Yet Another Value Podcast - Randy Baron from Pinnacle Associates discusses Amyris's lead in synthetic biology

Episode Date: June 23, 2021

Randy Baron, Portfolio Manager at Pinnacle Associates, gives an overview of the Synthetic Biology space. Randy thinks "the 21st century is going to be a century of biology," and he discusses all the ways synthetic biology can change the world and why he thinks Amyris (AMRS) could be the biggest winner given their head start in the space.Randy's Barron's write up on Synthetic Biology: https://www.barrons.com/articles/an-investors-guide-to-the-promise-of-synthetic-biology-51623275429My thread with AMRS management quotes: https://twitter.com/AndrewRangeley/status/1407372814466826240 Chapters0:00 Intro1:00 Synthetic Biology Overview9:00 Amyris's founding treating malaria12:30 Squalene oil overview19:00 What's the barrier to entry for synthetic biology?23:45 Why is scaling so hard in synthetic biology?25:05 Comping AMRS to ZY (Zymergen)31:45 Discussing the value of AMRS's scaled molecules and pipeline35:00 AMRS's consumer brands37:20 Is having consumer brands and a research arm too good to be true?39:20 How AMRS could improve vaccines44:55 AMRS's zero calorie product, Purecane49:50 Quantifying the value of AMRS's different parts (SOTP)1:01:00 Discussing management and John Doerr's involvement1:06:00 How do you evaluate AMRS's CEO?1:11:45 Final thoughts

All right. Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm excited to have Randy Barron. Randy's a portfolio manager at Pinnacle Associates. Randy, how's it going? Good, Andrew. How are you? I'm doing good. Let me start this podcast the way to do every podcast. And that's by pitching you, my guest. I mean, you and I talked for 20 minutes before this. People are going to get on this real quick. But we actually met a couple weeks ago talking about meme stocks and through some other mutual friends and stuff. And I think I kind of offhand mentioned my introsynthetic biologist. and it turned out I was talking to a man who had just written the investor's guide to investing in synthetic biology and Barron's. You've had a huge position in the stock we're kind of going to focus on Amherst today. The ticker there is AMRS. But you've just got a depth of knowledge in the space that's outstanding. It's a complicated space. I've done 24 to 48 hours on it. So I know enough to be dangerous only to myself, but I'm just so excited for this. And I think our listeners are going to love this. So that out the way, why don't we, you know, we We want to talk about amorous, but the whole sector, synthetic biology, I think many people,

unless you've got a real background here, they're not going to know what it is. So maybe you could just start off by talking about what is synthetic biology and then we can kind of go into the key players here. Sure. If you don't mind, I think we should do it like a cocktail party because it wasn't synthetic biology that was interesting to you as much as it was a ginkgo specifically. That is true. And so this is like the thing where people come at you, you're talking a cocktail party and like

you're known for something like, oh, we really like the sexy new. car and all the stuff. And the conversation I had with you was, well, that's great. But there's also a way to do it from a value perspective with growth, like cash flow and all of that. I came to do a sizzle and you're like, hey, why go for the sizzle when you can go for the stake, which is, you know, a quarter of the valuation and actually has revenue and cash flow, but please go on. Well, and I'm chuckling because everyone that follows this knows your work on discovery and like the in-depth, you know, SPAC work. And like, there it is. Like, yet again, we get sucked into the and I think fundamentally that's an issue in our industry that people like you and I then spend

time conversing and digging through. Let me take a step back and talk a little bit about biology at the most fundamental level because I do think the title of synthetic biology scares people off and it shouldn't necessarily. So synthetic biology is a really cute way of just describing next generation, kind of the evolution, right? Like biology and this is what I wrote in that Barron's piece that you reference, and you can probably tag it in your show notes. It'll be in the description for anybody who wants to see. You know, this is the first paragraph, you know, and by the way, going through a Barron's copy editing process about talking, because I think the first sentence was something like for four billion years, you know, genes begat genes.

But like the who versus that, like, you know, Andrew Begat, Randy. Like, they were really clear that didn't want me to make an Old Testament reference, which I thought was like the poetry of the whole thing. The point is biology has existed for a long time. And biology is a way of structuring matter at a molecular scale by slotting each atom into its needful place, right? It's a way of controlling flows of energy on every scale from, you know, that of the smallest living cell to that of the whole living planet. And this is kind of my last sentence on this, but it's like my poetic way of thinking about it. Biology is a way of growing order and surprise in a universe that in all other resources.

