When reading up on Ginkgo Bioscience ($DNA), another biotech mini-cap was brought to my attention. Twist Bioscience ($TWST) claims to be another company of the future, disrupting the DNA industry by being able to synthesize massive amounts of DNA on a large scale for low cost. Synthesis of DNA is the first step in creating GMOs to produce biosynthetic products, as I described when talking about Ginkgo Bioscience. Because GMOs are supposed to fuel the incoming biotech revolution, the company that gets to synthesize the DNA going into those GMOs should make a lot of money, and sure enough Ginkgo and Twist recently partnered so Twist could sell Ginkgo DNA.

Browsing the price options, Twist does seem to offer DNA for a bit cheaper than it’s nearest competitor, GeneScript. These modest savings are supposedly thanks to Twist’s silicon-based DNA synthesis platform, a technology that is namedropped in every Twist press release but which I am unsure of it’s full scope nor how much it’s used in their actual manufacturing. The technology appears to be old-fashioned DNA synthesis coupled to a microarray that allows the process to be controlled by a computer. I’m sure name-dropping silicon is supposed to make people think of Silicon Valley, semiconductors, and the computer/tech revolution, but the novelty seems surprisingly modest and I’m not sold on how it is supposed to lead to the huge magnitude of savings claimed by Twist. Because while their prices are a bit cheaper than their competitors, it is worrying that Twist has been accused of selling their products below cost which is not a sustainable way to run a business. Twist’s publicly available earnings reports do show that they’re spending 2$ for every 1$ they make in revenue, so the shorts may be right on this one. Burning investors’ money to gain market share may work when interest rates are low and money is cheap, but in the currently constricted environment it doesn’t seem sustainable which is probably why Twist’s stock is down 70% year to date.

Twist has also tried to generate hype by claiming that DNA is the next information-storage medium, and that they have the patents to make this happen. I honestly think this sounds a lot like Elon Musk’s claims that Tesla will produce Robotaxis or build a robot, it’s hype for hype’s sake with no path to a profitable product. DNA does store information, but information is only as good as our ability to write and retrieve it. Silicon is a great store of information because photons can be used to change the electron states of the atoms and thus to read and write information at the speed of light. On the other hand DNA does not easily read/write. Writing information to DNA means changing a DNA base, which is a very difficult process requiring very precise biochemistry (like CRISPR or other enzymes), and it fails as often as it success. Reading DNA information means extracting it into some usable form, and while photons from silicon are easily converted into electric impulses which can drive some process (the movement of a robot arm or the display of a pixel on a screen), DNA codes for RNA which codes for proteins and none of those are easily converted into an electric impulse or anything else that could drive a process. At best, you could do some kind of X-ray crystallography and hit the DNA with photons to read out its sequence, but doing so damages the DNA to the point that you’re better off just using silicon, and you still haven’t solved the problem of writing new information to the DNA.

So does Twist have it? They are currently selling DNA for cheaper than anyone else I could find, but they’re also burning investors’ money to do so meaning I’d rather be a customer than a shareholder. They had a net loss of 218.9 million dollars and 505 million dollars in cash, so they can keep this up for at least 2 years without taking loans or selling more stock. In that time, it’s possible that they could gain market share and economies of scale to the point that they become profitable, but I kind of doubt their silicon-based hype will be the key driver of of those profits. I also am highly skeptical of their DNA-as-information-storage hype, and don’t think it will contribute much more than Elon Musk’s robotaxis. If they can profitably sell DNA for less than their competitors they’ll be a buy, but until I see evidence of it I won’t touch their stock myself.