DNA weaver Twist Bioscience finds itself the target of synthetic biology short-seller Scorpion Capital

After watching its stock price drop earlier this week by more than 20% following the publication of a stinging report from the activist short-seller firm Scorpion Capital, the DNA weaver Twist Bioscience responded by calling the document "highly misleading" and accusing it of containing "many distortions and inaccuracies." 

In its statement, Twist did not address the particulars of the report—which started off by describing the company as a “cash-burning inferno”—and instead directed analysts and investors to tune into the company’s earnings call scheduled for this Friday, Nov. 18, which will cover its fourth quarter and full 2022 fiscal year.

Twist is not the first synthetic biology company to find itself in Scorpion’s crosshairs. In October 2021, the short-seller targeted Ginkgo Bioworks, calling its work a “hoax for the ages” less than a month after it went public through a $1.6 billion SPAC deal. Since then, Ginkgo has upped its commitments to buying DNA synthesis supplies from Twist, relying on an interwoven industry as it plans to grow out its cell programming efforts.

The latest short report also comes after Twist’s stock price surged late last week, rising nearly 40% to over $39 on Nov. 11, amid optimism that the company would post higher-than-expected gains in revenue. But Scorpion’s 236-page release (PDF) brought shares back down to about where they started, falling to around $27 as of this morning.

Scorpion called Twist’s finances “a ticking time bomb,” with prices set below the total cost of production for DNA products that are used in biomedical research and diagnostic development.

Twist says its technology is built on “a proprietary semiconductor-based synthetic DNA manufacturing process featuring a high-throughput silicon platform,” which allows the company to produce genes cheaply and in much greater numbers compared to previous approaches using the same amount of physical space.

However, Scorpion compared this claim to the story of Theranos, saying Twist still employs traditional methods to assemble genes piece-by-piece, whereas the infamous blood testing company used competitors’ instruments to produce lab results when its own machine didn’t work.

Another portion of the report centered around Twist’s planned “Factory of the Future,” a 110,000-square-foot facility outside Portland, Ore., which aims to greatly expand the company’s DNA production capacity when the $100 million hub is slated to come online at the start of next year.

Calling it implausible, Scorpion pointed to interior photos of the location Twist posted to its Facebook page in July and August showing a lack of lab equipment, and the firm also dispatched a private investigator to the site. Scorpion claimed its pictures show a “deserted parking lot, a quiet loading dock/construction area, and about a dozen office employees sitting in an open and mostly empty floorplan.”

“Twist remains focused on its mission to improve health and sustainability by manufacturing DNA at scale and on growing its business, including shipping product from the Factory of the Future in January 2023,” the company said in its response.

In its most recent earnings report (PDF), Twist posted a company record of $56.1 million in revenue for the third quarter, a gain of 60% compared to the same three-month period in 2021. 

It pegged the cost of those revenues at $30.9 million, while the addition of R&D and administrative expenses brought its total operating costs for the quarter to $117.3 million, resulting in a net loss of about $60.5 million. At that time, it also increased its full-year sales forecast to $203 million.