Last week I presented at the Synberc Spring Retreat at UC Berkeley, but, as I usually do when I'm in the Bay Area, I made sure to meet with several companies. This time I took a stroll around the Joint Bioenergy Institute (JBEI), which is a national research lab focused on developing next-generation renewable fuels and chemicals from agricultural feedstocks and engineered microbes.
After touring JBEI I walked across the hall (literally) to the headquarters of synthetic biology pioneer Amyris (NASDAQ:AMRS), where I met with CEO John Melo, CFO Raffi Asadorian, and President of R&D Joel Cherry to tour and discuss the company's research labs, pilot production facility, and marketing strategy. Before my visit I strongly believed that the market didn't fully appreciate the progress Amyris has made in the last year. After my visit, that belief was confirmed as fact. Here are some up close and personal takeaways from the company's latest developments.
Increasing efficiency of R&D
Amyris hasn't done a great job communicating the benefits captured from improved research and development efforts. To be fair, that isn't exactly what investors care about (they care about commercialization of the platform), but it has a tremendous impact on the company's overall operations and commercial trajectory. How? More efficient R&D allows the same amount of funding to accomplish more work, more work to be accomplished in the same amount of time, increases the productivity of each employee, and even creates opportunities to monetize the R&D platform through contract services.
This is primarily accomplished with two methods: (1) automation of organism engineering and (2) the implementation of better, faster, and cheaper research tools.
Indeed, every month Amyris can create and analyze 120,000 unique yeast strains, select the 60 most promising strains for further evaluation in small lab-scale bioreactors, and transfer the two most promising to larger pilot scale operations every month. After further fine-tuning to specifications, two to four strains per year can be transferred to the company's manufacturing facility in Brotas, Brazil, and begin generating revenue.
The advantages of the processes leveraged may be abstract to most investors, especially if they have never experienced the tedious tasks of pipetting small liquids from test tube to test tube. But perhaps this will hammer it home: an Amyris engineer at the conference I attended was able to login to the software in the company's research lab and guide the robots to complete a project -- from the conference! With a coffee in his hand!
In addition to automating R&D processes, the implementation of multiplex genome editing tools allow researchers to insert, delete, or edit the DNA of a yeast cell with incredible accuracy, speed, and precision. The latest advance includes CRISPR technology, developed under a grant from DARPA, which Amyris used to demonstrate the engineering of an entire metabolic pathway (representing an entire molecule for commercial production that was the foundation of Draths Corporation, acquired in 2011) into an organism in one week, which is four weeks faster than previous methods used internally.
In addition to its R&D prowess, Amyris boasts a long list of strategic partners that will be instrumental in lifting the company to the next phase of growth.
Total SA (NYSE:TOT), which beneficially owns about 26% of the synthetic biology leader, has set up a solid presence at the company's headquarters. The pair has an agreement that allows Total SA to leverage Amyris' research and pilot facilities to advance its interests in drop-in renewable fuels, which the pair is working to commercialize. Shortly before my visit the French oil and gas leader installed a 1,000 liter bioreactor in the pilot facility, which is more than three times the size of those operated by Amyris and will allow for additional scaling data to be collected. It's a sign of the company's long-term belief in the platform.
Work also continues on a collaboration with the tire manufacturer, Michelin, and Braskem (NYSE:BAK) seeking to commercialize isoprene, or natural rubber. Amyris brings its synthetic biology know-how to the partnership, while Braskem is a leader in large-scale chemical manufacturing. That's good news considering that a special manufacturing facility will need to be constructed to produce isoprene from the technology platform (it cannot be produced at Brotas). If all goes well investors could see commercial sales near the end of the decade.
Perhaps the most important collaboration in the near term is the recently formed partnership with Genome Compiler. Investors didn't know what to do when Amyris announced the collaboration, probably because few know anything about Genome Compiler in the first place, but it could build into a meaningful revenue stream over time. Given its importance, I'll explain the collaboration further in a future post.
Consumer products strategy in place
Manufacturing high-quality cosmetics ingredients remains one of the most valuable opportunities for Amyris in both the near and long term. To date, the company has been a supplier of the moisturizer squalane (pronounced "skway-lane") to well-known personal care brands sold globally. But supplying ingredients ensures the lowest amount of value is captured from the final sales of the product. On the other hand, formulating a product containing your ingredient(s) to major brands or selling your own product directly to consumers captures significantly more value from the sale of a final product.
So, it's no surprise that Amyris has been hard at work developing consumer products and brands in-house; along with marketing and advertising strategies designed to maximize the value generated from sales. That includes building a new marketing team boasting individuals with prior experience positioning personal care products from Procter & Gamble and Solazyme. After all, pitching business-to-business sales (Amyris' experience to date) is much different from selling to individual consumers.
Those efforts will bear fruit this year when the company launches its first consumer-facing cosmetic products -- including pure squalane moisturizers -- through its Biossance brand. It's a great example of how to maximize the value created from producing a specialty ingredient. Consider that 1 liter of squalane might fetch $25 when sold to a major personal-care brand as a raw ingredient. Meanwhile, Amyris could sell a few ounces of pure squalane as a stand-alone moisturizer for $60 or more. Since there are nearly 34 fluid ounces in 1 liter, pursuing direct-to-consumer sales could make the same amount of production significantly more valuable.
The company is also preparing to launch Muck Daddy, its industrial hand cleaner (not a consumer product per se), to select markets later this month before launching worldwide later this year. But with a name like that, I just have to cover it in a future article in more detail. Stay tuned.
What does it mean for investors?
It's very clear to me that Amyris remains misunderstood by the market, Wall Street analysts (nothing new there), and individual investors. While past manufacturing hiccups may be difficult to shake from your memory, no one at HQ flinched when discussing past obstacles, which, in retrospect, served as a springboard for implementing processes currently used that compound the value created from the technology platform.
Unlike other publicly traded industrial biotech companies, Amyris faces no major manufacturing hurdles for producing or finishing the ingredients it produces. There may never be an "aha!" moment where investors catapult Amyris stock to new heights overnight, but the near and long term potential of the technology platform is greatly underappreciated. I'm all in.