Selling Illumina, Buying Twist Bioscience
Twist biosciences $TWST is one of the major success stories in the business of biology and they're powering the new revolution in synthetic biology.

What Is Synthetic Biology?
Synthetic biology is a field of science that involves redesigning organisms for useful purposes by engineering them to have new abilities.

How Does It Work? (I'm an investor, not a scientist!)
Scientists typically stitch together long stretches of DNA and insert them into an organism's genome. These synthesized pieces of DNA could be genes that are found in other organisms or they could be entirely novel.

Can You Give Me An Example?
Microorganisms harnessed for their ability to break down a huge range of organic compounds and absorb inorganic substances in order to clean pollutants from our water, soil, and air.

Can Give Me Another Example?
Rice modified to produce beta-carotene, a nutrient usually associated with carrots, that prevents vitamin A deficiency. Vitamin A deficiency causes blindness in 250k-500k children every year and greatly increases a child's risk of death from infectious diseases.

I Like Examples, Do Me One More!
Yeast engineered to produce rose oil as an eco-friendly and sustainable substitute for real rose that perfumers use to make luxury scents

Post media

Ok So How Did Twist Biosciences Get Started?
Co-founders Emily Leproust, Bill Peck, and Bill Banyai were talking to a friend who was buying a lot of DNA. There were delays, they weren't getting what they wanted, and it was super expensive. Emily and the Bill realized that DNA synthesis was a big market with unhappy customers. So they invented a technology that was much better at serving customer needs than what was out there at the time.

What Did They Invent?
To understand what they made you have to have a cursory understanding of microplates, photolithography, and liquid handling robots. Don't bail now! You are capable of understanding the relevant parts:

Microplates are a flat plate with multiple "wells" used as small test tubes. The microplate has become a standard tool in analytical research and clinical diagnostic testing laboratories.

Post media
Photolithography is a process used to make extremely small structures.
This procedure is comparable to a high precision version of the method used to make printed circuit boards. Photolithography provides precise control of the shape and size of the objects it creates and can create patterns over an entire surface cost-effectively.

Twist is essentially making microplates like the ones pictured above, but an extremely miniaturized version reminiscent of computer circuit boards, and look like the one pictured below:
Post media

A liquid handling robot is used to automate workflows in life science laboratories. It is a robot that dispenses a selected quantity of liquid to a designated container.

Post media

Combining these three things, they were able to build the technology to read and write DNA onto silicon.

Why Does That Matter?
Throughput and cost. The DNA market was already doing fine on quality, after-all, cloned DNA is by definition a perfect copy. But the big pain points were how long it took to create the DNA and how much it costed.

In 2017 when Twist Biosciences started selling DNA it was 25 cents a base (aka a rung of the DNA ladder). If your gene is a 1,000 base pairs, the cost was high enough that you may do the cloning yourself. And this wasn't scalable. You could buy a gene or two, but if you wanted to do a high throughput experiment with 100 genes, you would have to wait a long time. If you wanted 1,000 genes, forget it. Even if you had the budget, it would take months and months to get thousands of genes.

Twist is a hardware platform company. They have ported DNA chemistry onto silicon and can essentially print DNA onto these silicon wafers. This miniaturized chemistry allows for increased throughput and decreased cost. And that is exactly what the market needed- to make more DNA at lower cost.

That is the high level overview of what Twist does, I will be writing more in the future about their business, so be sure to give a follow if you want to keep learning!
Nathan Worden's avatar
For a nice visualization and generalized explanation of their process, see this video:
Josh Worden's avatar
I like buying stocks in tech/medical fields because many have high upside but I also am pretty cautious because most of their work (Twist Bio definitely included) is so complicated, it's above my liberal-arts-degree-understanding. So I like buying in a small amount just to join the fun but not overcommitting to something I can't even fully explain. Your summary gives me just enough to say "sure why not invest $25?"
Nathan Worden's avatar
Haha glad it was worth a $25 look
😅 🥸
Ambrose's avatar
See that purple silicon plate right there. They have the technology to create very volume efficient, cost-efficient "plates" to sequence genes. Allowing you to sequence 9.6k genes at 1 go which 100x more genes than 96 genes from traditional well plates.

I think they are the only ones on the market to sell such stuff

NGS products revenue in this quarter is $23.6 million which increased by 271% when compared to last quarter $8.7 million
Nathan Worden's avatar
I know you have a pretty high bar in adding companies to your portfolio- is it safe to say Twist is on your watchlist @zebo ?
Ambrose's avatar
Yea, but total revenue growth is declining is a bit concerning. Revenue growth is 113.89% in 2019 and only 65.67% in 2020 when it is the pandemic. They also expect rev growth to be 31.1% in 2021 from $90.1 million to $118 million.

If they could increase their revenue growth more, then I would get a position again.

Revenue growth is declining too fast for my taste esp in their best environment. Of course, 31.1% rev growth is still a lot and there is still a lot of upside to this stock. I would say this is still a decent stock with low risk.

Author

Related