What's Going on With Ginkgo Bioworks Stock? $DNA
Summary
TLDRSynthetic biology company Ginkgo Bioworks saw its stock price decline following disappointing 2022 earnings results. Despite past promises of their innovative platform, revenues from their core cell engineering segment were flat while downstream value revenues remained negligible. As Ginkgo pivots to biopharma and acquires other companies, longtime concerns persist about lack of gross margins clarity and dependence on future milestone payments. While synthetic biology offers excitement, Ginkgo’s stalled growth and shifted priorities raise uncertainty, warranting a cautious view of the stock.
Takeaways
- 😕 Ginkgo Bioworks missed its 2023 revenue guidance, with cell engineering revenue remaining flat
- 😞 Downstream value revenues were only $4 million in 2023, far below expectations
- 🤔 $1 billion in milestone payments were cancelled, resetting revenue timeline
- 😯 2024 revenue guidance predicts a 10% decline due to macroeconomic headwinds
- 😠 Lack of transparency around COGS makes profitability analysis difficult
- 🧐 Pivot towards bio-pharma resets revenue timelines even further into the future
- 😫 Stock issuances for acquisitions signals dilution rather than business growth
- 🤨 Business model shift after 16 years raises doubts about viability
- 😤No reasonable explanation provided for flat cell engineering revenue growth
- 😒 Analyst remains pessimistic on stock due to growth struggles and lack of transparency
Q & A
Why is Ginkgo Bioworks stock sinking despite strong growth projections?
-Ginkgo missed its 2023 revenue guidance by 9% despite projecting strong growth. This raises doubts about its ability to achieve its ambitious goals. Flat cell engineering revenue and low downstream value are also concerns.
What types of revenue does Ginkgo Bioworks have and which matter most?
-It has related party revenue, biocurity revenue, cell engineering revenue (key metric), and downstream value revenue. Cell engineering and downstream value revenues matter most as indicators of platform success.
What is Ginkgo's 2024 revenue outlook?
-It projects 22% YoY growth in cell engineering revenue to $175M in 2024. But total revenue is expected to decline 10% to $225-245M due to lower biocurity revenue.
Why is Ginkgo making more acquisitions?
-It claims the acquisitions will supplement its core foundry platform. But this signals it needs external help to boost growth after 16 years in business.
How long can Ginkgo fund operations with its current cash reserves?
-It has $955M cash after burning $360M in 2023. It expects cash burn to improve in 2024-2025, giving an estimated runway of 2-3 years.
Why doesn't Ginkgo provide cost of goods sold data?
-Without COGS data, gross margins are unclear. Costs may be bundled into its high R&D spending instead, reducing transparency.
What are the analyst's parting thoughts on Ginkgo?
-Growth stalled in 2023 amid a biopharma pivot and cancellation of $1B in milestone payments. Old concerns persist while new ones emerged regarding growth and transparency.
What does downstream value revenue indicate?
-Downstream revenue comes from successful commercial products made using Ginkgo's platform. It helps validate the platform and is key for long-term business model success.
Why is related party revenue a concern?
-Related party revenue comes from insiders and doesn't reflect real platform demand. It raises questions about whether revenue is artificially inflated.
What might indicate progress for Ginkgo in the coming years?
-Investors want to see cell engineering and downstream revenues grow substantially. These will indicate true commercial traction for its synthetic biology platform.
Outlines
😞Genetic Engineering Company Ginkgo Bioworks Has Stalled Growth
Ginkgo Bioworks is a leader in synthetic biology which aims to program cells to solve problems. However, their stock price sank after recent earnings. This is concerning given their ambitious vision. We are only interested in their pure cell engineering revenues, not related party transactions. Downstream revenues validate their platform works but so far outcomes are small like CBD gummies. Cell engineering revenues were flat year-over-year which is worrying for such an innovative company.
😕Milestone Cancellations and Resets Indicative of Uncertainty
Ginkgo lists over $1.5 billion in milestone opportunities but a billion was removed due to cancellations. New milestones reset the timeline which is bad since most are late-stage commercial deals. The vast majority of milestones are from biopharma companies which take over 7 years on average to bring a drug to market. This timeline keeps getting pushed back.
😣2023 Results Miss Guidance Casting Doubt on Growth Potential
Ginkgo missed their 2023 revenue guidance by 9% with cell engineering only growing 144 million, remaining flat year-over-year. For 2024 estimates only 22% growth to $175 million for cell engineering. Still no downstream value estimates provided. Cash burn improved but operational metrics underwhelming given 16 years in business.
