Gingko Bioworks, a synthetic biology company now valued at around $ 15 billion, begins trading on the New York Stock Exchange today.
The launch of Gingko on the market is one of the most important in the history of biotechnology. It is expected to bring in around $ 1.6 billion for the company. It is also one of the largest PSPC deals to date – Gingko goes public through a merger with Soaring Eagle Acquisition Corp, which was announced in May.
Actions open to $ 11.15 each this morning under the DNA ticker – biotech diehards will recognize him as the old teleprinter used by Genentech.
The exterior of the NYSE is decorated in a Gingko decor. The imagery clearly sports Jurassic Park themes, like MIT Tech Review’s Antonio Regalado underline. It’s probably intentional: Jason Kelly, CEO of Ginkgo Bioworks, reread jurassic park this week, he told TechCrunch.
The decor also features a company motto: “Cultivate everything”.
Ginkgo was founded in 2009 and now presents itself as a synthetic biology platform. It’s basically based on the idea that one day we’ll be using cells to “grow everything,” and Gingko’s plan is to be that platform used to do that growth.
Kelly, who often uses language borrowed from computers to describe her business, compares DNA to code. Gingko, he says, aims to “program cells like you can program computers.” Ultimately, these cells can be used to make thing: like perfumes, flavors, materials, medicines or food products.
The biggest lingering question about Gingko since the announcement of the SPAC deal has focused on its massively high valuation. When Moderna, now known thanks to its Covid-19 vaccines, went public in 2018, the company was valued at $ 7.5 billion. Gingko’s assessment is double that number.
“I think that surprises people to be honest,” says Kelly.
How is Gingko going to make money?
Ginkgo’s massive valuation looks even more striking when you look at its existing income. SEC documents show the company has pulled out $ 77 million in 2020 revenue, which grew to around $ 88 million in the first 6 months of 2021 (per year Call to investors for the month of August) The company also reported losses: including $ 126.6 million in December 2020 and $ 119.3 million in 2019.
Gingko aims to dramatically increase revenue in 2021. SEC documents initially indicated the company aimed to generate around $ 150 million in revenue in 2021, but the August revenue call brought that total for the year. to over $ 175 million.
Gingko aims to make money in two ways: First, he contracts with manufacturers during the research and development phase (that is, while the company is studying how to make a cell that spits a certain flavor, bio-based nylon or a meatless burger). This process takes place in the Gingko “foundry”, a huge factory for bioengineering projects.
This source of money is already starting to flow. Gingko has declared $ 59 million in foundry revenue for 2020 and is forecasting $ 100 million in 2021, by the August investor call.
These revenues, however, do not cover the full costs of Gingko’s operations according to information shared by the company in SEC documents. However, it covers an increasing share and as Gingko expands its platform the costs will come down. Based on fees alone, Kelly predicts Gingko will break even by 2024 or 2025.
The second type of income comes from royalties, milestone payments, or in some cases equity interests in companies that sell products, such as flavors or meatless burgers, made using the facilities or know-how. make Gingko. It is this source of income that will constitute the vast majority of the future value of the company according to its expectations.
Once the product is made and marketed by another company, it requires little or no work on Gingko’s part – all the company does is raise the money.
The company is often reluctant to factor these benefits into its projections because it relies on other companies to market their products. This means that it is difficult to know for sure when these downstream payments will appear. “In our models, we are very sensitive to the fact that at the end of the day, these are not our products. I can’t predict when Roche might bring a drug to market and give me my milestones, ”says Kelly.
Kelly says there is evidence this model will start to work in the short term.
Gingko obtained a “bolus” milestone payment of 1.5 million shares from The Cronos Group, a cannabis company, for developing a rare, commercially viable lab-grown cannabinoid called CBG for commercial use (there are seven more in development, Kelly says). These milestone payments (in cash or in shares) are earned when a business achieves a predetermined goal using the Gingko platform.
Gingko also worked with Aldevron make an enzyme essential to the production of mRNA vaccines, and plans to collect royalties from this relationship – although no foundry fees were collected for this project.
Finally, Gingko negotiated a stake in Foodworks pattern, a spin-off company based on its technology. This company has so far raised around $ 226 million and will aim to launch a lab-grown beef product developed at the Gingko smelter, already paying Gingko the aforementioned smelter fees for this contribution.
Gingko’s “greatest value factor”, according to Kelly
This rich source of money will depend very much on the ability of the outside entrepreneur to manufacture and sell products made using the Gingko platform. This exposes the business to risks beyond its control. Maybe, for example, it turns out that people don’t want as much bio-manufactured meat as many had anticipated – that means certain types of downstream payments may not materialize.
Kelly says he’s not particularly worried about it. Even if a particular program fails, it plans to have so many programs running that one or two are bound to be successful.
“I’m just kind of like: some will work, some won’t. Some will take a year, others three years. It doesn’t really matter, as long as everyone is working with us, ”he says. “Apple doesn’t care which apps will be the next big app in the App Store,” he continues.
A key metric to watch for Gingko going forward will be how many new cellular programs they manage to shut down. So far, Gingko has added around 30 programs this year, Kelly says. Last year there were 50 programs.
Remember: some of the projects are spin-offs from Gingko, like Motif Foodworks, and not clients who come to the platform on their own. And historically, the number of companies Gingko has partnered with has been a subject of criticism. According to SEC documents, the majority of revenue came from two major partners in 2020 – although Kelly said Business intern that it was a slowdown linked to the pandemic.
The more programs Gingko has, the more isolated it is from a product’s success or failure. Plus, it’s a sign that people are at least using the “app store” for biology.
“Gingko’s biggest value factor is how quickly we add programs,” says Kelly.
