Synthetic Fermentation

There’s been enough grim news this year—high inflation, the Russian invasion of Ukraine, and the S&P’s 2022 slide come to mind immediately—that we wanted to highlight some grounds for optimism as a change of pace. After all, winter is finally over, the Easter holiday is near, and springtime brings its own promise of renewal. What caught our attention this past week was a note from AllianceBernstein’s Edward Bryan regarding the future of fermentation technology.

Bryan’s thesis is that synthetic biology can help relieve supply chain pressures by enabling localized production of many products. Needless to say, COVID exposed a key vulnerability of globalization—if supply chain efficiency depends on just-in-time production, and key inputs become suddenly unavailable, we can see nasty consequences across the economic spectrum, with both shortages and inflation. The Ukraine invasion is disrupting energy and food markets as well.

How can synthetic biology help? Bryan goes into greater detail in another lengthy paper, but the short summary is that the fermentation process can be used to manufacture a wide variety of compounds, and that production costs, like the costs of renewable energy, are rapidly declining. Synthetic biology potentially can be used to make nylon, plastics, and fertilizer, which are byproducts of oil and natural gas. It could create pharmaceutical ingredients, enabling greater domestic production of medicines. It could make food, in the form of alternative protein sources (Bryan comments that most of the global supply of vanilla is synthetic as well). It could improve the extraction process of precious metals that are used in electric vehicle batteries. Finally, synthetic biology may also be used to help manufacture clothing, through the production of nylon, silk, cotton, dyes, or specialized fibers. 

This is not to say that synthetic biology is guaranteed to exhibit runaway success. Nonetheless, it is worth noting that localized labs have the potential to manufacture a variety of materials, and should globalization recede over the next decade, fermentation labs may be able to pick up a portion of the production slack. 

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This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument or investment strategy. This material has been prepared for informational purposes only, and is not intended to be or interpreted as a recommendation.  Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice.