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Amyris, Inc. (AMRS)
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Current Market Cap of AMRS is $2 Billion dollars. After the convert they have close to zero debt (Yes never in their history) approx $500 Million in cash. *They have $50 million debt remaining but that's with JD and he will convert it too.
So if you were to sell AMRS today in parts, we have the following:
1) $500 Million cash
2) Biossance (Almost $1 Billion)
3) Pipette + JVN + Rose Inc + Terasana + Costa Brazil ($1 Billion - very conservative)
That is $2.5 Billion already. Now add to that:
5) Ingredients B2B - Not sure what value to put on that?
5) Ingredients (Squalene, CBG, Reb M etc)
6) Other Ingredients in Pipeline developed - 13
7) Ingredients in developing stage - 24
(Now Melo has sold ingredients in the past as a one time deal if he wants to a partner, in the range of $50 - $100 Million, so that gives an idea of their value pipeline)
If you put a very conservative value of $2.5 Billion for 4 - 7 above. We are at $5 Billion and that's not even counting the value of the AMRS platform (The golden goose that keeps laying golden eggs)
So even with a doomsday scenario, if AMRS was to be sold for parts today, it's atleast worth $5 Billion, that translates to $12.50 a share (fully diluted). That is double of what it is today. Hope you all keep this in mind, have some patience and have a great Thanksgiving!
Amit Dayal from Wainright has just come out and reaffirmed a $30 PT for a year from now. Here is the report:
Upsized $690M senior unsecured convertible note financing
closed. On November 15, Amyris announced that it had closed the
financing of an up-sized $690M (up from the initially announced $400M)
senior unsecured convertible note due in 2026. On November 22,
the company provided further details during a public conference call.
Management indicated that the offer was 4.75x oversubscribed and that
a total of 111 institutions participated in the offering. The five-year notes
carry a 1.5% coupon to be paid semi-annually, and the $10.75 strike
price represents a 35% premium to the prior day’s close. In a separate
transaction, the company purchased a capped call option for $81M,
which raised the effective conversion premium of the note to 100%. After
paying for approximately: (1) $19M in transaction expenses; (2) $81M
for the capped call option; (4) $51 in principal debt repayment; and (4)
$14M in interest and fees, the company now has $525M in additional
cash. As a result of the transactions, the company’s annual interest
expense for the new $690M note is expected to be equivalent to the
interest paid as of September 30, 2021, on its $102M legacy debt.
Investing in the future. Management plans to use the proceeds from
the transaction for expanding manufacturing, R&D, ERP, M&A, and
general corporate purposes. Specifically, the company plans to invest:
(1) $97M toward the completion of the Brazil ingredients, fermentation
manufacturing plant and downstream processing unit, as well as the
U.S. consumer production facility; (2) $58M toward expansion of R&D
technology, infrastructure, laboratories, and the pilot plant, as well as
ERP upgrades; and (3) $60M toward acquisition of complementary
beauty and personal care brands.
Key takeaways. We believe this financing now provides the company
with ample ammunition to pursue its growth agenda, including
expanding production capabilities as well any strategic or opportunistic
M&A. Management maintained its 2021 revenue outlook for between
$330-370M. However, in light of the ongoing supply chain challenges
across the market we feel it is prudent to lower our expectations for
4Q21 to $57.8M, from $72.4M to bring our revenue projection for 2021
closer to the lower end of the guidance. We believe the company's
product development pipeline with 24 ingredients under development,
and traction with offerings already commercialized, position it well to
execute against a fairly aggressive growth mandate. However, the stock
performance from here, in our opinion, will be driven by delivering
against this mandate.
With the COVID-19 variants running loose... bio-tech firms will take the fighting lead. DNA code to defeat the virus is humanity's best weapon. Bill Gate funded AMRS to get rid of Malaria, now there is a very serious fight to get rid of COVID-19. Mutating COVID-19 is having humanity playing whack-a-mole. Melo is correct, COVID-19 is not going away and new medicine is needed fast. IMO keep on loading.
Han opened the call - This was the largest liquidity event in the company's history, and took advantage of favorable market conditions. All high-interest legacy debt is now retired, and the company is fully-capitalized to execute on all objectives, including additional M&A.
