Amyris IPO: Making Money Off Third-party Ethanol

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While biofuel maker Amyris unveiled that it had scored some major partnerships and investment earlier this week, the good news doesn’t distract from the fact that Amyris is generating the majority of its revenues from selling ethanol produced by other companies.

Amyris says:

Our total revenue increased $11.6 million to $13.7 million in the three months ended March 31, 2010 compared to the comparable period the prior year. The increase was primarily the result of the increase of $8.4 million in sales of third party ethanol. We sold 4.9 million gallons of ethanol in the first quarter of fiscal 2010

Amyris hasn’t yet commercialized its next-gen biofuel product, and accumulated a deficit of $136.6 million as of March 31, 2010. The company plans to start producing its synthetic organism-based biofuel at commercial scale in 2011.

So why would a company resell ethanol purchased from third parties? Biofuel guru Robert Rapier pointed out to me that before ethanol company Xethanol went bankrupt, it had the same reselling tactic (Rapier has followed the chronicles of Xethanol closely). The reasons a company will resell others’ fuel before producing its own can include an attempt to demonstrate that it can produce revenues somehow, as well as to develop a sales organization familiar with the ethanol markets.

I contacted Amyris to learn more about its ethanol suppliers and how long it expects to be dependent on third-party sales, but the company is in silent mode and refused to comment.

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Michael RS

There are various ways to look at this. Conventionally a biotech company (and at the core Amyris is one) does not generate revenues for a long while. The entire Biotech industry did only turn profitable this year, 30+ years into its existent. Hence, a few years old Amyris should not be faulted for the mechanics of the industry model. To quote Fred Frank: “A biotech company is a pharma company unencumbered by profits.”
That said, more focus should be put on the actual type of products, their scalability and implications for overall portfolio and viability in a competitive commodities market. That is way more interesting to look and decipher.

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