In the beginning there were genes that begat genes that begat more genes. For 4 billion years, such was the cycle of biological life on this planet: Raw materials, aided by the invisible hand of natural selection, evolved organically—and thus arithmetically—over millennia. Today, that eons-old paradigm of producing a sequence of DNA (a gene) by copying an already-existing sequence has been upended by gene editing, big data, and repurposed fermentation. Synthetic biology is exponentially accelerating gene evolution. And—as made clear by 2021’s blockbuster IPO of Zymergen (ticker: ZY) and the pending $17.5 billion SPAC merger of Ginkgo Bioworks—investors have caught on to its potential.
The world is at a point where the script of life can be leveraged and manipulated to manufacture useful materials. “Industrial biotechs” produce fuels, chemicals, and other physical materials from biomass such as corn, sugarcane, or even wheat. This biomass is converted through various biological processes into a vast variety of products, the best known of which, especially in dollar terms, is fuel for transportation. If you drive a car with gasoline, it’s powered in part by ethanol.
Yet no “synthetic biology” is required to make ethanol or biodiesel. You only need simple yeast to ferment corn, which is neither exciting nor sophisticated. The real conversation is about the frontier of next-generation products. Consider fuels without ethanol, like inexhaustible jet fuel for aviation, or renewable diesel. And fuel is only part of it: Specialty chemicals can have a 5- to 10-times higher value per unit than fuel, and are being as used as components of plastics, flavors, fragrances, and cosmetics, to name just a few of synthetic biology’s potentially significant end-products.
Bioindustrial solutions can be more environmentally sustainable than what industry has traditionally used. Petroleum is the normal raw material for fuels and chemicals, while renewable bio-based fuels and chemicals by definition have a lower carbon footprint. They fare better under government policies designed to mandate or subsidize renewable materials, such as restrictions on plastic bags. The nonrenewable bags you get at the local grocery store can be made from bio-based feed stocks instead.
There is a straightforward economic argument for using synthetic biology: Bio-based raw materials can make a product more efficient, higher performance, and most often cheaper than the legacy products they’re displacing. In the case of certain specialty materials that have never been based on oil and gas, the trade-offs can be even more abhorrent. The Brazilian rainforest has been decimated by the search for molecules; squalane, nature’s best emollient, has historically been sourced from the death of 500,000 sharks per year. Synthetic biology can help to streamline the industrial process, make manufacturing more consolidated, lessen the number of steps, reduce the cost structure accordingly, and, in the case of squalane, unarguably leave the world’s ecosystem a better place.
Zymergen’s recent runaway IPO and Ginkgo’s subsequent public showing have been the talk of Wall Street, drawing institutional investors like Cathie Wood’s ARK Invest to the prospect of upending existing industries. Zymergen’s Hyaline, for example, could eventually replace the film used for cell phone screens. Other investible synbio securities include Berkeley Lights (BLI), which is overhauling traditional cell therapy strategies to provide better patient care, and Codexis (CDXS), which is accelerating enzyme discovery to make big pharma drugs more sustainable. Twist Bioscience (TWST) seeks to eventually use DNA for archival storage of digital information. The most accomplished and longest-lived public industrial biotech is Amyris (AMRS). It has by far the most revenue, the most developed molecules, and a half decade or more head-start versus the competition.
Given the diversity of end markets that can be improved upon by synthetic biology, there is room for all of these players in the public market. It’s important to understand the term “synthetic biology” is not just about growing things better (though of course that’s what clean chemistry does). Instead, it’s really about the evolution of thoughts and ideas and an answer to the broader question of what can bring us to a future of global equilibrium.
Humans have been manipulating biology for over 10,000 years, going back to the domestication of crops and animals at the dawn of the age of agriculture. The difference now is that with synthetic biology we can more efficiently reprogram life to produce useful new products, take new forms, and act in helpful ways. And unlike the exploitation of fossil fuels, synthetic biology affords a virtuous cycle. Industry and investors can know they are making a positive impact on their bottom lines while also feeling good they are working toward balance and stability of the world via more efficient energy, waste reduction, and clean health.
The 19th century, the age of chemistry, gave us the periodic table of elements and Marie Curie’s work on radiation. In the 20th, physics provided relativity and thoughts on an expanding universe, plus the fission of uranium that welcomed the Atomic Age. The 21st century’s contribution will be gauged in due course. But we are well on our way to making it the century of synthetic biology.
Randy Baron is portfolio manager at Pinnacle Associates.