Investing — Stocks — Biotechnology
The Reasons Why You Should Consider Investing in Synthetic Biology
Discover 3 stock ideas to bet on the future of bioindustries
Some people compare synthetic biology to the internet revolution. I strongly believe that by investing in synthetic biology, I’m betting on the next step in the development of industrial biotechnology! With this article, you will learn about this fascinating market segment and discover three publicly traded companies that already play a major role in this sector.
Cells and DNA in the Service of Mankind, a Disruptive Promise for Modern Industries
Synthetic biology is based on two principles:
- Every cell has a code. You might know that we use “0” and “1” symbols to write a binary code readable by computers. Well, each living being (at least, according to our conception of life) has a four-letter code (A, C, T and G), called DNA, that we can write and read by DNA synthesis and sequencing, respectively.
- Each cell carries a complex molecular machine able to understand this code to transform it into molecules (proteins, messenger RNA, etc.). It’s a tried and tested system: the fact that you’re reading me now is proof of that.
In a nutshell, synthetic biology aims to write synthetic DNA, put it in a cell factory, and produce something useful.
Synthetic biology applications are numerous, from chemistry to agriculture or computer science
Indeed, synthetic biology opens up a whole host of future possibilities for biotech sciences and economics. By combining molecular systems, computer science tools and engineering, scientists dare to push the boundaries of what’s possible.
Synthetic biology can help address key challenges facing the planet and its population. Research in synthetic biology may lead to new things such as programmed cells that self-assemble at the sites of disease to repair damage.
— Craig Venter, an American biotechnologist and businessman.
Imagine producing biofuels using industrial waste gases. Improving or even replacing traditional chemistry pathways by creating brand-new ones. Or, establishing new medical diagnostics. Imagination becomes a powerful driver of innovation.
My favorite concept is about storing data in DNA. Breakthroughs in DNA sequencing and synthesis allow using DNA to store digital information. In 2019, Catalog successfully stored all the content of Wikipedia’s English-language version onto DNA.
DNA has two big advantages compared to traditional hard disk drives:
- It’s very dense: then, it can store a lot of information;
- It’s highly resistant: it won’t be corrupted or damaged after a few decades. Just think about DNA in fossils!
Seeing the yearly growth of digital data generated around the world, it’s easy to understand why DNA storage gains traction over the years!
A Market With Attractive, Albeit Hypothetical, Financial Projections
The synthetic biology market roughly revolves around three axes:
- Sales of synthetic compounds (synthetic DNA, enzymes, etc.);
- Sales of technological equipment (sequencers, synthesizers, etc.);
- Services (synthesis on demand, outsourced R&D, maintenance, etc.).
Nonetheless, synthetic biology relies on a central element, comparable to digital data in computer science. This basic unit of synthetic biology is the “nucleotide base pair.” Let’s call it a “letter.”
By assembling letters one after the other, we create sequences containing the information. Put it in a cell, and it will decode it. Ultimately, this tiny factory starts to produce a compound of interest.
In 2000, synthesizing DNA cost USD 10 per letter. A gene easily counting 1000 letters, synthesizing a full gene was then expensive! Fortunately, by 2010 this price had fallen below USD 1, and now you can write a letter for 0.1-0.2 USD. Even less in case of large volumes.
Why this cost per letter matters? Because it makes synthetic biology more accessible! Remember that democratize DNA will lead to more business models based on synthetic biology.
In a recent study from Research And Markets, the global market for synthetic biology was estimated at US$6.4 billion in 2020. It’s projected to reach a revised size of US$28.8 Billion by 2026, growing at a compound annual growth rate (CAGR) of 28.1% over the analysis period.
Geographically, the United States remains the main player in synthetic biology, since it currently represents a global market share of 39.8%, with an estimated market of 3.3 billion dollars in 2021. It’s well known that the United States is a long-standing and significant scientific contributor to R&D in the fields of pharmaceuticals and biotechnology.
Three Stock Ideas for Investing in Synthetic Biology
It is no coincidence that renowned investors are investing in synthetic biology companies, such as Bill Gates or Cathy Wood from ARK Invest. Do you want to do the same?
Here are three publicly traded stocks that play key roles in the synthetic biology ecosystem. This selection is purely arbitrary. Here is a long and very exhaustive list to embrace the sector.
Amyris (NASDAQ: AMRS)
I’ll start with Amyris because its business is easy to understand for everyone. Indeed, it’s close to the traditional chemical industry.
Amyris was founded in 2003 to develop a new molecule against malaria. Since then, the company has specialized in the production of various specialties and performance chemicals. These are used as base ingredients in many products and processes: adhesives, cleaners, construction chemicals, perfumes, paints, automotive polymers, synthetic textiles, and more. In short, everything that makes up our modern life.
