Biotech Investing

Think biotech has bottomed out? SoftBank disagrees. The massive Japanese holding company just made a $130 million investment in Zymergen.

Think biotech has bottomed out? SoftBank (TYO:9984) disagrees. The massive Japanese holding company just made a $130 million investment in Zymergen, a biotech startup based out of the Silicon Valley. Zymergen genetically reprograms microbes for use in any number of industries—from medical device manufacturing and pharmaceutical development to agricultural production or military defense.
The Defense Advanced Research Projects Agency (DARPA), for example, recently commissioned Zymergen to make some 360 new molecules for use in coating metals or producing electronics. Zymergen’s other clients include Fortune 500 companies across a wide range of industries.
How can microbes—simple single cell organisms—have such ample applications? Think of them like miniature chemical factories: after taking in carbon and undergoing fermentation, for example, yeast produces carbon dioxide.

Zymergen intervenes in these chemical processes, genetically editing microbes so that they produce more valuable compounds. “More valuable,” of course, is defined by a client’s unique needs. These byproducts can be used to make surgical sutures or as active pharmaceutical ingredients. They may one day provide protective films for personal electronics.
It’s this vast range of potential customers that has garnered so much interest and prompted investment from companies like Data Collective, True Ventures and now SoftBank. Zymergen has the infrastructure in place to support clients in healthcare, agriculture, electronics and more—it’s just a matter of tweaking their technology.
Backers also believe that Zymergen’s market share will be somewhat protected, thanks to the compounding nature of their microbe technology:
“Let’s say Apple (NASDAQ:AAPL) woke up tomorrow and said they’d spend $100 million to kill Zymergen,” Data Collective’s Matt Ocko told Forbes. “They couldn’t do it. In the time they’d hire and research and figure out each of the multiple thousands of steps that Zymergen has proven, Zymergen would be moving geometrically ahead.”
Of course, that’s not to say Zymergen is totally without competition. Gingko BioWorks operates in the same space and shows similar promise: June 2015 saw them land $100 million in funding.
But it does indicate an interesting—and perhaps lesser known—opportunity for genetics investors. Most interest in the sector currently revolves around CRISPR-Cas9 and its healthcare applications. But as companies like Zymergen prove, there are alternative methods of genetic engineering at hand—ones that may have more far-reaching applications, both within the life science sector and beyond.
Indeed, $130 million from SoftBank seems like a strong vote of confidence. And why not? Since June 2015, Zymergen has quadrupled both its employee numbers and revenues, according to Forbes.
With this sort of backing and numbers to its credit, investors may want to keep an eye on Zymergen. This company has the potential to capture major market share from companies currently listed. And if it goes public someday soon? Plenty of people may be interested in grabbing a piece.
Don’t forget to follow us @INN_LifeScience for real-time news updates.
Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.


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