What's Going on With Ginkgo Bioworks Stock? $DNA

Summary

Synthetic 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

00:00

😞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.

05:02

😕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.

10:04

😣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.

Keywords

💡synthetic biology

Synthetic biology is the design and construction of new biological parts and systems that do not exist naturally. The video discusses the promises and aspirations of synthetic biology companies like Ginkgo Bioworks to program cells to solve major problems.

💡foundry model

The foundry model refers to Ginkgo's platform for engineering organisms. It serves as a factory to design, code, and test living systems. The video analyzes Ginkgo's foundry revenues over time to assess the real platform demand.

💡cell engineering

Cell engineering means genetically programming cells to produce useful materials and products. It was previously referred to as foundry revenues. The video tracks this metric over time to gauge the substance behind Ginkgo's platform.

💡downstream value

Downstream value refers to the future commercial revenues realized from products successfully created using Ginkgo's cell programming platform. It helps validate that the platform works over the long term.

💡biofarma

Biofarma refers to biopharmaceutical customers and partners working on drug discovery and development. Ginkgo has pivoted its focus more towards biofarma as other areas have stalled.

💡milestones

Milestones are predefined technical or commercial achievements in Ginkgo's partnership deals that trigger payments upon meeting targets. The video analyzes shifts in milestone payments over time.

💡runway

Runway means the amount of cash Ginkgo has left to sustain operations given its current burn rate. The video calculates they have about 2.6 years of runway based on their balance sheet.

💡acquisitions

Ginkgo is making more acquisitions to supplement its platform, which the video sees as a negative sign that they can't fully capitalize on their core foundry business model after 16 years.

💡cost of goods sold

The video criticizes Ginkgo for not providing cost details related to cell engineering revenues, making it hard to evaluate potential gross margins.

💡growth

The video concludes by noting that Ginkgo's growth stalled in 2023 as they missed revenue guidance targets and pivoted their business model, replacing old concerns with new ones.

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

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thanks so much for taking the time to

watch this

today