Ginkgo Bioworks Acquires Gen9 – What That Means
As each day passes, mankind seems to get dumber and dumber. Squabbling about petty political disagreements, idolizing talent-less “celebrities”, allowing stock promotion scams to run rampant, eating gluten-free food, trying to keep up with the Kardashians, chasing around cartoon characters, ruining the planet – the list of stupid things we occupy our time with just keeps growing and growing. The only thing we have going for us right now is that technology is starting to do such amazing things that it defies the imagination. As Peter Diamandis said recently, 99.99% of people don’t realize what we’re on the cusp of. It’s not just the 4th Industrial Revolution where a robot takes your job, there’s a lot more to it than that.
Take synthetic biology as an example. Scientists have actually figured out how to manipulate DNA now and they’re creating new life forms that do things we tell them to do. Remember a firm we talked about called Ginkgo Bioworks? Ginkgo was just one of three firms we highlighted that are essentially building nanobot factories that will produce microscopic biological machines programmed to make things more efficient and effective.
“programming without a debugger, manufacturing without CAD, and construction without cranes”
Ginkgo is dissecting organisms and putting them back together to make biological nanobots that perform functions for their creator. The speed at which they are moving is incredible given how quickly genomics technology is advancing. Just look at this hockey stick which essentially shows us the speed at which they can design new nanobots:
Synthetic biology has gotten off to a rough start for investors with many of the stocks cratering alongside a few wins like Intrexon. Ginkgo represents the idea that synthetic biology investors have wanted to invest in all along so we’re keeping a close eye on them. Just last week, they acquired a company called Gen9. Since we already know what Ginkgo Bioworks was getting up to before the acquisition, let’s try to better understand the “what” and “why” of the Gen9 acquisition.
Founded in 2005, Silicon Valley startup Gen9 had taken in almost $50 million in funding from investors that included Agilent Technologies and Draper Fisher Jurvetson (DFJ). Why is the name DFJ particularly interesting here? It’s not just because of their reputation, it’s also because they’re an investor in Zymergen which is a direct competitor of Ginkgo Bioworks. DFJ provided the seed funding for Gen9 which then took in the lion’s share of their funding from $15.5 billion medical instrument company Agilent Technologies (NYSE:A). It wasn’t just funding that Gen9 was looking for out of the deal with Agilent. Here’s an excerpt from the press release issued back in 2013 by Agilent:
As part of this relationship, Gen9 will incorporate Agilent’s Oligonucleotide Library Synthesis (OLS) technology into its manufacturing process to allow for the large-scale creation of pathway constructs and DNA libraries. Agilent’s OLS technology is the industry-leading platform for generating high-accuracy oligos. Today, Gen9 is manufacturing and shipping double-stranded GeneBits(tm) DNA constructs, or gene fragments from 500 to 1,024 base pairs long.
This investment also helped validate the initial seed investment by DFJ (not to be confused with DJT) which, let’s be frank here, had to be a complete no-brainer given the pedigree of one co-founder who is none other than George Church himself.
That’s right. George Church, the synthetic biology pioneer who has co-founded 9 different companies (including ones we’ve highlighted before like Veritas Genetics, Editas, Joule, and Knome) and who has also remarked that “of all the researchers who might deserve more credit for developing CRISPR, he’s at the top of the list“. If George Church tells you he has a great idea, you throw money at him and ask questions later, kind of like what we see people doing all the time with penny stocks.
So what exactly was Gen9 doing with all that cash? They were using it to make synthetic DNA. If you remember from our earlier article on Synthego, gene editing involves using a set of tools to cut a strand of DNA and then insert your own “genetic code” in the form of DNA strands. Who makes these strands? There are two main players in this space. The first is Gen9 and the second is a company we profiled before called “Twist Bioscience“. Last year when Ginkgo Bioworks closed their $100 million in financing, they planned to use that funding to buy 600 million base pairs of manufactured DNA which represents about 60% of all synthetic DNA sold in 2015. Gen9 was expected to supply half of that order and now Ginkgo has acquired them.
What this acquisition represents is a form of vertical integration for Ginkgo Bioworks. Why have Gen9 supply your competitor(s) or any other client for that matter when you’re already purchasing a ridiculous amount of their synthetic DNA, presumably at a meaningful markup as well? Lowering costs and reducing risk at the same time seems like a good move. One wonders if Zymergen won’t follow suit and snap up Twist Bioscience. With backing from Softbank, cash shouldn’t be an issue should Zymergen want to do some vertical integration of their own. With DFJ having backed Gen9 and Zymergen, the decision to sell Gen9 has to be some part of a larger master plan.
Investors need to be paying very close attention to this space because it may be much larger than anyone can possibly imagine. Sure, we had a false start before but now it may be for real. As the Ginkgo Bioworks CEO said to Forbes in an interview last year, “At the end of the day, as a society, we need to stop manufacturing everything and grow everything“. We need to spend more time pondering that powerful statement and less time wondering why Kim Kardashian ordered chicken fajitas for lunch yesterday.
Here at Nanalyze, we complement our tech investments with a portfolio of 30 dividend growth stocks that pay us increasing income every year. Learn how to build your own dividend growth stock portfolio in our report on Quantigence - A Dividend Growth Investing Strategy - freely available to Nanalyze Premium subscribers.