The introduction and widespread adoption of fun new gadgets, games, and services in the last 15 years has provided billions of dollars of revenues and profits to the technology companies innovative (and lucky) enough to grab your attention.
So if I asked what you think will fuel the growth of today's technology giants in the next 15 years, what would your answer be? You might say familiar or trendy terms, such as user growth or the Internet of Things. Or perhaps that the companies with the most innovative products and services will reign king in tomorrow's tech markets. And while those are likely partially correct answers, there's a tremendous amount of growth to be had from a rather unlikely source.
It might be difficult to believe that companies that have traditionally relied on silicon chips, mobile apps, and lines of software code could profit from something as seemingly disconnected as making biological engineering as predictable as traditional engineering fields, but a closer look into research and development spending hints that it may not be that far-fetched after all. Why are Autodesk (NASDAQ:ADSK), Intel (NASDAQ:INTC), and Microsoft (NASDAQ:MSFT) quietly investing in synthetic biology, and what could it mean for investors?
Project Cyborg seeks to transform the design of living systems
Computer-aided design, or CAD, software has revolutionized how our world is built. But the seamless efficiency and accuracy won't be relegated to digital movies, buildings, engine parts, and airplanes for long. Autodesk is investing in bioCAD tools for synthetic biology applications through Project Cyborg, which is part of the company's Bio/Nano/Programmable Matter Group. The team is led by Carlos Olguin, whom I interviewed in 2014, and is also home to Andrew Hessel, one of the field's most infectious thought leaders and the guest speaker at The Motley Fool's annual writers' conference last September.
Autodesk Chief Technology Officer Jeff Kowalski considers design tools for synthetic biology a more lucrative opportunity than even 3D printing. That's big talk, especially considering that the company plans to invest $100 million into 3D printing start-ups over the next several years, but he might be right. What is currently referred to as the bioCAD industry is comprised of glorified text editors for building DNA, although it is already beginning to replace less efficient protocols that are widely used in biology laboratories throughout the world. That opportunity alone is worth several billion dollars per year.
But Autodesk has larger ambitions to capture an even bigger opportunity. An actual CAD program would allow researchers to design virtual organisms from DNA strand to cell chassis, test their behavior in virtual environments, and model changes to biological systems without lifting a pipette. Researchers could accurately predict the function of a cell before it was built, similar to how virtual airplanes are expected to fly when the first prototype is built. Of course, there is a long way to go before we can fine-tune our understanding of complex biological systems, but even basic early tools could help Autodesk diversify and expand its $2.3 billion in annual revenue. Better yet, digitizing life could become a major revenue source for the company by the end of the decade.
Fish in a laboratory
Another way to make biology more predictable is to reduce human error and weed out noise in experimental data. Like it or not, most published research is actually nonsense, or at the very least, unable to be reproduced. Amgen and Bayer recently attempted to reproduce the results from landmark cancer biology studies. That should have been as simple as following the exact protocols in each paper, but Amgen could only recreate 11% of the results, while Bayer enjoyed a 25% success rate. In some instances, the original researchers could not even recreate the results from their own work! That's pathetic considering the majority of research surveyed received federal funding and/or was used as the basis for larger clinical trials.
Intel believes a better solution is to follow each experiment from start to finish with smart machines. Autodesk wants to digitize life; Intel wants to digitize research. So, with the help of Eric Klavins' synthetic biology laboratory at the University of Washington, the company is testing a system that tracks everything that occurs in the laboratory with cameras, outfits all equipment with smart sensors, and designs machine-learning protocols that allow computers to make real-time suggestions for experiment parameters. Known as The Aquarium Project, Intel is studying the behaviors of real researchers in the lab (the "fish") to develop a smart system to make biology research more reproducible.
The company thinks a successful system could be used to document experiments, train new staff, teach students, and double check the work of stubborn professors. If the complex environment of a wet lab (biology lab) can be quantified with software and machine learning, then other systems, such as a factory or medical facility, could deploy similar technology to reduce unnecessary costs from human error. It is still in the early days, but Intel could very well be developing a revolutionary technology much different from its core business.
Microsoft's newest programming language
Everyone wants to discuss the latest edition of the Surface tablet, or if the "Start" menu will be added back to the next rendition of Windows, or the Xbox One. But Microsoft could get the last laugh with a newly created programming language. No, it won't build the next great mobile game, although it could make biology much more predictable.
Microsoft Research created the Genetic Engineering of Cells, or GEC, simulator that breaks cellular processes into their most basic interactions by focusing on the concept of modularity, or in this case, biological parts. Consider that genes and proteins are largely responsible for dictating how a cell functions, but we are still learning how specific combinations interact in even the most well understood organisms. That can be troublesome when deciding which biological parts are needed to provide a desired outcome, such as producing a specific chemical, and has led to many costly mistakes for industrial biotech and agricultural companies.
GEC aims to solve that by translating desired functionality into DNA code, which is the reverse of current biological engineering efforts. In other words, suppose researchers want certain bacteria to produce a never-before synthesized fragrance compound. They would tell Microsoft's GEC what end product they want, perhaps with known constraints, and the programming language would output the DNA sequence needed to achieve the synthesis of that molecule.
The current GEC is quite basic, but it allows researchers to build new organisms without knowing the specific parts available. By comparison, several bioCAD startups have started with less of a foundation and less robust tools and still managed to land multibillion-dollar partners and customers. It will take a bit more tweaking, but Microsoft could jump into synthetic biology tools with a splash before the end of the decade.
What does it mean for investors?
In the near future, many everyday products will be created from living systems. That includes easy-to-imagine products such as fuels and foods and eyebrow-raising products such as electrical wires and car tires. The wave of innovation will build strength in the next few years and create major opportunities for not just the companies designing the organisms and industrial processes, but also for those supplying them with the tools behind the scenes. Yet, when I speak to most investors, it quickly becomes obvious they are completely unaware of the R&D projects under way today at their favorite tech companies. So, if you're willing to take a closer look at the research being performed at Autodesk, Intel, and Microsoft, then you could be a step ahead of your peers in realizing new avenues of potential growth.