Investing in Synthetic Biology Stocks and Companies
Saint Steve Jobs once said “I think the biggest innovations of the twenty-first century will be the intersection of biology and technology.” That’s a great way to describe synthetic biology, perhaps the most disruptive technology mankind will ever create. Since all living things have DNA in their cells, we can do unimaginable things if we can:
- Read the DNA – (we can, thanks to Illumina)
- Understand the DNA – (machine learning helps here)
- Edit the DNA (gene editing helps here)
The last bullet point refers to synthetic biology. If you think about it, the name is quite intuitive. You might paraphrase the term to be “fake life,” except what we’re able to create isn’t fake, and it’s definitely alive.
It’s pretty easy to start thinking up some use cases for synthetic biology. We can begin to mimic nature in our products, something called biomimetics. We’re now able to create fake meat, fake dairy, fake wine, apples that don’t brown, clothes made out of a spider’s silk, cherries with no pits, and even genetic circuits. We’re now using deep learning to understand what DNA does. One company is actually using DNA to reconstruct what people look like to solve crimes. At least nine companies are looking at how we might store data on DNA. (The below photo will give you some idea of just how much data can be stored within a single strand of DNA.)
It’s no surprise that venture capital firms are pouring money into synthetic biology startups in hopes of disrupting billion-dollar markets with more efficient ways to produce chemicals or better ways to grow food. (For example, Solugen is using genetically modified enzymes to produce hydrogen peroxide.) In many cases, companies are using tools like gene editing to manipulate DNA at the nano level and achieve desired properties. Let’s talk a bit about gene editing, a tool that lets us create genomically recoded organisms.
The Potential of Gene Editing
The emergence of gene-editing tools like CRISPR, TALENs, and zinc finger nuclease provide companies with a myriad of ways to edit the DNA of organisms so that they can do useful things like cure diseases. As we go along, companies are also coming up with new ways to edit genes. There may not be one best technology for gene editing since different use cases might lend themselves to different methods. Companies like Synthorx (acquired by Sanofi for $2.5 billion) are actually expanding the genetic alphabet so we can create synthetic DNA using more than just four letters.
In addition to all the fake-food startups popping up, initial areas of focus for gene-editing applications seem to be in healthcare, agriculture, and chemicals. Since there is so much going on in the world of gene editing for retail investors, we put together a Guide to Investing in Gene Editing Stocks which covers the topic of gene editing in a whole lot more depth. This is actually a good segue into talking about the mixed bag of synthetic biology stocks we’ve come across over our years of research.
Investing in Synthetic Biology Stocks
WTF Happened to Synthetic Biology Stocks? we asked back in 2017. Several years prior to that, we identified seven synthetic biology stocks that we believed provided some exposure to this theme. It didn’t exactly pan out as we expected. Let’s start with a story about that company that seemed the most promising among the bunch – Intrexon.
A Story About Intrexon
Founded in 1998, Intrexon claimed to be a leader in synthetic biology. It was a compelling story. The man at the helm was billionaire Randal Kirk who had amassed his wealth making successful biotech investments. In 2013, we began following Intrexon around the time of their IPO. Enamored as we were about the potential of synthetic biology, it was easy to see the appeal of a company that had an “Intel-inside” business model which they coined exclusive channel collaborations (ECCs).
In exchange for use of their intellectual property, they would often take an equity stake in the companies that used their technology. They also made some acquisitions – Oxitec that was genetically modifying insects, ActoGeniX that was engineering therapeutic proteins, and Trans Ova Genetics that was providing animal genetic services including the cloning of pets. In 2015, Intrexon and Ziopharm announced a deal with Merck to develop cancer immunotherapy (CAR-T) products. It seemed like really big things were happening, but that wasn’t the case.
Over time, Intrexon’s stock price kept dropping, and the promised revenues never transpired. People started asking questions, and one research firm claimed that Intrexon’s “self-proclaimed Google-of-life-sciences technology platform is an overhyped, undifferentiated collection of commodity and failed products.” Around 2017, we gave up hope on this dismally performing stock. The icing on the cake was the below comment made in one of their earnings calls:
As previously detailed, we expect our sales from just apple slices alone to reach 20 million in 2020, 100 million in 2022 and $500 million in 2026 representing a CAGR of 70% during that time frame.Intrexon 2017 Earnings Call Transcript
We didn’t sign up for a company that now thinks the way forward is selling apple slices.
Today, Intrexon is a shell of its former self, going under the new name of Precigen (PGEN). The company now “develops gene and cell therapies to target the diseases in immuno-oncology, autoimmune disorders, and infections.” Unfortunately for investors, plenty of other synthetic biology stocks went that same path.
The Lackluster Performance of Synthetic Biology Stocks
In 2015, we wrote a piece on 3 of Synthetic Biology’s Failing Biofuel Stocks – Solazyme, Gevo, and Amyris. Since then, not much has happened for the first two names. Solazyme changed their name to TerraVia and went bankrupt in 2017, and Gevo has flat revenues and a market cap of just $17 million. As for Amyris (AMRS), they have meaningful revenues but they’re burning through a whole lot of cash. We took a second look at the company in a piece titled Amyris Stock – Producing Ingredients Using Synbio, and more recently looked at how Amyris spent 2021 pivoting into beauty products.
Other synthetic biology stocks that haven’t fared well include BioAmber which was trying to produce bio-based succinic acid by fermenting sugars. That went nowhere, as they officially ceased operations in 2018 after going bankrupt.
Another company struggling to get traction is Yield10 Bioscience (YTEN), formerly known as Metabolix. They’ve moved away from biopolymers and into crop technologies to improve yield for farming. With a market cap of $15.5 million, YTEN still can’t show revenue growth with losses that continue to grow by the year.
