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    $450 mln$1.3 bn$4.4 bn

    Ginkgo Bioworks

    Synthetic Biology
    OTC
    Medium risk

    Valuation in 2016-2019

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    Investment Idea Details
    About the company

    Ginkgo Bioworks is a new lab that uses robotic systems to make an assembly line for churning out exotic life-forms. The company experiments with DNA and programs cells to create custom-made organisms for their clients. The synthetic organisms manufactured by Ginkgo Bioworks are used in a wide range of industrial and pharmaceutical applications.

    Ginkgo builds on the premise of replacing technology with biology. Modified organisms from Ginkgo Bioworks streamline the production of perfumes, beverages, pesticides, and laundry detergent. For example, the extraction of rose oil from rose petals is expensive, but if you add the right genes to a yeast cell, you can get the real oil.

    Ginkgo Bioworks outsources the manufacture of synthetic DNA from several biotechs. Building a custom-made organism with the right capabilities on a grand scale requires huge resources and rigorous lab testing, and that’s what Ginkgo actually does.

    Founded by scientists from MIT in 2009, Ginkgo Bioworks has become a leader in synthetic biology with industrial applications. The company built the most advanced compiler and debugger of genetic code for accelerated engineering of new organisms. In the future Ginkgo Bioworks plans to create a biological platform to produce any compound that can be synthesized in a living organism.

    Market Opportunities

    A September 2020 Grounds Alerts report says that the global synthetic biology market is valued at $11 billion in 2018 and is expected to reach $55 billion by the end of 2025, at a CAGR of 24 % over the next five years.

    For a long time scientists have been seeking to optimize the genetic engineering process. But Ginkgo Bioworks is the one biotech that actually succeeded in bulk experimentation. The company applies a rigorous design-build-test cycle and extreme automation of routine tasks to create organisms in a few months instead of years, if not decades.

    Ginkgo Bioworks’ service enabled by its in-house software, robotic equipment and outsource manufacture represents the most impressive attempt at a technology revolution in a lab.

    Risks

    Long-term activity related risk. Zymergen, Thermo Fisher Scientific (TMO), Twist Bioscience (TWST) are seen as Ginkgo Bioworks’ biggest rivals. The competition may stunt the company’s development in the future.

    The market may be overvalued. The synthetic biology market is comparably young – there is a chance that analysts and venture capitalists are overestimating the growth potential of this industry.

    Ginkgo Bioworks hasn’t disclosed its financial performance. It is unknown if the company is currently profitable and if there’s any tendency toward profitability.

    Financials and Valuation

    Ginkgo Bioworks has secured a total of $790 million from venture investors. Its last funding in September 2019 valued the company at $4.4 billion. Price per share is $150,19. Now Ginkgo shares on the OTC market are worth $138.6, which suggests a valuation of $4 billion.

    Ginkgo Bioworks’ revenue comes from two channels. It produces living organisms on a scale and launches spinouts with corporate partners. Ginkgo partnered with Bayer to work on the plant microbiome to make nitrogen fertilizer available for plants, creates protein replacements with Motif Foodworks and produces cultured cannabinoids with Cronos. Such business model allows the company to scale up and create multiple growth opportunities in the future.

    According to Forbes, Ginkgo's revenue doubled to $80 million in 2019 from $40 million the previous year. The company's projected revenue by the end of 2020 — $150 million, in 2021 — $200-300 million.

    Similar biotech Twist Bioscience went public in 2018, with one share worth 14$. At the end of September 2020 its stock is $75. Twist Bioscience’s capitalization is $3.3 billion, its last year's revenue was $73 million. Shares are traded at a 45x P/S ratio, with slightly slower growth (56% year-on-year) as compared to Ginkgo.

    Ginkgo’s projected capitalization, given it maintains the current multipliers, will amount to $9-12 billion on the public market. Bioworks IPO is expected in 2021. Potential return on investment is 150%.

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