specs tends towards entropic stagnation, right? So biology is the fundamental building blocks of what we're doing. And this is nothing new. How it's evolving is new, but you got to think about human nature has interacted with the world for a long time. We've had really impactful transformations. I mean, the most recent, there's like three great ones and working backwards, like fossil fuels, right? Like there's prosperity and progress, but a lot of negative things that came from that too. Before that, you had the globalization of the world's ecosystems

after the European conquest of the Americas. And of course, initially, and this is the very first thing I always come up with people say, well, isn't this GMO? Yeah, synthetic biology is the definition of GMO. Let's not bury the lead because the very first thing we did from a biological perspective is the domestication of crops and animals

at the dawn of the age of agriculture. So that's kind of a really high-level overview of what's changed. Now, what happened in the last 20 years, and the space has been growing for pretty much the last two decades, the company we're going to talk about today. Amherness was started in 2003, right? So that kind of gives a bound, Ginko, 2008. So, you know, 2015 years, you had AI, you had CRISPR,

you had all the different parts of big data. which we're able to come in and be applied to what used to take evolution and generations to make a change. The reason that matters is you can do things quicker. It's an iterative process. And most synthetic biology today, there's different pathways to do it. There's E. coli. There's yeast. You can do it through mammals, mammalian, they call it. But the idea is we create a host. And the way I always think about it is like if you're brewing beer, right? This is like small batch production. You've got a bat.

This is not Henry Ford on the line that we're just pushing things through. Like the hardest part of this, the secret sauce is not actually the biology, although that's hard. It's the production and more importantly, the scale. So the question becomes, and you know I've talked about this, how do you change from a science project, meaning just something in the lab? but it's a great idea to something that actually has volume and that you can commercialize at real scale. I'll pause there, but that's kind of an overview of the history. Let me ask a question. This analogy just came to me as you're talking, but if I remember correctly,

like, you know, you and I can go to the store and we can get delicious tasting yogurt, right? And a lot of this yogurt, they don't even have to add tons of sugar into it and anything. And the reason you can do that is there are these yogurt processors that have been growing yogurt cultures and stuff and evolving them for, you know, decades at this point. And they just kind of evolve them to the point where they have really tasty yogurt cultures. And am I kind of right in my head to think, synthetic bio, what it does, it skips those decades of evolution. And they kind of just choose a culture or a protein that, no, so I'm wrong on that.

Okay, go ahead. It doesn't. No, it's just, I want to catch that word is we're not skipping evolution. We're accelerating. So you've got to think of this as an iterative process. We're still doing, in your example, the yogurt, you know, yeast bacteria, we're still kind of stacking on top and ever, but we're now doing it so fast. I mean, the example of amorous is things that used to take them, you know, several years and $70 million, they can now do in less than a year,

from, by the way, idea to commercial scale and $1 million. So it's just up, you got to think of it of a complex of like biology is the backbone for all of this, but we're overlaying on top of it tech and big data and AI and all the things that did not exist. even a decade ago in many ways, and this, my wife kind of rolls her eyes when I say it this way, the space in general today is the same as the internet in 1993. Yeah. And by the way, I don't know who becomes pets.com and who becomes Amazon, but I'm pretty sure if you own the foundational player in the space, hint, amorous, you're going to have some good

position years out. The way that I kind of talk about to clients, I always get this question of, oh, is it, you know, the stock has run and, you know, I think it was a $2 stock in November and it hit 22 earlier this year. It's roughly 16 today. Oh, is it too late? Did we miss the run? Like, if I'm right about this stock, and by the way, we're not going to know for eight to 10 years, you buy it in your kids account, avoid the wealth transfer issue altogether. And then I don't care if you buy it at 10 or 15 or 20 because we're talking about something that has an effective poison pill, which we'll get into the specifics, which is John Doors' ownership, this is the richest venture

capitalist in history, no one's going to buy this from us. It is just going to compound over time. And we have such a head start against the rest of the industry, which is populated by a lot of Amherst alums, ironically, that you can make an argument that were somewhere between five and eight years ahead of where everyone else is. Yeah, the argument. And this is why I was initially interest in Ginko is because people had pitched it to me as, hey, yes, the valuation is expensive and stuff, but you're buying Amazon Web Services, like, you know, in year one or two. And as you're saying, Ambers, if this is Amazon Web Services, yes, the stock, and again, you were on it at two, yes, the stock's gone from two to 15 or 20.

But, you know, when Amazon Web Services came out and Amazon went from 100 to 300, well, you know, it was on its way to 3,000 and probably more. Not to be too basic here, but the company tells a great story about their founding with fighting malaria and Bill Gates. Maybe you could just tell that story, because I think it shows the advantages of synthetic biology as well. And it's a pretty interesting story. So rough numbers here. But I'm going to tie it. And by the way, I want to come back to that AWS metaphor you just talked about because Amazon makes its money. And so we just make a note because I want to, when we get to the end of

the story, I think there's a really, really specific AWS link with Amheras. So just don't let me forget that. But company started 20 years ago, 18 years ago, 2003. This is a UC Berkeley lab experiment. that Bill and Melinda Gates, to your point, like Bill Gates, sometimes I think he's too much of an engineer when you kind of hear the way that he thinks about the world. Like, for example, his first solution was a very engineering solution to, like, resolve the issue of malaria to exterminate all the mosquitoes.

Like, that is a super, like, computer science solution, but maybe not so great for the world's ecosystem. I'm just going to make that argument. So the foundation, Bill and the Gates came in, I think, 2005, 2006, to Amherst and said, want you to develop tech that's capable of creating microbial strains that produce artemisonic acid, which is basically the precursor of artemisinin, which is the antimilarial drug. And Amaris pulls that off.

