In today's video, we continue our exploration of the turbulent journey that is Cathie Wood's Ark Invest, focusing on one of their most troubled ETFs, ARKG Genomic Revolution ETF. Over the past 5 years, ARKG has underperformed the S&P 500 by a staggering 70%. We've previously delved into one of ARKG's holdings, Ginkgo Bioworks, and today we turn our attention to another key player, Twist Biosciences. Twist is a significant holding in the ARKG ETF, with Ark Invest being its largest shareholder, owning 12% of the company's outstanding shares.
Founded in 2013 and going public in 2018, Twist Biosciences promised to revolutionize synthetic biology with its gene editing microchip, claiming it could create synthetic genes thousands of times faster than traditional methods. This breakthrough was anticipated to accelerate drug discovery, develop hyperproductive plant strains to combat world hunger, and open doors to numerous other revolutionary applications. This excitement drove Twist's share price to nearly $200 in 2021, giving the company a valuation close to $10 billion. However, since then, Twist Biosciences' stock has plummeted by almost 90%, resulting in substantial losses for Ark's investors.
In this video, we take a deep dive into Twist Bioscience, exploring why investors were so enthusiastic about it just two years ago and dissecting the factors behind its catastrophic share price decline.
Nothing in this video is investing advice, we are giving our own opinions based on publicly available information.
Check out our second channel Broken Business Models where we discuss unusual or otherwise suspect businesses that may be unviable: https://www.youtube.com/ @BrokenBusinessModels
Email us: Wallstreetmillennial @gmail.com
Check out our new podcast on Spotify: https://open.spotify.com/show/4UZL13dUPYW1s4XtvHcEwt?si=08579cc0424d4999&nd=1
All materials in these videos are used for educational purposes and fall within the guidelines of fair use. No copyright infringement intended. If you are or represent the copyright owner of materials used in this video and have a problem with the use of said material, please send me an email, wallstreetmillennial.com, and we can sort it out.
0:00 - 1:26 Intro
1:27 - 5:55 What Twist Does
5:56 The Bear Case
#Wallstreetmillennial #syntheticbiology #cathiewood #arkinvest
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Founded in 2013 and going public in 2018, Twist Biosciences promised to revolutionize synthetic biology with its gene editing microchip, claiming it could create synthetic genes thousands of times faster than traditional methods. This breakthrough was anticipated to accelerate drug discovery, develop hyperproductive plant strains to combat world hunger, and open doors to numerous other revolutionary applications. This excitement drove Twist's share price to nearly $200 in 2021, giving the company a valuation close to $10 billion. However, since then, Twist Biosciences' stock has plummeted by almost 90%, resulting in substantial losses for Ark's investors.
In this video, we take a deep dive into Twist Bioscience, exploring why investors were so enthusiastic about it just two years ago and dissecting the factors behind its catastrophic share price decline.
Nothing in this video is investing advice, we are giving our own opinions based on publicly available information.
Check out our second channel Broken Business Models where we discuss unusual or otherwise suspect businesses that may be unviable: https://www.youtube.com/ @BrokenBusinessModels
Email us: Wallstreetmillennial @gmail.com
Check out our new podcast on Spotify: https://open.spotify.com/show/4UZL13dUPYW1s4XtvHcEwt?si=08579cc0424d4999&nd=1
All materials in these videos are used for educational purposes and fall within the guidelines of fair use. No copyright infringement intended. If you are or represent the copyright owner of materials used in this video and have a problem with the use of said material, please send me an email, wallstreetmillennial.com, and we can sort it out.
0:00 - 1:26 Intro
1:27 - 5:55 What Twist Does
5:56 The Bear Case
#Wallstreetmillennial #syntheticbiology #cathiewood #arkinvest
––––––––––––––––––––––––––––––
Buddha by Kontekst https://soundcloud.com/kontekstmusic
Creative Commons — Attribution-ShareAlike 3.0 Unported — CC BY-SA 3.0
Free Download / Stream: http://bit.ly/2Pe7mBN
Music promoted by Audio Library https://youtu.be/b6jK2t3lcRs
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In today's video, we're continuing our coverage of the gradually unfolding train wreck that is Kathy Woods Arc Invest. One of Ark's worst performing ETFs is the Arc G Genomic Revolution ECF which has underperformed the S&P 500 by More than 70% over the past 5 years. We've already discussed one of this Etf's Holdings Ginko Bioworks. In a previous video today we're talking about another synthetic biology company called Twist Biosciences.
