During the May Day holiday, the concept of synthetic biology was widely disseminated on major financial websites, attracting the attention of countless investors.
In fact, it doesn't matter what you fry, the key is to be new enough, big enough, and exciting enough.
For a good theme, the concept must be new, so that it can tell a good enough story, and secondly, the capacity must be large, so that it can accommodate enough investors and funds, and the heat can continue.
Synthetic biology does meet these criteria, and stories about it are being told by word of mouth among investors.
How can synthetic organisms tell grand narratives?
Synthetic biology is not a recent concept, the short-term is mainly stimulated by news, since the 70s of the last century, people began to use bioengineering and other technologies including genetic engineering to synthesize new products, such as the production of antibiotics, insulin, etc.
The reason why synthetic biology has attracted so much attention is because of its huge application potential and super imagination.
In the past, many products were manufactured based on petroleum, but with the advent of synthetic biotechnology, products from various industries can be synthesized. It is even possible to synthesize oil, which is never exhausted.
Through synthetic biotechnology, algae can be transformed into an energy source similar to oil and coal, and ethanol is one of the largest and most widely used renewable biofuels in production.
At present, the more mature synthetic biology applications include chemical products such as L-alanine, artificial meat, squalane, a raw material for skin care products, and some pharmaceutical intermediates.
Theoretically, many of the products that people come into contact with in their daily lives are expected to be "bio-based" instead of "petroleum-based", and the manufacturing of food raw materials such as "artificial protein" can also reduce the environmental pressure caused by farming.
In the context of carbon neutrality, this is exactly what meets the market demand.
The future is bright, but what is the current development of the industry?
As a representative of new quality productivity, with the help of top-level design and technological development, the synthetic biology industry has developed rapidly.
According to Reportlinker, the global scale of the synthetic biology industry has exceeded US$10 billion in 2021 and is expected to reach US$33.6 billion in 2026.
In recent years, China's synthetic biology industry has also entered a stage of rapid development from the embryonic stage.
From 2018 to 2022, the financing amount of China's synthetic biology industry was 2.671 billion yuan, 403 million yuan, 2.159 billion yuan, 2.295 billion yuan and 6.6 billion yuan respectively, and the total financing amount showed a state of fluctuation and climbing, and it will double in 2022.
The rapid development is not only reflected in the scale of the industry, but also in the heat of capital.
As of December 10, 2023, a total of 52 synthetic biology-related companies in China have completed a total of 57 financing/fundraising events, and the latest round of disclosure may exceed 15 billion yuan.
So, for investors, what link should biosynthesis focus on?
Upstream: The upstream of the industrial chain provides key underlying technologies (gene sequencing, gene synthesis, gene editing, etc.) for the industry, and is a tool-based enterprise.
Midstream: The midstream of the industrial chain provides a biological platform for the industry, which is a platform-based enterprise, and its main business involves the design, development and transformation of biological systems and organisms.
These companies focus on strain design and modification, and provide R&D outsourcing services for synthetic biology for product-based companies.
Downstream: The downstream of the industrial chain is a product application enterprise, which focuses on the synthesis of target products and key technological breakthroughs, and needs to have the ability of the whole industry chain from R&D to production, and directly deliver end products to customers.
Downstream is the core link of the entire synthetic biology industry chain, and its product selection is crucial, mainly covering medicine, agriculture, beauty, food, chemical, energy and other fields.
According to different application scenarios, the core targets of A-share products with relatively pure concepts include Cathay Biotech (long-chain diacids), Huaheng Biotech (alanine), Twining Biotech (APIs), MGI (gene sequencing), Genscript (gene synthesis), and Bloomage Biotech (sodium hyaluronate).
In addition, there are some small subdivision track targets, such as Berry Gene (genetic testing), Azure Biotechnology (enzyme preparations), Xinghu Technology (food additives, etc.), Lukang Pharmaceutical (plasticizers), as well as Giant Biotech, Jinbo Biotech (recombinant collagen leader), etc.
Which of the above core targets are worth long-term attention and tracking?
From the above companies, we chose Cathay Biotech, Huaheng Biotech and Twining Biotech for comparative observation.
Cathay Biotech is the world's largest supplier of long-chain diacids, Huaheng Biotech is the world's largest acrylic acid manufacturer, and Twining Biotech is the world's main supplier of antibiotic intermediates.
Judging from the performance
It can be clearly seen from the above figure that among the three companies, Chuanning Bio's profit growth is the fastest, with a net profit of 412 million yuan in 2022, a year-on-year increase of 269%, 941 million yuan in 2023, a year-on-year increase of 128.56%, and continued to be strong in the first quarter of this year, with an increase of more than 100%.
There are two main reasons for this, one is the continuous development of the sales side, and the sales revenue of pharmaceutical intermediates will increase from 3.531 billion yuan in 2022 to 4.447 billion yuan in 2023.
The other is that the company strengthened management, and the continuous decline in management expenses led to the continuous growth of the company's net profit margin.
On the other hand, the profits of the big brother Cathay Biotech have shrunk significantly in the past two years, mainly because of the recurrence of some reasons in 2022, and factories in various regions have been affected to varying degrees, resulting in the operating rate of main products such as long-chain diacids and polyamides falling short of expectations.
At the same time, under the influence of this factor, the demand is weak, and the pace of promotion of polyamide and other products has slowed down.
However, with the recovery of the company's production capacity and global demand, the company's performance is gradually recovering from the first quarter of this year.
From the perspective of investment, in the short term, there is the logic of the strong and the strong, and the performance of Twining Biotech is good, the technical barriers are high, and the capital and popularity in the market are focused, and it has become the leader of the sector.
At the business level, Twining Biotech is in an absolutely leading market position, in the field of two major classes of antibiotics, cephalosporin and penicillin, of which the production capacity of cephalosporin intermediates is more than 3,000 tons, with a production capacity of 37%, ranking first in the industry, and the output of penicillin intermediates is about 6,700 tons/year, with a market share of 18%, ranking second.
In addition, in the field of erythromycin thiocyanate, the company's market share has also reached 44%, second only to East Sunshine Pharmaceutical, which almost occupies more than 90% of the market.
The prospects of synthetic biology are obviously bright, but the current relatively mature applications are still limited to a small number of industries and have not been rolled out on a large scale.
Therefore, if you invest in the long term, choose relatively mature industries such as medicine and chemical industry as much as possible, and avoid short-term speculation.
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Source: Flying Whale Investment Research