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Berkeley Lights, Inc. (BLI) Q2 2021 Earnings Call Transcript

By Motley Fool Transcribing – Aug 11, 2021 at 8:00PM

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BLI earnings call for the period ending June 30, 2021.

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Berkeley Lights, Inc. (BLI 2.94%)
Q2 2021 Earnings Call
Aug 11, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Berkeley Lights second-quarter 2021 earnings call. [Operator instructions] I would now like to turn the call over to your host, Carrie Mendivil, investor relations. You may begin.

Carrie Mendivil -- Investor Relations

Thank you. Earlier today, Berkley Lights released financial results for the quarter ended June 30, 2021. If you have not received this news release or if you'd like to be added to the company's distribution list, please send an email to [email protected] Joining me today from Berkeley Lights are Eric Hobbs, chief executive officer; and Kurt Wood, chief financial officer.

Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties and that could cause actual results or events to materially differ from those anticipated. For more information, please refer to the risks, uncertainties, and other factors discussed in our SEC filings. Except as required by law, Berkeley Life disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise.

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This conference call contains time-sensitive information and is accurate only as of the live broadcast, August 11, 2021. With that, I'd like to turn the call over to Eric.

Eric Hobbs -- Chief Executive Officer

Thanks, Carrie, and thank you, everyone, for joining us this morning. Today, we are going to provide an update on our progress against our stated strategic objectives as well as an overview of our second-quarter 2021 financial results. Berkeley Lights continued to make important progress during the second quarter, and I'm very encouraged by the increasing demand and enthusiasm for our platform. Our team members across the globe continue to execute on our strategic initiatives, and we are better positioned than ever to find the biology that cures disease.

Starting with our second-quarter results. We generated $19.3 million in revenue, bringing our year-to-date revenue to $38 million, a 56% increase over the first half of 2020. We successfully launched our new TechAccess subscription offering tailored to the specific capacity needs of antibody discovery and cell line development customers. We released Opto Plasma B Discovery 4.0 on schedule.

Customers are now finding 10 times the hits at a tenth of the lead time and a tenth of the cost per validated sequence. This quarter, we also officially announced our partnership with Thermo Fisher Scientific in AAV, which successfully progressed into Phase II of the project. And this morning, we announced a partnership with Bayer for high-throughput functional screening to significantly accelerate their pipeline for agricultural product discovery and development. This partnership, along with the Thermo Fisher partnership, highlights the progress on our business development efforts.

Collectively, these two non-exclusive partnerships represent a revenue opportunity of more than $30 million with the potential for additional long-term revenue related to the future milestones and commercialization of products. At Berkeley Lights, our mission is to find the biology that cures disease. This starts with therapeutics for people but our impact goes way beyond that. Our technology can help find cures for diseases in plants, animals, and also provides a scalable and sustainable path for life on this planet.

To achieve this, we are providing the most advanced, highest throughput, functional characterization platform on the market today as a means to find the best biology. To understand the full potential of our platform, it is helpful to place Berkeley Lights in the context of the three main pillars that are the key to unlocking the full potential of biology. The first pillar is sequencing, which enables us to read biology. Sequencing gives us the fundamental code of life.

Today, sequencing is a huge industry. And although the ability to read sequences is extremely important, sequences without correlated function, have limited value. And next pillar is gene editing, which allows us to write to biology. Here, we attempt to reprogram biology by changing the genes in the cell and modifying its code.

Gene editing is another massive industry. And today, there is the potential to add a vast numbers of cells. But without understanding which edit creates the needed product, there is also little value here. And the third and final pillar is functional characterization.

This is where our sequences and edits come to life and gain true meaning. Today, functional characterization is fragmented, highly manual, and lack standardization. At the same time, there is an ever growing amount of sequence data and a near infinite rate at which gene-edited cells can be made. This has created an enormous backlog of required functional characterization.

The complexity in that backlog is growing exponentially, requiring higher resolution and polyfunctional readouts. Current manual processes simply won't scale. Berkeley Lights' goal is to consolidate and standardize functional characterization. We are bringing the first biological supercomputing platform to market, providing automated, high-throughput, high-resolution screening, access to rare precious samples, polyfunctional resolution on live biology, the export of an optimal live biology and digitization of multi-parametric data.

To translate the multibillion-dollar opportunity that functional characterization represents, percolates must run a high-volume platform business, establish high-value service businesses leveraging Berkeley Lights BioFoundry and generate revenue from Berkeley Lights-owned biological assets. The Bayer deal is another step into offering high-throughput functional screening services at Berkeley Lights. This truly is digital cell biology, where we received DNA sequences from our customers, express the proteins encoded in the DNA, and screen each DNA sequence in a massively parallel fashion for the desired function. The service business gives Berkeley Lights full access to data, which is critical to our strategy.

