Executive Summary / Key Takeaways

• Disruptive Technology Drives Market Share: Twist Bioscience leverages its proprietary silicon-based DNA synthesis platform to offer unparalleled speed, quality, and cost efficiency, enabling it to capture significant market share across synthetic biology (SynBio) and Next-Generation Sequencing (NGS) markets, even amidst challenging economic backdrops.
• Accelerated Path to Profitability: Strategic divestiture of the DNA Data Storage business into Atlas Data Storage, coupled with rigorous operational efficiencies and gross margin expansion (now consistently above 50%), has significantly accelerated Twist's timeline to achieve adjusted EBITDA breakeven by the end of fiscal 2026.
• Diversified Growth Engines: The company benefits from a resilient, diversified revenue base across healthcare, industrial chemicals, and academic research, with strong growth in NGS clinical diagnostics (liquid biopsy, MRD) and a rapidly expanding SynBio Express portfolio.
• Innovation as a Core Moat: Continuous, capital-efficient R&D, including the development of proprietary enzymes and new product launches like gene fragments without adapters, enhances product differentiation, strengthens the supply chain, and unlocks new market opportunities.
• Key Risks to Monitor: While the outlook is positive, investors should monitor ongoing litigation, potential fluctuations in academic funding, and the successful commercial ramp-up of key NGS customers following a temporary revenue normalization.

The Genesis of Biological Engineering

Twist Bioscience was founded with a bold vision: to industrialize biology. Incorporated in Delaware in 2013, the company's core innovation lies in its proprietary DNA synthesis platform, which pioneers a new method of "writing" DNA on a silicon chip. This technological breakthrough, combined with sophisticated software, scalable infrastructure, and an intuitive e-commerce platform, has enabled Twist to achieve unprecedented levels of quality, precision, automation, and manufacturing throughput at a significantly lower cost than traditional methods. This foundational strength positions Twist as a formidable player in the synthetic biology landscape, offering a distinct advantage over competitors.

The company's strategic journey began commercially in 2015 with gene fragments, quickly expanding its product portfolio. A pivotal decision around its 2017-2018 IPO was a significant bet on Next-Generation Sequencing (NGS) in clinical applications, a move that has since proven highly successful. Today, Twist's offerings span synthetic genes, oligo pools, NGS tools for sample preparation, and antibody libraries for drug discovery, all designed to empower customers to conduct research more efficiently and effectively.

Technological Edge: The Silicon Chip Advantage

At the heart of Twist's competitive moat is its silicon-based DNA synthesis platform. This core technology allows for the high-throughput, high-quality, and cost-effective manufacturing of synthetic DNA. Unlike traditional plate-based approaches, Twist's method miniaturizes chemistry, leading to substantial operational and financial benefits. The company's ability to deliver "fast, high quality and lower cost DNA than the competition" translates directly into a compelling value proposition for its diverse customer base.

The tangible benefits of this technology are evident across its product lines. For instance, the Express portfolio, which includes Express Genes and gene fragments, boasts industry-leading turnaround times, with gene fragments shipped in as few as two business days and clonal genes in four days. This speed is not merely a convenience; it accelerates research cycles, enabling customers to achieve "more shots on goal" within their budgets. Furthermore, Twist's operational efficiencies, such as a new oligo manufacturing process, have doubled daily output to 16 million oligos in the same footprint, significantly increasing available revenue capacity.

Twist's commitment to innovation extends to its R&D initiatives. The company has strategically invested in developing proprietary enzymes, such as a high-fidelity polymerase for internal SynBio workflows and a specialized ligase for liquid biopsy and Minimal Residual Disease (MRD) applications. This ligase, developed with a modest investment, has demonstrated superior performance, outperforming peer offerings and significantly improving sensitivity in NGS assays. Such internal developments reduce supplier dependency, enhance product performance, and contribute to margin expansion. These technological advancements are not just about new products; they are about embedding structural cost advantages and performance differentiation across all offerings, reinforcing Twist's market position and driving long-term value creation.

Strategic Evolution and Operational Excellence

Twist's history is marked by a continuous evolution of its strategy, adapting to market dynamics while leveraging its core technological strengths. The company's operational prowess is a testament to its "relentless focus on driving to profitability." This includes a series of well-executed continuous process improvements and software implementations that expand portfolio capabilities and enhance efficiency. For example, the company increased NGS capacity by approximately 200% and reduced turnaround times by 20% for bespoke MRD assays through automation upgrades, all while maintaining a fixed headcount.

