Equity X-Ray: In-Depth Research #25

The Printing Press for DNA: Fueling the Entire AI-Drug Discovery Boom

Introduction

I believe that Twist Bioscience (NASDAQ: TWST) is a great long-term investment opportunity, and I am initiating coverage with a Buy rating. The market, still cautious from being burned during the 2021 genomics bubble, is not assigning an adequate price to the company’s proven ability to execute operationally, its near inflection to profitability, and its position as the key infrastructure enabling the AI revolution in biotechnology. While many of its peers have disappointed, Twist has quietly developed a robust, high-margin business that is now poised to enter a new era of compound growth.

---

🌱 Support Our Work: Buy Us a Coffee🌱
Your small gesture fuels our big dreams. Click below to make a difference today.

[☕ Buy Us a Coffee]

---

Twist Bioscience can best be described as the company that built the printing press for the genetic code. For biology to become a truly programmable engineering science, scientists needed a means of “writing” DNA, that is, synthesizing it from scratch, as easily and cheaply as the semiconductor industry manufactures microchips. By developing a way to synthesize DNA on silicon chips rather than on traditional plastic sheets, Twist has radically transformed the speed, scale, and cost of this vital process, making it an essential partner in enabling the innovation taking place in all areas of healthcare, in industrial chemicals, and in academic research.

I arrive at a fair value estimate of $65 per share, representing significant upside from the current stock price.

---

---

Company Background

To understand the investment thesis that drives Twist Bioscience, it is necessary to understand the underlying problem that it was created to solve. For decades, the field of biotechnology existed in a profound imbalance. Scientists had become experts at “reading” DNA, the instruction manual for all living things, encoded in a simple four-letter language (A, T, C, and G) because of next-generation sequencing technology. This led to the ability to “decode” genomes and to understand the genetic basis of disease. “Writing” DNA, synthesizing it from scratch to build new biological tools, however, was still a slow, expensive, and artisanal process.

This was the single biggest bottleneck that hindered the development of the entire field of biotechnology. To engineer biology successfully, scientists did not need to merely be “readers” but needed to be “writers.” They needed to build a printing press for DNA. In 2013, Dr. Emily Leproust, one of the founders of Twist Bioscience, along with engineers Bill Banyai and Bill Peck, founded Twist Bioscience to build that printing press.

The Core Innovation: Writing DNA on Silicon

To grasp the advantage of Twist’s technological moat, one can do no better than compare it with the computing revolution. For years, synthetic DNA was made in 96-well plastic plates, a method like building a watch by hand, component by component. This was slow, yielded an extremely limited amount of genetic material, and was enormously expensive. Twist’s revolution was to completely re-conceive this process, basing it on the principles of semiconductor manufacture. Instead of plastic plates, they devised a system of writing DNA directly onto silicon chips.

This is not a step—this is a complete breakthrough.

Each silicon chip contains millions of microscopic wells, creating a vast array of parallel reaction chambers. This permits Twist to synthesize millions of individualized DNA strands at one time, in parallel. This stupendous miniaturization means that they consume only a portion of the expensive reagents needed in the old methods, and consequently, the costs are brought down enormously while at the same time the production is increased by several orders of magnitude. What this means to a scientist is that no longer are the old methods applicable. An experiment which before might have necessitated testing several dozen of genetic designs now can, because of the speed and price, test thousands—even millions or these designs within the course of four or five days and for a pittance. This is not only quicker, but it opens up new and entirely different problems which otherwise would be impossible to solve.

This platform is the motor that runs the whole show at Twist.

Slide from TWST Website