Amyris: Biochemical Bargain?

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Industrial bio-chemical developer Amyris, Inc. (AMRS:  Nasdaq) has been in the headlines recently  –  some pointing to solid fundamental progress, others ‘not so much.’  Amyris recently announced a new relationship with Givaudan (GIVN: VX), a supplier of active ingredients for cosmetics.  The two have agreed to collaborate in research and development on proprietary fragrances.  Earlier this month Amyris announced the launch by Takasago International Corporation (TYO:  4914) of a new fragrance created with Amyris’ technology. Cosmetics and fragrances present large market opportunities and the strength of demand for personal care products supports strong profit margins.  The relationships are likely to lead to incremental sales for Amyris.
Yet it was just a week ago that Amyris announced the company was crosswise with Nasdaq.  Apparently, the bid price for AMRS shares has been below $1.00 for 30 consecutive trading sessions, violating a minimum listing requirement for the Nasdaq Global Select Market where AMRS trades.  There is no reason to panic just yet.  The company has six months to come into compliance.  Still the notice from Nasdaq puts a spotlight on the struggle that developing companies face  –  trying to get established in highly competitive markets for their products and technology while clinging to whatever access to capital they might establish.

Amyris has been able to build up revenue to $34.1 million in the most recently reported twelve months ending March 2016.  Of course, the company is still operating with a deep loss as research and development efforts still eclipse revenue.  The net loss during that period was $184.9 million or $1.26 per share.  More importantly the company used $105.6 million in cash resources during that period to support operations.
Since cash on the balance sheet was only $9.3 million at the end of March 2016, there is some real concern for Amryis’ future.  Granted the company executed a small private placement in May 2016, bringing in about $15 million in new capital net of fees.  That has provided some breathing room for the company.  Then, if Amyris is closer to selling its Biofene-branded farnesene chemical, the future might not see as bleak as suggested by the balance sheet.  Farnesene is a renewable hydrocarbon chemical that is the building block for a range of products such as cosmetics, detergents and lubricants.  It shows promise for high-volume applications and large market opportunities.  In May 2016, the company announced a new relationship with CJ CheilJedang Corporation (097950:  KS), a Korean contract manufacturer, to provide high volume production of farnesene for Amyris.  Unfortunately, it will take until at least the third quarter for the two to hammer out a definitive agreement, which suggests that revenue is not likely until well into 2017.

Priced at about $0.40 per share, AMRS appears fairly priced as an option on management’s ability to bring together the right elements of technology, commercial products and paying customers.  Until more commercial relationships are in place or the existing relationships begin producing revenue, there is probably no justification for a higher price.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

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.


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