Mindmap
Keywords
💡synthetic biology
💡foundry model
💡cell engineering
💡downstream value
💡biofarma
💡milestones
💡runway
💡acquisitions
💡cost of goods sold
💡growth
Highlights
Geno bioworks offers the promise of programming any cell like code in the form of DNA
We are only interested in Geno bioworks' pure cell engineering revenues, not related party deals or pandemic pivots
Downstream revenues prove Geno's platform can produce commercially viable products, but so far it's just CBD gummies
Geno missed its 2023 revenue guidance by 9%, not a good sign for a revolutionary synthetic biology platform
Geno predicts 22% cell engineering revenue growth in 2024 but they predicted growth last year and went flat
Geno has depleted $360 million in cash over the past year and now has about 2.6 years of runway
Geno is making more acquisitions instead of focusing on their core platform after 16 years
Geno shifted focus to biopharma but they've pivoted strategies many times over 16 years with little revenue growth
There are no cost of goods sold details for Geno's cell engineering, raising questions
Growth stalled in 2023 as Geno pivoted to biopharma and had $1B in milestone cancellations
We still have longstanding concerns about Geno's lack of real platform validation and downstream revenues
Would like to see specifics on cell engineering cost of goods sold which are not provided
Hoping to see evidence next year that Geno can realize promised growth and downstream revenues
For now, avoiding investment in Geno Bioworks due to stalled growth and unproven platform
Those interested in synthetic biology may want to look at gene editing companies instead
Transcripts
there's plenty of room at the bottom
that was the name of a lecture given by
physicist Richard fainman in 1959 and I
think it best describes the sort of wild
aspirations that synthetic biology
leader Geno bioworks offers investors so
why is Geno bioworks stock sinking
following the release of their year-end
earnings well the answer to that
question requires more thought and
research than a cursory look at earnings
numbers so we've produced a lot of
research here at analy I think we're
going on 2400 research pieces and of
those 220 have been on nanotechnology
and 90 of those on synthetic biology and
our story really starts eight years ago
when we wrote this piece gko bioworks
Nanobots are finally here and I just
pulled some statements from that piece
and we talk about the book by Eric
Drexler called engines of creation where
he talks about little machines that
self-replicate and can be programmed to
solve our biggest problems refers to
self self assembling self-replicating
and self-repairing where biology builds
renewably from the molecular machines
inside of cells to Global ecosystems and
this is describing the promise on offer
from gko bioworks you can actually
program any cell right so if you look
out in nature and you look inside any
plant animal or insect in the cell will
be code in the form of DNA and it's what
originally got us into technology
several decades ago now most recently
last year we wrote these three pieces on
Geno bioworks because it's a fairly
popular stock it's certainly the most
exciting thesis we cover and arguably
genko is the leader in synthetic biology
so some takeaways from our 2023 research
pieces on genko were purely interested
in pure Foundry revenues that's now
referred to as cell engineering so no
related party Revenue stuff no Rona
stuff we only want to see cell
engineering revenues and here you can
see in the table on the right that
they've broken out related parties from
third parties and you want to see that
number decreasing over time and indeed
it is Downstream value so their business
model is such that there's immediate
revenues realized upfront in today's
terms and there's monies realized
Downstream for successful commercial
products that are produced on the genko
platform that helps validate that their
platform works and that's a major point
of contention that we have with this
company now you also need to be wary of
non-cash consideration that was
something we covered in our most recent
piece on Geno where we looked at a
company that's paying them in shares
that are being increasingly diluted over
time so gko has always been able to tell
a great story and we keep reading about
that and hoping now if you want to
receive our research pieces every week
There's a free newsletter we produce
called analyze weekly I'll put a link to
that in the comment section when you go
to read the comments please just click
that and subscribe to our newsletter and
you'll receive um the research pieces
that we do every week so types of
revenues coming from gko well there's
related party these are drying up but
they don't reflect true platform demand
the idea there is if I took money that I
had and gave it to you and then you gave
it back to me to purchase my services
and said you were my customer it's it's
more or less a conflict of interest
right so biocurity is another type of
Revenue that we're not interested in
this is the old pandemic pivot it's not
what we're after we're after the Grand
Story that's being told by GLE bioworks
so cell engineering can be broken down
as I said or what used to be referred to
as Foundry into services and the company
has said these are revenues that they
recognize year on-ear that this is
increasingly seen as less important to
the business model in other words
the U Focus now is on rewards that are
coming down the road so it's becoming
more story and less substance Downstream
therefore proves the platform can
produce useful things so what does
Downstream look like well the chart in
the upper left here was taken from uh a
recent piece we did on gko looking at
their 2022 results or at least this
piece was from last year and you can see
those blue bars that's a cannabis
company called Kronos group and they
produced these CBD gummies and our
criticism there you can see that they
make up the majority of Downstream
revenues that they've ever realized is
was that the greatest thing that you
could offer mankind so far is some CBD
gummies CBD they don't even have THC so
not impressed with that and've been
critical about their lack of Downstream
revenues and here you can see on the
right of course two problems right off
so cell engineering is flat
year-over-year that's not good and you
can see that the downstream revenues
they had for 2023 $4 million whoopy Doo
so when we look at Milestone
opportunities this is a chart in the
recent deck there's a couple interesting
things pop out here so this excludes
royalties it's just milestones and of
this you can see the chart 2022 and 2023
of this $1.5 billion was added from
biofarma companies in 2023 Why didn't
the number go up by 1.5 billion it only
went up 200 million that's because a
billion dollars was removed due to
