Sefa Ozel
Ginkgo Bioworks’ (NYSE:DNA) Tuesday’s announcement of Zymergen’s bankruptcy filing shows how the biotech IPO boom has played out in 2021 amid rising interest rates and falling stock prices.
Ginkgo Bioworks (DNA) and Zymergen made their public debut in 2021, a record Year for biotech IPOs. Biotech companies accounted for 36% of all IPO activity this year as investors recognized the potential of healthcare at a time marked by the raging pandemic.
Zymergen OPO was touted at a $500 million valuation in April 2021, a month before Ginkgo (DNA) made its public debut in a $2.5 billion SPAC merger.
Fast forward to 2023: Biotechs have lost their appeal, with the SPDR S&P Biotech ETF (XBI) down about 16% over the past 12 months, compared to a gain of about 16% for the S&P 500.
Zymergen is no exception. The company lost its CEO Josh Hoffman a few months after its IPO and focused on drug research last year.
Despite its difficult past, Ginkgo (DNA) acquired Zymergen in October in an all-stock deal valued at $300 million, representing a significant discount to the California biotech’s IPO valuation.
In announcing its Chapter 11 bankruptcy filing, the wireless platform company acknowledged that Zymergen had significant contingent liabilities at the time of the acquisition.
“Zymergen has always operated as a separate legal entity, separate from Ginkgo,” DNA said.
With the bankruptcy filing, Ginkgo (DNA) will once again become a bidder for Zymergen under an agreement to offer $5 million in cash and assume $77 million in future liabilities for the majority of its assets.
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