Synthetic Biology: From Promise to Profits
In 2010, a synthetic biology company set out to revolutionize the therapeutics space. It touted a synthetic messenger RNA platform that could drive an expansive pipeline of healthcare products. In 2019, the company earned $60 million in revenue at a -700% gross profit margin. Two years later, the company earned $18.4 billion in revenue at a 86% gross profit margin — all thanks to the success of their novel mRNA-based vaccine. That company is Moderna, a hallmark example of how synthetic biology can deliver significant impact and economic value.
At G2 Venture Partners we broadly define synthetic biology (“synbio”) as “anything that enables, uses, or engineers naturally-occurring biology to make a target output”. Synthetic biology’s value proposition does not end at pharmaceuticals. McKinsey estimates that “as much as 60% of the physical inputs to the global economy could, in principle, be produced biologically”. While only a fraction of this is likely commercializable, that fraction is expected to underpin ~$1.7T of annual global economic impact in 2030 and double to $3.4T in 2040. Synbio applications also have the potential to offset over 3 gigatons of CO2 emissions each year — equivalent to taking 650 million passenger vehicles off the road — by replacing carbon-intensive products & feedstocks and enabling sustainable industrial processes. With so much potential for growth, start-ups are grappling with how they can use synthetic biology to drive value and impact in industries like food & agriculture, apparel, consumer goods, and energy.
The proof that synbio can expand beyond pharma is in the money. More venture funding than ever before is flowing to synbio start-ups. Venture firms invested ~$18 billion in 2021, over double the previous year and nearly as much as all funding since 2009. This begs the question: what makes synbio an attractive space now? Three megatrends point to an answer:
- The cost of synthetic biology tools is exponentially declining: DNA sequencing, the tool that allows scientists to read and accurately manipulate genetic code, is fundamental to synthetic biology. In 2001, DNA sequencing cost ~$10 million per megabase. Sequencing technology has evolved so rapidly that it now costs ~$0.01 per megabase — or 1,000,000x less than 20 years ago. This decline has outpaced Moore’s Law, which predicted that computing costs would halve every two years, by 1,000x.
- Publicly available biological data is reaching critical scale: In July 2022, AlphaFold — an AI system developed by DeepMind — announced that it had characterized the 3D structure of every protein in the known universe. Scientists have experimentally characterized the 3D structures of ~190k proteins. AlphaFold has characterized over 200 million, published for anyone to use. This wealth of available knowledge will enable synbio companies to explore new organisms and pathways. In addition, it will help them build better models for testing & scaling solutions, reducing time to commercialization.
- Consumers are pushing more companies to decarbonize their supply chains: Consumers have put increased pressure on brands to go green. That includes direct CO2 emissions, like energy consumption, but also indirect ones, like those coming from manufacturing supply chains. In response, companies across the supply chain have explored new ways to integrate synbio into their products. Lululemon is working with Genomatica to replace nylon with bio-built fabrics in their garments. Bridgestone is substituting chemical polymers with biological replacements in their tires. And BASF has invested in Bota Bio, an industrial synbio manufacturing platform, to develop sustainable chemicals, including sweeteners, vitamins, and personal care products. More companies will follow suit, enabling synbio start-ups to capture value across markets.
While these trends are speeding up the rate of discovery in synbio, they do not ensure a synbio start-up will have an attractive production cost curve at scale. Few synbio companies have demonstrated their ability to compress the “green premium” and get to price parity with incumbents. Scale has been a longstanding challenge in synthetic biology for two main reasons:
- Live organisms are generally not well-suited to grow at industrial volumes: Every organism has an inherent tradeoff between how quickly they can grow and how much mass — including any target output — they can produce. Organisms optimized for maximum output will grow slowly, lowering throughput and making manufacturing economics less attractive. This can be exacerbated even further if organisms are engineered to perform reactions that hinder growth in the process. In addition, large volumes are less controllable. Inconsistent environmental conditions can negatively impact organism productivity. Gradients of nutrients can form in a large system that promote organism growth in some areas but reduce it in others. Cell colonies can die from disease and create toxic conditions for themselves by excreting natural outputs (e.g., CO2) at higher volumes than what can be tolerated. Organisms are also constantly evolving; a mutated strain that has a lower yield for target products could outcompete the existing microbial population.
- Isolating target products produced by organisms is time- and cost-intensive: Target molecules produced inside organisms require extraction, purification, and in some cases further processing. Downstream steps all require additional capex and operational costs from biological inputs, equipment, and labor.
Addressing these hurdles requires synbio companies to focus on two key manufacturing parameters: productivity (yield of target product per unit of reaction volume) and downstream processing (DSP) steps.
Two ways synbio companies could optimize productivity and DSP are (1) targeting the whole organism as the desired commercial output or (2) using cell-free synthesis (producing a target output using enzymes, cofactors, and cellular components without a living organism). These “all or nothing” approaches to scale could enable companies to:
- Maximize productivity: The majority of synbio companies use precision fermentation to grow their cells and products, which involves combining an organism with necessary inputs and growing the organism for a set length of time to produce a target output. Cell-free synthesis is a novel alternative that removes the organism from the process. This maximizes productivity and may decrease costs to drive better unit economics.
- Reduce downstream processing: Most synbio products are molecules produced by cells that need to be extracted and processed downstream. Using the whole cell as the product, on the other hand, can increase yield (by reducing metabolic strain) and decrease the need for expensive DSP.
Some synthetic biology companies have begun to scale with an “all or nothing” approach. Pivot Bio, one of G2’s portfolio companies, offers fertilizer containing engineered microbes that optimize nitrogen production for crops based on plant health and conditions . Pivot products can replace synthetic nitrogen fertilizer, which accounts for ~5% of U.S. CO2 emissions. Another company targeting whole organisms as their product is Nature’s Fynd, an alternative protein company offering vegan breakfast foods made from a fungus found in a Yellowstone National Park hot spring. Nature’s Fynd uses precision fermentation to grow this fungus at scale, requiring 95%+ less land, water, and energy to do so. The company then uses it as the input into their end products. Solugen is taking the opposite approach by generating specialty and industrial chemicals from cell-free synthesis. They convert corn syrup to intermediate chemicals using enzyme-based, cell-free reactions. Intermediates are then converted into end chemicals using metal catalysts. Today, Solugen has developed SynBio-based chemicals to replace petrochemical-based water treatment processes.
Synthetic biology is primed to disrupt traditional industries and generate significant economic and climate impact in the process. The success of today’s innovative synbio companies in climate tech comes down to scalability. Reaching scale requires innovative approaches to the challenge of making biology effective and economical at large volumes. An “all or nothing” approach — with the use of whole organisms as products or cell-free synthesis — are two such innovations that could take synthetic biology another step down the cost curve.
Author: Eric Helfgott, G2 Summer Intern
Sources
AlphaFold reveals the structure of the protein universe (DeepMind, July 28 2022)
DNA Sequencing Cost Data (Genome.gov, accessed August 31 2022)
Can Synthetic Biology save us? This scientist thinks so (New York Times, November 23 2021)
BASF invests in biotechnology start-up Bota Bio (BASF, March 26 2021)
“Grown using no synthetic nitrogen fertilizer…” Sustainability claims 2.0 (FoodNavigator, October 14 2021)
