Ginkgo programs cells. "Biology by design" as they call it. Recently, management increased its expectations of new programs from 23 to 30 as early cell programming success has led to greater demand. This allowed the company to increase total revenue expectations from $150 million to at least $175 million for the full year 2021.
The company is at the forefront of applying advanced technology to biological applications. In addition to cell programming, Ginkgo has seen growing demand for biosecurity, a huge new market brought on by COVID-19. This takes the company beyond foundry and diagnostics.
Cell programming offers stable revenue, as DNA receives upfront payments to cover the costs of the research and development the company is performing for customers. It is highly predictable and not dependent upon success, but it comes with a huge upside.
Ginkgo garners downstream value through customer equity or royalties or both on successfully completed programs. The more successful the results of the R&D Ginkgo was paid to complete, the more potential economic upside Ginkgo has through their downstream value financial arrangements.
The 2023 estimated total addressable market for "cell engineering" labor and tools is $58 billion. The upside of the downstream value could be as high as $3.5 trillion over the next two decades.
To give you some idea of the potential windfalls Ginkgo could receive from active projects, here are a few customers and partnerships they have in place:
* Potential for $100-plus million upon completion and commercialization of all programs for Cronos (CRON) .
* The company expects Cronos to commercialize one of its two programs this year.
* Up to $115 million in milestone payments from Biogen.
* Tiered royalty sales from Roche (RHHBY) and Aldevron.
* 35% equity ownership of JOYN Bio, a joint venture with Bayer (BAYRY).
* Equity in MOTIF Foodworks
These are just some of the active projects. And as I mentioned before, Ginkgo has a growing pipeline. In addition to this, the company made a massive leap in biosecurity in its work with Aldevron. The work in the mRNA field will be used in K-12 COVID testing now and for identifying future threats and the subsequent response. Revenue from biosecurity is expected to be $75 million for 2021.
In short, Ginkgo is an incubator of sorts, but with different approaches to different ventures. Ginkgo isn't about yesterday or today. It's about tomorrow. I believe they are the future of biotechnology. While speculative, it's a core holding, and will continue to be that way unless they show a consistency of failed ventures.