Twist is a top 10 holding in the Arc GF Additionally, Arc Invest is the single largest shareholder of the company, owning 12% of its shares. Outstanding! Founded in 2013 and Iping in 2018, Twist promised to revolutionize the field of synthetic biology with its gene editing microchip, which they claim can create synthetic genes thousands of times faster than traditional methods. This could accelerate the discovery of life-saving drugs, develop new strains of hyperproductive plants to end world hunger, and variety of other revolutionary use cases. This hype caused the share price to Surge to almost $200 in 2021, giving the company an almost $10 billion valuation.
Since then, the stock has fallen by almost 90% costing Arc's investors hundreds of millions of dollars of losses in this video. We'll take a deep dive into Twist Bioscience why investors were so excited about it 2 years ago, and why it share prices performed so disastrously. Since synthetic DNA is nothing new, The first commercial product made with synthetic DNA was an insulin product called Humulin marketed by Eli Lily and gaining FDA approval in 1982. Medical researchers can create artificial strains of DNA which have useful properties in drug development or other fields.
Companies like MC Thermofisher and Agilant have been doing DNA synthesis for decades. Historically DNA Synthesis has been a timeconsuming and expensive process where technicians need to manually Place various liquids and chemicals into test tubes one at a time. Twist created a silicon based chip, which which contains what are kind of like thousands of microscopic test tubes. They claim that this can massively speed up the process, making it far more efficient and cost effective.
In addition to synthesizing DNA they can also do DNA sequencing, which is basically reading DNA They claim that with their chip, they can do genetic sequencing for 50% cheaper and two times faster than traditional methods. With such an impressive technology, it's no wonder why investors were so excited to buy a piece of this company. So how does this translate to a business model? Instead of developing new drugs on their own, Twist sells its DNA synthesis and sequencing services to other companies. A drug company such as Tequita or Regeneron will tell Twist what type of DNA they need and Twist will synthesize it for them.
If you look at their customers, there are a couple that stand out specifically: UNICEF and Netflix are customers of Twist. This is weird. What could they possibly want with synthetic biology? Twist has a third segment which we haven't talked about yet called data Storage. Digital storage takes the form of ones and zeros on a computer's hard drive. They convert these ones and zeros to nucleotides and write it as a synthetic strand of DNA. The physical DNA can be stored in sequenc at a later date to extract the data, turning it back into ones and zeros that can be read by a computer. Last year, they gave an investor presentation talking about the future growth opportunity. They've been working on data storage since at least 2018 and have thus far not generated significant Revenue, But they expect to be generating billions of dollars from data storage within the next 5 years.
Eventually, they expect this segment to grow to $35 billion of Revenue When I first read this, I Thought this: DNA data storage was storing some type of complex genetic data that couldn't be stored on a traditional computer. Surely, they're not trying to store regular data with DNA but it turns out that's exactly what they're trying to do. They want to store regular data like text files and MP4s with DNA. The whole idea is absurd on its face.
It's an over engineered and overly complex solution for a problem that's already been solved. What possible justification could there be to store data with DNA Because DNA can store data on a molecular level, it can theoretically take up far less physical space than a traditional hard drive. A number of startups have tinkered around with this. In 2019, a Boston based startup called Catalog packed 16 GB of Wikipedia articles into DNA strands.
They could have just bought a $5 flash drive on Amazon to achieve the same result. Once the data is stored in DNA it can take many hours to sequence it and convert it back to computer readable binary code. Imagine waiting several hours to load a Wikipedia page. DNA Data Storage is basically just a science experiment.