Digitization of multi-parametric data at a large scale. Linking function to sequence is critical to enabling the future of in-silico design of biology. The service business is a prerequisite toward our ability to create Berkeley Lights-owned biological assets. It is here where Berkeley Lights will run its own targets and partner targets with the goal to participate in downstream revenues such as milestones and/or royalties.

The Thermo Fisher partnership is yet another example of deeper value capture through technology. The successful completion of this partnership will transform how viral vectors are developed and manufactured at industrial scale, allowing gene therapies to go from orphan diseases to mainstream therapies. As previously announced, the viral vector workflows developed in this partnership will only be available through a subscription model. I would like to spend a little time to talk about high-throughput functional screening on the Berkeley Lights platform.

As sequencing and gene editing capabilities mature, there is an increasingly large library of unvalidated sequences, which require high-resolution functional readouts at scale. Typically, functional readouts are performed scanning many live cell candidates against one common target. We have developed a NanoPen-based cell-free expression solution, which allows direct expression of DNA into proteins against thousands of targets simultaneously for a functional readout. This provides one to two orders of magnitude improvement in speed and throughput while significantly reducing cost when compared to currently available methods.

We will offer our higher-throughput functional screening services only via our BioFoundry. We believe access to these services will accelerate the design-build test cycles for our customers, further reducing the time to find biology that cures disease. We expect that as cell-free expression continues to evolve, it will find many applications in many markets. With that, I will now turn the call over to Kurt for more detail on our financials.

Kurt?

Kurt Wood -- Chief Financial Officer

Thanks, Eric. Revenue for the three months ended June 30, 2021, increased 82% year over year to $19.3 million with $13 million coming from product revenue and $6.3 million from service revenue. We received orders for three TechAccess subscriptions within the quarter. Under the TechAccess model, we do not recognize the revenue upfront and instead, we'll recognize the subscription revenue over the subscription period, meaning a trade-off of near-term revenue for a more rapid platform adoption and the ability to build backlog and predictable recurring revenue.

Our TechAccess subscription offering is designed to increase our served available market opportunity and drive incremental platform placements. Many smaller biotech customers run lower campaign volumes and want to run their own biology. Our TechAccess subscription provides a financially attractive path for these customers to run antibody discovery and/or CLD workflows on the BLI platform. It's a renewing one-year commitment, inclusive of the platform, software, consumables, service, and support, which provides a compelling ROI with a lower upfront cash commitment for the customer.

We added seven platforms to our installed base during the second quarter and with 92 platforms in the field. Further breaking down Q2 and looking at our three revenue streams, direct platform sales totaled $11.4 million in the second quarter of 2021, increasing 51% over the prior year period. Recurring revenues totaled $3.9 million in the second quarter of 2021, up 35% from $2.9 million versus the second quarter of 2020. Our year-to-date pull-through per instrument remains on track with our historical experience.

Revenue from joint development agreements and partnerships was $3.9 million in the second quarter of 2021, compared to $100,000 in the second quarter of 2020, and up 26% sequentially versus Q1. The sequential increase was the result of a full quarter of activity from our viral vector partnership with Thermo Fisher Scientific. With the recent signing of the Bayer partnership, revenue from joint development agreements and partnerships will increase as a percent of total revenues in the second half of 2021. Gross profit for the second quarter of 2021 was $12.7 million, compared to $7 million in the prior year.

Gross margin for the second quarter of 2021 was 66% in line with the prior year period. As we have discussed on previous calls, our gross margin is negatively impacted by the cumulative impact of the Ginkgo workflow buydown. Excluding the Ginkgo impact, gross margins for the second quarter would have been approximately 72% in line with our long-term target of approximately 70%. Total operating expenses for the second quarter of 2021 were $30.6 million, inclusive of $5.6 million of stock-based compensation, compared to $19.1 million in the second quarter of 2020.

The increase of $11.5 million was driven by an increase in stock-based compensation. G&A-related expenses as we transition to become a public company and continued investment in our R&D and sales and marketing teams. Net loss for Q2 was $18.2 million, compared to a loss of $12.4 million for the second quarter of 2020. All net loss numbers are inclusive of stock-based compensation.

Regarding capital and liquidity. During the second quarter, we completed the refinancing of our $20 million debt facility. Under the terms of the new agreement, we extended the non-amortization period by up to 36 months with final maturity extended to 2025. The interest rate was lowered by approximately 250 basis points to 4.17%.

In addition, we added a revolving credit facility that provides access to $10 million of additional liquidity. As of June 30th, we had a cash balance of $215.1 million and available liquidity of $225.1 million, inclusive of the undrawn revolver. Turning to our outlook for 2021, we continue to expect revenue to be in the range of $90 million to $100 million, representing growth between 40% and 56% over the prior year. As contemplated in this guidance range, we do expect a meaningful uptick in Q4 driven by normal seasonality as well as increases from our growing business development activity.

With that, we will now open it up to questions. Operator?

Questions & Answers:


Operator

[Operator instructions] Our first question comes from Doug Schenkel with Cowen.

Doug Schenkel -- Cowen and Company -- Analyst

Good morning and thank you for taking my questions. My first is on the subscription model. At a high but important level, I'm just wondering if the subscription model program is impacting the funnel the way you anticipated. And maybe building off of that, what is the profile of -- the typical profile of the subscription model customer? I asked because part of the intent here is not just to lower barriers to entry here but sort of by extension to potentially move you into some customer adjacencies that you weren't having as much traction with, historically.

So I guess beyond just getting an update on whether the funnel is tracking the way you would hope. It would be interesting to hear what are the phenotypes of those customers that are moving forward with Berkeley Lights and Beacon with this financial structure.

Kurt Wood -- Chief Financial Officer

Hey, Doug. This is Kurt. Maybe I'll take this. And then, Eric, you can chime in with it.

I appreciate the question. As we launched it, it was really geared toward that smaller customer that had lower campaign utilization rates than what the Beacon had capacity for. So we've tailored this to folks that need to run between five and 10 campaigns a year, which obviously is significantly less than what the Beacon is capable of. And the intent there was to attract that customer to the Berkeley Lights platform that otherwise would have went to an alternative solution, whether that's in a CRO or to build out the lab space that they needed to do it manually in-house with that.

So the design here was to price an all-in package that included the tool, the software, the service, and the consumables at a very simple price per campaign, easy-to-sell, goes through an opex budget versus a capex budget type of a model. Now obviously, when we launched then, and as we mentioned on the call last quarter, there will be -- if you look at it in the extreme, where you've got some folks who clearly will -- the subscription makes 100% economic sense, and then on the high throughput customers, such as your high-throughput CDMOs, etc., where buying a Beacon on the capex model, makes sense. There's a certain amount of folks that will fall in the intersection of those two circles but we believe that's a relatively small percentage, 25% or less, of the total customer base that will convert over from a capex sale into a subscription base. And that's essentially what we saw with -- in the initial launch here and kind of what our pipeline is looking like as we see what's in the funnel today.

So it is attracting a new customer to us that we otherwise weren't able to get, and increasing our serviceable available market. The other thing to note here is -- which we didn't mention on the call, the three TechAccess subscriptions that we took orders for Q2 were not included in the seven unit placements. Those -- all three of those units have shipped earlier in Q3 for this quarter. So it's tracking to what we thought in the phenotype, specifically to your question, is that smaller customer of the utilization, who wants to run their own biology.

And we just provided a compelling reason for that, and it's tracking as expected.

Doug Schenkel -- Cowen and Company -- Analyst

That's great. And if I could just ask one more, and then I'll let others hop in. The total revenue number was about what we were expecting but the components were a little bit different. Recurring revenue specifically was a little lower than we expected and I think it was down sequentially.

Acknowledging that I'm in transit, so I'm not scrubbing the model in front of me, so I apologize if I have that part wrong. But I know relative to what we were looking for, you were a little bit light. That can always just be a function of our model but I want to make sure that there's nothing to unpack there in terms of pacing or any surprises that you're seeing in terms of customer activity. Thank you.

Kurt Wood -- Chief Financial Officer

Yes. Good question. You're spot on. It did decline sequentially quarter over quarter, $3.9 million this quarter versus $4.4 million in Q1.

Obviously, we saw -- there's always a seasonality aspect where we see year-end budget consumption from customers in the fourth quarter. We saw a little bit of that kind of trickle into Q1 as well. We also had a customer place a fairly large order in Q1 as well. But the bottom line is when we look at it over the 12-month period, it's very much on track to what we said historically.

Doug Schenkel -- Cowen and Company -- Analyst

OK. Thank you again.

Operator

Our next question comes from Brian Weinstein with William Blair.

