Twist Biosciences specializes in a kind of industrial production that would have been unimaginable just a few decades ago: the manufacturing of DNA for scientific and commercial purposes. There is no doubt that Twist has broken all kinds of scientific ground. But is it a viable business worthy of your investment?
By Sudheer Narasimha
Twist Bioscience is a pioneering biotechnology company that has revolutionized the field of synthetic biology through its innovative approach to DNA synthesis. Founded in 2013, the company utilizes a proprietary silicon-based technology platform that enables high-throughput, massively parallel synthesis of custom DNA sequences. This approach has far-reaching applications in various domains, including medicine, agriculture, and industrial biotechnology. By offering researchers and industries access to high-quality, custom-designed DNA strands, Twist Bioscience has played a significant role in accelerating advancements in areas such as gene editing, protein engineering, and DNA data storage. With its commitment to pushing the boundaries of genetic engineering, Twist Bioscience continues to be a driving force in shaping the future of biotechnology and its transformative impact on multiple sectors.
Twist Bioscience’s mission revolves around empowering scientists, researchers, and industries to unleash the potential of synthetic biology for positive global impact. The company is dedicated to democratizing access to high-quality, custom DNA synthesis, thereby enabling breakthroughs in fields such as medicine, agriculture, and data storage. Twist’s vision is to drive innovation by providing the tools necessary to engineer biological systems with precision and efficiency. By offering a scalable and cost-effective platform for creating custom DNA sequences, Twist Bioscience aims to accelerate the development of new therapies, sustainable agricultural solutions, and advanced biotechnologies. The company’s commitment to responsible and ethical genetic engineering underscores its mission to usher in a new era of scientific progress that addresses some of the world’s most pressing challenges. In short, Twist manufactures the building blocks of 21st century biology, which should, theoretically, mean unlimited growth ahead.
Great Science, Questionable Finances…..
The issue is, in today’s economy, interest rates are fairly high. Rising interest rates tend to have a constraining effect on financial liquidity. As central banks and monetary authorities opt for a tighter monetary policy to control inflation or manage economic growth, borrowing costs for individuals, businesses, and even financial institutions increase. This subsequently leads to reduced borrowing and investing, as the higher cost of capital deters individuals and entities from engaging in financial activities. Consequently, asset markets, such as equities and real estate, might experience decreased trading volumes and increased bid-ask spreads as market participants become more cautious due to the elevated borrowing expenses. Moreover, higher interest rates can prompt investors to shift their portfolios towards fixed-income assets, seeking better yields in the form of bonds, which can further impact the liquidity of other asset classes.
For a small biotech startup, like Twist Bioscience, the confluence of rising interest rates and low liquidity can pose significant challenges. The increase in interest rates translates to higher borrowing costs, potentially limiting the startup’s ability to secure funding for research, development, and operational expansion. This can impede their capacity to innovate, bring new therapies to market, or scale up their operations. Moreover, low liquidity in financial markets can hinder the startup’s access to capital through avenues like initial public offerings (IPOs) or secondary offerings, as risk-averse investors might be hesitant to invest in riskier assets like early-stage biotech companies in such an environment. With limited access to financing, the startup’s growth prospects could be constrained, potentially leading to delays in critical research milestones or commercialization efforts. The reduced availability of funds could also impact the startup’s ability to attract and retain top talent, as they might struggle to offer competitive compensation packages or invest in necessary resources.
Twist was born in an era of unlimited liquidity; just a few years ago the most questionable biotechs could easily raise capital as long as they could demonstrate promising science. However, times have changed. As 2023 moved forward, the new reality of much tighter funding became inescapable. In May, Twist made several changes to confront the funding challenge head on. First, they laid off 25% of their workforce, determined to do more with less. Second, they announced a goal to produce positive EBITDA by the end of 2024. This would mean that, by the end of 2024, Twist would become a self funding enterprise, without the need to rely on fickle capital markets to survive.
Twist just released their 3rd quarter fiscal report a few days ago and it seems to be a bit in the gray area. On paper, their fiscal results are all positive. Since they made their vow of positive EBITDA, their revenue has gone up, and their expenses have gone down. However, both their revenue increasing and their expenses decreasing has only been a marginal amount. Overall, the company is still at an operating loss of about $55 million per quarter. Their gross margin is still around 36%, and revenue may not be growing fast enough to offset the significant expenses that a start up accrues when attempting to pioneer new technology. They re-affirm their target of financial self sufficiency by the end of 2024, but it’s going to be very close indeed.
That being said, Twist’s science and technology is definitely cutting edge and very promising and they also have around 325 million dollars in cash to work with. Therefore, Twist is a very risky stock that definitely isn’t for the faint of heart. For people who dare to take a chance, it could prove to be very profitable but, with the current state of the economy, there is also a chance that Twist may not survive for very long.