Friday, February 11, 2011

Funny Farnesene

Shares of Amyris, Inc. (AMRS:  Nasdaq) moved higher this week largely on progress in bringing the company’s novel designer chemicals to market.  The stock set a new high last week of $33.99.  The Company has a market capitalization in excess of $1.3 billion without turning a penny of profit.  The net loss in the twelve months ending September 2010 was $118.4 million on $68.6 million in revenue, most from contracted development work.

Investors are not focused on the bottom line  -  at least not yet.  Last month Amyris signed agreement with Glycotech, Inc. and Salisbury Partners, LLC to convert Amysis’s renewable farnesene into finished products.  Glycotech will provide chemical processing services at Salisbury’s Leland, North Carolina facility.  Amyris already has production agreement for farnesene in Piracicaba, Brazil and Decatur, Illinois in the U.S.

Amysis has genetically modified microorganisms  -  yeast  -  to produce designer molecules that can used as renewable chemicals and transportation fuels.  The Company intends to market its farnesene-based chemicals for use in detergents, cosmetics, perfumes and industrial lubricants.  The Company even expects to sell into the renewable diesel fuel market.

Farnesene is a set of six closely related chemical compounds.  Even though it does not have a household name, eveyone knows farnesene.  It is the fragrant oil chemical giving Granny Smith Apples that distinctive acrid odor. Traces of it can also be found in the hops used for some very tasty Czech pilasters and Irish lager beers.

With the stock price riding to new highs since the Company’s September 2010 initial public offering, the venture capitalists are celebrating.   Amyris was originally funded in 2006 with $14.1 million in Series A investments from Kleiner Perkins and Khosla Ventures among other venture investors.  However, newcomers to the stock should step into AMRS with caution.  The stock price already reflect much of the promise of its unusual product line.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. AMRS is included in Crystal Equity Research’s Beach Boys Index in the Alternative Chemicals Group.

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