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3fb4 Twist Bioscience is a pioneer 3fb4 and market chief in DNA 3fb4 writing, having developed a disruptive 3fb4 DNA synthesis platform that industrialized 3fb4 the engineering of biology. At 3fb4 its core, Twist makes use 3fb4 of this platform to “write” 3fb4 DNA on a silicon chip. 3fb4 This chip permits them to 3fb4 jot down 10,000 instances the 3fb4 quantity of DNA in contrast 3fb4 with typical strategies, at 1/10 3fb4 of the associated fee, whereas 3fb4 utilizing a fraction of the 3fb4 chemical substances. Twist combines this 3fb4 platform with proprietary software program, 3fb4 a scalable infrastructure, and an 3fb4 e-commerce platform to create an 3fb4 built-in providing. The corporate is 3fb4 rising so quick that it 3fb4 has reached capability at its 3fb4 manufacturing facility and is constructing 3fb4 a brand new facility, which 3fb4 is able to greater than 3fb4 double its capability. The tip 3fb4 markets wherein Twist operates are 3fb4 rising at 20+% yearly, and 3fb4 we consider Twist shall be 3fb4 a key enabler for this 3fb4 progress for years to come 3fb4 back.
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3fb4 Twist’s income is comprised of 3fb4 three segments: SynBio, which includes 3fb4 37% of its income and 3fb4 is the muse of Twist; 3fb4 NGS, which leverages the core 3fb4 tech, is the fastest-growing phase, 3fb4 and includes 49% of income; 3fb4 and Biopharma, which is a 3fb4 more recent phase that additionally 3fb4 leverages the tech to do 3fb4 drug discovery (15% of income).
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3fb4 The SynBio (artificial biology) phase 3fb4 sells instruments to corporations that 3fb4 genetically engineer compounds to interchange 3fb4 chemical substances or restricted pure 3fb4 assets for industrial, agricultural, or 3fb4 medical use. One of many 3fb4 fastest-growing purposes for synbio is 3fb4 in biotech. For instance, Novo 3fb4 Nordisk, a Danish pharma firm, 3fb4 not too long ago partnered 3fb4 with genetic engineering Gingko Bioworks 3fb4 to “develop” drugs to deal 3fb4 with persistent sicknesses. Synlogic, a 3fb4 Cambridge-based biotech firm, has engineered 3fb4 a micro organism to deal 3fb4 with PKU, a uncommon metabolic 3fb4 dysfunction. HTEC member Codexis is 3fb4 making a reputation for itself 3fb4 in biotech via varied improvements, 3fb4 together with their not too 3fb4 long ago engineered enzyme that 3fb4 Pfizer is utilizing to provide 3fb4 Paxlovid, a world-leading COVID therapy.
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3fb4 Twist’s secret sauce, as famous 3fb4 above, is the DNA synthesis 3fb4 platform that it launched in 3fb4 2016, which basically industrialized the 3fb4 engineering of biology by “writing” 3fb4 items of DNA on a 3fb4 silicon chip roughly the dimensions 3fb4 of a smartphone. With this 3fb4 know-how, Twist can write 10,000 3fb4 instances the quantity of those 3fb4 DNA items as typical strategies, 3fb4 at 1/10 of the associated 3fb4 fee. Twist additionally has a 3fb4 decrease environmental footprint, as its 3fb4 silicon chip makes use of 3fb4 a fraction of the chemical 3fb4 substances which might be sometimes 3fb4 wanted in DNA synthesis. Twist 3fb4 combines this platform with proprietary 3fb4 software program, a scalable infrastructure, 3fb4 and an e-commerce platform to 3fb4 create its built-in providing. Prospects 3fb4 merely want to go surfing, 3fb4 add the DNA sequence that 3fb4 they need, select their configuration, 3fb4 and place their order.
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3fb4 The NGS enterprise, which now 3fb4 includes extra income than SynBio, 3fb4 sells prep kits utilized by 3fb4 pharma, researchers, and academia. The 3fb4 prep kits are used to 3fb4 arrange a DNA pattern to 3fb4 be positioned on an NGS 3fb4 (next-generation sequencing) instrument. The NGS 3fb4 market has been rising quickly 3fb4 and is anticipated to develop 3fb4 by 20% CAGR for the 3fb4 following 5 years. As such, 3fb4 it has attracted many entrants 3fb4 and has change into a 3fb4 extremely aggressive area. What makes 3fb4 Twist’s kits distinctive is that 3fb4 they minimize down on sequencing 3fb4 prices, and may make customized 3fb4 instruments quicker.
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3fb4 The fast progress of the 3fb4 NGS finish market has pushed 3fb4 Twist’s efficiency on this phase 3fb4 (55% y/y progress in FY’21). 3fb4 We anticipate the market progress 3fb4 to speed up at the 3fb4 side of additional innovation in 3fb4 genomics, corresponding to liquid biopsy 3fb4 and minimal residual illness testing. 3fb4 Moreover, as Illumina’s patents expire 3fb4 within the coming years, new 3fb4 entrants will convey extra sequencers 3fb4 to market. The price of 3fb4 sequencing will decline, which is 3fb4 able to drive a rise 3fb4 in utilization. Twist could be 3fb4 very effectively positioned for this 3fb4 enlargement as its know-how is 3fb4 agnostic, and may work on 3fb4 any model of sequencer.
