So changing the DNA of cells to make them do new things, that is really our niche. And that work by and large, is still done in-house. So we do see that, and by the way it’s a large part of the research budget for at least the biologics half of pharma not the small molecule. But for the biologics half biopharma and also in target discovery increasingly, there’s a good amount of that kind of work. And we just don’t see it being substantially outsourced right now.
Derik de Bruin: Got it. Thanks.
Jason Kelly: Yes. Good to hear from you.
Operator: Thanks, Derik. Our next question comes from Matt Larew at William Blair. Matt, your line is now open.
Matt Larew: Okay. Good evening and thanks. So Jason, the comparison to the sort of software tech ecosystem, I think sort of what strikes me is that perhaps the pace of innovation there is so quick because the ultimate customer adoption curve is so fast. There’s zero impediment to option, the UI is so easy. So that middle layer of companies of race to adopt the underlying technologies. And obviously, something you found bringing this to biopharma but other end markets is that there are far more barriers to sort of adoption and something you’ve launched TDK, you’ve done a variety of things to capabilities in-house and technology partnership here. What sort of you think have been the learning’s of the last couple of years of what actually can move the needle to reduce those barriers to adoption?
Is it – are there regulatory dynamics that you’re attacking in government? Is it technology? Is it first mover, I don’t know what it is, but maybe share just what you’ve learned and how that’s informing kind of the strategic investments you’re making?
Jason Kelly: Yes. So I’ll break it into two parts. I do think one of the, again, I just compare biotech to tack I would say the overall product development cycle in biotech is probably 2 to 3x at least time lines relative to a substantial tech product. Obviously, you can launch any small thing quickly. But like a tech product that would deserve being compared to like a drug or something in terms of the opportunity. And so it’s not like these things happen instantaneously intact, but they do happen, I’d say, 2 to 3x faster. And so that path to market a lot of what makes it slow is regulatory. And so I do think thinking about regulatory, again, not about research tools or anything else, but just about getting biotech products in the market, I think, is important.
Now I think in, for example, pharmaceuticals, that is a well-fought battle, right? In other words, like people are go out FDA has got a hard job, right? I don’t know if there’s a secret this magic wand to wave, although I do think there’s an interesting lesson in operation warp speed and what we did with COVID. And so I don’t want to rule out that there’s a lot faster ways to do it, but it’s a harder fight. In some of these other markets, though like in agriculture, for example, I think regulatory has gotten a bit out of whack. So you just don’t – you have regulatory that looks like pharmaceuticals, but the market doesn’t support that kind of timeline, and I would say the sort of safety history in agriculture, in other words like, almost at least, I’m not sure I even know of adverse events when it comes to genetically modified crops and things like that feels like it’s gotten a little bit out of whack.
And so I do think there might be opportunities to change that and U.S. competitiveness and so on, where maybe that would help. So I do think that is just a net dampener on biotech versus tech. It doesn’t mean biotech is not a big industry it is. But if you wanted to really unlock it, I do think speed of products to market is one of the big ones, and a lot of that is regulatory. Now, given that it’s still huge, still really [ph] still $0.5 trillion. Like now we have big biopharma companies and they have big research budgets. So there’s still a question of getting infrastructure services adopted into the billions and billions of dollars being spent on research every year that are not going to infrastructure services. And so I think in the near years, particularly with Ginkgo’s revenues where they are now, where they’re still early and small, we have enormous growth by just tapping into that.
So that is why you see me continually experimenting with this, Matt, right? Like, yep, we’re going to try this. We’ll try success based pricing, we’ll try technology network, because we need that same shift that, for example, the cloud service providers had to figure out when everyone was resistant to outsourcing their IT back in the mid-2000s, mid to late 2000s Right? So you got to try things, got to figure out what are the right micro services, what’s the right sales process, so on. And we’re happy to be running those experiments. We think we’re the leader. Like I said, I like our position overall, but it is still a puzzle to get worked out. And the faster we unlock it, especially in biopharma, it’s the gating rate on all this technology.
Matt Larew: Right, okay, thanks.
Jason Kelly: And then expect us to keep doing it. Right like we’re not, I’m not going to – on the fundamentals. I think this was really true when it came to like cloud infrastructure back in 2008 or whatever. Everyone’s like, I don’t want to put my data on Amazon services in Seattle, servers in Seattle. I trust my IT people, I don’t trust their IT people. Their uptime is bad and AWS is just sitting there knowing the scale economic means that centralized compute will win. And that is when we see this 40% to 50% drop in campaign costs. The scale economic means that centralized automated labs are going to win in the long run. And so we just got to be there for it and ultimately clear the path for adoption.
Matt Larew: Right. Okay, thanks for those thoughts. And then speaking of improvement of campaign costs, and you referenced the impact of the RAC’s from Zymergen, at the Analyst Day last fall. I think, Mark, you might have laid out a capacity comment that maybe two to three times the number of programs you had today, active programs, could be run on the existing machinery. Today, you talked about the launch of Biofab1 in 2025. Maybe just speak to what that investment will get you, why it’s the right time to make that investment, and how to think about that within the context of the other capacity you’ve built.