By the way, and this is an important just asterisk, using E. coli. And the reason I say that is later when we talk about the specifics is these guys are known for yeast. And I want to also, as we get into, give a little overlay of the space. because there's the hardware and software sides of SynBio, but I'll come back to that in a second. And they made a decision because in like 2010, 2011, you know, oil was $100 a barrel.

And you have to think that all of these guys in synthetic biologists is not specific to Amheris. They have a thought process that they're really a community living up to ideals of openness and public service. Things that we would almost call SRI, although they don't do it because it's ESG or SRI is just part of who they're just good people fundamentally. And they said, what can we do using this really cool science that we've developed to help save

the world? And so they pivoted. By the way, every SYNBio company this time did. Amherst is one of the only ones that survived the bankruptcy process, which gets into a lot of why it was hairy for a long time. And they said, we are going to solve the problem of fossil fuels. And they did. They made petroleum.

Now, the problem of petroleum is anyone that goes to Costco knows and you're, you know, doing this, this is a gross volume business that you're selling for pennies one way or the other. When you produce that small scale, back to we talked about how this is produced kind of almost like small batch production, you can't make money at scale, especially when oil falls to $30 a barrel. Yep. So part of the reason that we're just hearing about synthetic biology more broadly today is that for, five years, the space was in the wilderness digging out of this space. Amherous through that process was able to develop kind of as a coroller in the carbon chain, something called squalane. And squalane, the way I describe it, is the beginning of the amorous story. If you don't mind, I'll just kind of run through it. Yes, please, go ahead. I'm learning so much. So squalane

is the best, I'm going to teach you a word, emoliant in the planet. It's the best moisturizer. Okay. And the women of Japan have known about squelaine for hundreds of years. And the dirty little secret of the beauty industry. This is sounding like snake oil salesman right here. Oh, no, welcome. Welcome to my world, right?

No one wants to believe it. But squalane, if you go to Sephora and you look at the products, pick up L'Orealis, St. Lauder, Shoshito, squalane on all the high-end products is there. but it's only there in three, five, six, seven percent at most. The reason is the way that you harvested squalane historically was twofold. One, you could do it from olives, but it's not very stable, has no shelf life. So that's not at a commercial scale viable. Or the more prevalent way is via the livers of sharks.

So the problem with shark A, shark B, shark C, in addition to destroying, again, the ocean's ecosystem. that small little thing, yeah, that little thing, although they're terrifying, but like they have like squealing to this stuff when I was a kid, I'd be like when you rub your nose, that's the oil. Am I remembering that correctly? No, that's another S word. That's, I just heard that word to the other day. That's the oil that your skin secretes. No, this is, this is something that goes into the skin to keep moisture locked in, basically. But the reason shark A, shark B, sharks here are different. Just they're just different sharks. So you can never get enough of a compound to be consistent to scale it.

Well, Amherst came in and said, you know what, we can do this. And so through squalane, which they produce now at scale, they are essentially the backbone of the beauty industry where they supply essentially the world squelan. Like they can do it for so much cheaper than harvesting sharks that why would you bother going to deal with inconsistencies because it's pure. And then on the commercial side, and this kind of begins. So Amaris has a couple different verticals. One is consumer.

That's a path they've gone in. So if you go to Sephora, the top brand is Drunk Elephant, which got sold for 8X revenue to a Japanese company, I think, two years ago. The fast is growing. And the way you can tell is it's the very back of the Sephora stores. It's the anchor, right? It's a brand called Biosan. And Biosan's, the reason it is growing so fast is that no Biosan's product has less than 50,

5-0% squalate, which means it's essentially the cleanest and best beauty product for your skin. And the example I always give is when you and I were growing up, like talcum powder was still a thing. You would never put talc on your kids today, given the cancer scares and everything. And even like vitamins, you think about vitamins are made of. They're basically made of petroleum. Like the things that we put into our body, I think we as a culture are much more cognizant of it than we were even five or 10 years ago. And so there's a massive appeal. Biosan's on a standalone basis did $52 million in revenue last year.

They're saying it's $100 million this year. It's June and we're recording this. We're growing at $3.X year on year. So I would argue that $100 million is sustainable. But part of the reason that I like the Amra story is that you can do some of the parts. And biosan standalone today is probably worth round numbers, $1.2 billion going to $1.1.1.1. $1.5 billion or $2 billion in the next year or two. And I'm going to have you do with some of the parts of the end.

But let me dive into a little bit of squailing because I think it would help illustrate the story. So, you know, if I go get and people on YouTube might be able to tell I'm not exactly slathering myself with skincare products. But, you know, if I go buy Laurel's product or whatever the drunk elephant, whatever a competing skincare product is, that has squealing. Is it's really likely that that squaline has come from amorous? A drunk elephant, drunk elephant, I don't know, but the other two.

