Zymergen reveals layoffs following setbacks for first product

The synthetic biology firm Zymergen has slashed 220 jobs as part of a cost-cutting plan after problems with its first product, a polymer film called Hyaline, which is used in electronic displays.

The cuts came in two rounds, in September and October. Zymergen, which engineers microbes to produce valuable chemicals or materials, had more than 750 employees at the end of 2020.

Zymergen started cutting expenses in August, when it announced that it had overestimated demand for Hyaline and that the material wasn’t always compatible with customers’ manufacturing processes. The company had previously predicted that sales of the film would start this year. Now, it doesn’t expect Hyaline, or any other product, to generate meaningful revenue until at least 2023.

“The product still has material opportunity in the market,” interim CEO Jay Flatley said on an investor call in August. “The pipeline is thinner than we might have expected back several months ago, but, intrinsically, we think the technical characteristics of the products are sound.”

Zymergen, which raised $500 million through an initial public offering in April, is one of several companies that have recently attracted eye-popping investments—and pressure to prove their technologies—by touting synthetic biology as a revolutionary technology.

In September, Ginkgo Bioworks, finalized a merger with a special purpose acquisition company (SPAC) that raised $1.6 billion and valued Ginkgo at $15 billion. The biomanufacturers Bota Biosciences and Genomatica have each raised over $100 million so far this year. Last year, Danimer Scientific raised $380 million through a SPAC merger that valued it at about $890 million.

The industry group SynBioBeta estimates that investors put over $4.2 billion into synthetic biology companies in the second quarter of 2021.

That funding often comes with more scrutiny. On an investor call in August, analysts questioned Zymergen’s credibility after the missteps with Hyaline, and short sellers have attacked Danimer’s production numbers.

Xiao Zhong, a materials analyst with Lux Research, says Zymergen took a risk by aiming to develop and market its own products. In contrast, Ginkgo helps create products that customers will be responsible for selling. Zhong says Zymergen’s product-focused approach could yield a bigger payoff, but the failure of a product can be a big setback.

“It’s going to take more time, with trial and error,” he says. “The public market is not responding well to trials and errors.”

Flatley said in August that the problems with Hyaline won’t change Zymergen’s riskier approach. “It’s something we think about all the time,” he said. “But the product model that we have is one that today we stand behind very firmly.”