Brian Weinstein -- William Blair & Company -- Analyst

Hey, guys. Good morning. Thanks for taking the questions. Starting on the Bayer deal, can you just give us a little bit more? Just specifically how the technology is going to be used and just a little bit more on the kind of terms of the deal here in terms of the duration and maybe some of the downstream opportunities that are there.

I think you mentioned that the two business development deals that you did are $30 million in total. Just not sure over what period that is, and how we should be thinking about that. So, a little bit more on kind of specifically how the tech is going to be used here, and then anything that you can give us on kind of how to think about that $30 million?

Eric Hobbs -- Chief Executive Officer

Yes, certainly. Good morning, Brian. [Inaudible] Great. As we discussed in the prepared remarks, right, we see high-throughput functional screening as a huge opportunity and to translate that into multibillion-dollar revenues annually, there were three things that we needed to do.

And the first is, of course, to run a high-volume platform business. The second is to establish high-value services business, which leverage our BioFoundry. And the third is to generate revenue from biological assets. And so the Bayer deal is another step to achieving these goals, right? And first, in regards to our platform, it expands our platform into the ag part -- market, right? And so not only does this increase our TAM, which I think we all love, but it also -- these partnerships, they always expand our capabilities.

So again, as we expand our capabilities that expand the value of our platform, that helps drive, of course, our high-volume platform business. So that really helps us with that first goal and objective. Second, what the Bayer deal does is it sets the foundation for future high-throughput functional screening services, which is -- in this partnership, they send us stuff. We execute and run, right, high-throughput functional screening, and then we send them information back.

And so that helps us on our second goal. And then third, this nonexclusive partnership provides us near-term multiyear revenue opportunity, followed by additional service revenue, and back-end milestone payments. And so, all the deal -- although the deal is a multiyear deal -- and, Brian, I can't give you the details because the terms, of course, we're not disclosing at this time, but it is multiyear on the deal side. It also gives us access to the back-end in milestone payment opportunities, which is important for our third goal.

So all three goals that helped us achieve this multibillion-dollar revenue potential in the future, right, are tied into the Bayer deal. So -- and it's not just the Bayer deal. If we talk about the Thermo deal as well, both of these deals really expand our market opportunities, but they help us achieve our mission, right, by not only doing things like accelerating cell gene therapy products into the clinic, but also helping our customers drive world-class innovations and standards in sustainability for farmers, consumers in the environment. So what I'm most excited about is that in our mission, to find a biology that cures disease, this pushes us beyond just therapeutics for human but into working in the agricultural space as we move into the future.

Brian Weinstein -- William Blair & Company -- Analyst

That's great. I appreciate the answer on that. And then one just on the guidance here, the $90 million to $100 million. So you did roughly $38 million, I think, in the first half so to the midpoint of the guidance.

It is a decent step up in the second half. And you've got this changing model, although a little bit going on here. So can you just give us some thoughts on the confidence in your ability to hit that guidance? And how we should be thinking about things like that TechAccess model? And as these new customers come online, what that's going to bring in terms of the revenue? And just how you're thinking about the broader mix within the different categories that's sort of built into that guidance?

Kurt Wood -- Chief Financial Officer

Yes. Perfect. Appreciate the question. I think first on the first half versus second half split that you talked about.

If you were to look historically over the last couple of years, it's been relatively that same profile, first half and second half. I will say that this year, we expect Q4 to be a slightly higher percentage than what it may have been, and that's primarily a function as you ramp up on some of these business development deals like the Bayer that we talked about as well as getting the TechAccess more rolled out, and you get more kind of on that recurring revenue base on there. So that's kind of what we're anticipating at this moment, going in. And that's all contemplated in our range of $90 million to $100 million.

And then as we talked about on the last call, clearly, as we launched the TechAccess, as I responded a little bit to Doug's question, there are a few customers that will be at the intersection of where it makes 100% sense to do a subscription financially from their sense versus a capex model. There's a few that fall kind of in the middle of where those two circles intersect. And in those cases, you'll be with trade-off where they might opt for instead of a capex sale subscription. And therefore, the more subscription we do, as we talked about in the last call, the closer to the lower end of the range will be.

And that program is off to a good start with getting three contracts signed in the first few months of that being launched.

Brian Weinstein -- William Blair & Company -- Analyst

OK. Thank you, guys.

Operator

Our next question comes from Tejas Savant with Morgan Stanley.

Tejas Savant -- Morgan Stanley -- Analyst

Hey, guys. Good morning. So just a couple of quick follow-ups for me. On the Bayer deal, Eric, I just wanted to get a sense of -- can you walk us through the evaluation process in terms of what's the status quo in terms of trade design? What are the approaches that Bayer was using originally? And how did that stack up versus the Beacon? I know you mentioned sort of massively higher throughput, but if you can perhaps put some numbers around it or perhaps some timelines, like you've done with the other workflows.