A significant strategic move in May 2025 was the spin-out of its DNA Data Storage business into an independent entity, Atlas Data Storage, Inc. This decision was driven by the recognition that DNA data storage is a specialized area requiring dedicated, substantial investment. The transaction provided Twist with approximately a 24% equity interest in Atlas, future royalties, up to $75 million in milestone payments, a $2.5 million upfront cash payment, and a $2 million secured promissory note. Critically, this divestiture is expected to yield a $5 million per quarter improvement in adjusted EBITDA and reduced cash burn for Twist starting in Q4 fiscal 2025, allowing for a sharper focus on its core synthetic biology and NGS businesses.

Twist has also demonstrated agility in customer engagement. Faced with evolving funding dynamics in the academic market, the company introduced promotional programs, such as offering Express Genes without the premium for a limited period. This initiative aims to support academic customers and expand market penetration, converting new users who experience the benefits of Express speed. The introduction of the "Twist Wallet" further streamlines the customer experience, offering flexibility and reducing administrative burdens. These initiatives underscore Twist's commitment to meeting customer needs while strategically expanding its market reach.

Financial Performance and the Path to Profitability

Twist Bioscience has demonstrated a compelling trajectory of revenue growth and margin expansion. For the third quarter of fiscal 2025, the company reported record revenue of $96.1 million, an 18% increase year-over-year. This growth was underpinned by strong performance in NGS tools, which saw a 27% year-over-year increase to $55.3 million, and synthetic genes, which grew 7% to $35.2 million (or over 20% when excluding a significant one-time order from the prior year). The company's gross margin reached a robust 53.4% in Q3 FY25, a significant improvement from 43.3% in Q3 FY24, reflecting increased revenue, volume leverage, and continuous process improvements. This marks a substantial achievement, as the company has increased its gross margin from 31% to over 53% in just two years.

Despite a net loss from operations since inception, the company reported a net income of $20.4 million in Q3 FY25, primarily due to a $48.8 million gain on the sale of its DNA Data Storage business. Excluding this one-time gain, the adjusted loss was $47 million. Net cash used in operating activities significantly decreased to $1.4 million in Q3 FY25, highlighting improving cash flow management.

The company ended the quarter with a healthy liquidity position of approximately $250.8 million in cash, cash equivalents, and short-term investments, which management expects to be sufficient to fund operations for at least one year.

Twist's full-year fiscal 2025 guidance projects total revenue between $374 million and $376 million, representing approximately 19.7% growth at the midpoint. Gross margin is expected to be between 50.5% and 51%, with an adjusted EBITDA loss narrowed to $45 million to $47 million. This outlook is supported by the expectation that 75% to 80% of incremental revenue will continue to drop to the gross margin line. Management has explicitly committed to achieving adjusted EBITDA breakeven by the end of fiscal 2026, a goal significantly bolstered by the operational savings from the Atlas spin-out.

When comparing Twist's financial performance to key competitors, its TTM Gross Profit Margin of 49.24% is lower than Illumina (ILMN) (65%), Qiagen (QGEN) (67%), and Agilent (A) (54%), though comparable to Thermo Fisher's annual 41% (FY24). However, Twist's operating and net profit margins are significantly lower, reflecting its growth stage and substantial investments in R&D and scaling its platform. This indicates that while Twist's technology drives strong revenue growth and improving unit economics, it is still in a phase of heavy investment to capture market share and achieve scale, with profitability expected to follow as revenue continues to expand and operational leverage increases.

Competitive Landscape and Strategic Positioning

Twist Bioscience operates in a dynamic and competitive landscape, but its proprietary silicon-based DNA synthesis platform provides a distinct competitive advantage. This technology enables higher throughput, greater precision, and lower costs compared to traditional methods, positioning Twist as a leader in synthetic biology innovation.

Against industry giants like Illumina, a leader in genomic sequencing, Twist differentiates itself by excelling in DNA synthesis rather than sequencing. While Illumina offers a broader, integrated genomics ecosystem and benefits from a dominant market position and higher gross margins (65% TTM), Twist's platform provides significantly faster and more scalable DNA writing capabilities. This allows Twist to capture market share in niche synthetic biology segments, particularly in drug discovery and research, where rapid, customizable DNA synthesis is critical.