And the great example, and this is part of why this is such an interesting SRI story as well is when L'Oreal goes down to Brazil. Because by the way, Amherst uses yeast and sugar cane, that's their propant, to do its molecules, fine. So when L'Oreal came down and said, okay, where's our land? Like, we need to make sure before we kind of sign on with you that we have this, like, dedicated, like, we're going to have supply, right? We can't risk that. And it was an acre of land. they couldn't believe how small, meaning how efficient the production cycle is. And so in addition to the fact that Amherst is saving the lives of two million sharks per year,

which on its own would be SRI, then you add into the fact that like, you know, someone once there was a gold miner I was looking at that said to me, he's like everyone gets offended at mining, but if you actually look at like the impact on the earth, that's a postage stamp because it's a mine versus like agriculture, you know, all the water and nitrates and everything we use. It's like, and, and it's a different conversation, but, you know, SRI is one of these things that there is no S&P or Moody's for SRI. There's 300 different rating systems. And I owned at one point, a solar company in India.

And I do, by the way, global, we should have said that global small cap. I look for like disruptive ideas anywhere in the globe. I don't care where you're, I just look for really interesting ideas. And the SRI rating of a solar company, this is Azare, is a ticker, is like 24 out of 100. And you get to talking about, like, how is that possible? And their answer is, well, yeah. No, their answer is we are a small company. We're not hiring a lawyer just to do the paperwork to make the SRI payment.

So when you look at like the Barron's top 100, how is Tiffany's top 10? Like, oh, because you don't use blood diamonds? That's like circular logic. Best Buy, top five. Like, these are not companies helping the world. Like, I'm sure they're great companies. I'm not demeaning them. But like, there's a lot of companies out there just because they're smaller and up

and coming. Amherst is a great example. Amherst has pretty mediocre. SRI score, but again, that's not, their North Star, their North Star is not, oh, we need to be SRI. Their North Star is, are we helping the world? Right. And they actually, and SRI for those listening, a little less used than ESG, but socially responsible investing is what it is. But so let's start just squailing. So, I mean, you can already see the advantages for what they're doing, right? They do it. They use only one acre. You're not killing two million sharks a year.

It's a much more consistent product. But I guess my first thing, and this will be really helpful as we think about the competitors is, you know, these guys are doing it on one acres of land, right? They're taking yeast and sugar cane, if I remember correctly. They're putting it into a big bat and they're using that to make the squailing. I guess my first thought is, okay, that's great. They're better than the competitors, they're better than the alternatives, killing all these sharks, but why couldn't you and I, probably not you and I, but why couldn't, you know, six PhDs go get some yeast, get some sugar cane, spend two years and figure out how to replicate this product because they are, they are creating a commodity input, right? They're just doing it in a

cheaper and better way than the alternatives. But why can't somebody else figure out the same way to do this in the same cheap, better way? And then you've just got a commodity fight. For sure. And there's a couple of things that. The first is you just touched on something that I want to stress. The whole role of amorous here is for clean chemistry. And I don't want to kind of downplay the fact that clean chemistry matters and is going to matter more and more in the world. You're absolutely right. Others could come in and do it. This is a carbon chain. Yeah, there's some IP protection, but it's not enough that no one's going to enter the moat. The moat here is actually not in making the broth, which any, you know, you can make the broth

that skip. It's in the refining and the downstream and what others call CMO, but basically manufacturing. So to give you some sense of numbers, because I think this is important, let's just use the cannabinoid example. This is another vertical that Amaris is in. Full disclosure, you're under a lawsuit with a company called Levant, which should have been resolved last November and was not. We can get into all of that. But just I think the numbers are really instructive. So if you look at the cannabinoid world today, why is CBD so prevalent? CBD being the thing that when we go to the supermarket and you need it like what I grew up as Ben Gay, that's like not as popular. Now you get like really natural things that you kind of rub into your body. Because of the

Farm Act and because of the prevalence of hemp and the aggregate supply curve that shipped it, CBD is really, really prevalent. It's easy to come across. The problem with CBD is, A, it's FDA regulated, which is a whole issue. And B, because of the concern on THC, which is a psychotropic part of the cannabinoid plant, companies like Charlotte's Web, if you actually were to look at what's on the shelf and analyze the CBD potion, more often than not, by the time it gets into your topical solution, it's the minimis, the amount of CBD because they're worried about getting the federale's on their case and having too much THAAT above a certain threshold, you're out of business. So it's not worth the risk. So there are other parts of a cannabinoid plant, which are

even more effective. CBG, for example, and CBN, which is like even a more mother's molecule, But CBG, which a lot of synthetic biology players, including Ginko with Creo and, sorry, Ginko with Kronos and then Creo ingredients is a synthetic biology player just doing CBG and CBGA, which is the asset part of it. If you look at kind of the space, the reason CBG had never exceeded, and as recently as November, when Raymond James, they're kind of, there's two analysts, Ruho and Michael, shout out to my boys up in Canada, did a basically a big flow pie chart of who was far, along and there were these big circles and all that stuff. When you talked about CBG, as recently six months ago, they would say, oh, there's no CBG market because there's no volume. Well, I can tell you today that market has changed. So just rough numbers. You can sell CBD today pretty cheap because there's such a glut of it. But to produce it in a farm cost you between $1,500 and $1,500 a kilo. So, CBG, which is between 5 and 10x, more effective than CBD, cost you $60, $300 a kilo, and CBN, which is, you know, the rarest.