That would be super helpful.

Eric Hobbs -- Chief Executive Officer

The Bayer deal, of course, a lot of the terms are not able to be disclosed. But what I -- here's what I can tell you is that historically, we had been in discussions with Bayer and showed them capabilities that we're actually quite interesting in terms of culturing lettuce cells and other plant cells on the platform to do -- to perform trade discovery. And so, we developed a new capability, internal Berkeley Lights, that allowed us to enable a much higher throughput functional screen. And what we said in the prepared remarks was this is one to two orders of magnitude improvement.

And so in our previous work, in Antibody Discovery, we are looking at workflows where you're pulling cells from animals and evaluating the cells to produce antibodies against that particular target. And in the ag space, there's a different need. The need there is to screen many different variants of bioactives against a particular target. And so it flips the problem on its head.

And so the scientists and whether they're biologists and technologies are pretty nice. They're uber creative. And so they came up with the way to do is we went back and shared it with Bayer. And Bayer said, hey, this looks too good to be true.

And we said, OK, well, give us the challenge. And so they created -- it was like nine technology gates that we had to get through in order to move forward and do this deal, and we completed it in nine weeks. And they were very satisfied with our progress in doing things that they didn't think were possible previously. And so that was by the context by which we signed this deal.

And so not only, am I excited about the additional capabilities that were developed through the beginning parts. And the challenge is always that are provided in emerging industries, but also really looking forward to working with Bayer on moving the technology and the innovative capabilities of Berkeley Lights into the ag space so that we can help them to accelerate the trade discovery to create that scalable and sustainable future, leveraging cell-based products.

Tejas Savant -- Morgan Stanley -- Analyst

Got it. Super helpful. And then a couple of quick ones on the new subscription model for me. Eric, are you seeing any impact on Lightning, sort of traction, given the subscription model now available, I mean, for these lower throughput, lower capacity customers? And then, one for Kurt on subscription.

The TechAccess units that you mentioned, are these subscription units or are these sort of a third bucket essentially?

Eric Hobbs -- Chief Executive Officer

All right. So I'll jump in on the Lightning question. And then, Kurt, you can jump in on the subscription question. On the Lighting side of things, this quarter, we had an excellent work done by a major medical university.

And the interesting thing that you'll find out is that when you're working on cell therapies, in particular, for pediatric cancer patients, there's a very -- it's a very precious set of cells that you get for the patient. Sometimes there's only thousands, tens of thousands cells, and our customers are previously having to make trade-offs in regards -- not our customers, but in general, outside of Berkeley Lights, our customers are having to make trade-offs in terms of what analysis they perform on these very precious samples. They can do -- of the five analyses they can do, they can do one because all of those analyses that -- whether it's a fact-based or [Inaudible] based, and they're terminal. They're terminal.

They destroy the cell in that process. But what we're finding is that even with this very, very small number of cells, our customers can perform things like cytokine secretion, T-cell cytotoxicity analysis, right? They can capture the TCR. They can do proliferation. They can look at serial cell killing.

And so, what we're learning is that there is extreme value in using very small cell samples or by profiling very small cells samples with the lighting platform. And so, the [Inaudible] set the foundation for what will be QA/QC activities in cell therapies, and are critical to CTMS. I'm happy to see the progress there this quarter. Kurt, did you want to jump in now on the second question, which was subscription?

Kurt Wood -- Chief Financial Officer

Yes. Tejas, the subscriptions that we did for TechAccess, it's only offered as a one-year subscription. And that's the -- they can choose between five or 10 campaigns that they want to run, obviously, two different pricing models for that with a one-year renewing subscription model for that. So, those three that we mentioned fell under that TechAccess subscription model.

Tejas Savant -- Morgan Stanley -- Analyst

Got it. Very helpful. And then one final one for me on the guide, Kurt. Are you seeing any impact from COVID in July here, I mean, particularly in terms of customer site access issues on new installs?

Kurt Wood -- Chief Financial Officer

Again, COVID, it's hard to see what's COVID-related versus what's normal now but we are -- with the emergence of Delta variant, we haven't yet seen restrictions to access to get the tools in play. I think we're still monitoring if -- with this new Delta variant, if there's going to be any type of customs delays or anything on that front. But so far, we haven't run into any issues, and we still continue to reiterate that we'll place at least 45 units this year. [Inaudible] what we said last quarter, we don't see risk in that as we stand here today.