Compared to broad life sciences tool providers like Thermo Fisher Scientific (TMO), Twist's specialized platform offers superior efficiency and customizability in synthetic DNA production. While Thermo Fisher benefits from its vast scale, diversified portfolio, and established customer relationships, Twist's targeted innovation allows for faster prototyping and more tailored solutions, driving growth in emerging synthetic biology applications.

Against molecular diagnostics specialists like Qiagen, Twist's platform offers greater efficiency and scalability for gene synthesis, outpacing Qiagen's more diagnostics-oriented tools. Qiagen holds a strong position in routine diagnostics with higher gross margins (67% TTM), but Twist's strategy targets advanced research and therapeutics, leading in innovation speed and product performance for synthetic applications.

Similarly, when compared to analytical tool providers like Agilent Technologies, Twist's silicon-based platform offers superior precision and speed in DNA synthesis, positioning it as a leader in synthetic biology innovation. Agilent's broader analytical tools and established ecosystem provide market stability and higher gross margins (54% TTM), but Twist's focus on customizable DNA solutions offers faster and more targeted synthesis for research.

Twist's strategy, encapsulated by management's "win by winning" philosophy, is particularly effective in turbulent markets. Amidst uncertainties like potential NIH funding pressures or tariff concerns, Twist's value proposition of high-quality, high-speed, and low-cost DNA resonates strongly, offering customers "more shots on goal" for a given budget. The company's U.S.-based manufacturing also provides a "tailwind" against competitors facing tariffs on products manufactured outside the U.S. Twist's continuous product innovation, including the Express portfolio and proprietary enzymes, further strengthens its competitive position, as competitors' responses have often been limited in capacity and less differentiated in pricing.

Risks and Challenges

While Twist Bioscience presents a compelling investment thesis, several risks warrant investor attention. The company is currently engaged in significant legal proceedings, including a putative securities class action lawsuit and a shareholder derivative suit, both stemming from allegations regarding its DNA chip technology and accounting practices. The outcome of these litigations is inherently uncertain, and an unfavorable resolution could have a material adverse effect on the company's financial position and reputation.

Furthermore, while Twist has demonstrated resilience, the broader economic environment presents challenges. The academic research market, a segment Twist serves, faces evolving funding dynamics and potential NIH budget pressures. Although Twist views this as an opportunity to gain market share due to its value proposition, a prolonged downturn in academic funding could impact revenue growth. Additionally, the planned $5 million revenue normalization in Q4 fiscal 2025 and some Q1 fiscal 2026 impact from a key NGS customer transitioning to commercial deployment introduces short-term variability, requiring successful optimization of the rollout to unlock multi-year revenue opportunities.

Finally, despite significant progress, Twist has historically incurred net losses and still operates at an adjusted EBITDA loss. While the path to profitability is clearer, achieving and sustaining adjusted EBITDA breakeven by the end of fiscal 2026, and subsequently becoming cash flow positive, relies heavily on continued robust revenue growth, disciplined cost management, and the successful execution of its innovation roadmap. Any slowdown in market adoption or unexpected operational hurdles could delay these critical financial milestones.

Conclusion

Twist Bioscience stands at a pivotal juncture, transforming from a high-growth, investment-heavy innovator into a disciplined, profitable leader in synthetic biology. Its proprietary silicon-based DNA synthesis platform remains a powerful differentiator, enabling superior speed, quality, and cost efficiency that continues to drive market share gains across diverse applications, from clinical diagnostics to drug discovery. The strategic spin-out of Atlas Data Storage has sharpened Twist's focus and significantly accelerated its path to adjusted EBITDA breakeven, demonstrating a commitment to fiscal discipline without compromising its innovation engine.

With gross margins now consistently above 50% and a clear roadmap for continued expansion, Twist is rebalancing its efforts towards top-line acceleration, fueled by a robust pipeline of new products and the immense potential of AI drug discovery. While challenges such as ongoing litigation and market fluctuations persist, Twist's diversified customer base, technological leadership, and operational agility position it to convert these headwinds into opportunities. For investors, Twist Bioscience represents a compelling opportunity to participate in a company that is not just engineering biology, but also engineering a sustainable and profitable future, driven by its unique platform and relentless pursuit of innovation.