Synthetic biology goes for scale: VCJ

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Synthetic biology, which uses engineered gene sequences to create new biological systems and devices, used to be a subject for futurists and sci-fi writers.

In the last few years, however, applications of synthetic biology are regularly showing up in the business models of venture-backed healthcare companies. Startups engaged in drug, biofuel and crop development, as well as several producing tools and processes for biological research, have attracted sizable, and in some cases, exceptionally large rounds.

Venture firms have invested more than $400 million in companies with a significant synthetic biology focus since last year, according to a VCJ analysis based on Thomson Reuters data. Most of that total is for companies like Juno Therapeutics, which employ engineered gene sequences into therapies.

Also raising significant capital are companies that don’t directly work on therapies, but develop technologies for engineering gene sequences. That includes companies like Twist Bioscience, a San Francisco-based company developing a semiconductor-based synthetic DNA manufacturing process.

Investments add up to what look like large numbers. But VCs active in the space say commitments are miniscule in comparison to the impact synthetic biology will have over the next few decades.

“When they write the history of mankind, there are going to be several pages devoted to synthetic biology,” said Keith Crandell, managing director at ARCH Venture Partners, and who led the firm’s investment in Twist.

It’s not a newfound point of view. ARCH invested during the late 1990s in Illumina, then a little-known developer of sequencing tools for genomic research. Today, Illumina is a $24 billion public company and a leader in the fast-growing sequencing space. Earlier this year, the company unveiled a platform for sequencing an entire individual genome for $1,000, down from about $40,000 five years ago.

The trend that’s getting Crandall keyed up these days is what he describes as a shift from “read” technologies like Illumina’s, which essentially read and analyze genomic information, to so-called “write” technologies, such as Twist’s, which produce gene sequences. Over time, mass-manufacturing will be available to make gene sequences in higher volume and with ever-greater accuracy. That will have high impact across industries, in particular enabling drug researchers to test new gene therapies faster and with more substantive results.

Although VCs have been investing in technologies for making gene sequences for a while, they’ve scaled up recently. One of the earliest entrants to the field, nine-year-old synthetic biology pioneer Gen9, has raised $46 million in two rounds over the past year from Agilent Technologies and other backers.

VCs’ confidence is bolstered by public market investors’ enthusiasm for companies with a bio-engineering focus. IPO investors in particular have been very receptive to offerings in the space.

Among the splashiest life science debuts last year was Intrexon, which uses synthetic biology processes to develop a range of products in the food, health, consumer goods and other spaces. It went public in August, 2013 and, though well off its highs, was still recently valued at over $2 billion.

This story first appeared in Reuters Venture Capital Journal. Subscribers can read the full story here. To subscribe to VCJ, click here for the Marketplace.

Photo illustration of test tubes from Shutterstock.

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