UPDATE III: Shares closed at the all-time low of $2.47.
UPDATE II: Amyris shares hit another new low, $2.49.
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.
>snip<
[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: 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 [see here and here for some background.].
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.
Then, just two weeks ago, the company announced it was dumping its U.S. ethanol distribution system,
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.
eats shoots 'n leaves 
The problem with Amyris is that they have no seasoned industrial scientists in executive positions, for it is seasoned industrial scientists who are best suited to determine which products will sell and to guide the R&D necessary to develop and manufacture them. Amyris is the result of an awful kind of Academia-VC-Wall Street racket that has come about over the past twenty years where it is deemed that college professors, graduate students, venture capitalists, and “executives in residence” know more about doing industrial R&D than seasoned industrial scientists do. Once the academics found a company, then the business types, who are mainly in it for making “The Deal” and who have very little understanding of doing industrial science, present the startup to Wall Street by making fantastic predictions. Amyris has a very good molecule in farnesene, but farnesene’s niche is in specialty chemicals, which don’t generate the same buzz as fuels and commodity chemicals do.
There are three reasons for the rise of the Academia-VC-Wall Street racket.
1. Academia no longer simply trains people for the technology workforce but has now become the technology workforce…thanks to The Bayh Dole Act, munificent federal grants, its nonprofit status, and liberal immigration law.
2. VC invalidly assumes that chemicals and materials technologies follow the same models as biotech, computer and internet technologies, but the reality is that retail and dating websites, social networks, and making new antihistamines are a lot easier to do than developing a biorenewable alternative to a commodity plastic at an equivalent cost-performance ratio.
3. Wall Street’s “quarterly conference call” unreasonably forces existing companies to show perpetual, escalating growth. And, the most convenient way of showing perpetual, escalating growth is to reduce expenses. And, the most convenient and direct expense for a company to reduce is its own research and development. This makes it extremely difficult for companies to nurture original ideas or to sustain vigorous R&D programs. The layoffs of corporate scientists create two tragedies: professional industrial scientists no longer have productive careers and corporations lose their intellectual capital (e.g., a eureka that a scientist may have in 2000 for a failed experiment that he did in 1985 is no longer exploitable because he was laid off in 1990).
Amyris will probably be absorbed into the corporate R&D department of its large investor, French oil giant Total, and Total will roll out new products in a sensible way. On one hand, corporate R&D is where the technology should have been placed in the first place. On the other hand, it is kind of comical that technology initiated with federal funds would wind up in the hands of a foreign entity. So much for academia being the Public’s steward of government funded research, as the Bayh Dole Act requires.
The winners in this system are university administrators, professors, MBAs, VC’s, law offices, and college towns. The losers are scientists, engineers, machinists, equipment operators, companies, manufacturing towns and the General Public.
Honestly, Richard — did Jay Keasling wrong you in a previous life? This blog is so filled with personal animosity – it reads like a personal vendetta, and nothing like an objective assessment of facts.
Jay Keasling never wronged me personally.
My concerns are strictly about the transformation of a public university into a corporate profit center, rather than an institution designed to create the fully educated citizenry essential for the healthy functioning of a democratic society.
Keasling has made millions off of research conducted at an institution created to benefit the citizens of California, and Amyris was incorporated in Delaware, a traditional move to avoid paying taxes to the state whose taxpayers enabled the company to exist.
Keasling, a quite personable and affable fellow, is merely symptomatic of the corporate capture and control of public institutions. I highlight his role because he has been held up as an exemplar by both the university and the state and city government.
Given the looses Amyris has sustained, the incorporation in Delaware matters little, but had the company achieved the goals Keasling held for it, millions of dollars would have been lost to a state that has been forcing students to pay ever-higher tuition to obtain the educations that California once declared should be free to all residents.
Keasling and his companies are simply symbolic of a larger problem in that sense.
But we are also concerned that Keasling extravagantly promised that “scaling up” technology that worked in the lab wouldn’t be a problem, helping to lure hapless investors into throwing away their money on what has proven thus far to be just a costly chimera.
I don’t understand your presumption that Amyris profits come at the cost of UC Berkeley. Do you think the university would have lowered tuition if it hadn’t licensed the technology to Amyris? If successful, the technology would reduce fossil fuel use and our dependence on the Middle East. Don’t these things benefit the citizenry?
I share your apparent disdain for the lottery system we call American capitalism. But scaling university research into large-scale solutions is not going to happen without the participation of companies, who ultimately produce and distribute them. And many of those companies are funding fully or in part the research that our impoverished universities no longer receive from the government. Our anger ought to be directed toward an electorate that doesn’t demand that its government fund this transformation. If companies fill the void, well that’s better than letting the technology lie fallow.
Amyris profits, if they ever come, will cost the State of California [and thus the university], in part because the company incorporated in Delaware to avoid paying California’s corporate taxes.
Your question is also premised on a lot of ifs, while neglecting others, what economists like to call “externalities.”
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