Melo reiterated that product demand and revenue growth has not slowed, and that the miss was because of world supply chain issues. He also promised that this failure would not occur again.
All in all a very upbeat presentation, apparently designed to counter all the recent negativity. They didn't take any analyst questions.
Great comment from Tanaka posted today on his Seeking Alpha article. Unfortunately when I post the link this lame platform deletes my post. If someone else can do it that would be great. Lots to chew on.
Here is part of it:
Slide #13, “INGREDIENTS PIPELINE” identified their new ingredients molecule pipeline annually to 2025. Most companies would not disclose their new product development pipelines for competitive reasons. Amyris must be confident that its Intellectual Property moat is big enough to protect these new ingredients. I do note with greater comfort that 3 ingredients are not identified.
While it will take time to evaluate all these ingredients, it is noteworthy that 8 of 29 are already partnered meaning that leading corporate partners have already approached Amyris to custom design yeast strains to produce these ingredients and that they must have agreed on the feasibility and economics which nicely de-risks the portfolio.
A post by one of the smartest investors I've ever found on line who got me into $ENPH at 2 a share who goes by the name Lucky?. He was long AMRS at 3 and sold out in the 20's and is back in. His comment is from the most recent article on Seeking Alpha. Has been following the company for at least 5 years and knows all about Melo:
AMRS share price has been cut in half over the course of a week or two plenty of times in the past (usually, like now, from Melo over promising and under delivering)......and since the R/S five years ago always seems to recover just fine in time.
The reason is their tech....and the growth it generates. With massive growth always comes hope...and with hope the share price always find buyers sooner or later (people/investors are optimistic by nature).
No matter how you slice it Melo still owns the goose that lays the golden eggs (their tech) and by all indications that goose is still very fertile.
So expect that growth to not only continue but accelerate going forward (just not last quarter).
As for vaccines..... I like NVAX because it already has shown all the benefits of the IDRI vaccine and will be out and approved in the US around Jan (my guess) and they will sell at least 2B doses next year and compete directly with the mRNA vaccines.
They are superior to mRNA vaccines in every category that matters....cost, safety, efficacy, durability, storage and shipping.
But that's just my opinion. Whether you invest in the stock I could care less....just make sure you get a booster of it ASAP after it is out. While the US owns tons of excess mRNA vaccines they will only have a limited supply of Novavax available and as word gets out (it's top secret with Fauci and the media today for fear it will further promote vaccine hesitancy) that supply will go fast.
NVAX also has a CEO who couldn't promote his way out of paper bag...unlike Melo who can promote his way through concrete walls.
The reason....it's 100% safe and steady protection against severe illness in every trial.
How to you beat 100% and steady for at least 6 months and maybe a year or more before boosting will push it to 1 to 2 years?
But back to AMRS.....between the earnings miss, the fear of the bond (I was pretty sure there was something sneaky in the fine print but was wrong) and now tax loss selling it's taken a major hit (the usual 50%). Just as that's normal for a highly abnormal CEO (big or go home Melo backed by Doer who thinks exactly the same) odds are this will recover just as it always has in the past.
Just don't ask me when....timing has never been my strong suit.
Wow, strong volume for what is normally a thin trading day. Bottom close to being in place?
Melo today humbly apologized for their huge miss last Q. I give him huge props for that. Has said supply chain issues will last another 2-3 quarters. Says it won’t happen again. We’ll see but the fact that they publicly admitted their mistake is a key first step.
For me, I’ll keep the shares I have for now but won’t buy anymore until I see next quarter numbers. Very glad to see they also understand that they need to make big operational upgrades to their ERP and other systems to manage their growth. These upgrades btw can easily take a year or longer to implement.
Amyris remains a long term hold. Great entry point here for new investors as their capital structure is much simpler and less expensive. More dilution is coming but IF they can turn the corner next year, stop the bleeding and show they can hit EBITDA positive it will have been worth it. Interesting slide on their molecule strategy for the next 4 years. That needs to be discussed here.
