The Boston genetic engineering company Ginkgo Bioworks and its CEO, Jason Kelly, have been spectacularly successful selling a story: that synthetic biology will transform the manufacture of physical products. What computers did for information, Kelly says, biology will do for the physical world. Instead of making a chemical from petroleum, why not have Ginkgo’s multi-floor “foundry” in Boston’s seaport design a yeast cell to manufacture it instead from a broth of sugar water?

I first saw Kelly, a boyish figure in a tight sport coat and sneakers, give his pitch a few years back. It was the same talk he’d been giving successfully in Silicon Valley for years. One slide featured a photo of an Apple computer, an iPhone, a camera, and a metal watch on a gray desk decorated with a potted plant and a black swivel lamp. “What’s the most complicated device on this table?” Kelly asked.

Of course, it’s the house plant. The point is that biology can make just about anything. Think of its incredibly sophisticated miniature machines, like the swirling flagellum that helps a bacterium swim. In Ginkgo’s hands biology would become programmable, revolutionary, and insanely lucrative, just like those famous tech products in the slide. “This is a much more powerful manufacturing platform than any of those other things,” Kelly said.

Given Kelly’s spiel, it is surprising that 13 years after it was founded, Ginkgo can’t name a single significant product that is manufactured and sold using its organisms. To the company’s fans, that’s no problem. They say Ginkgo embodies the biggest trends in DNA science and surely will become the Intel, Microsoft, or Amazon of biology. Kelly has compared Ginkgo to all three. To skeptics, however, Ginkgo is a company with modest scientific achievements and little revenue, and its greatest talents lie in winning glowing press coverage and raising money.

Ginkgo’s story matters because it has become the face of synthetic biology to many investors as it prepares to begin trading as a public stock in September following a merger with a special-purpose acquisition company, or SPAC, called Soaring Eagle. A SPAC is a shell company that sells shares to the public in an IPO with the intention of merging with a promising private business, thereby taking it public too. SPACs can open exciting (and risky) young tech companies to ordinary investors, although it’s at a price negotiated by a small circle of dealmakers. Earlier this year, Soaring Eagle announced it would merge with Ginkgo in a deal that valued the Boston company at $15 billion. Kelly’s stake will be worth well more than $700 million.

Some biotech investors believe this valuation is excessive for a company with little revenue; in 2020 Ginkgo brought in $77 million providing research services and covid-19 tests but lost plenty of money while doing so (more than $137 million, to be exact). “It looks like a great example of a clever story that caught the attention of investors,” says Jean-François Formela, a venture capitalist at Atlas Venture in Cambridge, Massachusetts. “If you boil down the message, it’s that biology is programmable. But it’s not that easy,” he says. Formela adds that the $15 billion valuation “seems insane.”

But in today’s bull market, being a skeptic doesn’t pay. So it’s difficult to say with any certainty what Ginkgo is really worth. After all, a single Bitcoin now costs $48,500 and Tesla has a market capitalization of around $700 billion, more than 10 times that of Ford. “Speaking with assurance on certain types of companies belies how difficult it is to know,” says Doug Cole of Flagship Pioneering, an organization that forms biotech startups in Cambridge. That’s especially true with companies that, like Ginkgo, are “creating new markets.”

Ginkgo’s success telling its story and raising money without introducing significant products has some skeptics wondering whether it will be next in line to crater once reality sets in. Earlier this month Zymergen, a competing synthetic-biology company, saw its stock price plunge 75% in a day after it said sales of its main product, a biological film for foldable phones, would be delayed by at least a year. Zymergen’s CEO, Josh Hoffman, who had also touted a coming era of “biofacturing,” resigned as well.

In a phone call, Kelly said his company purposely isn’t betting on any one product. Instead, he says, Ginkgo is a science and engineering “platform” for other companies to use. He compared Ginkgo to an online app store, except that the apps are programmed cells. Like an app store, Kelly says, Ginkgo will eventually profit by taking a cut of customers’ revenues, in the form of royalties or shares. It will be up to them to make and sell the biomanufactured products.

 “I am not a product company, and I have no desire to be a product company,” Kelly told me. “People in biotech are brainwashed to think

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By: Antonio Regalado
Title: Is Ginkgo’s synthetic biology story worth $15 billion?
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Published Date: Tue, 24 Aug 2021 10:00:00 +0000