There are not yet any real world use cases on any significant scale. So what has Twist been doing with Netflix In UNICEF In 2020, Twist helped Netflix to encode one episode of one of its shows into DNA It was purely a marketing gimmick. The show in question was called Biohackers a science Fiction Thriller about an evil biology. Professor The DNA storage of the first episode was designed to gain media attention for the show.
The show was stored on Netflix's regular data centers. just like all of their other shows. The the DNA storage had no effect on their actual operations. The UNICEF thing was another marketing gimmick.
They encoded the UN convention on the right of children into DNA This is a 21-page text file. Just like with the Netflix Biohackers gimmick. There's no real world utility in doing this. The fact that a publicly traded company would waste money and resources on such a dumb gimmick is already a huge red flag. But what about the core business of DNA synthesis and sequencing? How is that one doing? Since going public, Twist's Revenue has grown quite nicely, increasing 10-fold from $25 million in fiscal 2018 to $245 million in fiscal 2023 their fiscal year and September 30th. But profitability doesn't look good. Given that their DNA sequencing chip is far faster and cheaper than previous methods, you would expect them to be highly profitable. But even as their revenue grew, their operating lost balloon to over $200 million this year.
So what's going on? Twist Bioscience was founded by Dr Emily Leous in 2013. Before founding Twist, she was a senior employee at Agilant Technologies where she worked for more than a decade. Agilant is a massive medical technology company which also does DNA synthesis and sequencing. It is a competitor to Twist Bioscience.
In 2016, Agilant sued Twist for sealing Trade Secrets. They claimed that while L Pral was working at Agilant, she took DNA sequencing technology and recreated it at Twist, thus violating Adelante's Trade Secrets and agreements she signed as an employee. Twist denied the accusation, but in 2020, they agreed to pay a massive $22.5 million settlement. While they did not admit to any guilt, it's hard to believe that they would have settled for such a large sum if the accusations were completely baseless.
And if Twist's technology is based on Stolen designs from Agilant, can it really be possible that their DNA sequencing chip is so much better than everyone else in the industry, including Agilant? In November of last year, a hedge fund called Scorpion Capital released a short report which attempts to explain what's going on behind the scenes. They claim to have talked to former Twist employees who say the company's DNA sequencing microchip isn't the Panacea that the company claims. Even with the chip, the process is still very labor intensive as many preparations are needed to fill it up with the necessary materials and many things have to be added individually. The chip itself only does one part of the process; other parts still have to be done manually by lab technicians.
Some employees say that using the microchip actually slows down the process compared to doing everything manually. Allegedly, Agilant The Twist Founder's former employer made similar chips many years ago and tried to sell them. They eventually abandoned the project because it was a flop. Twist posted a press release calling the short report inaccurate with many distortions and inaccuracies.
They did not give any specifics about what was inaccurate, although they did Point investors to their inaugural ESG report. The ESG report talks about the company's monthly culture conversations, which explores topics including Lgbtqia plus identity and agism how this is supposed to be relevant to the short report. I'm not sure it's impossible for us to independently ver verify the allegations in the short report, but if we just look at Twist's financial statements, we can see some Oddities As their revenue has grown, their gross profit has also grown. In recent years, they've posted impressive gross margins of around 40% These strong gross margins are consistent with their claims of the DNA sequencing chip being far more efficient than the traditional processes used by their competitors. Yet, despite the strong growth in Gross margins, their operating losses have ballooned to over $200 million in each of the last 2 years. Since their IPO Twist, spending on research and development as skyrocketed, This has prevented them from achieving an operating profit despite their impressive gross margins. Cost of goods sold, which is used to calculate gross margins represents all expenses incurred to conduct the DNA sequencing and ship the finished product to customers. This includes the technicians who operate the microchip.
Etc Research and Development represents expenses incurred in researching and developing new products. or Technologies We looked at the career section of Twist's website and filtered for research and development. We found this job job posting for a research associate. The listed job responsibilities included supporting day-to-day operations, service, and troubleshooting for manufacturing.
