revenue with minimal additional investment. This scalable infrastructure is key to achieving margin expansion as revenue grows. Concurrently, Teknova has undertaken aggressive cost management, reducing operating expenses by $8.1 million in 2024 compared to 2023 (excluding non-recurring items) and decreasing headcount by over 40% from its peak. Changes have also been implemented in inventory management practices following an inventory write-down in 2024 related to excess stock built in 2022. These efficiency improvements have contributed to a significant reduction in free cash outflow.

Financial Performance and Path to Profitability

Teknova's financial results demonstrate progress towards its goals despite the headwinds. For the first quarter of 2025, total revenue was $9.8 million, a 5.4% increase compared to $9.3 million in Q1 2024. This growth was driven by an 11.7% increase in Lab Essentials revenue to $8.1 million, partially offset by a 32.4% decrease in Clinical Solutions revenue to $1.2 million. The decline in Clinical Solutions was attributed to lower average revenue per customer and the timing of a large order in the prior-year quarter, highlighting the segment's inherent lumpiness. Gross profit improved significantly to $3.0 million (30.7% margin) in Q1 2025 from $2.2 million (23.8% margin) in Q1 2024, primarily due to higher revenue and lower overhead costs. Operating expenses decreased substantially to $8.0 million in Q1 2025 from $10.2 million in Q1 2024, reflecting the impact of the 2024 workforce reduction and lower stock-based compensation. This resulted in a reduced operating loss of $5.0 million compared to $8.0 million in the prior-year quarter. The net loss for Q1 2025 was $4.6 million, an improvement from $8.1 million in Q1 2024. Adjusted EBITDA, a non-GAAP measure, also improved to negative $2.5 million from negative $3.8 million year-over-year.

For the full year 2024, total revenue was $37.7 million, a 3% increase over $36.7 million in 2023. Excluding a large $2.7 million Clinical Solutions order in 2023, the underlying growth was 11%. Gross margin for FY 2024 was 19.2%, impacted by a $2.8 million inventory write-down; excluding this, it would have been 26.5%. Operating expenses saw an $8.1 million reduction (excluding non-recurring items) in 2024.

Free cash outflow improved significantly to negative $13.5 million in 2024 from negative $26.7 million in 2023.

As of March 31, 2025, Teknova had $26.3 million in cash, cash equivalents, and short-term investments, contributing to $32.7 million in net working capital. The company refinanced its credit facility in March 2025, extending the maturity to March 1, 2030, with principal repayments starting in April 2028. This facility provides up to $28.25 million, including a Term Loan and a Revolver, and includes minimum revenue and cash covenants ($39.0 million trailing twelve-month revenue for FY 2025, $8.0 million minimum cash). Management believes that based on reasonable assumptions about future growth (at least 13% average annual revenue growth), profitability leverage (70% marginal drop-through), controlled OpEx (targeting ~$8 million/quarter), and CapEx (~$2 million/year), the company has sufficient liquidity to reach adjusted EBITDA positive ($50-$55 million annualized revenue) and become cash flow positive shortly thereafter, without needing additional external capital.

Risks and Outlook

Despite the positive trends and strategic positioning, Teknova faces notable risks. The company has a history of operating losses and may not achieve or maintain profitability. The macro environment, including inflation, interest rates, and geopolitical factors, could continue to impact customer spending and supply chain stability. Reliance on a limited number of raw material suppliers without long-term contracts presents a potential vulnerability. Failure to meet the minimum covenants under the refinanced credit agreement could trigger a default. Share dilution remains a risk given outstanding equity awards and potential future issuances. The pace of recovery in biotech funding and clinical trial activity is a critical external factor influencing the timing of revenue growth, particularly in the high-potential Clinical Solutions segment.

For 2025, Teknova reiterates its total revenue guidance of $39 million to $42 million, implying 7% growth at the midpoint. This outlook assumes mid-single-digit growth in catalog products, at least 15% growth in biopharma custom products, and mid-single-digit growth in custom life science tools and diagnostics. The company targets a gross margin in the high twenties percentage range for the year and expects free cash outflow to be less than $12 million. Management anticipates Q1 2025 to be the lowest revenue quarter, with sequential improvement through Q2 and Q3 before a slight seasonal dip in Q4.

Conclusion

Alpha Teknova is executing a focused strategy to capitalize on the specialized needs of the biopharma market, particularly in cell and gene therapy. By leveraging its proprietary manufacturing processes for speed and customization, investing in scalable GMP infrastructure, and implementing aggressive cost controls, the company is building a foundation for future growth and profitability. While the macro environment presents ongoing challenges, evidenced by conservative spending among some customers, Teknova's increasing clinical customer base, new product offerings, and improved operational efficiency signal positive momentum. The refinanced credit facility and existing liquidity provide the necessary runway to pursue its organic growth strategy. The investment thesis hinges on Teknova's ability to convert its growing pipeline of clinical customers into higher-volume commercial-stage business, expand margins through operational leverage, and navigate external market uncertainties. Investors should monitor the pace of the biotech market recovery, the continued acquisition and progression of clinical customers, and the company's ability to achieve its gross margin and cash flow targets as key indicators of its long-term potential.