Is Amyris On the Rebound?
The company’s main business, converting crops into renewable chemicals for products as diverse as cosmetics and industrial lubricants, has faced skepticism from some global investors as prices for sugar and ethanol have fallen 13 percent and 12 percent in the past year, respectively. Furthermore, the biotechnology sector is well-known for being highly volatile and unpredictable due to the heavy reliance of companies in the sector on scientific innovation.
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Shares in Amyris had dropped 74 percent by early October. The company’s decision to delay the opening of a new plant in Brazil due to concerns that the project would not be able to turn a profit was a key factor in the downward slide. Amyris also temporarily stopped production at two of its three third-party manufacturing partners during the second quarter to cut costs.
However, the company’s third-quarter earnings report revealed that its exit from unprofitable ethanol production resulted in a smaller-than-expected quarterly loss. Shares rose as much as 23 percent after the report was released, and traded up 19 percent at $3.09 as of 12:30 Eastern Standard Time. For the three month period, net loss decreased by 54 percent to $20.3 million, or 34 cents per share, down from $43.7 million in the year-ago quarter. In comparison, revenue fell 47 percent year-over-year.
Despite an endorsement of the industry from Rupert Murdoch several months ago and contracts from U.S. government agencies, other companies in the biotechnology sector, including Solazyme (NASDAQ:SZYM), have struggled this year as well. Seeking Alpha reported in mid-July that Wall Street’s concerns over these companies’ profitability had contributed to the stocks’ low prices.
But in the most recent quarter, Amyris beat analysts expectations by $9.7 million, as top-line numbers benefited from higher sales of renewable products. Chief Executive Officer John Melo told analysts during the third quarter conference call that the company had increased the yield and efficiency for its new generation of chemicals “Our process is working at industrial scale as in the lab and we are achieving our internal manufacturing targets,” he said.