There will be lots of tax selling into the end of the year here, do the stock is dead money. Use these low prices to accumulate or buy in. For me, this is a hold. I will not invest more here until they report q4 next March. The company does not deserve it given many other places to invest. But the long term promise of the platform is real. These problems are fixable, but it will take time. The Amyris turn around thesis is set back at least 9-12 months in my view.
Glad I added more yesterday. Sometimes things do work out for me! Let's hope we continue onward and Upward and put this horrible quarter behind us. I hope we never see this level again.
Happy Thanksgiving ALL no matter your position long or short. Just better to be long on this one. IMHO
I don't always buy stocks, but when I do, I buy AMRS.
From Graham Tanaka's Seeking Alpha Article (here are the Summary points:
Amyris Buying Opportunity Created By Q3 Miss, Mega Convert And Potential Revolutionary COVID Vaccine
- Big Revenue miss for Q3 due to supply chain shortages and Amyris guides lower for Q4.
- Surprise $690 million convert is less dilutive (12%, not 18%) and at a beneficially higher effective conversion price ($15.90, not $10.75/share) due to a capped call hedge.
- Mega overfunding adds about $590 million cash which can be used to pay off debt, finance new plants, acquire IP and assets and allow Amyris to negotiate deals from strength.
- Potential revolutionary COVID vaccine in 50/50 Joint Venture with ImmunityBio - Clinical trial data in Q1 2022, with an objective of up to 1 billion doses in 2022.
- Potentially great buying opportunity especially for those that missed the stock a year ago as delays from supply chain shortages and effects of the surprise convert should be temporary.
My thoughts on what the call on Monday could address and questions we should have answered:
1. Clarification on the Debt
a. Detail the components of the convertible structure in "layman's terms" and the "capped call" transactions
b. How much dilution can we expect at different AMRS share price points at different time periods (I have discussed this in a prior post based on my own interpretation of the filings, but its best if it comes from the horses mouth)
b. What will the debt proceeds be used for. For example:
- Second Brazilian Facility buildout
- 3 new acquisitions mentioned on the call
- Build up of working capital/inventory in anticipation of further supply chain constraints
- Any capital expenses required by the ImmunityBio JV?
- Share buyback (if the shares were worth buying back in the teens...would they be a screaming buy at this point which could further help against dilution). As an Extreme example...AMRS could have taken all of the proceeds from the convertible debt offering and purchase enough shares (based on today's close @$7.14) at $10.75 to satisfy the debt requirements and use the remaining proceeds for operations at a low cost of funding (I know...crazy idea, but throwing it out there).
c. Will this be sufficient to carry the company to cash flow positive, and if not, how long with this capital raise last for at a bare minimum (and should we expect further dilution)?
2. Supply Chain Issues
a. What specifically was delayed in Q3 and what is at risk at Q4?
b. Clarification on what the status is for Q4 (i.e., what did the AMRS team when they said it was mostly built up in advance) and how are they managing for Q1 and beyond?
c. Will the completion of Brazilian and Reno facilities solve all the issues?
d. Half-way into Q4, can AMRS provide any color on how the quarter is shaping up?
e. What is the company doing to improve visibility along the supply chain to prevent these "surprises" from happening again?
3. Clarification on ImmunityBio
a. What is the structure of the JV (other than being 50/50)?
- Cap Ex requirements by both parties?
- R&D responsibilities
- Manufacturing responsibilities?
- Distribution responsibilities?
b. Economics of a dose
- Wholesale price/dose = $7/dose
- COGS/dose = $2/dose
- Distribution-Opex/Dose = $3/dose?
So does that mean pre-tax profit per dose to JV is $2/dose? (of which 50% goes to AMRS?)
- Who manufactures the doses? (e.g., ImmunityBio's facilities in South Africa, AMRS, other?)
- Does the JV have the capacity to handle 1 Bn doses for 2022?
- If you add up the populations of South Africa (60MM); Brazil (211MM), Portugal (10MM), USA (333MM). Even if we assumed that all four countries agreed and every single individual were to get a single dose, that would only be 614MM.
If you have additional specifc questions (leave the emotion out of it), feel free to comment.
I (and others) can try to ask these questions during the call during Q&A.
Hope that helps and Happy Investing!