Jason Kelly: Yes. Again, I can actually speak to that a little bit. So there’s a pretty interesting phenomena from the semiconductor industry where you would have generational improvements in semiconductor tech, right? So you would have an X nanometer fab, and then two years later, two or three years later, you’d have a smaller nanometer Y nanometer fab. Right. And in the intervening years, what would happen is you basically build a fab with that generation’s technology. The next year you’d expand capacity, you’d make it bigger, and then you would move on to, in the third year, or approximately, a new generation of the tech that Y nanometer fab. And I think what’s really exciting is what we’ve been doing over the last year and a half in particular, is moving to like a new generation of the infrastructure.
We’re moving to this RAC automation. We think it’s massively flexible, it’s more scalable, and that’s been us sort of like proving it out in our current facility, getting it working, putting more customer programs through it, migrating more of our stuff from old automation to that. If that keeps going, which I’m bullish, it will, then 2025 should be about the right time to build out scale of that technology. And so that’s what we’re really excited about is we do think it’s a chance to expand again, purpose built facility around that sort of RAC hardware, largely to do the automation. So we’ll see if it plays out exactly like that. But that is what we’re going for with that facility. And I’m hopeful, again with the expansion of work in biopharma and other places, that it’ll be good timing to do it.
Matt Larew: Okay, thank you for the questions.
Operator: Thanks, Matt. And our last set of questions comes from Michael Freeman at Raymond James. Michael, your line is now open.
Michael Freeman: Great. Hey Jason, Mark and Megan, can you hear me. All right.
Jason Kelly: Yes. It’s good to hear you, Michael.
Michael Freeman: Terrific. Good to see you. Thanks for having me on. First congratulations on bringing this technology network together. These are some of the coolest companies we’re aware of in the space, so it’s cool that you’re teaming up. Curious, what are some of the qualifying characteristics for companies to join that technology network? And seeing that on the same day you announced several acquisitions and the technology network, I wonder what governs your decision making around which technologies to acquire, bring in-house and which companies and technologies to partner with?
Jason Kelly: Yes, that’s a good question. I can take that. So first off, I think that’s going to be a moving front. Right. Like what should we bring in house versus what can we partner? It depends a little bit on how this technology network goes. Right. So today we’re acquiring, when we see a good opportunity, it’s a mix of sort of breakthrough technology. So sometimes it’s a piece of, in the case of proof, it’s like a key piece of molecular technology that we think is quite interesting and a complement to other gene editors and things like that. But on the teams right. We’re really excited to bring on the teams, particularly as we’re trying to grow our strength in AI and modeling and ML in these areas. We can sort of speed up the development of that by bringing a mix of some of the software and data and the people who are just excellent and have been thinking that way for years.
And so that’s some stuff that we know we need to have core, right? Like we know we need to be core in AI as we go into this sort of large data and large neural net models, world of the future that I think is absolutely working in biotechnology, so that we know we need to have. But in the future, some of these an editor technology or things like that probably comes in better through the partner network. Right. Through the technology network, if I’m being honest. But we got to make sure that we figure out how that all is going to work. Right. And one of the things I’m hopeful on, you asked about like bringing people on network today. It was people we thought were, you mentioned a lot of the cool technology you’ve seen is out there. It’s people we knew, people we really respected what they were doing, and so we are doing that over time.
I’d also just like to, as we get some experience with this, I want to standardize those interfaces so that, hey, listen, there might be somebody else who’s got a brilliant idea. I’ve never met them. They’re a new startup. They’re a tool developer. And in a perfect world, it’s almost like they can drop into a distribution channel. Right? Like they can go get business from the biopharma industry even when they’re small, and a new upstart via some sort of standardization of how that works at Ginkgo. If you play the tape out a year or two in the future, maybe we get to somewhere like that. But a lot’s going to depend on just our experience bringing this kind of combined effort to some of our customers and seeing how it goes.
Michael Freeman: All right, that’s helpful. Thank you. And now, next question. Last quarter, you provided some metrics around fully commercialized programs and commercialization in progress. These are six and 15, respectively. I wonder if you could provide an update at the end of this year.
Mark Dmytruk: Yes, I don’t have an update for you, Michael, but I could take that offline, potentially.
Michael Freeman: Sounds good. Thanks very much. That’s all for me.
Jason Kelly: I did love the slide where we showed like all the programs and how they were progressing to us.
Michael Freeman: My favorite slide.
Jason Kelly: Swear to God to scale…
Mark Dmytruk: I think, Michael, my section got too long for today to begin.
Jason Kelly: Yes. Thanks, Michael.
Michael Freeman: Thanks, guys.
Megan LeDuc: All right, thanks, Michael. That wraps up all of our questions. Thanks for sticking with us. I know we went a little long today, but Jason, do you have any closing thoughts for us?
Jason Kelly: No, I think we covered a lot of it. Again, I like our position going into 2024, like our strategy for the year. I think it sets us up well and appreciate all of your confidence in us. Thanks a lot.
