Driven by a pair of
bullish analyst initiations, shares of Twist Bioscience (TWST 25.94, -0.05, -0.19%) spiked higher
earlier this morning, up as much as 10%, coming within a few pennies of hitting
new post-IPO highs. However, TWST has given back most of those gains as the
stock is currently trading with a modest gain on the session.
To rewind a bit, the company went public back on October 31, to little fanfare. In fact, its 5 mln share IPO priced at the low end of expectations ($14 vs. $14-$16) and then opened for trading with a 7% loss. Since that slow start, however, the stock has been on fire, surging by nearly 100% from its IPO opening price.
Prior to this recent downturn in the IPO market, healthcare-related IPOs had been in high demand. So, investors may have been looking to take advantage of the weak pricing and opening, before enthusiasm picked back up for these deals.
As noted above, today was the quiet period expiration on TWST, allowing investment banks involved on the deal to publish research and estimates for the first time. Of the three we see so far this morning, two landed on the bullish side. Specifically, Robert W. Baird assigned an Outperform and $30 price target on the stock. Cowen also put an Outperform on the stock.
On the more cautious side, JP Morgan went with a Neutral and $27 price target.
The next key event for TWST will be its first earnings report as a publicly traded company (no date set yet). In its IPO prospectus, TWST provided some financial guidance for the three months ended September 30, 2018. It is expecting revenue of $7.9-$8.3 mln, which represent increases of 22% and 27%, respectively, from revenues of $6.5 mln for the three months ended June 30, 2018. This increase is primarily attributable to higher sales to Ginkgo Bioworks. TWST is also forecasting an operating loss of ($20.9)-($19.5) mln, which represents increases of 11% and 19%, respectively, from loss from operations of $17.5 mln in the three months ended June 30, 2018.
TWST is a synthetic biology company developing a DNA synthesis platform to industrialize the engineering of biology. The core of its platform is its proprietary technology that uses a new method of manufacturing synthetic DNA by "writing" DNA on a silicon chip. The company has combined this technology with its software, commercial infrastructure, and an e-commerce platform to create an integrated system that leads to a much lower cost structure than its competitors.
The company is currently manufacturing a broad range of synthetic DNA-based products, including synthetic genes, tools for next generation sample preparation, and antibody libraries for drug discovery and development. Additionally, it believes its platform will enable new value-add opportunities, such as discovery partnerships for biologic drugs, and will enable new applications for synthetic DNA, such as digital data storage. TWST sells its synthetic DNA and synthetic DNA-based products to a customer base of over 600 customers across a broad range of industries.
TWST's core technologies combine expertise in silicon, software, fluidics, chemistry, and motion and vision control to miniaturize thousands of parallel chemical reactions on silicon and write thousands of strands of DNA in parallel. With a footprint that is similar to the size of a 96-well plate that produces one gene, TWST is able to produce 9,600 genes in parallel. Based on current production needs, it has intentionally designed its latest chip to make 6,144 genes in parallel, but it has the current capability to increase this to 9,600 genes, as needed.
In April 2016, TWST launched the first applications of its platform, synthetic genes and high diversity collections of oligonucleotides, or oligo pools, to disrupt the gene synthesis market and make legacy DNA synthesis methods obsolete. Its silicon-based chip technology is able to increase DNA production by a factor of 9,600 on a footprint similar to that of traditional DNA synthesis methods. Also, it significantly lowers the volume of required reagents, specifically the most expensive reagent by a factor of 1,000,000, and improves the precision of the synthesis process relative to legacy methods. This enables the company to produce high-quality synthetic DNA on a much larger scale and at lower cost than competitors.
TWST launched its proprietary, innovative, and easy-to-use e-commerce platform in October 2017 to existing customers and expanded access to the general public in January 2018. Its platform allows customers to design, validate, and place on-demand orders of customized DNA online. This is a critical part of its strategy to address its large and diverse customer base, as well as drive commercial productivity, enhance the customer experience, and promote loyalty.
The company's currently marketed products target the synthetic DNA market, a sub-segment of the synthetic biology market, and NGS sample preparation, a large adjacent market opportunity. TWST estimates that the combined market opportunity was $1.8 bln in calendar year 2016. Furthermore, it believes that current estimates understate its market potential because they reflect the costly, time-consuming, and cumbersome nature of legacy DNA synthesis technologies.
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