According to Sebastian Rowe of Harvard Graduate School, the modern drug discovery pipeline is filled with expensive failures. From the first process of finding a drug target to submitting applications to the Food and Drug administrations for approvals, each process takes millions upon millions of dollars to produce few promising results. Most of them do not make it past the pipeline. In the US, this phenomenon is numerically represented by the National Institutes of Health’s BRDPI, or the Biomedical Research and Development Price Index. In real terms, 2 USD worth of research progress is 14 USD in 2015, and even more now than ever: from 1980 to 2020, BRDPI has risen by 357%.
New frontiers of Biology may be the key to this ever-rising research inflation problem. Synthetic Biology, or SynBio, aims to engineer Biology to suit our needs, including pharmaceutical applications. Researchers from Peking University have discovered that man-made biological circuits can be programmed to speed up the discovery of novel drug targets. It includes diseases of high interest to the market, such as cancer and immunity diseases. Moreover, researchers also point out that these circuits can be used alongside CRISPR technology. AstraZeneca and other large pharmaceutical companies already use CRISPR in their pipelines. Even more innovative solutions are also in the works: Siolta Therapeutics, a SynBio start-up, has developed the organism SMTC-103H, which may be able to prevent allergies entirely.
SynBio can both directly help the pipeline by providing more efficient methods or entirely revolutionize the field by introducing new products and modes of treatment. In addition, the development of these products may cost much less than conventional drug development methods. For example, the cost of DNA sequencing, a core part of synthetic biological engineering, has dropped from 100 million USD to just around 5000 USD from 2002 to 2013, a 99.995% decrease.
In recent years, SynBio has gained the attention of entrepreneurs, investors, and the market at large. Last year, the market saw some of the biggest SPAC and IPO deals regarding SynBio-based companies. Ginkgo Bioworks (NYSE: DNA), a SynBio company that sells engineered organisms with industrial applications, went public in September of 2021 via a merger with the SPAC company Soaring Eagles Acquisition Corp., which raised its pre-equity valuation to 15 billion USD. Zymergen (NASDAQ: ZY), another company that sells engineered organisms, also went public in April of 2021, raising 500 million USD after collecting more than 1 billion USD in venture funding. Overall, investments reached 8 billion USD by 2020, according to SynBioBeta.
The interest in SynBio companies is also present within the UK market. According to Stephen Chambers of SOSV, in 2018, a total of 268 million GBP of equity finance was invested in UK SynBio startups. The average deal size for these companies is 9.9 million GBP, and 15% of them have had exits in the form of IPOs and Acquisitions. The number of SynBio companies continues to steadily increase (28% from 2013 to 2018, for example).
It seems that the SynBio industry is in its booming stage as more funding becomes available and more companies join the market. It is only a matter of time until companies innovate with SynBio to the level of approved pharmaceutical applications.
However, this field presents immense risk as well. Zymergen’s first line of biological products, a foldable film for LED screens, faced technical issues and failed to roll out. Their revenue for 2021 was practically zero, and their stock tanked 69%, as revenue figures for 2022 are expected to be the same.
Ginkgo Bioworks is considered to be overvalued by many. Its sceptics have pointed out that it made it through all of the funding rounds without introducing any significant products, to what Ginkgo Bioworks’ CEO Jason Kelly has replied: “I am not a product company”.
Some have also raised concerns regarding ethical and moral issues regarding SynBio technology. In a TED talk, Bob Reid speculated that, with the increasing access and democratization of Synthetic Biological technology, a person of ill will could manufacture a “doomsday bug” that can harm humans.
With the presence of extreme technical risk and ethical issues that can hinder the already challenging approval process, investors have to proceed with caution when dealing with the promising Synthetic Biology industry.
By Pavat Pichetsin
Sector Head: Anuar Gaisin