Amyris trading at $16/share

Despite the lower-than-expected initial public offering (IPO) price of $16/share as opposed to between $18-$20/share, Amyris, the California-based synthetic biology start-up did pretty well as it raised nearly $85m on the first day and its stock closed at $16.85/share on the second day of trading at NASDAQ.

As Amyris is one of the first advanced biofuel/renewable chemical startup company that went public, the company is kind of a bell wether on how this industry will turn out in the financial world. So how did its venture backers fared with this initial trading? Here’s a very interesting analysis from The author noted that the company’s series A investors, Khosla, Kleiner Perkins and TPG Biotech did pretty good with their investments with Amyris.

I have not really covered Amyris that much in the past so here’s some pertinent info about this company.

Amyris started out as a non-profit venture with the Bill and Melinda Gates Foundation to engineer microbes to produce artemisinin, an anti-malarial drug which was turned over to pharmaceuticals giant Sanofi-Aventis in 2008. Using its technology platform of tweaking microbes, the company focused on producing fermentation-based fuels and chemicals instead starting with its first soon-to-be-commercialized product, beta-farnesene, a 15-carbon hydrocarbon sesquiterpene. (Does this molecule ring a bell? Hello Allylix!)

According to Wikipedia (sorry, no time to scour the web scientific journals), the isomer part of beta-farnesene is a constituent of various essential oils or could also be from an aphid pheromone. Several plants, including potato species, have been shown to synthesize this pheromone as a natural insect repellent.

Amyris’ beta-farnesene, under the trademark Biofene, is being created as a cost-economic chemical building block to replace petroleum-based materials (and higher-priced natural-based materials) initially focusing on emollients, flavors and fragrances, surfactants for various consumer and commercial purposes, isoprene, industrial and automotive oils and lubricants, and transportation fuels.

Like any other sesquiterpenes in the market right now, volume of beta-farnesene currently being sold is very small, hence prices are high.

According to Amyris’ IPO prospectus, the company expects to soon produce 600 million liters of farnesene production and high value product sales annually using Brazilian sugarcane as feedstock. Their strategy is to work with Brazilian sugar and ethanol producers to build new, bolt-on facilities. Their first such arrangement is their joint venture with Usina São Martinho, a subsidiary of São Martinho S.A., one of the largest sugar and ethanol producers in Brazil.

Amyris said it needs access to 12 million tons/year of sugarcane crush capacity. Of course the biggest risk the company has to face is when sugar price becomes to high! According to Amyris, Brazil crushes over 600 million tons of sugarcane annually to provide feedstock to approximately 400 sugar and ethanol mills.

Amyris started its 5,000 liter demonstration facility in Brazil in September 2009 and was also able to produce farnesene in a 60,000 liter fermentor at a contract manufacturing facility in the U.S. The company is in the process of establishing and implementing contract manufacturing capabilities in Brazil and North America.

Commercialization of their first farnesene-based specialty chemical products are expected next year using contract manufacturers, Their first capital light production facility via the Usina São Martinho is expected to start in the second quarter of 2012. Amyris already entered development and commercialization deals with Procter & Gamble, Cosan, M&G, Soliance and Total:

Cosan : a term sheet with Cosan for the formation of a joint venture to

develop and commercialize farnesene-based specialty chemicals for industrial

and automotive applications.

M&G : a collaboration agreement with M&G Finanziaria S.R.L. that establishes

the terms under which M&G may purchase our farnesene for use in M&G’s

polyethylene terephthalate, or PET, resins to be incorporated into

containers for food, beverages and other products.

P&G : a supply agreement with The Procter & Gamble Company that establishes

terms under which P&G may purchase our farnesene for use in its products.

Soliance : an agreement with Soliance for the development and

commercialization of farnesene-based squalane for use as an ingredient in

cosmetics products.

Total : a collaboration agreement with Total Gas & Power USA Biotech, Inc.,

an affiliate of Total S.A., that covers the research, development and

commercialization of chemical and fuel products.

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