TWIST BIOSCIENCES: ON A STRAIGHT LINE TO PROFITABILITY

By Grant Bailey, Biotech Analyst 

Ever heard of Twist Biosciences? With their current growth prospects, you’ll probably be hearing about them soon if you haven’t. TWST is a biotech company based in South San Francisco, California, that specializes in manufacturing DNA products for customers of various industries. It’s a pretty new company, as it was founded in 2013, but our research suggests they could soon be transitioning from just one of many Bay Area startups to a critical player in the influential industry of Big Pharma.

This is a pretty unique company; rather than developing and discovering all of these new drugs themselves, they provide other small-cap biotech companies with the developmental processes, tools, and libraries needed to find these cures and treatments. Since there will always be new, smaller companies working to develop new cures and treatments, it’s likely that there will always be plenty of customers up for grabs, from TWST’s perspective. This is a sustainable target market that shows at least some sign of stability, which is important for a startup-esque company such as Twist Biosciences.

But aside from that, what do the financials look like? Regarding the revenue, there’s a lot to like about it. TWST’s most recent quarterly revenue represents year-over-year quarterly growth of 18.5%, and that number has remained above 14% since late 2018, so the growth has been practically impeccable. Many would argue that revenue is vanity and profit is sanity, but revenue certainly doesn’t mean nothing in this situation; Twist’s margins have never looked better. 

But what do these different margins even indicate, anyway? Well, gross margin compares the revenue to COGS (cost of goods sold), operating margin is calculated by subtracting COGS and all operating expenses from the total amount of revenue, and EBITDA margin takes a company’s EBITDA (earnings before interest, tax, depreciation, and amortization) and divides it by the company’s total revenue. With rapidly growing revenue, profit margins are quickly becoming much more manageable than before. TWST’s net margin back in late 2020? Nearly -120%. By the end of 2023, that number was still an insanely unreasonable -78%. Even in early 2025, the profit margin was worse than -50%. But how about now? In their most recent quarterly report, that number shot up to -23.51%. No, it’s not great, but that certainly shows significant progress. What’s most impressive is that TWST, as of now, boasts a gross margin of nearly 50%, proving the spectacular raw profitability of their products. As for Twist’s EBITDA margin, it has shown steady promise, moving from -%100 in 2022 to -30% currently, indicating that TWST appears to be firmly on a trajectory for profitable growth. 

One of the concerns about TWST is its financial runway. Twist Biosciences currently has ~$250 million in cash on hand. Meanwhile, in the most recent quarterly report, TWST reported total expenses of $126.2M and total revenue of $96.1M, representing a loss of $30.1M. Assuming this burn rate continues, TWST would be losing over $120M/year. With their current cash position, they’d have around 2 years of financial runway, but if they are unable to become profitable by then, they’ll most likely have to have yet another round of fundraising to reinforce their financial bandwidth. While TWST’s expenses year-over-year have risen slightly, its revenue is, of course, growing at a much faster rate, which means this shouldn’t really be too much of a concern, assuming this trend continues. Net profitability may not be far away. 

In conclusion to this quantitative review, TWST’s recent financial report suggests an impending rise to profitability, through continuing revenue and margin growth, respectable commercial and operational success, platform enhancements/new products, expanding markets, and expanding market share.

On the qualitative end, there is much to appreciate here as well! TWST’s ongoing product innovation is illustrated through products/areas such as SynBio Write, NGS Read, and Biopharma Solutions, all of which have future innovation opportunities through the foreseeable future. These areas also represent the “growing market” that TWST is referring to. Exactly which market is that? The biotechnology market, of course! Just kidding. To be more specific, SynBio Write refers to the technology of creating synthetic DNA, a market that measures up to $16B, with substantial projected growth in the coming years. NGS Read is basically the technology of sequencing DNA/RNA to analyze genetic information, and that market should surge significantly, considering the rising demand from academic and research institutes, pharma/biotech companies, and hospitals. As for biopharma solutions, that area is obviously much more general, but even in a general aspect, the expected biopharma industry CAGR is estimated to be anywhere from 8% to 14%, depending on who you ask. 

According to the 4Q financial report, which took place not long ago, Twist’s gross margin is improving even more at 50%+, and its EBITDA loss (earnings before interest, taxes, depreciation and amortization) is shrinking heavily. This news strengthens our analysis and follows our expectations, so it was quite surprising to see TWST share price drop as far as it did. That said, this dip should prove to be a fantastic buying opportunity for most investors.