(I still believe in AMRS and am accepting the Supply Chain issue, but I know these questions should be asked and answered regardless)
I’m bummed like everyone else on the huge price drop. I got in small and added as the price went up. Now, I’m underwater for most of my lots. I won’t sell but, won’t be buying right now. One alternative, if you believe in the long term, is move shares to a Roth IRA from a deductible IRA. The hopefully bigger future gains would be tax tree, although you pay taxes now but on a lower basis. I’m sure the smart people on this board have considered this, so excuse my rambling
This is one of the molecules that AMRS is developing with a partner that was on the slide for this year. It is a terpene found in Cannabis:
Due to its unique ability to bind with CB2 receptors, Beta-caryophyllene has potent anti-inflammatory, antimicrobial, antibacterial, and antioxidant properties. It is known to help relieve anxiety and pain, reduce cholesterol, prevent Osteoporosis, and treat seizures. Also, some research has shown that it may help against certain neurodegenerative diseases and cancers.
Beta-Caryophyllene Anti-Inflammatory Properties
Beta-caryophyllene can reduce inflammation in the brain and chemicals that cause oxidative stress associated with inflammation. These properties can aid the brain from swelling during a stroke and improve its outcomes. Besides, it has been shown to reduce gut inflammation.
The continuing short interest in this stock is remarkable. Virtually every transaction appears to be a short sale. This has occurred from about $10 and paints my time and sales reports.. Short interest is at least 15 percent of the float. If they ever get their act together... the stock could have a pretty impressive spike. Having said that .....until this lightens up the pressure and deterioration will continue . It looks to me like it is trying to fill the gap from the 12 month lows....ugly for the buyers at 12 and an opportunity who enter the game in the 4's...although it takes some stones to buy a falling knife.
So what can we expect on Mon?
If Melo is good at one thing, then that is making BOLD Forward looking statements (BTW Forward looking statements can be anything, no one can Sue you cause you said you "planned" to do that) So I am expecting a very bullish outlook spoken by Melo on Mon, on his grand plans on how he is going to use the money to buy/launch new brands and some of the new initiatives around vaccines, and probably mentioning about new plants.
Now there are some serious trust issues between the retail investors community and Melo, so you can hear it and forget it. However some new investors will believe in it, and the constant PR pumpfest machine will eventually make you into a believer too, until the ERs come out, where Melo can't lie and has to show numbers, then reality sets in. Next year is going to be a rinse and repeat of this. However I still think most of the damage is already done, so it's going to be an upward trajectory from here. You can't expect $4-$5 prices now, that was so last year. I will be backing up the truck if that happened.
Anyway what's going to really move the stock price is institutions, they are the ones who bought thousands of bullish calls, they are ones producing huge volumes, with little to no movement in price this week, just call it MM games. They are the ones that loaned the money, the ones who want to be paid back in much higher equity rather than getting paid with 1.5% interest. So do the math, if you align with the institutions and their timelines, you can't go wrong. The question is can we be that patient?
A friend of mine is a ‘retired’ Jesuit Priest. He had a ‘ dream ‘ about E.F. Hutton. He said Hutton mentioned Amyris. My Jesuit friend now has 30k Shs. @ $ 6.66 a Sh avg. ( 🙏🏼 )
Can someone explain why Amyris needs the ingredients business? The consumer brand businesses I generally love. I see huge upside there. But the ingredients business looks like it runs a negative gross margin? The progress towards profitability in that segment is so slow it could take five or more years of continuous losses for it to just get to breakeven. Why does the company need to do this? These continuous huge losses mean the company keeps diluting investors, and as I pointed out in a previous post here, the revenue per share of this company has gone nowhere but down in the last four years, in spite of the revenues going higher. They dilute investors faster than they grow the company. That's pain.
One answer to my question might be around economies of scale. Maybe they need higher volumes than they can use in the consumer businesses in order to get their costs to some strategic low point. But the company has not explained that well. Can someone make the argument clearly with specific chemicals and volumes and prices?
At what point does the company at least not have a negative gross margin on these businesses?
Being thinking about Melo maintaining 400mil guidance so close to the ER. It was also close to the PR for the cash raise. Would it have caused difficulty to get commitment for 400 mil cash raise and pricing if the Amyris had lower its guidance earlier ?
