Ginkgo Bioworks (NYSE:DNA) stock jumped almost 14% overnight after it signed a collaboration agreement with Pfizer (NYSE:PFE).
The deal gives Ginkgo upfront cash and could eventually be worth $331 million, based on its RNA technology.
DNA stock opened this morning at about $2/share, with a market capitalization of $3.6 billion.
Save My Business
Ginkgo’s original business model was to become the “Apple Store of Biotech,” tackling research for other drug companies through its “foundry” in exchange for a piece of their action once drugs were licensed.
It hasn’t worked out. Sales have been falling, and losses are increasing. During the second quarter, the company lost $173 million, nine cents per share, on revenue of $80.5 million. Through the first six months of 2023, revenue has been half that of 2022. This came despite Ginkgo adding 21 cell lines to the foundry program during the quarter.
What’s most important is that Ginkgo’s cash balance fell from $1.316 billion to $1.105 billion. The deal lets Ginkgo extend its cash runway without selling new stock, which might be difficult in the present investment environment.
The Pfizer deal isn’t about the foundry but about DNA’s underlying technology. That’s focused on creating new molecules based on Ribonucleic Acid, single-stranded molecules that can regulate gene expression. There are three main types of RNA, the best known of which is messenger RNA, which Moderna (NASDAQ:MRNA) and Pfizer partner BionTech (NASDAQ:BNTX) used to create their Covid-19 vaccines.
Tipranks lists Ginkgo as a moderate buy, with five analysts following it. Traders at Stocktwits are hoping for a big day, but some warn that the stock’s trend remains down.
DNA Stock: What Happens Next?
These are tough times in the biotech sector. While small biotechs have huge potential, investors prefer revenue and earnings. A new pandemic or major discovery could change that in a heartbeat.
As of this writing, Dana Blankenhorn held LONG positions in MRNA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
