Can Twist Bioscience’s new factory boost its share price?

Twist Bioscience received a big analyst upgrade from Evercore ISI last week. This should give the stock a much-needed and timely boost as it prepares to start shipping gene products from its new production facility in Portland, Oregon later this month.

• Evercore ISI’s new price target on Twist Bioscience implies a 46% upside from the 9 January closing price
• The synthetic DNA market is forecast to grow at a CAGR of 19.63% between 2023 and 2030
• Cathie Wood added almost 64,000 Twist shares to the Ark Genomic Revolution ETF in the first week of January

Evercore ISI analyst Vijay Kumar upgraded Twist Bioscience [TWST] from ‘in-line’ to 'outperform’ last week, raising its price target from $28 to $36. "We believe the tides are changing and have become incrementally positive on this name," wrote Kumar in a note seen by Genome Web.

The DNA company’s stock came under pressure in November when it became the target of a short-seller. Scorpion Capital published a 236-page report arguing that Twist lacks proprietary tech and accusing the company of being a “cash-burning inferno” and “lab-on-a-chip scam”.

Responding to the report, Twist described the short attack as “highly misleading, with many distortions and inaccuracies”.

Speaking to Portland Business Journal in December, Twist co-founder and CEO Emily Leproust attributed the report to short sellers being “in it for a quick buck”.

The Twist share price is down 62.9% in the past year, but up 13.2% from its 52-week low of $21.78 set on 27 December. It’s gained 3.5% since the beginning of 2023.

Production to ramp up

January should be a significant period in Twist’s synthetic DNA journey. Its so-called ‘factory of the future’ was on track to start shipping gene products and generate initial revenue later this month, Leproust said on the Q4 2022 earnings call back in November.

Scorpion Capital’s short report had labelled the facility “a ruse for improper capitalisation”, but following a recent visit to the site, analysts at SVB Securities wrote that it “could deliver on gross margin if volume and growth was to materialise”.

“To drive that volume, Twist has to be competitive with pricing in the market, but the demand depends on the spending environment in 2023 which now appears more cautious [versus] before,” the analysts wrote in a research note seen by Endpoint News.

They also pointed out that although Twist’s products can spend up to half of their time in storage, the new facility should help to “accelerate delivery time”.

Synthetic DNA positioned for growth

Twist shipped approximately 558,000 genes in fiscal 2022 to 2,300 customers, up from 372,000 genes in fiscal 2021.

As production capacity at the company’s Portland factory ramps up, Leproust expects it to enable Twist to “support the increasing needs of our customers as they scale globally and plan for aggressive growth into synthetic biology and biopharma”.

A report published by Grand View Research last week on the synthetic DNA market forecasts it to be worth $12.8bn by 2030, up from $2.9bn in 2022. It’s set to grow at a compound annual growth rate (CAGR) of 19.63% until then. Twist and Thermo Fisher Scientific [TMO] were named as key players in the space.

Growing demand for synthetic DNA should be a catalyst for Twist’s share price in the long term. In the near term, inflation and a stronger dollar could lead to lower international sales.

Funds in focus: Ark Genomic Revolution ETF

Cathie Wood remains bullish on Twist, adding almost 64,000 shares to the Ark Genomic Revolution ETF [ARKG] last week alone, bringing it to 3.22% of the portfolio, making it the thirteenth-largest holding as of 10 January. The fund is down 3.86% in the past month, but up 5.7% in the past week.

The Ark Innovation ETF [ARKK] also holds Twist with a weighting of 1.5%, though no shares have been added since 19 December. The fund is down 7.1% in the past month, but up 7.7% in the past week.

The stock has been allocated a weighting of 2.66% of the iShares Genomic Immunology and Healthcare ETF [IDNA] as of 9 January. The fund is down 5.1% in the past month, but up 1.4% in the past week.

The Global X Telemedicine and Digital Health ETF [EDOC] has allocated the stock 2.12% of its portfolio as of 9 January. The fund is down 6.2% in the past month, but up 2.3% in the past week.