Problems at Twist Bioscience (TWST)

Hunterbrook Media’s investment affiliate, Hunterbrook Capital, does not have any positions related to this article at the time of publication. Positions may change at any time. Full disclosures below.

In October, I co-authored a technical report with Anthropic. We used an unreleased AI model to design an experimental antivenom. Twist and Adaptyv, two lab vendors, helped us test our designs.

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A similar technical report in August had catalyzed a short squeeze in TWST, with many investors claiming the report meant that Twist was partnered with Anthropic. That squeeze helped return Twist to around $200 a share, its previous high in 2021.

After that earlier peak, TWST fell 95%.

My experience using Twist with Anthropic, interviews with Twist executives and biotech experts, and a detailed review of its financials suggest that the valuation may have overshot again.

Twist sells life science tools and services to biomedical clients. If you need DNA for a gene, or protein for a drug candidate, Twist is one of your options. Twist assesses proteins, such as the ability of a drug candidate to bind its target. It also sells reagents for sequencing.

CEO Emily Leproust co-founded Twist in 2013, then settled litigation with her prior employer — giant lab vendor Agilent — over her alleged theft of the foundational tech, paying $22.5 million without admission of wrongdoing. Twist went public as TWST in 2018.

The bull case today is that increasing demand, Twist’s scale and operating leverage, and the expansion of its platform to additional markets have vaulted the company into a higher echelon than other lab vendors. It’s a strong pitch.

But customers have alternatives. Several other vendors provide similar services at similar prices. Twist faces competition across essentially everything it offers. And TWST already trades at the highest multiple among peers.

Behind the paywall, The Bear Cave takes premium readers through the business, my recent interview with the CEO, the competitive landscape, and different valuation scenarios. While Twist may post good earnings next week — the CEO struck a bullish tone in our conversation — our reporting explains why that may not be enough to justify the current TWST stock price.

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Authors

Nathaniel Horwitz is the CEO of Hunterbrook Media and Hunterbrook Capital. He co-founded Hunterbrook after company-building and investing at a premier biotechnology and healthcare firm, where he was the youngest venture partner by over a decade. At that firm, Nathaniel incubated four companies, ranging from AI-designed medicines for cancer to cell therapies for autoimmune diseases. He has served on the board of directors at several companies and volunteers as executive chair for the health education nonprofit Mayday. He earned a degree in molecular biology from Harvard, where he co-authored biomedical research. He has published in several national outlets. His first job out of high school was reporting for his local newspaper. Nathaniel may contribute reporting or editorial input.

Editors

Vikas Kumar joined Hunterbrook from The Capitol Forum, where he led the corporate investigations team for a decade as a senior editor. He was previously an attorney at Gordon Feinblatt, a trial attorney for the Department of Justice, and a law clerk for a federal judge. He has a J.D. from University of Virginia School of Law and a bachelor's from Emory University. Vikas is based in Maryland.