So that's just the outlier, $14,000 a kilo. Amorous, when it starts making CBG at scale, once its factory goes online this December, is going to be producing CBG at roughly $500 a kilo. them. So my point is we are at a point, yeah, it's a commodity, but if you can't produce it at scale to transform an industry, what does it really matter? So I have two follow-up questions here. And that is super interesting. So one, I think you mentioned scale several times. And Emirates, in their slides, they have a, the science is hard is a direct quote. And they say, scaling up from lab to pilot to industrial scale is harder. And that's the real moat. That's the real thing, as you are saying. I think they say, hey, it's a $1 billion-fold increase to go from

lab project to kind of commercial production. So what makes scaling up so difficult? It's just iterative, and it takes a lot of time, and it's a really specialized production pathway. Again, while this is biology and maybe advanced biology is better term than synthetic biology, you're doing things that if you have an iota of mistake along the way at commercial scale, the whole product is ruined. So you basically start scaling up incrementally, and then you get to a point where you can try and do it. But you need specialists that do it.

And part of the negative of being an amorous shareholder for a long time is I got to see a lot of mistakes. When you look at amorous, right, I mean, it's the truth. But when you look at amorous versus the other players in the space, it has a lot more shares. It had more debt. The balance sheet wasn't as good, right? Because it had to survive.

And it did what it had to. Like that old million dialogue, the strong do what they can, the weak, do what they must. Like, they just survived, right? Their average cost of debt was 14%. CBI Heights, like this toxic converts. Like, it was just every kind of like flashing warning light. By the way, that's all cleaned up now so we can move past it. But they went through the trenches to be able to say we can scale up.

And I think part of what we're going to have a real reckoning in the space is when others realize just how hard it is. So let me give you an example. And I wrote this down because Zimerjigs ZY, ZY, a big success this year, IPO. This is a company that founded by an Amherst alum, and you'll start realizing how tied in Amherst is to everything came public with essentially one product that's not even commercial scale yet. So it's called Highline, and it's a cell phone screen that's going to make. Oh, I was just going to, this is a $5 billion company, if I'm looking at my numbers correctly. The enterprise value today of Zimurgen is comparable, if not above, Amherst's.

Zimurgen, 15 million in revenue, Amherst, 400 million revenue this year. So, like, it's, I mind you, there's some asset sales in Amherst and we'll get into the model, but like, it's glaring that difference. And so when you talk to Zimurgen, Zy, and you say, okay, well, why is this? And I think I should pause there to just say, in this space, there's like the hard players like twist bioscience, which twist is big, by the way, Kathy Wood is in like all of these other than Amherst. So it's very like the Kathy Wood meme stocks. I think she owns 8% of twist. Twist's kind of claim to fame is they're going to store, you mentioned AWS, they're

going to store data eventually in the cell. So essentially get rid of the data center. Like let's just store things in a cellular level and just be able to scale. That's the hardware side. Then there's, you know, like the apps that kind of build on it. Like I mentioned creon ingredients, doing just CBG and this one thing. And then there's three software guys, Zimergen, Ginkgo, and Amherst. And I say software because essentially they're doing a platform. They're someone that you can come to them and say, hey, I want to make vanilla or I want to make a drug. Or in the case of, you know, Ginkgo, I want to do something with agriculture.

And then they find a solution and they can kind of scale it up. But what I find really funny about this is like Ginko and all of Jason Kelly's advertisements for the SPAC, which is coming soon. He talks about, oh, we have, you know, this huge facility in Boston and all the robots. And, like, that's wonderful. And I know that that sells, like, it's sizzle to what your comment was earlier. But it's not actually the work. So here's some things I wrote down after a conversation with Zimurgeon. Zimurgeon is quick to point out three things.

They have a multi-organism platform and database and aren't to be. dependent on one route pathway tree with yeast, like Amherst, this is a quote, two, their customers have sold products worth over $1.3 billion based on their strains. And so they have experience with scaling. And then three, they think going to the end customer is the right approach. And again, Zimrich is doing it with cell phones and screens. Well, what I would argue against that is, if you're using products you've sold, like end products as your P&L, like I don't even know how it is, but like you're probably not very good at business that you're selling 1.3 billion, but only recognizing 15 million revenue. Yeah. Right? Like that's not actually a feather in your

cap. If I were to use the same comparable for Amaris, it works out to they're doing $9 billion for their partners. And if I, by the way, excluding royalties, milestones, everything else, generating $90 million for Amherst. So, you know, the other thing that Zimurgeon said, which was kind of shocking, is that they only have CMO manufacturing capacity. capacity into 21. In other words, they don't have any CMO lined up for next year. And therein lies the glaring mistake that these companies are going to make, which is they said, oh, it's mass surplus. We can kind of solve it. It's not as easy as you think. If you look at the purpose of novel and engineered organisms, it's a very niche thing. And so Amaris, what they're doing

is building a plant in Brazil where they're going to essentially combine what I would call upstream and downstream in one location, get rid of transport, they're going to have 15 points improvement to their gross margin from that and control their destiny. It's as simple as that. And none of these other guys, because they haven't, again, gone through the mud and spent the money when we talk about why is Amheris five years ahead, whatever the number is six years ahead, A, it's because we have revenue, they don't. This can take you some time.

