Hope of a new bull market is helping biotech stocks like Ginkgo Bioworks (NYSE:DNA). Ginkgo announced a new drug candidate for gout with Synlogic (NASDAQ:SYBX). DNA stock spiked from $3.12 to $4.64 per share on Aug. 10. They fell right after, but bounced back to $3.54 early on Aug. 12.
Synlogic, which is worth just $76 million, jumped 11% Aug. 11 and another 3.7% overnight. Ginkgo is worth about $6 billion.
This is the second drug candidate the two companies have worked on together. The previous one was a possible treatment for homocystinuria, a rare inherited blood condition.
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Gout affects about 9.2 million people in the U.S. There is currently no cure, although there are drugs that reduce levels of uric acid. Uric acid crystals cause the pain associated with the disease. The Ginkgo-Synlogic drug, SYNB2081, is a synthetic biotic that would compete with existing drugs.
Ginkgo wants to be a leader in synthetic biology and recently said it will buy Zymergen, which is also in that space, for $300 million in stock. Gingko had sales of $313 million in 2021 and has yet to turn a profit.
The group has also been helped by two other events. Invitae (NYSE:NVTA) got a brief lift from its earnings report, with sales of $133 million up almost 20% from a year ago. Tech whisperer Cathie Wood has also been buying stock in small biotechs for her Ark Invest exchange traded funds (ETF).
What Happens Next for DNA Stock?
Biotech based on manipulation of DNA is seen as a huge growth market for the next two decades, but few small players are profitable. The hope is always that a promising drug can be bought by a larger company that might shepherd it through the regulatory process.
Common conditions like gout offer promising new markets for companies like Ginkgo, but until tests are done on people and analyzed by experts, investors are speculating.
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On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
