Nanalyze

3 of Synthetic Biology’s Failing Biofuel Stocks

Synthetic biology is exciting, make no mistake. The first alien life form or “designer organism” was created by Craig Venter in 2010 and now Mr. Venter, a synthetic biology pioneer, is looking to increase human longevity. Another exciting synbio company is Intrexon (XON) with their synthetic biology design platform that can be used to create apples that don’t brown, design clever drug delivery methods, and can even be used to clone your pet. However, as we get all excited looking at the potential of synthetic biology we shouldn’t forget about some of the disasters that have taken place over the past 5 years. During the time of high oil prices not so long ago, 3 companies in particular stoked investors’ imagination with the promise of using synthetic biology to produce biofuels. Here’s what happened to those investments:

Ticker  Market Cap (millions) IPO Date 1-Year Return Since IPO
Solazyme SZYM 268 2011 -70% -83%
Amyris AMRS 159 2010 -43% -88%
Gevo GEVO 60 2011 -73% -98%

Diversification would not have helped at all here. Had you invested $5000 in all three stocks in equal amounts, you would have lost -90% of your money leaving you with just $516 today. Note that the real difference between these “biofuel stocks” and all other biofuel stocks is that these three companies utilize synthetic biology. The first two companies, Solazyme and Amyrs, started out with the goal of producing biofuels as a commodity but have now moved on to producing smaller amounts of high value products instead. The third company, Gevo, is still focused on isobutennol. Here’s a brief summary of each of these 3 synthetic biology companies.

Solazyme (NASDAQ:SZYM)
The “synthetic biology” part refers to the fact that Solazyme uses genetically engineered microalgae. According to Wired, “algae is by some measures, up to 30 times more energy-dense than other biofuel crops. It ought to yield cheaper fuel, saving huge swaths of arable land.” Solazyme has moved away from biofuels to target customers in the industrial products, food products and personal care products markets. This new focus brought in over $60 million in 2014 revenues. Perhaps the most followed of these 3 companies, Solazyme has incurred massive debt recently to fund their ever increasing costs of operations.

Solazyme_Financials

Solazyme Financials – Google Finance

Amyris (NASDAQ:AMRS)
Amyris creates genetically engineered microbes, primarily yeasts, and uses them as living factories to produce various “renewable products”. The Company has taken in over $700 million in funding since inception and is now focused on building a pipeline of renewable products across a broad range of industries such as cosmetics, fragrances, lubricants, polymers, and of course fuels. Debt has been increasing sharply over the past 5 years while revenues have not.

Amyris_Financials

Amyris Financials – Google Finance

Gevo (NASDAQ:GEVO)
Gevo has created genetically modified enzymes that are capable of producing isobutanol from basic sugars. The company currently makes isobutanol from corn and just last week announced a breakthrough to its fermentation technology that will allow it to produce isobutanol from cellulosic feedstocks such as wood waste.  Revenues have been sporadic over the past five years and this year saw a 1 to 15 reverse split with more shares issued to keep the operation going leaving shareholders of the original IPO with just 2% left of their original investment. As of the end of March 2015, Gevo had $4 million in cash left.

Gevo_Financials

Gevo Financials – Google Finance

While some would argue that these were three public examples of failures in synthetic biology, there have also been failures in the startup world as well. Founded in 2005 by premier scientists and top-tier venture capitalists, Ls9 planned to genetically engineer microorganisms to produce biofuels. The Company was sold in 2013 eight years later for half of the original $80 million investment. Another company, Sapphire Energy, was a startup that was also using genetically modified algae to produce biofuels. Sapphire produced the world’s first renewable gasoline with their algae but just several months ago, their new CEO stated the Company’s new focus would be developing new products in such markets as “nutraceuticals”.

However, there is one high-profile private company left in this space that hasn’t failed. Joule, under the guidance of synthetic biology pioneer George Church, has patented an incredible organism that secretes hydrocarbon fuel continuously when exposed to sunlight in a process similar to sweating. Joule just closed another round of funding last month of $40 million made by existing investors, including Flagship Ventures, bringing the Company’s total funding to $200 million raised to date.

Apparently, the original value proposition hasn’t panned out yet for these three stocks but is there any value left to be salvaged here? Do you think SZYM, AMRS, or GEVO still have potential for synthetic biology investors?

If you pay more than $4.95 a trade, you're paying too much. Ally Invest is one of the lowest-fee brokers around so you spend less money on transaction fees and more on stocks. With more than 30 trades a quarter it drops even lower to $3.95 a trade. Open an account and begin trading today.

  • Stuart

    Care to explain this comment about Solazyme: ‘Solazyme has incurred massive debt recently to fund their ever increasing costs of operations.’ ?

    SZYM is actually in a pretty good cash vs debt position and has been reducing it’s expenses in recent quarters.

    • Nanalyze

      Thank you for the comment Stuart. The statement is referring to the below numbers for Solazyme taken from Google Finance. These seem like very high G&A expenses as a percentage of sales.

      General/Admin Expenses
      2011 – $41 million
      2012 – $58 million
      2013 – $63 million
      2014 – $90 million

      Long Term Debt
      2011 – $15 million
      2012 – $8 million
      2013 – $88 million
      2014 – $200 million

Subscribe to the Nanalyze Weekly Digest

Subscribe to our Nanalyze Weekly Digest to receive a summary of all articles every week.

We’ll never use your email for anything other than sending you great articles about investing in disruptive technologies.

  • This field is for validation purposes and should be left unchanged.

10 Shares
Tweet
Share1
Share9
Reddit
+1
Buffer