It also included fulfilling orders for custom products that deviate from standard operations workflows. Based on this description, it looks like the research associate helps with the DNA sequencing for complex customer orders that the regular production team can't handle. In which case the research associate is actually a production worker. This possibly indicates that Twist is misclassifying production workers as researchers to shift costs out of cost of goods sold and into research and development.
But why do this? Either way, a cost is a cost and it has no impact on reported operating profit. But such a misclassification if it is indeed happening would help to juice gross margins for Innovative growth. Companies like Twist investors typically don't mind if they're losing money so long as there's a path to profitability. If your gross profit margins are high, the more your Revenue grows, the more gross profit you will generate.
If you grow enough, eventually your gross profit will be enough to cover your fixed cost such as R&D and general administrative costs. If your gross profit margin is very low, the path to profitability becomes much more difficult. That's a potential motivation for misclassifying expenses. If we think about things in this context, we can speculate as to a more Sinister motive for their data storage segment.
We've explained previously why we think this is a horrible idea and is likely a massive waste of money, but maybe this is a useful distraction for investors to explain away their massive reported R&D expenses. There's a chance we miss Staken Twist's DNA sequencing microchip could indeed be revolutionary, and their data storage Venture might emerge as a major success. However, considering the nearly 90% Plunge in the share price from its peak, it appears that few aside from Kathy would maintain their faith in the company. All right guys, that wraps it up for this video. What do you think about Twist Bioscience? Let us know in the comments section below. As always, thank you so much for watching and we'll see you in the next one! Wall Street Millennial Signing out.
“ But if I’m right if I’m right if I’m right…. the gains will be enormous”
She said that on CNBC in one of her many appearances
The woman is a boiler room huckster masquerading as a wise money manager
The fact this old lady has so much under management, is mind blowing. The key to success in the new world is make every sentence sound good to someone that has zero sense and plenty dollars. 😂😂😂 How difficult her job is
Lots of obvious bot comments on this video lol
"Biotech" was 10 years ago what "AI" is today.
this is a pretty mid take imo. I know Twist really well from a personal and professional perspective.
the DNA storage angle is actually a reasonable path because of a point you seem to have missed. It's not that current data storage methods can't do the job, they obviously can, but it's actually a matter of the longevity of those products. is the B2C market with $5 USB sticks going to need an advanced DNA read/write capability? No. But would a legacy data storage infrastructure that would like to not replace 1000s of HDDs/SSDs every 10k read/write cycles because they breakdown and corrupt system critical data? YES. There are many such applications in the enterprise sector.
Whether Twist can actually capture any of that market is another debate entirely, but the idea isn't so unreasonable.
And your assertion that they're trying to essentially hide fraud with this tactic is pretty mid too.
Every single public biotech has dropped around 90% from their peaks in 2021-2022. Twist doing the same is a non-sequitur.
You seem to have also fundamentally misunderstood their value prop. They write DNA with high-throughput automation, but they don't really have disruptive "read" technology they're deploying at this time. To my knowledge they just use off-the-shelf solutions like the Illumina NGS sequencers. I think they made their own sample-prep kits but that's really not that big a deal. Their DNA writing though is legitimately innovative and reduces costs significantly compared to other providers. That's clear to anyone who asks them for a quote on a gene production project.
You've also missed their significant investments/ acquisitions in the past few years which have contributed greatly to both their spend and revenues. You didn't mention anything about their antibody discovery business which is really driving a lot of the revenue growth, or their massive manufacturing expansion for cell/gene therapies.
Do they spend too much money? Maybe, that's a real criticism. I have heard they are quite top heavy and have no plans on slowing down. But they're also a really well capitalized startup driving down the cost of drug discovery and manufacturing with really significant market penetration and clients across the globe.
pulled out of ARK funds, had to take some losses at the time but I sleep better now
Woods is like a lottery winner who thinks they're actually a financial wizard.
" no real world use for reducing storage space from a thumb drive to a strand of dna"
Ia this satire? Take a leisurely afternoon stroll around a server farm one day. Maybe play some cricket on their Olympic size field
One word re the groundbreaking technique of micro amounts of test and analysis material: Theranos
seems like a pump and dump penny stock
Cathie woods is a gambler.
