NEW YORK – Berkeley Lights will be expanding on its subscription-based model for placing its optoelectronic cell analysis platforms, adding an all-inclusive package aimed at smaller biopharma firms.
Like a car lease with a low mileage limit, the new subscription option includes the company's Beacon platform, reagents, software, service and support — everything a customer would need to start doing a few projects, or "campaigns," for antibody discovery or cell line development.
These subscriptions are aimed at customers running about five or 10 campaigns a year, JP Morgan analyst Tycho Peterson wrote in a note to investors, and cost $600,000 per year for 10 campaigns or $500,000 for five. He called it an "important move to further open up customer access," requiring "significantly less commitment" compared to a three- to five-year subscription, "which should facilitate significant conversion of customers which have been previously on the fence for a capital purchase."
"This provides an easy way for them to get in and, in some cases, allows them to bypass an initial feasibility study because the hurdle is smaller, and they go right into being able to run campaigns very quickly in a cost-effective, differentiated way," Berkeley Lights CFO Kurt Wood said on a conference call with investors on Tuesday following the release of the firm's first quarter financial results.
CEO Eric Hobbs noted that the new subscriptions are not meant to compete with other offerings on the market from other companies. "We are early in the release stage but are encouraged by the interest we're receiving so far," he said.
The plan was well received by Wall Street analysts, who seemed to agree that it could help grow the company's installed base. Peterson wrote that the subscriptions would be "an additional catalyst to drive accelerated instrument adoption," while William Blair analyst Brian Weinstein called it "an evolution in the company's thinking and yet another way to bring down barriers to adoption and meet customers where they are."
"Just as the initial subscription model helped customers gain access to the Berkley Lights technology without having to put down $1.5 million to $2 million up front by allowing what was essentially a reagent rental model, this expanded version of subscription helps alleviate that initial downstroke," Weinstein wrote.
"Management noted that the new model would cause some cannibalization in the short term but eventually lead to incremental unit sales," Cowen analyst Doug Schenkel noted.
The news came as Emeryville, California-based Berkeley Lights announced 10 new placements in Q1, including only one subscription, bringing its installed instrument base to 85. Eight of the placements were for antibody therapeutics, one was for cell therapy, and one was for synthetic biology, Peterson wrote.
Berkeley Lights has been offering subscriptions to its technology since before it went public in July 2020. But according to Schenkel, only three platforms are run on a subscription plan so far.
According to Hobbs, the company has noticed that while the subscription model lowered the financial barrier to accessing the Beacon platform, a large subset of customers did not necessarily need the full capacity available from the instrument. These customers, often small with a limited amount of money, may have turned elsewhere to run the small number of projects they felt they needed to build their company. Now, they can come directly to Berkeley Lights.
"Those customers generally have a longer sales cycle to begin with, so this alleviates that constraint of a longer sales cycle and allows them to have a way to access the technology all-in," Hobbs said.
Wood noted that revenues from these smaller subscriptions will be recognized over the subscription term, compared to upfront recognition of a typical sale. "As we ramp this offering, it is possible that some previously anticipated capital expenditure sales may transition to a subscription offering. This could impact quarterly revenues in the near term, but in turn would provide upside to recurring and overall revenues in future periods," he said.
In addition to the new subscription plans, Berkeley Lights officials also provided updates on the company's collaboration with Ginkgo Bioworks and its board of directors.
The company executed "buy down" rights to two workflows developed with Ginkgo, Wood said, providing full commercial rights in all target markets. This "allows us to expedite the commercialization of these workflows and leverage them into new partnerships and accelerated growth," he said.
The company plans to release the workflows near the end of the year. "Then you'll start to see us commercialize these through 2022," he said.
Hobbs also noted that John Chiminski, CEO and chairman of Catalent Pharma Solutions, would join the board effective May 14. Also, board chairman Michael Marks will retire and Greg Lucier, CEO of Corza Health and former CEO of Life Technologies, will assume that role. "Greg has a wealth of experience growing public companies, both organically and through high growth acquisitions in this space," Hobbs said.