A comment from Graham Tanaka that he just posted on his Seeking Alpha article from a ways back:
Amyris has dropped sharply from $12.98 on 11/08/21 to $$7.51 on 11/10/21 since reporting a big miss on revenues for the 3rd Quarter as well as an announcement of a very large convertible bond offering on 11/8/21. Our take:
1. Q3 miss: Amyris has established a large commercial lead in one of the world’s newest and fastest growing industrial revolutions, engineered bio-manufacturing. It has been growing revenues by 100% per year, but this very fast growth is sometimes difficult to manage and is certainly not always up in a straight line. For Amyris Q3 was a big hiccup as total revenues fell short at $47.8 million vs. $62-64 million estimated. Versus last year, total Q3 revenues were up 39% and revenues up 196% for the 9 months at $277 million. Important high margin Consumer Products Q3 revenue was $23 million vs. $12.3 million last year, up 87%.
2. Why the Miss: Mgmt explained that the revenue miss was because of supply chain shortages of plastic containers and caps from China, a large shipment of key ingredient farnesene stuck in a ship off the coast of Savannah, shortages of membranes and delayed launches of the three new product lines. Many companies have had supply chain shortages. Apparently, Amyris had the orders to make the forecasts but with 3 new brand launches and 3 acquisitions, it had added 300 new suppliers and didn’t have the ERP and reporting systems in place to know that the shipments could not be fulfilled due to parts shortages. Yes, they should have known and have assured us “it won’t happen again.”
3. Surprise Convert: Amyris also put out a second press release just as the Q3 conference call was starting that announced a $400 million convertible bond financing with a “capped call” feature. Unfortunately, this advantageous capped call feature was not explained in the press release which may have created confusion and contributed to the massive decline in the stock price. We have seen these convertibles issued very successfully before for Tesla (twice) and for Rudolph Technologies as well as for Enphase -- The issuing company advances money to bankers to buy leveraged calls to buy long positions in the common stock to in effect offset much of the implied dilution from the convertible bond that accomplishes two things: (1) reduces dilution and (2) raises the effective exercise price of the convertible bonds.
4. The net result is a cheaper than expected convertible bond financing at a higher than stated conversion price, not bad for existing shareholders: While the convertible issuance doesn’t close until Monday, we believe that the convert underwriting must be oversubscribed as the offering was upsized from $400 million to $600 million and the terms are at only a 1.5% interest rate over 5 years with a 35% conversion premium. Although not yet final, we believe that the math on the capped call feature improves the net effective terms by raising the effective conversion price (for Amyris) to about $15.90/share from $10.75/share and the dilution is lowered to about 12% more common shares vs. over 20% nominally stated even with the green shoe of an additional $90 million.
5. We estimate that there will be around $700 million of cash on the balance sheet after the raise: The net effect is that Amyris will finally be “overfunded” as we have been wishing for for some time and that it will now be able to: self-finance several more plants beyond Barra Bonita, make additional acquisitions of IP and upstream and downstream assets and brands, negotiate new partnership deals from strength – and sleep at night.
6. Especially for those who missed buying AMRS a year ago at $3.00, I believe that now is another advantageous entry point at $7.51/share.
7. Ahead of others in the Engineered Bio-Manufacturing industry by 3-5 years, Amyris has shown that its science, processes and ability to scale is already producing 13 products that are leaders in their end markets: In the last few years Amyris has created and quickly taken large shares of high margin Consumer End Markets to capture more of the value by delivering superior performing and more sustainable products to end consumers. Amyris has 28 molecules in its R&D pipeline and has major partners and initiatives percolating in consumer and health verticals, cannabinoids, meat proteins, HMOs, no-calorie sweeteners, monoclonal antibodies, 2nd Gen vaccines for Covid, the flu and for cancers, adjuvants for vaccines, rubber/plastics, more green fuels and other specialty industrial products.
Additional disclosure: This commentary expresses my personal beliefs and opinions relating to the subject matter contained in the article. I have not been compensated by any entity, and all thoughts, opinions, conclusions and statements contained in this article are my own. Further, I have no affiliations or arrangements of any kind with any entity mentioned in this article. Finally, we
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