Tejas Savant -- Morgan Stanley -- Analyst

Got it. Thanks, guys.

Operator

Our next question comes from Julia Kan with J.P. Morgan.

Julia Kan

Hi, good morning. First question is just a couple of follow-up on the partnership revenue. I know you said $30 million for the two deals with Thermo and Bayer. What's the time frame that we should be thinking about for those $30 million? And then specifically, during the quarter, how much milestone payments did you guys receive? And how much do you guys embed in your current guidance for the second half?

Kurt Wood -- Chief Financial Officer

Yes. Eric, maybe I can take that and then you can add color. Our hands are somewhat tied. We -- the financial portions of the agreement are under confidential agreement, so we can't disclose.

But what I would say is if you remember what we talked about with Thermo Fisher Scientific, it with a new gene therapy segment. So you can look at our queue and see how much is rolling through in that segment and that will give you an idea for what the Thermo aspect is, but its multiple quarters of each that deal. And what we like about these type of business development deals, obviously, they're good margin for us but they're also similar to the subscription, a nice, stable recurring revenue base for us and it establish deep roots partnerships with each of those customers for longer-term relationships as well. In terms of milestones for -- they're different for each deal there, obviously.

But typically, the first couple of deals have a little bit less milestones and then the latter part would have more. So in the near term, I'd say there's very little of the milestone. It's more of an upside. We typically treat the -- prefer milestones in lieu of longer-term royalties just because of the greater certainty of getting those over a shorter period of time.

But as we look into this year, where the projects are, we're not embedding the milestones in there. They'll be a little bit later out in 2021.

Julia Kan

Got it. That's helpful. And then regarding the subscription versus capex mix, obviously, 30% subscription that you see this quarter. Just wondering what kind of mix you are expecting for the second half and going forward? I know you previously mentioned that you'll probably see -- expect to see a higher uptick in subscription mix in 4Q once it's got more time on the market.

Should we be thinking about maybe it can reach a 50-50 mix or what was the right ballpark to think about?

Kurt Wood -- Chief Financial Officer

Yes. We're not giving the mix between the two right now. It's still relatively new. It's been out for just about a quarter.

We think we made good progress with getting three orders placed in Q2, and then obviously shipped in Q3. We'll continue to give you updates throughout the -- this year on bookings that we do there and provide you color if that materializes. But our guidance range of greater than 45%, obviously, includes what we think is going to be placed on the subscription TechAccess model as well.

Julia Kan

Gotcha. And then maybe on a high level, taking a step back, I wonder how you guys are comparing kind of the pros and cons of the subscription model versus a center of excellence model or a BioFoundry service model. And just in the long term, how should we think about the distribution of your potential customers across these different monetization models, right? The current way I'm thinking about is you probably have partnership model for the high-volume or marquee customers, subscription model for kind of the low-volume users and then capital placement for those in the middle. Is that the right way to think about it? And based on your current customer funnel and conversations, where are you seeing the greatest appetite in terms of the different models? I'm particularly interested about kind of the partnership versus capital sale model.

Like do you see one significantly increasing versus the other in the long term?

Eric Hobbs -- Chief Executive Officer

Yes. So it's a great question, Julia. In regards -- so let's talk high level, right? When we think about the biology markets, right, there -- it starts in an R&D space. It moves in then to a discovery development space and then moves back out into clinical trials, manufacturing, et c.

So if we think about that continuum for a moment, right? On the upfront side, there is a very large market, a very high-volume business associated with the R&D efforts, the academic institutions and translational centers around the world. So there's a very high volume there. Then you get into discovery and development, which represents a funnel, right? You start with a lot of candidates that come in. They get whittled down, whittled down, whittled down until you find the one.

And then you enter into these clinical trials where you start scaling up volume in terms of manufacturing and quality control and then back into the end. And for Berkeley Lights, as we look at it, and that's -- that ties back into kind of the three items that I mentioned in the prepared remarks and I referred to in terms of -- there is a large, very large multibillion-dollar per year revenue opportunity in high-throughput functional screening and -- that exists in a high-volume platform business in the early stage of that pipeline that I talked about and a very high-value service business that exists in the middle. And then it comes back to a high-volume platform business in manufacturing and QA/QC, right? And so, we see all three components, the high-volume platform business -- the high-value service business, which then generates revenue, which leads to revenue for Berkeley Lights -- for biological assets that Berkeley Lights has some level of ownership in. All are critically important.