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3fb4 The third income phase, Biopharma, 3fb4 additional leverages Twist’s platform to 3fb4 find new medication. The corporate 3fb4 both companions with biotech corporations 3fb4 to develop antibodies in opposition 3fb4 to a goal the accomplice 3fb4 offers, or it develops proprietary 3fb4 antibodies by itself that it 3fb4 seeks to license out to 3fb4 biotech corporations to develop and 3fb4 commercialize. This enterprise generates income 3fb4 within the type of up-front 3fb4 funds when contracts get signed 3fb4 with 3fb4 3fb4 companions who convey targets 3fb4 . Present companions embrace Takeda 3fb4 and Boehringer Ingelheim, whereas Astellas 3fb4 Pharma has an unique choice 3fb4 to license a compound Twist 3fb4 developed internally. There are additionally 3fb4 potential “name possibility” revenues within 3fb4 the type of milestones and 3fb4 royalties as these antibodies progress 3fb4 via their lifecycles of growth 3fb4 and commercialization.
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3fb4 Twist’s share worth has been 3fb4 minimize by greater than half 3fb4 within the first half of 3fb4 2022, for a number of 3fb4 causes. First, macro elements like 3fb4 inflation and rising rates of 3fb4 interest have shifted investor sentiment 3fb4 largely away from high-growth technology-forward 3fb4 corporations that aren’t but worthwhile, 3fb4 significantly people who have been 3fb4 beforehand buying and selling at 3fb4 nosebleed valuations. Second, an adjoining 3fb4 firm within the area, which 3fb4 went public in 2021, had 3fb4 a tough first few months 3fb4 out of the gate, driving 3fb4 detrimental sentiment on the entire 3fb4 area. In our view, Twist 3fb4 is being inaccurately penalized by 3fb4 the market. Whereas most pure-play 3fb4 SynBio corporations are within the 3fb4 enterprise of creating issues with 3fb4 artificial biology, Twist is what 3fb4 we take into account an 3fb4 enabler of the trade, because 3fb4 it offers the items of 3fb4 DNA that different corporations use 3fb4 to make their merchandise. The 3fb4 corporate reported order progress of 3fb4 32% in its FYQ2, which 3fb4 we consider signifies continued power 3fb4 in the long run market 3fb4 demand.
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3fb4 Additional dividing it from this 3fb4 group, Twist is just not 3fb4 new to public fairness markets. 3fb4 It has been publicly traded 3fb4 for almost 4 years and 3fb4 has delivered a income beat 3fb4 for at the very least 3fb4 the final 10 consecutive quarters, 3fb4 which we consider is a 3fb4 robust indicator of administration’s skill 3fb4 to set expectations and ship 3fb4 on its targets.
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3fb4 There have additionally been aggressive 3fb4 issues as extra corporations enter 3fb4 the DNA writing market—like DNA 3fb4 Script, an organization that sells 3fb4 a DIY DNA printer. That 3fb4 being mentioned, this whole trade 3fb4 continues to be in its 3fb4 early levels, with loads of 3fb4 room for extra entrants. Additionally, 3fb4 Gingko Bioworks, a frontrunner in 3fb4 artificial biology and a long-standing 3fb4 shopper of Twist, not too 3fb4 long ago signed an settlement 3fb4 that tacked on one other 3fb4 4 years to this relationship. 3fb4 This validates Twist’s aggressive benefit 3fb4 as an trade pioneer and 3fb4 know-how chief.
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3fb4 Lastly, the corporate does anticipate 3fb4 some gross margin strain whereas 3fb4 it ramps up capability in 3fb4 its new manufacturing unit. Present 3fb4 market sentiment doesn’t have a 3fb4 robust urge for food for 3fb4 corporations going through near-term strain 3fb4 on profitability. Nonetheless, we consider 3fb4 the strain shall be momentary 3fb4 as the brand new manufacturing 3fb4 unit scales up, and that 3fb4 finally, Twist will be capable 3fb4 of enhance margins via the 3fb4 high-value proposition it should provide 3fb4 as soon as it provides 3fb4 new capability. The corporate expects 3fb4 to interrupt even on profitability 3fb4 with SynBio and NGS when 3fb4 their mixed revenues attain $300 3fb4 million, and with Biopharma when 3fb4 its income reaches $80 million. 3fb4 Given the fast progress of 3fb4 those industries, we anticipate this 3fb4 to occur within the subsequent 3fb4 2–3 years.
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3fb4 General, we view this as 3fb4 a high-quality firm with a 3fb4 protracted tailwind of progress, and 3fb4 a path towards profitability. The 3fb4 inventory has largely been de-risked 3fb4 by the current market compression, 3fb4 and it’s simply one in 3fb4 all many undervalued corporations within 3fb4 the HTEC portfolio that provide 3fb4 a compelling motive to be 3fb4 lengthy proper now.
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