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Ginkgo Bioworks is on the forefront of a revolution, Raymond James says

Raymond James analyst Rahul Sarugaser has turned his attention to Ginkgo Bioworks Holdings (Ginkgo Bioworks Stock Quote, Chart, News NYSE:DNA), initiating coverage on Wednesday with an “Outperform 2” rating and target price of $14.50/share (all figures in US dollars).

Headquartered in Boston, Ginkgo Bioworks Holdings builds bespoke living cells through the use of synthetic biology, which enables the company to program the cells with instructions to become microscopic ‘factories’ that, in turn, can manufacture materials to serve essentially any industry.

The company’s system is built on its Foundry + Codebase platform, where the Foundry is the suite of physical infrastructure on which Ginkgo undertakes its cell programming work, while the Codebase is Ginkgo’s entire catalogue of institutional biological knowledge that it draws on to execute new projects.

Sarugaser said Ginkgo is on the frontier of biological engineering.


“Humankind’s relatively recent development of technologies that enable the efficient reading, accurate editing, and well-informed writing of life’s instructions (DNA) has empowered Ginkgo—and a growing number of peers—to design living cells that do/make/consume/sense what we want them to,” Sarugaser wrote.

Ginkgo Bioworks comes as the result of a recent merger involving Ginkgo Bioworks and Soaring Eagle Acquisition Corp., which officially closed on September 17.

“For nearly two decades, my co-founders and I have been on a mission to make programming cells as easy as programming computers,” said Jason Kelly, CEO and co-founder at Ginkgo in the company’s press release announcing the completed acquisition. “Today marks an important milestone not only for the team at Ginkgo, but for synthetic biology as a whole, and I am thrilled to work with our team, partners and investors as we continue scaling our platform to solve even bigger problems with biology.”

On account of the diversity of its offerings, Ginkgo has developed partnerships with numerous major companies across almost every industry, including agricultural partnerships with Corteva and Bayer/Joyn Bio, industrial partners Sumitomo and Genomatica, Bolt Threads and Givaudan in consumer products, and numerous healthcare partners like Biogen, Moderna/Aldevron, Antheia and Roche. 

Sarugaser made note of previous coverage involving cannabis producer Cronos Group dating back to an agreement between Cronos and Ginkgo in September 2018, which helped Cronos become a top-tier organization in the cannabinoid innovation industry. Shortly thereafter, Cronos received a $1.8 billion investment from Altria, which Sarugaser believes was fueled by Ginkgo’s technology, which also showcased the benefits of a partnership with the company.

“We believe leveraging biology as a manufacturing modality and discovery engine has the potential to be just as transformative for Ginkgo’s current and future partners,” Sarugaser said.

Noting that the company was built as a hub for others, Sarugaser believes the company has built a solid foundation for itself by focusing on establishing synthetic biology as an engineering discipline instead of rushing ahead with a blindered focus on applications in its relatively early days.

“How broad its network can become is the big question governing the company’s future,” Sarugaser said. “But, in our view, one thing is sure: The more important synthetic biology becomes, the more Ginkgo wins.”

Sarugaser’s financial projections show a company continuing its growth and development, projecting revenue to reach $192 million in 2021 for a potential year-over-year increase of 149.3 per cent, followed by another projected jump to $261 million in 2022, a potential year-over-year increase of 35.9 per cent.

Meanwhile, Sarugaser also predicts fluctuations in the company’s EBITDA over the next two years, beginning with a projected $161 million loss in 2021, down from the reported $123 million loss in 2020. 2022 is a slightly more positive picture on the EBITDA front, with Sarugaser projecting a $114 million loss.

Sarugaser’s valuation metrics also present a varied picture of the company, with the EV/Revenue multiple forecast to drop from the reported 239x in 2020 to 95.6x in 2021, with a further projected drop to 70.1x in 2022. In contrast, the EV/EBITDA shows more fluctuation, improving from the reported (149.4)x in 2020 to a projected (114)x in 2021, then going in the opposite direction to (160.3)x in 2022.

Sarugaser is optimistic about Ginkgo’s potential in the synthetic biology field, believing the company will be a major player moving forward.

“We believe the engineering of biology will be core to most industries of the future, and that Ginkgo—the sector’s best-funded, most equipped, and most broadly scoped company—will be an anchor organization in creating that future,” Sarugaser said.

At the time of publication, Sarugaser’s $14.50 target represented a projected 12-month return of 31.9 per cent.

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Geordie Carragher is a staff writer for Cantech Letter
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