DNA is as fundamental to biotechnology as it is to biology itself. From synthetic biology to pharmaceuticals, making and using DNA is usually a necessary first step in bringing a biotech product to market. That makes the leading DNA stocks foundational to the whole biotech industry. And it means the best DNA stocks can have revolutionary potential.
But of course, not all DNA is alike any more than any other product. Some companies specialize in selling DNA libraries, often made up of a single gene with point mutations at every position. That library lets you decide how best to make and express a protein of interest. Other companies give you the tools to make and extract DNA for yourself. Sell a man a fishing pole, and he’ll be your customer for a lifetime.
Still, other companies sell you not just the DNA but all the ancillary products needed to use that DNA. The double helix may be the most important piece of the puzzle, but it isn’t the only piece. The leading DNA stocks have all staked out different strategies for selling their products. And it’s still up in the air as to which strategy will win.
So when looking for a high-potential DNA stock, be on the lookout for not just technology but business models too. How a top DNA stock decides to sell itself to labs and companies around the world is just as important as the cost and purity of its DNA. So for investors interested in the future of biotechnology, here are three of the must-have DNA stocks available today.
Twist Bioscience (TWST)
Twist Bioscience (NASDAQ:TWST) excels at selling DNA for very cheap. Since getting and testing the right DNA is step one in nearly every synthetic biology application, this gives them a very big market to work with. From DNA libraries to fragments to clone-ready genes, Twist is ready and willing to sell at rock-bottom prices. That could make them the face of the revolution in DNA stocks in the biotech sector.
But Twist’s business practices have brought along some naysayers. In November of 2022, activist short sellers at Scorpion Capital accused Twist of selling their products for less than the cost of production. The company also claimed that Twist’s Factory of the Future in Oregon was a Potemkin village that would never materialize.
Although Twist’s stock price fell precipitously on Scorpion’s claims, the company proved Scorpion wrong in one respect. The Factory of the Future has been operational since December 2022. And while naysayers may scoff, Twist’s Q3 2023 earnings report says revenue for the quarter was $64 million versus cost of revenue of $42 million — hardly selling products below cost. That same report did show a comprehensive loss of $58 million, however, so Twist still needs to show it can be profitable.
Ultimately Twist’s future will rely on whether its rock-bottom prices can attract enough buyers to make up the expenses. I can say from experience that its price per base pair is lower than what any other DNA synthesis company is offering. And if the company can prove itself profitable at those prices, Twist will be the best biotech DNA stock you can buy this decade.
Thermo Fisher Scientific (TMO)
Thermo Fisher Scientific (NYSE:TMO) is a giant in the biotechnology industry. As a company, it provides nearly everything a biology lab needs, and that includes DNA. Not only that, but Thermo Fisher also provides a number of tools for labs to alter and transform DNA to their heart’s content. Modern biology allows a quick turnaround where genes can be discovered one day, inserted into a plasmid the next and grown in a bacteria the third day. Thermo Fisher’s giant catalog of products allows scientists to do all of this from a single vendor.
The business also has a network effect that many of its competitors will find hard to replicate. As the biggest supplier of many labs, managers and procurers already have a deep relationship with Thermo Fisher products and salespeople. It’s then very simple to expand that relationship to include DNA, should a lab require some. Being the biggest has its perks; you can be the first port of call for a customer who wants DNA but doesn’t know where to look.
Thermo Fisher’s Q2 2023 earning report showed a slight dip in revenue year over year from $10.9 billion to $10.6 billion. That, along with increased operating costs, meant net income was down year-over-year (YoY) from $1.7 billion to $1.4 billion. TMO has been in an earnings quagmire along with much of the biotech industry. But as one of the biggest forces in that same industry, it could easily come roaring back faster than the rest. Thermo Fisher is one of the top DNA companies available, and if you believe in the future of biotechnology then you should believe in TMO.
Azenta (NASDAQ:AZTA)provides both DNA purchasing and sequencing, two important sides of the synthetic biology pipeline. Putting DNA into a cell isn’t always a simple and easy process, and this molecular cloning process needs to be checked at each step. Azenta, therefore, lets you buy DNA, insert it into an organism, and then send it back to the company to make sure it was inserted correctly. That helps customers control their results and lets Azenta make money at every step of the process.
The business has had a busy year financially. In Q2 2023, it announced plans to repurchase a total of $1 billion in shares. That was less than its previous estimate of $1.5 billion but still a lot for a company with a market cap of under $4 billion.
Then Azenta’s Q3 2023 earnings report beat expectations. Revenue grew YoY from $133 million to $166 million. And GAAP net loss fell from $9.6 million to $1.5 million. Non-GAAP EPS was $0.13.
Azenta’s business model is a winner for synthetic biology. Its ability to offer services at every step of the pipeline is exactly what many labs want in a DNA company. And financially, the company is improving year on year, growing into a more profitable company in both GAAP and non-GAAP measures. Any biotech investor can look to Azenta as a must-have DNA stock for today.
On the date of publication, John Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.