NEW YORK (GenomeWeb) – Cowen and JP Morgan both initiated coverage of Twist Bioscience today, citing the company's leadership role in the synthetic biology market and its ability to manufacture DNA cheaply and at scale using its commercial platform.
While Cowen assigned the company's shares a rating of Outperform, JP Morgan analyst Tycho Peterson gave them a more conservative rating of Neutral, saying in a note to investors that the stock's value has essentially doubled after the firm's initial public offering, prompting JP Morgan to wait for a more opportunistic entry point.
Twist raised about $70 million in its IPO in October, selling 5 million shares at $14 per share. It had previously noted that it intended to use the proceeds to improve and update its platform and core technologies by investing in equipment, expanding its research and development capabilities, and establishing new and scalable operation facilities; to expand sales and marketing capabilities globally; to develop manufacturing operations in China; to develop and expand into the biologics drug discovery and DNA data storage markets; and for working capital and general corporate purposes.
Both Cowen and JP Morgan acted as underwriters for the offering.
In his own note to investors, Cowen analyst Doug Schenkel wrote that Twist's capabilities in DNA manufacturing "can address a key bottleneck in synthetic biology and help catalyze growth of the overall segment," which he estimated could be worth up to $14 billion by 2022. Schenkel also noted that the firm has a lot of room for additional cost savings and sales increases, which should come from both existing customers and new customers and markets. In fact, he added, Twist's "disruptive approach" enabled it to reach deals with more than 600 customers in 2017, "and we believe it is now the leading provider of synthetic DNA worldwide."
Further, Schenkel said, Twist's proprietary silicon-based approach enables it to generate more DNA than its competitors while using fewer reagents. Twist can then pass these scale and cost benefits on to its customers, which differentiates it from its competition.
Twist is also able to leverage its gene synthesis platform into areas such as NGS enrichment and DNA libraries, Schenkel wrote. "Here, the company has been able to demonstrate its highly optimized products are superior to traditional offerings from many of the large and established providers in the life science tools industry," he added. "Although its NGS enrichment kit was only launched this year, its clients already include many of the top companies and institutions in the NGS space including Grail, Helix, Roche, Baylor, the Broad Institute, GeneDx, and LabCorp."
JP Morgan's Peterson, who assigned a $27 price target to Twist's shares, also cited the firm's core platform, its proprietary silicon-based technology, its wide range of synthetic DNA-based products, and its longer-term plans for a DNA-based data storage solution in his initiation note.
"Attractive end markets and differentiated platform should drive robust top-line growth. Twist's portfolio includes synthetic DNA, oligo pools, DNA libraries, and NGS sample prep kits. Driven by supportive end market trends and a superior solution, we project [about] 68 percent top-line [compound annual growth rate] for Twist through 2021, with long-term upside from drug discovery and data storage applications," Peterson wrote.
However, the firm's shares are up about 85 percent post-IPO, he added, which JP Morgan views "as a fair but full premium," hence the Neutral rating.
Twist's shares rose 2 percent to $26.56 in morning trading on the Nasdaq.