Now the question is what is the transition and how you go as a function of time? And of course, as you've seen through the history of Berkeley Lights, we started in the platform business. The platform business really through these R&D partnerships, we're able to understand the reach and develop the meaningful workflows and applications that can execute on our platform that it further increases the value of our platform and the reach of our platform into the R&D activities and into discovery and development and its manufacturing in all of these different markets. And I think -- a standard question, well, which one is most important? Well, they're all important at different time points and right now, building up the workflow, platform capabilities and partnering with additional customers in the R&D space are critically important, and those lead to the downstream revenue. So, all of these folds into our overall strategy in regards to how we see things.

I think what you can see right now, what are the -- what is the market saying in regards to the value of Berkeley Lights platform? With the Thermal deal and the Bayer deal, I think you're seeing an increasing appetite for the level of capabilities that Berkeley Lights can perform that other platforms just can't perform. And so, as we continue to further develop our business development team, we'll see more of these partnerships, which will add additional TAM and SAM to our overall opportunity, which will lead to that future, multibillion-dollar revenue opportunity. Does that help provide some color to the question, Julia?

Julia Kan

Yes, very helpful. Thank you.

Kurt Wood -- Chief Financial Officer

Yes. And, Julia, I would say kind of our go-to-market strategy when you look at a capital sale program, a subscription-type program, and then now what we're announcing here is that high throughput functional screening service business, they're all key pillars of it. And I think that service business is pretty exciting is what we're doing is we're innovating new things with customers and we're having that roll through what we describe as our BioFoundry, where we have access to the data and everything else. And then ultimately, as we've always said, there will be some workflows that we deem so valuable that we've created that we will only offer as a service or only offer as a subscription because it's the best way for us to monetize the value of the workflow that comes off of that.

You just simply can't do that in a capex sale. So I think when you look at the data that comes off that as well as our ability to control a greater portion of the economics form the value that we're creating on that. The service business is a great foothold into that, and we're pretty excited with that and couldn't be more excited to be working with Bayer on those as well.

Julia Kan

Got it. Thanks for all the color.

Operator

Our next question comes from Mark Massaro with BTIG.

Mark Massaro -- BTIG -- Analyst

Hey, guys. Thanks so much for taking the question. I had a chance to speak with one of your customers on the cell line development side. And I'm curious if you can just comment about the cell line development 2.1 workflow.

Anyway, one of the customers indicated that their workflow went from about three months or more to about one week using your platform. I guess can you just speak to how the new workflow is going? And maybe just talk about how -- whether or not this is sort of indicative of other customers you're working with?

Eric Hobbs -- Chief Executive Officer

Yes. Mark, I'll jump in here. Thanks for the question and great to talk to you again. The -- in the cell line development market, this is pretty typical, a few months to one week.

And so what -- where really the savings are is leveraging the micro fluid capabilities with our assays. But actually, there's additional savings in there that have to do with the cloning and clonality that we provide. So the cell line development 2.0 and 2.1 continue to move forward. Our customers continue to leverage them and transition everybody -- most of our customers have transitioned to -- from cell line development 1.0 to 2.0 at this time.

Mark Massaro -- BTIG -- Analyst

Terrific. And I guess I didn't hear you guys talk about your development work, specifically in syn-bio and your work with Ginkgo. Can you just talk about workflow development there in yeast and bacteria, specifically E.coli? Are you still on track to deliver workflows to Ginkgo likely later this year?

Eric Hobbs -- Chief Executive Officer

Yes. So, we're still on track. We're still on track and the tech teams are, of course, in contact and working on how do we transfer workflows developed here to workflows developed there. We continue to make great progress with the Ginkgo team, and it's a great partnership.

And in this world, right, we're just -- we're super happy to be working with one of the most innovative and forward-looking companies syn-bio [Inaudible] works and we're happy to leverage our high-throughput functional screening to help them not only accelerate their overall throughput but reduce the overall cost to do these screenings, which were developed in antibody therapeutics market, but moving the basic capability into the syn-bio space.

Mark Massaro -- BTIG -- Analyst

OK. And maybe a clarification question, Eric. Did I hear that the viral vector deal is only available on a subscription model? So I guess, can you just maybe help us think about what workflows are available subscription-only versus through taking a Beacon for Lightning?

Eric Hobbs -- Chief Executive Officer

It -- yes, so it's a bit of a transition. As we start to understand -- and Kurt alluded to this earlier, right, is we're understanding the value we create, right? There's a significant value in creating a stable cell line for viral vector manufacturing. And that workflow, I can't sell a Beacon for a high enough price to actually capture the value that's created. And so the business model is that this will, therefore, only be available through subscription.