certain program cancellations and then
in their earnings call they said a good
chunk of that did relate to a single
customer well what about the other chunk
and when you have new Milestones coming
in what does that do it resets the
starting point and these are majority
from biofarma well it takes a long time
for biofarma to get a drug to Market
what seven years on average this isn't a
good thing now when we look at the
larger slide that we pulled that chart
from see they talk about penetrating
large biofarma accounts note that these
Milestones are commercial not regulatory
or clinical or technical the vast
majority are commercial which means you
need to be pretty late stage to start
realizing those and the interesting
thing here is if you take the chart on
the left and you plug it into the chart
on the right you see on the right it
says royalties and Milestones and then
Milestones so that's just that component
so potentially they're going to realize
in the future a lot more on royalties
again late stage that you actually have
to have a product to Market and selling
it how long is that going to take
especially if you're resetting that
starting point so when we look at the
expectations for 2023 versus reality and
perhaps this might be why their stock
was sinking after hours you see cell
engineering they expected to have over
$175 million again the revenues that we
care about what they actually realized
144 million flat same as last year
Downstream value contributed to 4
million and they hesitated to provide
guidance on that number and they did the
same that in their 2024 guidance not
good right uh revenues in total of 251
million um versus their guidance of 275
million so they missed by 9% this Grand
uh synthetic biology platform that
harness is the power of nature should be
growing like mad not missing guidance so
when we look at 2024 full year outlook
they give us some color as to why they
missed guidance they talk about
macroeconomic headwinds continuing to
pressure industrial biotech okay perhaps
the same thing that we're seeing with
companies like schinger right which is a
piece that will be uh pushing out fairly
soon to analyze what's going on there
but when you look at the outlook here
you see okay they say cell engineering
is going to grow by 22% % again no
Downstream value estimated and then
total revenues are declining by 10% okay
your biocurity there stuff we don't care
about is declining fair enough but uh
this isn't a good thing we look at cell
engineering they predicted
175 last year and then they went flat so
this is a look at the revenues we care
about year over year right so 2024
estimates 175 that will be 22% growth so
let's hope that they hit that now when
we look at cell engineering Revenue
remember I told you we don't care about
related parties and we want to be
careful of non-cash consideration we can
check these two things right you can see
here for 2023 related party revenues
went down they're still there right but
they're less than the previous year
non-cash consideration dropped as well
that's great but the fact that it still
exists is rather annoying now this is a
company with 16 years of History so now
they've gone from having 1.3 billion
dollar in cash to 955 million so they
depleted 360 million last year that
gives them about 2.65 years of Runway
however when queried about that during
the call they said well cash Burn's
going to improve in 2024 and then
further in 2025 well that's great now we
need to start seeing some Downstream
value soon here and when probed on that
so the analyst correctly asked the
question there was some real softballs
in there but this guy said all right you
have 2. 4 billion in Milestones when can
we see that give us some idea of when
that's coming in you know 2025 2026 and
very evasive answer for management so
the other thing is that they're now
making more Acquisitions we don't see
that as a good thing why not focus on
your incredible Foundry platform that
you've been building for 16 years how
much do you need to supplement that
thing and of course they're using stock
for Acquisitions instead of cash but
that also tells us something so you can
see here their shares outstanding
increasing over time for various reasons
so keep an eye on that dilution but here
look at this line item here issuance of
common stock for asset Acquisitions in
2023 what $4.7 so under $10 million what
did you acquire for such a small price
what what a value that's going to affect
your hopefully the top line and when you
look at the company's Focus they talk
about well we're shifting our Focus to
biofarma well they've been at this for
16 years now and they're they're
shifting on the revenue side they said
we have gone from our biofarma being
really just a rounding error a few years
ago to making up almost a third of our
cell engineering Revenue this year you
know what that means without bio
biofarma they'd be really hurting in
2023 so what happened to everything else
that they were up to I don't know the
answer to that question and the other
thing that I noted here and I'm not sure
that we've even talked about this before
but where are the cost of goods sold for
cell engineering and if you remember in
our recent article on twist bioscience
we talked about how their uh cost of
goods sold might be stuffed under R&D
spending and one wonders if that's not
happening here with $580 million in R&D
spending in 2023 well at least that's
down from the billion dollars in R&D
spending they had in 2022 so it's hard
to see how we'd ever invest in a company
that doesn't provide us with indications
of what gross margins look like so just
some parting thoughts on Geno bioworks
stock so growth stalled in 2023 as the
company pivoted into biofarma and the
cancellation of a billion dollars in
Milestone payments and then 1.5 billion
in biofarma Milestones added so that's a
net positive change of $200 million it's
not a good thing because that's sort of
reset the starting point so our old
concerns that we've had over the years
are really being replaced with new
concerns and we'd really love to see
some color on cogs I'd like to hear from
our audience if there's any good reasons
on why Geno bioworks should get a pass
on not providing cogs for cell
engineering So the plan for us going
forward we'll check back in a year to
see how the company's doing and in the
meantime we're going to continue
avoiding the stock now if you're looking
for some interesting companies dabbling
in the synthetic biology umbrella you
might want to check out Gene editing
land and this recent piece that we did
on crisper stock is rather interesting
so before you watch that please make
sure to go to the comments SE as I said
and sign up for our free newsletter
thanks so much for taking the time to
watch this
today
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