What happened

Shares of Amyris (NASDAQ:AMRS) gained over 12% today after the company announced the market launch of its zero-calorie sweetener, consumer brand Purecane. The product is based on an ingredient found in stevia plants called Reb M, but the company produces it via fermentation.

The idea is that industrial biotech can enable a reduced production footprint and improved economics, compared to traditional agricultural cultivation methods. Similarly, consumer brands are traditionally accompanied by much higher margins, compared to selling bulk volumes of ingredients to other businesses. 

As of 3:35 p.m. EST, the small-cap stock had settled to an 8.3% gain.

A man cheering while viewing his laptop.

Image source: Getty Images.

So what

Amyris has a long history of overpromising and under delivering, as well as overhyping minor developments. Today's news appears to fit that pattern. 

For one thing, there's ample competition in the zero-calorie sweetener market from entrenched food conglomerates with unrivaled reach. Consider the major brands of Reb M: Coca-Cola and Cargill own the Truvia brand, which is the current market leader. Royal DSM and Cargill own the Avansya joint venture, which just began commercial production of EverSweet (also produced via fermentation). Tate & Lyle produces the Tasteva M brand. Ingredion offers the Bestevia brand.

For another thing, Reb M isn't the only zero-calorie sweetener vying for the taste buds of consumers. There's sucralose, aspartame, a range of other stevia extracts, and more.

It's worth pointing out that, while companies are allowed to label their Reb M products as "natural" -- a potential marketing advantage over "artificial" sweeteners -- regulators and consumers don't always agree on what that word means. To be fair, the labels are next to meaningless at this point, but if it matters to consumers and the image of a brand, then it matters to investors.

Perhaps most important, Amyris has never consistently and profitably manufactured an ingredient at commercial scale. As of the third quarter of 2019, the cost of products sold still exceeds the amount of product revenue generated.

Now what

Amyris needs to significantly reduce operating expenses and ramp-up sales of its high-margin consumer brands. Perhaps Purecane can play a role, but investors need to see concrete results that are reproduced and built upon for several quarters or more.