I don't really know much about DNA storage but I do know that over time regular hard drives and solid state drives do end up losing their data if left for long enough. That's why in the arctic vault we don't use them for storage because if someone found them in a thousand years it would all be useless. So if DNA storage is something that could work without degradation then it would be great for preservation. Though, again, I just heard of this for the first time. I am just pointing out that hard drives/ssd's do have drawbacks for long term storage and this might fill that niche.
Don’t mind the numbers, here’s our ESG work. 🤮😂😂
I'm beginning to think WSM has a preteen type crush on Cathie Wood ! :). U know, pulling her pig tails cuz he really wants to get to 1st base, behind the school maintenance shed, by the 'Woods.'
Sorry, lame. It is really entertaining to see inherited or otherwise OPM money thrown at bad, and CW's latest foibles and bombs. She must have at least some rate of return for her clients – or maybe she just counts as a DEI fund FOR those clients, whether she makes them money or not.
"Bitcoin will be worth $1.48 million by 2030." – Cathie Woods 🤣🤣🤣
When you are anointed as something or someone you can fail upwards as Cathie has done. At the end of the day she doesn’t care as it’s other people’s money, she is still making fees.
Ok, book writers, have someone’s thesis encoded into dna creating a zombie virus
Ark and Jeremy financial education should start a fund together to invest in companies going bankrupt after buying at the top
$22M is not massive to corporations
Congrats on proving you don't understand this technology, or even the basics of the problem domain. DNA storage is in its infancy but will be the future. You sound like someone who wrote articles on how the internet would never work.
Kathy sucks, I lost a substantial amount in ARK
I never liked the strategy of this fund. When it's other people's money and you are taking a management fee based on the total, it's easy to swing for the fences without proper due diligence. Plus, she constantly reinforces the fact that she knows nothing that you and I don't with a simple search. Heavily investing in companies that have government risk is never a good idea no matter how good the tech IP is.
I don't know what they're doing, but I'm skeptical of your speculation they are misclassifying those research associates.
It's easily possible that they are working on things so challenging to synthesize for whatever reason that it requires inventing new techniques or technologies altogether.
I don't work in DNA synthesis, so I'm just spittballing, but I imagine plasmids with site-specific methylation or deamidation might be annoying, or stable intermediates for crossing over, or something with fish probes incorporated into it.
Is easy to think what they could go that would never be possible to attract someone with the skills to a non-research position.
She made 19% returns last year though. And the S&P 500 was down 19%. So that's pretty good performance. Also, using genetic material might be a way to unlock faster data processing – Google the "Travelling Salesman Problem".
"Look, your business model is flawed and there's no way you can reach profitability" – "Nonsense, we are committed to our ESG rating and will continue fighting sexism and ageism". Riiight.
No video on Qurate Retail?
Managing money is different from accumulating wealth, and the lack of investment education in schools may explain why people struggle to maintain their financial gains. The examples you provided are relevant, and I personally benefited from the market crisis, as I embrace challenging times while others tend to avoid them. Well, at least my advisor does too, jokingly.
Scientists think that DNA can be used for long term data storage, long term meaning > 100 years. Long term data storage is something that has NOT been solved by now.
But Billions within 5 years … that's … optimistic
Like that movie scene from Wolf of Wall Street brokers are the ones making money for themselves
Dunno honestly I don't see anything that scammy and the company seems legit and with a nice long-term strategy, contrary to most pharma/biotech sector publicly listed companies
DNA based data storage has plenty of potential uses.
1. Personal data storage on a person
2. Identification systems
3. Undetectable data transport and transmission
Just to name a few off the top of my head. If we can integrate data into the organism then it can be used for tracking many things. Like encoding genes that might be used in bio weapons to be able to indicate the perpetrator or to provide documentation with the organic matter.
DNA data storage seems about as useful and accessible as a physical hard drive moon storage. In either case you save space on the earth…
Cathie is either very unlucky or the worst financial manager we've seen in recent times.