Profile

Ginkgo is a Commercial Research Organization that is the leader in Synthetic Biology. They are driving down cost by driving up a level of scale that is commercially beneficial to customers. They are focused on 2 key franchises with synthetic biology and biosecurity. The foundry and codebase make up their synthetic biology platform. Synthetic Biology brings together cell engineering, chemistry and genetic editing to alter the DNA of cells to create new organisms with new purpose. Their subsidiary Concentric is focused on biosecurity solutions. This is about developing technologies to detect, test, track and predict pathogens and outbreaks. We live in a world where bioterrorism is one of the biggest risks we face.

Management

I have been following Ginkgo and Jason Kelly since they went public. I know a lot of people find him to be smug and arrogant. I think he has done a really good job. Recently, I have been really concerned with all the insider sales from their stock awards. Jason Kelly addressed the issue on their earnings call. I think he took on a very hard question and handled it with grace and ease. I have even more respect for him after. I think they are focused on the long term company building and not just impressing analysts for the next quarter.

Science

The foundry is all about engineering living organisms. Cells are encoded with DNA which acts as the programming for that cell. It doesn't matter if it is a human T cell, a bacteria or a yeast cell. If you learn how to change the DNA of living cells, you can recode their programming to make them do whatever you want. The codebase is that database that Ginkgo has for all that genetic programming information. With synthetic biology, we can rewrite life and create new organisms with new purposes. This can be a yeast that makes a mediation or ingredient for manufacturing. It could even be something that changes the world like bacteria that creates fertilizer in the fields or an algae cell that cleans carbon emissions from the environment. We can create safe bacteria in the food and water that emit a glow when they come in contact with harmful pathogens or toxins.

Biosecurity is about protecting this new world of biology from pathogens that can harm us. This is about tracking and preventing pandemics. We live in a world where we have the tools for bad people to create a pathogen that could wipe out the entire world. We need to have the tools to be able to detect, track, contain and prevent these types of events. Pathogens do not respect borders which makes them a global threat. The biosecurity franchise is all about building the tools to test and the software to track and model outbreaks.

Valuation

Cash $1.3 billion

Foundry only earns about $175 million in sales right now. That is because this platform is like a pipeline for other biotech companies. Programs are put into the foundry when a company partners with Ginkgo. It can take years for these programs to be completed to the level of commercial launch. They get paid a small amount for their work, but most of the value is in the form of Equity Stakes, Royalties and Milestones. The key here is to watch the number of programs they have in their pipeline. That is the indicator of potential future revenues. I think they could reach $1 billion in foundry revenues in the next 7 to 10 years. I would give this a value of $1.75 billion based on realistic price to sales on their current foundry sales.

Biosecurity has been really strong since Covid. There is some concern it could fall off as Covid sales fade. This started to happen as Covid testing sales slow and are being replaced by recurring longer term revenues from their preventive programs. Right now, they are doing $100 million in biosecurity sales. That gives it a value of about $1 billion in value based on a realistic price to sales.

The pipeline of the foundry has well over $2 billion in downstream value in the programs from 2022 alone. I would venture that this pipeline is much bigger than that. I would give this a standard $500 million valuation for a typical early stage clinical pipeline.

All in, that is a $4.55 billion market cap. Based on the 1.6 billion shares outstanding , that comes to $2.84.

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