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Cowen Initiates Coverage of Ginkgo Bioworks With Outperform Rating

NEW YORK – Investment bank Cowen on Wednesday initiated coverage of shares of Ginkgo Bioworks with an Outperform rating and a price target of $12 per share.

"Ginkgo democratizes synthetic biology product R&D and biosecurity surveillance, and has a significant lead in scalable genetic engineering," Cowen analyst Steven Mah wrote in a note to investors.

"While we expect there will be many successful SynBio companies, we see Ginkgo Bioworks as pioneering a leading versatile approach," Mah wrote, adding that the company's platform can serve different markets and product categories and its business development strategy is flexible.

"Ginkgo's high-growth foundry business is likely sustainable given its diverse and rapidly growing partner programs that provide immediate revenue and long-term value share from partner product successes. We see the biosecurity business poised to be durable as COVID-19 becomes endemic and grow as the US government (and likely World Health Organization) allots funding for biological threat readiness, both natural and synthetic in origin."

Ginkgo went public in September through a merger with a special purpose acquisition company, raising $1.63 billion in proceeds. Cowen joins BTIG in covering shares of the firm; in January, BTIG gave shares a Buy rating and a price target of $12.

Ginkgo's foundry business engineers cells for partners seeking to create molecules using synthetic biology. "The company has flexibility in designing partnership deals, some of which are for multiple programs," Mah wrote. "They secure a base revenue of upfront payments and program fees and an optional revenue that couples to the partner's commercial success with equity, milestone payments, royalties on sales, or a combination."

Ginkgo created its biosecurity business in response to the COVID-19 pandemic and has grown it by acquiring Project Beacon COVID-19, a company founded by F-Prime Capital, GV, and the Broad Institute to help implement coronavirus testing in Massachusetts.

"It was cost-effectively and quickly built by leveraging existing operational know-how and acquiring e-commerce enterprise capabilities," Mah wrote, and is expected to exist beyond the current COVID-19 pandemic.

In morning trading on the New York Stock Exchange, shares of Ginkgo were down 3 percent at $4.15.