To date, Amyris has created and marketed 13 sustainable ingredients that are used by hundreds of millions of people, in products made by more than 3,000 leading global brands. The product line is mainly focused on the beauty products business because that’s where Amyris achieved its first real success: synthetic squalene. Companies such as Givaudan, L’Oréal and Estée Lauder are among Amyris’ clients.
Ginkgo Bioworks (NYSE: DNA)
Here is the “hottest” company of the selection! Ginkgo Bioworks, America’s first synthetic biology unicorn, went public in September 2021 through a merger with a SPAC, Soaring Eagle Acquisition. Its ticker became “DNA,” a simple but effective way to shine!
Ginkgo Bioworks specializes in the use of genetic engineering to produce bacteria with industrial applications, on behalf of clients from various sectors. If I want to simplify by making an eloquent analogy, I would say that Ginkgo Bioworks is trying to become the Amazon AWS of synthetic biology. You will understand why.
Its business model revolves around three axes:
- R&D: seeking to identify a molecule, process or strain with commercial value.
- Engineering: by reprogramming an organism to adapt it to the discoveries generated by step 1.
- Manufacturing: by optimizing and scaling up the modified organism in step 2.
It’s a relatively simple and agile model, in the sense that it can be declined in many ways according to the customer’s needs. Also, by focusing on stages 1 and 2, Ginkgo leaves stage 3 to their customers; a smart way to offload industrial, resource-hungry manufacturing, riskier and more complicated.
Ginkgo Bioworks also offers a large library of DNA sequences and other elements used in synthetic biology, a library in which any customer can pick bits up easily, in exchange for payment.
Thanks to its expertise, Ginkgo offers very competitive development and engineering fees for its clientele, much like a traditional engineering consulting firm. This is where I come back with the Amazon AWS analogy.
Thanks to its skills, technology and competitive costs, a new synthetic biology company should rather outsource R&D and engineering steps to Ginkgo, and avoid carrying out everything in-house from scratch. It’s the same reason that drives so many companies to use Amazon AWS cloud solutions, rather than building a cloud platform in-house.
Twist Biosciences (NASDAQ: TWST)
Twist Biosciences is a leading player in the synthetic biology industry. Its business model is based on its proprietary DNA synthesis platform.
I know you’re all smart readers. So, you should have understood that DNA will be a basic element for many companies and projects in synthetic biology. Simply put: without DNA, no synthetic biology. It’s a bit like wanting to get into pottery, without having a clay supplier to work with. Here, the clay is the DNA. And the clay supplier… Twist Biosciences! The company offers DNA as a Service, to draw a parallel with the software industry.
Its platform, a real DNA factory, allows to print high-density synthetic DNA on silicon wafers: a million pieces of DNA at once. This is what allows Twist to reduce the cost of DNA synthesis, as low as $0.02 per letter.
High speed, high volume, low cost. Everything you need to set up a competitive advantage, right? Twist Biosciences has many businesses, including a functional and growing commercial synthesis segment. The company also plans to play a leading role in DNA data storage.
I chose to invest in Twist Biosciences because the company is really at the base of the synthetic biology value chain. From my point of view, it’s really the equivalent of a chip manufacturer, to make the analogy with semiconductors. It could therefore take full advantage of the synthetic biology market growth, especially regarding the increasing demand for synthetic DNA.
We’re Intel and Ginkgo is Microsoft
—Emily Leproust, CEO and Founder of Twist Bioscience.
Embrace the Future of Biotechnology
Synthetic biology is a nascent industry. Starting with biotechnology, it’s expected to spread to many other application sectors over the years, as economic opportunities appear. The synthetic biology market should benefit greatly from falling DNA sequencing and synthesis costs.
However, it still remains fairly confidential. We’re clearly in an early stage of development, and therefore highly risky. But, well, you know: “high risk, high reward.” Like many innovative technologies, the disruptive potential of synthetic biology will only be fully appreciated within a long-term investment horizon.
After all, as Craig Venter and Daniel Cohen wrote:
If the 20th century was the century of physics, the 21st century will be the century of biology.
I’m Raphaël, founder and editor-in-chief of Investiforum.fr, a financial website for French-speaking private investors. Thanks for reading! Don’t hesite to follow me on Twitter and Polywork.
This article is for educational and entertainment purposes only and shouldn’t be considered as financial or legal advice. Not all information will be accurate, but all the data is sourced. Consult a professional before making any significant financial decisions. This article shouldn’t be seen as an incentive to buy or sell any of the securities mentioned therein. I have a beneficial long position in the shares of TWST through stock ownership. I have no plans to buy/sell any security mentioned in the article in the three following days.
