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Amyris Loses Major Mutual Fund Investment

By Richard Brenneman
Monday May 07, 2012 - 09:38:00 AM

Editor's Note: Richard Brenneman has been tracking the sinking fortunes of Amyris, a U.C. Berkeley spin-off which is typical of the kind of companies contemplated by the radical amendments proposed for the West Berkeley Plan and its zoning which the Berkeley City Council seems ready to pass in the next couple of weeks. This story first appeared on his blog, Eats, Shoots 'n' Leaves.

UPDATE: Shares just hit another record low as we were posting. They’re now selling for $2.59.

Companies like to drop bad news on Friday. That’s because few people are interested in news on Saturday.

Amyris, the UC-Berkeley spawned genetic engineering company created by Val “bioengineer” Jay Keasling, dropped a bombshell on Friday afternoon: Their biggest mutual find investor, the Fidelity group of funds, is selling off two thirds of their holdings. 

The company had trumpeted the news when Fidelity bought 6.2 million shares on 28 February, paying $5.78 a share. 

As of market close Friday, those same shares were worth $2.73, and as we write, they’re going for $2.65, just four cents above the company’s all-time low of two weeks ago. Shares were going to $33.85 just 14 months ago. 

In a prospectus Amyris filed to sell the Fidelity shares, the company made the usually cautionary disclosures. 

These in particular caught our eye: 

We have very limited experience producing our products at the commercial scale needed for the development of our business, and we will not succeed if we cannot effectively scale our technology and processes. 


[O]ur technology may not perform as expected when applied at commercial scale on a sustained basis, or we may encounter operational challenges for which we are unable to devise a workable solution. For example, in 2011 at our contract manufacturing facilities, contamination in the production process, problems with plant utilities, lack of automation and related human error, process modifications to reduce costs and adjust product specifications, and other similar challenges decreased process efficiency, created delays and increased our costs. Such challenges are likely to continue as we and our contract manufacturing partners develop our production processes and establish new facilities. 

Back in 2010, in a video produced for Lawrence Berkeley National Laboratory, where he hangs his hat as the lab’s chief synthetic biologist, Keasling blithely dismissed any problems with scaling up. As he observes in the video “They scale beautifully.” 

To which we can only add, except when they don’t. 

Back to the prospectus, where we discovered this little item: 

The 4,173,622 shares of common stock covered by this prospectus may be acquired by the selling stockholders from us by electing to convert the senior unsecured convertible promissory notes issued to the selling stockholders pursuant to the Securities Purchase Agreement, dated February 24, 2012, by and between us and the selling stockholders. We agreed to file a registration statement with the SEC covering the resale of the shares issuable upon conversion of the unsecured senior convertible promissory notes referenced above. 

Note that word “unsecured.” 

UPDATE II: Some background 

Amyris was started by Keasling and funded by Bill Gates to used genetically engineered microbes produce a cheap version of the antimalarial artemisin to replace the drugg naturally derived from artemisia, the wormwood plant, which is cultivated by thousands of farmers in Asia and Africa. 

While the bugs produced the drug, the price was no cheaper than the natural version. 

They next converted the microbe to produce precursors of fuel from plant cellulose. So far the process has been used mainly to produce higher cost chemicals for use in cosmetics, and mass-produced fuel remains a dream, thanks to those scale-up problems Keasling blithely assured us weren’t a problem. 

Just what the future holds for the company remains very much in doubt, and just how long the other major institutional investors will be willing to accommodate massive losses before forcing a bankruptcy remains an open question