Amyris ($AMRS) is another small-cap biotech that alongside Ginkgo ($DNA) and Twist ($TWST) has lost over 50% of its value year-to-date. With a stock price of ~2$ and a market cap of less than a billion, I think they technically qualify as a “penny stock” so all the usual caveats about volatility and such apply here. With that said, Amyris might be the better positioned company out of the 3. While Ginkgo wants to be the Apple App Store and take a cut out of everyone else’s money, Amyris is content to make money themselves by making and selling biosynthetic products. In the first 3 quarters of 2022, they made 194 million dollars a year in revenue, and spent 610 million dollars (GAAP) in order to do so. They had 483 million dollars of cash in December of 2021, but only 18 million in cash was left at the end of 2022 Q3. It all seems rather unsustainable and what’s worst is that only 81 million dollars of their expenses come from R&D ie most of the expenses are just running the business. Cost of products was 170 million, Sales+Admin was 358 million, and revenue remember was 194 million.. But if you fired all the salesmen, administrators, and R&D people they might theoretically be making a profit, whereas Ginkgo expects to make a profit from licenses that may never materialize and Twist is being accused of selling products for less than their cost.

That does not mean Amyris is a good investment, even in this theoretical world where they made 26 million dollars in earnings they would have a P/E north of 200, and not even Amazon trades that highly these days. Still revenue has been growing close to 100% year on year, and there is perhaps a profitable company somewhere inside Amyris that could be worth your money.

Amyris is interesting to me because they appear to be the most “pure play” of the synthetic biology micro-caps that I see talked about. Ginkgo and Twist both operate on the “shovel salesman” business model, the old chestnut that in a gold rush you’d rather be a shovel salesman than a miner. Ginkgo wants to license the GMOs that would produce synthetic biology products, Twist wants to sell the DNA that goes into those GMOs, but Amyris is actually doing the work of making biosynthetic products and selling them on. And what are they producing? Well beauty products, mostly.

Most of Amyris’ products are a good window into the synthetic biology world. There was some chemical discovered ages ago that was useful to humans, but it only came from a rare plant or animal, so we humans would harvest these plants and animals by the billions to extract the chemical and put it in whatever product we needed. Then synthetic biology comes along and finds a way to produce the chemical in a microorganism instead. The benefits in cost for this should be massive, but they don’t seem to be showing up in Amyris’ balance sheet. Instead the biggest benefits appear to be in Amyris’ branding and product ethics. There’s been a years long push to make products be “less cruel” depending on one’s definition. For some consumers this means products should not be made using animals, for others they should not be extracted from conflict zones, still others demand the products be made with only unionized or at least well-paid labor. Everyone has their own definition of ethical consumption, and their own boundaries that they will not cross. Importantly our boundaries usually depend on how necessary we find that product for our daily lives, some folks will only drink Fair Trade coffee but some will take any cup of joe served by an underpaid Starbucks employee because they need their caffeine and need it now. Beauty products sit right at the top of Mazlow’s hierarchy of needs and so the consumers of these products can demand as much ethics as they want because the consumer doesn’t really “need’ them and the producer knows it. There’s also the fact that beauty products are already sold to us as an avenue of self-expression, and for some folks moral/ethical self-expression is the most important type of all. To this end, beauty products have recently tried to show themselves as world leaders in ethical consumption, advertising that they have no animal cruelty, don’t contain products from combat zones, aren’t produced by underpaid laborers, and all sorts of ethical guarantees. This is a place where Amyris and other synthetic biology companies should have the greatest benefit because there are very few ethical concerns to making a product in a Silicon Valley lab using micro-organisms. To that end, it’s not surprising to me that beauty products are so far Amyris’ strong suit.

But beauty isn’t the end all be all, there are stories floating around on social media that Amyris only pivoted to beauty in a desperate attempt to get cashflow and save the company. It still might not work because they’re burning cash and have little of it left on hand. But if it works, the higher ups (it is claimed) still want to make all the other synthetic biology products you can think of, plastic substitutes, green hydrogen, novel drugs those kinds of things. It’s a lofty goal and if Amyris can do it and make a profit then I’d invest. But right now they’re still burning cash and their fate is likely tied to how far and fast the Fed tightens the money supply. Only time will tell.