Santamyris’ sustainable Christmas, good for investors too?

This week, news arrived from Amyris that they have purchased the Glycotech facility in Leland, North Carolina where, since 2011, they have been on a contract basis converting their farnesene into squalane for the cosmetic markets. Total purchase price for the small manufacturer was $4.35M — a good deal for a manufacturing site with more than $20M in assets on the books.

In the realm of Amyris’s broad product portfolio, the 30-carbon squalane hasn’t received gobs of attention as it’s one of those small-volume, high-margin molecules too innumerable to remember; it’s the molecule behind Amyris’ Neossance squalane, and when you think of it, just think for now about “moisturizer”.

That squalane market

The global market for squalane is under $150M and has been falling, precisely for the reason that Amyris’ prospects are bight within: squalene has been made primarily from shark liver oil, it takes the livers of 3,000 sharks to produce a ton of it, and it’s smelly and unstable until converted into the hydrogenated squalane. There’s been a growing uproar over the annual shark kill volume, which has grown into the millions. Too high a price for beauty, many have concluded.

Along came plant-based alternatives — primarily olive oil. (Rice has been used as well, but the purity is puerile). But plant oil prices are notoriously volatile and the yields are on the low side. Just 0.004% of olive oil falls into the squalane category. So, at the high-end of yield, it takes around 70 acres of olives to produce a ton of squalane. That means you have to run an awful lot of oil through a separation process to recover the squalane, and the by-products could include powerful irritants that required costly removal steps.

So entered Amyris into the fray, with a two-step process via synthetic biology to manufacture squalane from high-yield cane sugar. It starts with production of farnesene from yeast, then chemical conversion to squalane. Accordingly, Amyris at last glance had 450 tonnes or around 20 percent of the global trade in squalane, and there’s a nice uplift from the underlying price of sugar even at today’s 19 cent prices.

What can you make with it?

Centerchem maintains a list, which includes: Day Cream, Night cream, daily moisturizer, body lotion, lip balm, skin lightener, protective cream, rejuvenating cream, after shave lotion, and veiling cream.

In other words, whether it’s protection, repair, or concealing you have in mind, Neossance’s your ticket. The complete list is here with the formulations, too. 

So what’s the problem, chief?

You need a lot of sugar to make a ton of squalane. The yields on farnesane are in the 28% range, and you use hydrogen in the conversion process to squalane, so margins are good but they are not off-the-chart by any means.

Here comes the brand

Now, take a moisturizer like The Revitalizer. And you’ll notice it retails around $58 for a 50 ml bottle. Think around $1 million per metric ton.

That’s why everyone likes the cosmetics business. It’s the biggest Get Out of Jail Free card ever invented for a biotechnology company working its way down the cost curve. You hardly have to hit the production yields of uranium to make cosmetics work as a business application.

Cosmetics forgive everything, and everyone. It’s like Lourdes, where the miracles happen.

Accordingly, here arrived Biossance, “the science of sustainable beauty through biotechnology” which in turn is associated by Amyris with “we commit to making effective products that restore your biological beauty and omit ingredients that are harmful to you or the planet.”

And you may have seen the relentless marketing effort aimed at ELLE, Brit + Co, InStyle, Darling and even the the Wall Street Journal and People. And a tempting holiday list with 10 gifts under $25.  Amyris will be looking into its Christmas stocking to see how it does.

Selling self-image

Of course, the question becomes brand, and brand marketing, and brand breakthrough. Because you’re not really selling squalane any more, you’re selling beauty and self-image. Not that companies who do IPOs and road shows don’t know a thing or two about selling a story — after all, early-stage companies are story stocks.

But when you are trying to rake in $58 for a 50 ml bottle of moisturizer, you’re in a different product world even if the margins are tempting, even if it feels relatively easy to build a website, an e-commerce engine, and a beautiful set of products shots and brochures. All of which Amyris has done.

One of these days, Amyris might be asking itself if it is a components company or a company about design, innovation and brand. A discussion that Apple went through early in tis history, and opted for the latter. The components are manufactured more or less in the Far East by suppliers engaged in cut-throat competition, and beautiful Jony Ive boxes and product shaping is not exactly int he picture there.

Amyris goes back and forth. Sometimes it is Apple, and uses contract manufacturing to make the product. Sometimes it is the back-end scale-up partner for alluring microbes under development by the likes of Arzeda and Gingko BioWorks. Sometimes, it is positioning itself as an engine of allure, as with Biossance.

So, we’ll all look at the Christmas results and wonder — exacrly where will Amyris head with all the opportunities it has.

Will there be an answer regarding the Amyrinthine future coming down the chimney on Christmas eve? We’ll see.

Meanwhile, enjoy those $25 stocking stuffers, readers. Buy one or two for your loved ones — I’ll expect they’ll be glad you did, and you’ll be glad too for the contribution you’ve made towards a better world, with better skin tone in it.