I mean, Ginko is a, and by the way, you know, as you know, SPACs can, anyone can make a PowerPoint so they can actually put out a 2025 number, which the SEC would never allow. in a prospectus. So, okay, Ginko is saying $1.1.1 billion. Well, Amherst in 25 is at $1.5 billion of revenue, right? By the way, 1.2 of that's consumer. So it's like just growing organically. And so I think the Ginkos of the world, the Zimrichens of the world, are still science

projects. I think everyone will succeed. I just don't think it's going to be as easy as they frame the reference to be. And by the way, all the cell site analysts that are flocking to this, and you know, I mentioned this before, you know, they're giving, I've never seen this in my whole career, 25 years. They're giving to Zimurgeon 80% of a TAM for cell phone screens they're going to replace. Like, that just seems not plausible, right? I mean, I've seen it one other place, and that's the electric vehicle SPACs where all of them said they were going to take 125% of the TAM in four or five

years. Right. And so it's, but, but again, I'm not even saying it's back. I'm saying like the analysts, and why. I hear you. Like the analysts that cover this space are mostly biotech guys. Like I think of Tyco at JP Morgan and Doug Shankill at Cowan. Like these are really, really smart guys in their vertical, right? Like Doug and I will have talk about Medicare coverage of innovative technology, M-Sit, which is totally changing the FDA process and accelerating payment and amazing things for companies like Rinalytics.

But they don't come from the boots on the ground chemical side. So there's only one analyst. He kind of has a seminal piece that I think in this. space. There's Harsha, who's HSBC analyst out of London. He's the only chemical guy that came here. And he covers DSM, largest chemical producer in Europe, Jibidon, for me, he's like all these other players. And he came to it after a 20 year career by saying, hey, these guys, these chemical guys, are coming to me and saying, this is the future. Yep. Like the things that Amherst are doing. And by the way, Amherst does, DSM is on Amherst's board.

They have a lot of work with. Yeah. Right. So like Amherst made a decision that green is important, meaning the environment, but green meaning money is also important as well. And that kind of partnership is what's going to get them through. Perfect. So let me talk a little bit more about Amherst.

So Amherst has 13 molecule scaled and a scaled molecule means that's a molecule ready for commercialization. They can put it into tons of products and everything. Am I thinking about that correctly? Correct. And they have, I think, 24 in the pipeline. Yes, yeah, I think that's right. So when you think about the pace, like, maybe I'm not thinking about this correctly,

but those 13 molecules, like, what revenue do you think these 13 molecules can generate? And then with 24 in the pipeline, like, how big are they? And it's probably a power law where some of the molecules are 10 million and maybe some are 100 million. But how do you kind of think about those financials there? I think the range that you're giving maybe a little low, but it's pretty good, which is some will be more successful than them. So forget the exact dollar amounts, but some will be like vanilla.

Like these guys, which they sold some of it to DSM, but they're going to make 500 tons of vanilla. And there's issues there because that's Madagascar's whole economy. But there were droughts in Madagascar. So the price of vanilla bean was up 4x. So a customer comes to Amherst and says, hey, can you guys solve the problem? They do a lot cheaper and a lot better for the world. But then phase it in so as not to disrupt this ecosystem, like I mentioned at the outset,

these SinBio guys are really cognizant of what their impact is. going to be. I think the important thing, which has surprised me in this, because you know, you and I model companies for a living, and I always assume some failure rate, right? You always have to assume, well, something's not going to work. In the last 10 years, Amherst has not had a molecule, not go commercial scale. 100% success rate. And that's like, they don't ever stress that, but I think it's really important for your listeners and viewers to be aware of, that these guys are really good at what they do. We say molecules and the first thing I think of,

obviously it's different is, you know, FDA drugs because those are molecules and the hit rate on those is, you know, 10% maybe, maybe. I mean, from kind of, you know, pre-phase one all the way it's approval, it's very small. So 100% just seems crazy. And I get, I think you could correct me if wrong. People literally come to them, as you said with vanilla. They come and say, hey, our input costs have gone up 4x,

you know, crazy volatility. We're having trouble, sourcing supply. So they know when they develop a molecule, there's demand on the back end. It's just still surprising that they're so successful generating these. Yeah. And some of the other molecules are like petuli, which is a framer and flagrins component. There's something from a whale blubber, all things that go in perfumes. And like, so an FNF flavor and fragrance customer will come to them and say, hey, listen, can you do this?