And there will be other workflows, which will only be available in our BioFoundry. And so, as we continue to add high-value capabilities, we will limit access to some of these things do, whether it's just BioFoundry or just subscription. And that's how we'll take those to market.

Mark Massaro -- BTIG -- Analyst

Excellent. And then maybe last one for me. I guess another clarification question. This is the first time you've done a deal with a company in the ag sector.

Obviously, I'm talking about Bayer. Can you talk about whether or not that consists of capital placements of either the Beacon or the Lightning or if that is also sort of in a subscription model? And then -- so I think you already answered my question on Thermo. It sounds like that is on the subscription model but I think it would be helpful. I know this question has been asked, but as we think about your business over the next year or two, how should we think about the mix between a subscription model versus capital placements and workflows?

Kurt Wood -- Chief Financial Officer

Yes. Thank you. When we --

Eric Hobbs -- Chief Executive Officer

Yes, so we have -- go ahead, Kurt.

Kurt Wood -- Chief Financial Officer

Go ahead. Go ahead, Eric.

Eric Hobbs -- Chief Executive Officer

OK. On the platform places versus service, right, question, this is an R&D service engagement, meaning that Bayer will send us stuff. We will perform high -- the high-throughput functional screening here. We will send them information and stuff back.

So that is on the service side of things, Mark. And, Kurt, you were going to jump in on the other side of the question?

Kurt Wood -- Chief Financial Officer

I would just say the same thing. They're not going to have beacons running at their location. They're going to be utilizing our BioFoundry and we're providing the service that Eric described there.

Mark Massaro -- BTIG -- Analyst

OK. Thanks, guys. Congrats on the quarter.

Kurt Wood -- Chief Financial Officer

Thank you.

Operator

Our next question comes from Paul Knight with KeyBanc.

Paul Knight -- KeyBanc Capital Markets -- Analyst

Hey, guys. Could you talk where you are with your business development team? I know the goal was to add this year, but could you frame that up, please?

Kurt Wood -- Chief Financial Officer

Yes. We're obviously not disclosing the exact number in each segment, but we've more than doubled that team in size and you can see we've made some tremendous progress in terms of -- in this year, signing Thermo and signing Bayer. And you could see that in the business development and partnership line, where that went from about $100,000 in Q2 of last year to $3.9 million in Q2 of this year.

Paul Knight -- KeyBanc Capital Markets -- Analyst

And I guess you expect to be done with that, what, mid-year?

Kurt Wood -- Chief Financial Officer

We look at -- when you say done with -- in terms of growing the team or --

Paul Knight -- KeyBanc Capital Markets -- Analyst

Business development team, yes.

Kurt Wood -- Chief Financial Officer

I think we're always looking for talent. And to the extent that we bring more people on, and we can cultivate new business and new partnerships, then -- and then there's the partnership alliance thereafter, we'll continue to add as the pipeline would see fit there. So I think we'll always be looking for good talent at that standpoint. But the team is reaching the critical math, if that's what you're asking.

Paul Knight -- KeyBanc Capital Markets -- Analyst

Yes. Yes. And the installed base is what right now?

Kurt Wood -- Chief Financial Officer

We're at 92% at the end of Q2, and that does not include the three subscriptions that we took orders for but had not yet shipped until early this quarter in Q3.

Paul Knight -- KeyBanc Capital Markets -- Analyst

Got it. It doesn't seem like any units are coming offline at customer locations.

Kurt Wood -- Chief Financial Officer

That's correct. We're seeing -- customers are utilizing the tools, and they have not decommissioned them.

Paul Knight -- KeyBanc Capital Markets -- Analyst

Yes, kind of historical paces of pull-through. Is that correct, Eric?

Kurt Wood -- Chief Financial Officer

Correct.

Paul Knight -- KeyBanc Capital Markets -- Analyst

OK. Thank you.

Operator

And I'm not showing any further questions at this time. I'd like to turn the call back over to our host.

Kurt Wood -- Chief Financial Officer

OK. Appreciate everybody for joining the call, and we'll talk to you next quarter at this time. Thank you.

Eric Hobbs -- Chief Executive Officer

Thanks so much.

Operator

[Operator signoff]

Duration: 47 minutes

Call participants:

Carrie Mendivil -- Investor Relations

Eric Hobbs -- Chief Executive Officer

Kurt Wood -- Chief Financial Officer

Doug Schenkel -- Cowen and Company -- Analyst

Brian Weinstein -- William Blair & Company -- Analyst

Tejas Savant -- Morgan Stanley -- Analyst

Julia Kan

Mark Massaro -- BTIG -- Analyst

Paul Knight -- KeyBanc Capital Markets -- Analyst

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