Biotech innovator Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) has had better days on Wall Street. The stock has declined by more than 77% over the past year.
With fears of a stalling growth, we look at the strategies that Ginkgo is adopting and try to reignite its growth.
Leveraging the Growing Global Biotechnology Market
Biotech is not just important in and of itself but also when it comes to other industries like biofuel, food, agriculture, and natural resources. So far, the industry shows significant prospects, which have led to a plethora of investments.
According to one report, the global biotechnology market is expected to expand at a compound annual growth rate of 9.2% from $1.68 trillion in 2024 to approximately $3.54 trillion by 2033. The U.S. is THE major player in this space with the market in US shores expected to reach around $1.47 trillion by 2033.
Inside this market space, cell and gene therapies have become quite popular. These are used primarily to treat and prevent life-threatening diseases, a huge market opportunity. According to one report, the global cell and gene therapy market is expected to reach around $97.33 billion by 2033, growing at a CAGR of 18.3%.
Hence, right now, Ginkgo Bioworks is standing at an interesting juncture, whereby the company can leverage the market’s growth to propel itself. The company asserted that its capabilities are well-positioned to provide biosecurity and R&D services in this growing market.
As biotech has become a matter of national importance now, the company highlighted the fact that it has 28 U.S. Government projects across cell engineering and biosecurity, with approximately $180 million of contracted backlog and unfunded potential backlog.
Leveraging Data and Artificial Intelligence
AI is becoming increasingly prominent in the drug discovery process. In a 2022 report by McKinsey & Company, the research firm identified 250 companies working in the AI-driven drug discovery industry, a majority of them inside the U.S. McKinsey expected that by putting AI at the center of the drug discovery process, companies have the potential to transform it and create substantially better patient outcomes.
Big data is also being increasingly leveraged in this sector. Information from health records and databases, which indicate the condition of patients, genes, and outcomes at large, is a valuable resource when it comes to bettering biotech.
Ginkgo is also trying to gain some efficiencies from AI and big data against this backdrop. It has made its bet on AI, with an AI model that helps in biological research and for other companies to develop their own drugs using the Ginkgo offering. And indeed the automation unit signed a deal with Aura Genetics.
Cost-Cutting Measures
After facing losses, Ginkgo was compelled to take up cost-cutting efforts. However, this is not just Ginkgo’s story. In fact, some notable biotech names have been engaging in laying off their staff to cut costs.
Coming back to Ginkgo, last year, it announced letting go of as many as 400 employees, which translated to more than a third of its workers.
Management forecasted lower operating expenses to the tune of $200 million over the subsequent 12 month period. These measures also meant consolidating locations into smaller facilities and making its customer programs simpler.
As of the first three months of this year, these efforts have seemingly worked, with the cost-cutting measures recording an annualized run-rate cost reduction of $205 million. By the third quarter of this year, Ginkgo expects to reduce costs by $250 million. Its consolidation efforts have also resulted in excess space for subleasing.
How Is Ginkgo Bioworks Pacing Now?
Management reported its first quarter results for fiscal 2025. Then the company reported a 27% jump in its total revenue compared to the prior year’s period to reach $48.32 million. This gain was mainly led by the company’s cell engineering segment, which registered a revenue growth of 37% year-over-year to $38.23 million. Biosecurity segment’s revenue remained relatively flat over this period at around $10 million.
Ginkgo is posting significant losses, although they were better this year than the previous year’s period. Net loss stood at $90.96 million during the quarter, while it posted an adjusted EBITDA loss of $47.45 million.
For the current year, Ginkgo is expecting a total revenue between $167 million and $187 million. This is notably lower than the 2024 total revenue of $227.04 million. Ginkgo has also set a medium-term target of achieving adjusted EBITDA breakeven by 2026.
Is Ginkgo Bioworks Stock a Good Buy?
Ginkgo Bioworks has 40.8% upside to fair value $8.20 per share according to the consensus of 5 analysts. Notably, though, the balance sheet suggests that cash is quickly being burned and worse, analysts don’t expect profitability this year.
Still worse again is that the free cash flow yield is poor and across most key dimensions from price to momentum the outlook is pretty dismal. In fact, the discrepancy between price and valuation is the biggest attraction now.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.