And then they'll go out and they'll start that. The cannabinoids was the same thing. Levon came to them and said, hey, can you do this? And a year later they did. And then there was a whole disagreement. that went into. What's really interesting is that because Amherst has had such success in the consumer channel, it kind of gets pegged as only a CPG play, which it's not. As I mentioned at the very outset, they did the malaria drug with E. coli. So they can do other things than yeast.

It's just, by the way, if you're really good at making money in something, why wouldn't you? And by the way, when you talk to the cannabinoid guys who are doing CBG, they can't touch yeast. When you talk about a moat, they say, and by the way, they didn't even know my involvement with Amaris. I said amores has yeast locked up as a pathway. We're not getting involved. We're not going to touch it. It's going to be some litigation issue down the road that we don't need to be involved in. And so what I find really fascinating is we talk about biosons. They had two brands. They had biosons and a spinoff for kids, basically. The idea being that like millennial moms, when they have kids, want to put good things on their babies. Yep. And so it's called pipette.

It's available at Best Buy and, you know, baby bed bath beyond all these places. It's hard get interesting going to the pandemic rough numbers amrists consumer products we're in like 2,000 storefronts coming out of it they're in 4,000 plus and now they can actually negotiate exactly the terms of where they want to be because of the success in their molecules others want to be with them right so I mentioned I think that they're going to have seven brands by the end of this year so like what's in consumer we're talking just consumer just squailing base and how are you going to evolve that? Well, one of them is with Jonathan Van Ness,

who's got the very flowing hair from the Netflix, queer eye for the straight guy, the neuteration. Well, men shampoo is something that needs a lot of work. You know, I learned this weekend that there's, like, sulfides in most shampoos, and what that actually is is the same thing that goes in, the non-sulfide stuff goes into car wash. Like, it's car wash.

Like, again, to your point earlier, we don't look like we use squatlin and not, but like I also don't want to look. like I'm tarring my face with with stuff. They have another product that's doing color cosmetics. They have another one. Actually, the one that I think is going to be the next billion dollar brand is they're taking squay lane as a delivery agent.

They're putting CPG on top of it, the cannabinoid, and they are going to do an acne treatment. And you think about this, that's called Teresana. The way most acne is treated today, whether it's over-the-counter or or or not is it's essentially a chemical peel, right? Like you basically strip it away. Yeah. What if I told you that you can actually help your skin while curing it?

They're finding it's two to three X better than most things in the marketplace. And I think the vanity of our culture is such that that's going to be, you know, a monster, monster brand. Let me push back on one thing here, right? Like everything we're saying sounds great. They've got great technology. They've got these great products. They're generating squirling.

It is surprising. I mean, I don't see many companies that develop this great technology and this that didn't go on to the brand side as well, right? And like Biosans, you just told me this is a $4 or $5 billion company. You think that's a billion-dollar-plus CPG brand and it could be even bigger than that. They're ruling all these global brands. And the brands sound great. But it is kind of weird, right? Like you're so good at this technology.

You're high-imped-use all this. And then you've also got this giant CPG brand. Like it almost seemed, it just seems like two good. to be true or like they're dividing their attention a little bit too much? Could you comment a little bit on that? I mean, you mentioned in your opening remarks that you spent, you know, 12 hours on this or whatever, you could spend 12 months. There are so many things that this company works on. It's, it's mind-boggling. I jokingly, you know, tell people I know. I said, you know, I started as a telecom cash flow guy. I never thought I'd be learning about cannabinoids and adjuvants for vaccines and

skin care. But it's really interesting, right? And you could make an argument that they should be two or three different companies, right? You could argue you'd sell the consumer brand and bring in a billion and a half. You should become the CMO. By the way, if the problem is that the rest of the industry can't scale, well, you have a solution in Brazil. Why don't you become the CMO or the Foxcon for this industry? Right. And there's an argument to be made because Amherst will build other plants. And that seems to be what Ginko is trying to do. Am I thinking about that, Yeah, but again, Ginko hasn't done it. I mean, to give you some sense of scale, we talked earlier about the dollar per kilo on cannabinoids. I didn't give you the volumes, but Amherst is doing it over 200,000, which does not exist. The trio, I mentioned that biosynthetic company that's doing only CBG is doing at 12,000 liters per volume. Ginko's at roughly 50,000. So like, Ginko will get there, but we're probably two to three years from that scale. And, um, Yeah, I think you're totally right.

It's mind-boggling. There's so many moving parts. We haven't even touched on adjuvants, which is something that squalane, by the way, shark-dry squalane. So when you get a shot, right, you get your flu shot. It's not all 100% RNA. It's probably 5% RNA and the rest is stuff. One of the stuff, a delivery agent, is called an adjuvant.

You probably never heard of it, but it's in every vaccine. And most adjuvants are either heavy metal aluminum or sharp. ARC-derived squalibing. Interesting. So Amherst signed an agreement with an IDRI, the infectious disease research institute to essentially do the flu shot. But we think, and this is just my speculation, they're also working on the second derivative of COVID vaccines because one of the issues I have, like, and by the way, I don't know. We're recording this on, what, June 22nd.

