Synthetic biology Investing in sustainability science


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By Edward Bryan, CFA and Sarah Tunnell, CFA


Sarah Tunnel: Ed, thank you so much for taking some time today. I know you recently published a very detailed article on the subject of synthetic biology, but could you give us a brief overview of what it really is?

Ed Bryan: For millennia, people have harnessed synthetic biology, harnessed nature, brewed beer; you use nature to produce things. Synthetic biology is accelerating this. It is based on these natural processes that we have been using for thousands of years. Nature has also given us a very efficient and powerful DNA-programming language. DNA is like the software of life. And so you can use the cell and the DNA and make changes to it, program the cells to produce almost anything. There’s a study that McKinsey published last year that estimated that over 60% of the physical inputs to our economy could be produced using synthetic biology.

Sarah Tunnel: Where do we see it? Is it something that already exists today?

Ed Bryan: Synthetic biology is not science fiction. It is around us. It is in many things that we use today on a daily basis. So take cosmetics. One of the key ingredients in cosmetics is a compound called squalene. Squalene was traditionally harvested from the livers of deep-sea sharks. And there is a company that has found a way to modify the genome of a yeast cell, so that the yeast cell produces squalene, which can then be used in cosmetics. There’s a California-based company today that can extract CO2 and methane from the air, and use a type of cell, which they found in the ocean, that can produce a resin that’s crafted and molded into forks and knives.

Sarah Tunnel: Synthetic biology, really, isn’t something we’ve heard so much about in the past. Why is this something you are talking about today?

Ed Bryan: The price of sequencing a genome has dropped a million fold, from hundreds of millions of dollars to a few hundred dollars. Thus, this price drop has allowed researchers to sequence genomes and better understand genetics. There are also other technologies. So creating new DNA from scratch has allowed an explosion of different kinds of experiments to understand what genomics means. And then another very important development recently has been AI and machine learning technologies. You need these data processing technologies to make sense of genomics. And so it’s this confluence of technologies that has accelerated discoveries in this space.

Sarah Tunnell: If you are an investor considering this space, what are some of the things you should consider?

Ed Bryan: I think from an investor perspective, one of the main considerations is to have a cross-industry approach. Many of the initial applications of synthetic biology began in the healthcare sector. And, due to the rapidly falling costs of synthetic biology, the technology is moving into other industries. There will be opportunities for outsourced service providers that will help some of these businesses grow and mature and improve their profitability.

Sarah Tunnel: So, what are some of the risks that investors should consider, if this is a space that interests them?

Ed Bryan: So, for consumer adoption, there is a risk that consumers will be put off by the prospect of synthetic biology. Major consumer packaged goods companies are beginning to adopt synthetic biology to manufacture their products. And these companies are experts in educating consumers, in marketing around these types of new products. Their adoption is therefore a positive sign for us. The second key risk relates to regulation. And what we are seeing is that countries around the world are taking a proactive approach in areas related to the United Nations Sustainable Development Goals. Countries are actually taking a proactive approach to encouraging the growth of the synthetic biology industry.

Sarah Tunnel: What does synthetic biology mean for investors specifically focused on sustainability?

Ed Bryan: Consumers, businesses and governments want solutions now to address sustainability, and synthetic biology can help them get there.

Sarah Tunnel: How far does it go? What are some of the futuristic applications of synthetic biology that we haven’t even thought of yet?

Ed Bryan: I don’t know if you’ve seen the movie, The Martian? Matt Damon was trying to grow plants on the surface of Mars. If he had a synthetic biology lab, he could literally engineer the plant to adapt and thrive in the microenvironment of Mars. So now you’re talking about terraforming the surface of Mars. You could design a plant to release oxygen into the environment, make it hospitable to humans. The bottom line here is that synthetic biology is not science fiction. It is in many products that we consume at the moment.

The opinions expressed herein do not constitute research, investment advice or trading recommendations and do not necessarily represent the views of all of AB’s portfolio management teams and are subject to revision over time.

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Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.


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