Synthetic biology, once hailed as a moneymaker, meets tough times

It’s been a rough go lately for synthetic biology’s flagship companies, which genetically engineer microbes to produce everything from medicines to materials. Three highfliers—each of which once had multibillion-dollar market capitalizations—have fallen fast and hard.

Amyris declared bankruptcy last year and by the beginning of this year had sold off several of its cosmetic and personal care product brands. In February, Zymergen, which was betting on microbes to produce transparent and flexible plastic films, liquidated its assets. And in June, Ginkgo Bioworks announced plans to lay off more than one-third of its workers after its stock tanked and revenues for its designer microbes failed to materialize.

“There has been a reckoning,” says Jay Keasling, a synthetic biologist at Lawrence Berkeley National Laboratory and co-founder of Amyris. Still, not all synbio companies are generating bad news, with some focused on pharmaceuticals and additives living up to the hype that has often surrounded the field.

One problem for the companies that have faltered, Keasling argues, was mountains of investor cash that led to an overabundance of ideas and a lack of focus. Amyris, for example, created a pipeline of nearly a dozen products. But none could generate the revenues needed to sustain the company’s highly trained personnel and sprawling infrastructure of industrial fermentation vats, in which engineered yeast turn sugar into products. “Early on it is good for companies to be starved of money,” Keasling says. “It forces you to choose what not to do.”

In contrast, firms more tightly focused on pharmaceutical products have made a powerful impact. Already, microbially produced protein therapeutics and other “biologics” account for about one-quarter of newly approved drugs in the United States, and they bring in nearly half of the country’s pharmaceutical company revenues.

Beyond pharma, synbio has also quietly worked its way into the fabric of modern manufacturing. For example, engineered microbes now produce many of the protein-rich supplements used in animal feed and the stain-removing enzymes in laundry detergents. “We talk about synthetic biology as what’s next,” says Tom Brennan, a partner at McKinsey & Company, a consulting firm. “But it’s here.”

And there’s room to grow, analysts say. By 2040, new bio-based materials alone could become a $300 billion market, according to a recent McKinsey reports. And that number could swell into the trillions once biofuels, pharma, cosmetics, and other personal care products are added in, McKinsey predicts.

Zymergen co-founder Zach Serber says relatively rigorous government regulations are helping keep pharma-centered companies in line. These firms must show a drug’s effectiveness in preclinical animal models, followed by safety and efficacy studies in human trials. If they miss those benchmarks, the would-be drug washes out and the company either moves on to another target or goes out of business. But if they succeed at any of those steps, they often can sell their drug candidate to a pharma company with deeper pockets. “It’s a very efficient system,” Serber says.

Companies trying to use microbes to make nonpharma materials face a tougher path to commercialization, Keasling says, in part because there aren’t defined milestones along the way that help reveal how a product stacks up against the competition. Zymergen, for example, thought its plastic film, called Hyaline, would have a huge market as a protective coating in electronic displays. But in 2021, company officials announced that “technical issues” would delay any revenue from Hyaline for at least two more years. A year later, the company, which had previously raised $1.5 billion from investors, was sold to Ginkgo Bioworks for $300 million.

Another challenge for nonpharma synbio firms is the sheer amount of product that they would need to produce to compete with established approaches. Investors initially salivated over synbio replacements for meat and dairy protein, for example, given that people annually consume hundreds of millions of tons of these foods. But fermentation firms have struggled to build and operate the facilities needed to match the high productivity and relatively low prices achieved by ranchers and poultry farmers, who have honed their operations over decades.

“The infrastructure is not there. … Industrial biotechnology has not scaled up like other industries,” says Kasia Gora, co-founder of the defunct cultivated meat company SCiFi Foods.

Firms that can make a profit synthesizing small volumes of product offer a better chance of success, believes Jason Ryder, a fermentation expert at the University of California, Berkeley. In 2014 he co-founded Joywell Foods—later rebranded as Oobli—a startup that engineers microbes to produce plant proteins that are up to 5000 times as sweet as table sugar. The company currently uses the proteins to replace sugar in its own branded sweet teas and chocolates. And in May, it announced its first deal with an international food firm looking to use the proteins in baked goods. Because only tiny amounts of the sweeteners are needed, Ryder says Oobli will be able to compete with the prices charged by industrial sugar plantations. The company is engineering 1000 new microbial strains per week, tweaking genes to increase protein production and thereby lower costs. “There’s lots of knobs we can turn,” Ryder says.

Another promising small volume market could be fertilizer supplements. The startup Pivot Bio has engineered two soil microbe strains that can steadily convert atmospheric nitrogen gas to ammonium, a form that corn and wheat can take up to speed their growth. In the United States, the company says the microbes have already been used on about 3% of the nation’s 36 million hectares of corn and could replace about one-third of the synthetic nitrogen fertilizers made from fossil fuels, which can pollute streams and rivers.

Amyris’s struggles, however, provide a cautionary lesson for synbio startups, as none of its numerous products proved profitable enough. Still, Gora says it’s just a matter of time before synbio hits its stride. “We’re in a down cycle,” she says. “But biology is not going anywhere.”

Synthetic Biology, Challenges, Market Downturn, Innovation, Investment, Biotech Industry, Economic Impact.

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