Speaking of growing losses, Synlogic is a synthetic biology stock that’s recently been going through a transition on their way to becoming a leading provider of “synthetic biotics,” a novel class of living medicines. Their basic financials show a company that continues to burn cash with minimal revenues.
For an exciting theme like synthetic biology, we want to see revenues as evidence of traction. None of this “build it and they will come” stuff. (We’ve already learned our lesson from what happened with Intrexon.)
Another company slowly trodding up the revenue ladder while reducing costs is Switzerland’s Evolva Holdings which “discovers, develops, and commercializes ingredients for use in food, nutrition, personal healthcare, agriculture, and other sectors,” using microbial fermentation. With just over $10 million in revenues last year, they don’t seem to be realizing the sort of growth one would expect from industry-disrupting technology platform.
It isn’t just publicly traded synthetic biology companies that have failed, plenty of startups have as well. For example, Joule was supposedly going to bring us algae that sweated biofuels. After burning through $225 million, the company closed its doors in 2017.
Where there is rain you’ll also find rainbows. One of these is Codexis (CDXS), a company that’s working on protein engineering. They’ve more than tripled their market cap since we last wrote about how they were pivoting away from biofuels and into pharmaceuticals. The problem is that Pfizer’s temporary COVID needs are fueling most of their growth.
A New Breed of Synthetic Biology Companies
One of the most exciting areas of synthetic biology to watch is the emergence of biological factories that are now producing things we need on demand. (Wasn’t 3D printing supposed to do that?) In 2016, we wrote about 3 Companies Building Nanorobot Factories – Zymergen, Ginkgo Bioworks, and Synthace. Today, Ginkgo Bioworks has taken in over $790 million in funding and is now valued at $4.2 billion. Their biological factories use automation and other advanced tools to rapidly design, build, and test organisms until they meet certain specifications. Zymergen also had an IPO, something we covered in an article titled Zymergen Stock is About Manufacturing with Nature.
With a CEO who thinks that society should stop manufacturing and just grow everything, Ginkgo Bioworks is probably one of the most exciting synthetic biology startups out there. Along with that excitement comes risk, something we talked about in our piece titled Ginkgo Bioworks Stock is a Risky Bet on Synbio. That risk increased significantly when Ginkgo was assaulted by short-seller Scorpion Capital, something we covered in two pieces titled Ginkgo Bioworks Stock Just Got a Whole Lot Riskier and Ginkgo Bioworks Responds to Short Seller Report. The latest? Why Ginkgo Bioworks Stock Soared Yesterday
The same can be said for Zymergen, which has now produced over 600,000 tons of product using biomanufacturing. (If you have kids, you may want to push them towards majoring in biochemistry.) There are now multiple companies building some of the most amazing machines known to man, designer proteins, which have seemingly limitless applications across all industries. (The study of proteins is known as proteomics.)
Another company that’s equally exciting is Twist Bioscience, a publicly traded firm that had their IPO in 2018. Simply put, Twist Bioscience leverages technology found in the semiconductor industry to create synthetic DNA at a much cheaper cost than anyone else at scale. (Gen9 was another company that was producing synthetic DNA, but they were acquired by Ginkgo Bioworks.) Twist’s biggest growth segment right now is next generation sequencing tools.
We’re taking the lazy route here and using two quotes from the company to demonstrate just how powerful their platform is. The first quote on performance:
Our silicon-based chip technology is able to increase DNA production by a factor of 9,600 on a footprint similar to that of traditional DNA synthesis methods. Also, it significantly lowers the volume of required reagents, specifically the most expensive reagent by a factor of 1,000,000, and improves the precision of the synthesis process relative to legacy methods. This enables us to produce high-quality synthetic DNA on a much larger scale and at lower cost than competitors.Credit: Twist Bioscience S-1
And a second quote on their competitors:
We are also an original equipment manufacturer, or OEM, of synthetic DNA to four synthetic DNA manufacturers that also compete with us, which we believe is a strong demonstration of the superiority of our platform.Credit: Twist Bioscience S-1
Twist Bioscience isn’t the only startup synthesizing DNA. A startup called DNA Script uses enzymes to synthesize DNA, and they’ve developed a DNA printer that allows researchers to do the work in their own labs. There’s even a desktop DNA printer being sold, something we covered in our piece on Codex DNA Stock – A Desktop DNA Factory. These printers could compete with Twist Bioscience, and investors should also be aware of the plethora of accusations made in Scorpion Capital’s short report targeting TWST stock.
He may not be as big a household name as your average Kardashian, but Dr. John Craig Venter is a man whose many accomplishments include being the first person to sequence the human genome and the first person to create a self-replicating synthetic life form (it carries around its own email address in its DNA among other things). He’s also the co-founder of Synthetic Genomics Inc. (SGI), a startup that designs and builds biological systems. Some of the companies SGI is working with include:
The first company on the above list, United Therapeutics (UTHR), invested $100 million in Synthetic Genomics. Unfortunately, that position can no longer be found on their books.
Similar to what Intrexon had hoped to do, SGI plans to create synthetic life forms that can transform industries. Unfortunately, the company has been rather tight-lipped on their progress, not issuing any press releases for close to two years now. Given the pedigree of the founder (he’s since stepped away from the company), we have high hopes for this startup and wish they would have an IPO soon so we could get a peek at their inner workings.
As with all disruptive technologies, opportunities for retail investors are a mixed bag as the industry tries to figure out what works. This can be seen in all the pivots that have happened and promising business plans that led to bankruptcies. It’s companies like Twist Bioscience and Ginkgo Bioworks that provide evidence of just how big synbio really is.
Programming without a debugger, manufacturing without CAD, and construction without cranes.Credit: Ginkgo Bioworks
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