China just announced they're extending their lockdown or at least not letting people in another year. London has pushed back the reopening to July versus America, we are fully open, right? Like, we're businesses back. So I don't know what's right, but I do know, like, that Delta variant is super scary, right? 60, 80% more contagious. And, you know, I'm hearing anecdotes that the doctors in Mount Sinai in New York are wearing masks again at home because they don't want their kids to get. I think this is like, I'm not as convinced we're out of the woods as others. But, okay, by the way, I hope we are.

I hope I'm wrong. I feel the same way, by the way. I feel the same way. One of the issues I have with a global pandemic is, and I kind of think about, you think about like the terror axis, right? Like the terror axis was basically D.C., New York, London, Madrid, Middle East. Like, these were the places that were always targeted.

And so you go to a place like Buenos Aires, and it's beautiful. It's Paris without like any of the stress of like, oh, there's other issues here. And what about a place like Africa, which has no infrastructure to store a vaccine to be stored negative 94 degrees? Well, guess what? Amaris, which has a partnership with GSK, who there was a board member, by the way, on both GSK, she just stepped off and Amherst is for a long time.

I believe that in the second iteration of the COVID vaccination cycle, Amherst is going to have an adjuvant that will enable the A more RNA, probably, in other words, if you have a better adjuvant, you need less RNA in that individual dose, so RNA can go faster, can go further. Right. One of the issues we had was vaccine supply, but the other issue is stability. So instead of being stored in a refrigerator or freezer, negative 94 degrees, what if I can put it on the counter and it can sit there for three weeks until someone needs it? Like that, to me, is solving a real problem. By the way, zero dollars in any of our of our numbers, but there's a reason coming out of COVID. Like I think about, I think about this a lot. I don't have, and then we could do the cocktail party than I can't go before. But like, if I were to say to you, what's like, let's do it. Okay, if you don't mind Andy, we'll play the game. What's, like, the most economic or one of the most economic legacies of 2001? 2001, the dot-com crash?

Sure. And I like a lot of people default and say 9-11 because it's like, oh-ohor. I was not saying everything in 9-11. I mean, you know, when I think dot-com crash, I think international fiber laying the groundwork for the internet, when I think, when I think terror is, I'm not really sure what the, well, I would make an argument. And this, again, this is why it's a cocktail party. I love this kind of conversation. you can make an argument it's the year that China gets admitted to the WTO and then what that brings under the Trump administration 15, 20 years later. By the way, same question, 2008. What's

the economic legacy of 2008 15 years later? Oh, man. Slow recovery probably leads to Trump in 2016 coming out of it, but probably all the bank regulations, right? Right. So people talk about the housing crisis. People talk about QE, right? I would make an argument 15 years. years later, the most impactful thing is the introduction of the iPhone that year. That's a great point. Yeah. Right? So my point is, I don't know sitting here today in 2021 what the real legacy of COVID's going to be 20 years now, 15 years from now, 10 years from now. But I do think transformative things like a better vaccine. Because by the way, we talk about adjuvants being aluminum or

squalane. As you get older, you need more of a vaccine to be effective. So let me get the straight, I'm dosing my grandfather with more aluminum, heavy metal in his blood. Like, that's not a virtuous cycle, right? So these types of products, so you say, okay, well, Amherst is spread across. And yeah, I agree, they do too much. But I would argue it's better than the alternative, which is not trying to help. Let me go to the vaccine. And by the way, I'm 100% convinced MRNA vaccines is going to be the great legacy that comes out of COVID because I think those things are closed. So what specifically does Amherst do that will let you store the vaccine kind of at room temperature versus 94 degrees with the current Pfizer vaccine?

It would just be their adjuvant. So the squalane-based adjuvant. And we talked about, so I talked about when I mentioned squaline at the outset that you can do it through like olive oil, but no one uses it because it's not stable. The stuff that they're producing has a shelf life. That's the important thing to say. And so. And so the natural product has to be stored at 94 degrees, negative 94, so that it doesn't break down. But there's theoretically would not. it doesn't theoretically yes it's not as clear cut as that because squalane is better than aluminum but it's just i can't get the sourcing from shark a shark b shark c so it's the same issue with the vaccine that the laurels of the world have that i can't come and say all right i can create a

formulation of a biotech to drive this through you need something that every single dose is the same and the shark base squalane is not that cool uh i want to get to some pushbacks on the idea because I do think there are, but I actually want to talk about one of the other huge home run optionalities they have that I was so interested in. Pure cane, this alternative sweetener they have, you know, it's zero calories, all sorts of stuff. But I'll just let you, you know, I see this zero calorie sweetener that's better for the environment and all this stuff. And I think, oh my gosh, this could be another billion dollar product. Could you kind of talk about pure cane and why it's so exciting? Okay. So pure cane is the consumer brand of

amorous is rev m so let me work backwards to talk about what the rev a rev m conversation is um rev m is the is the wonder child among stevial uh glucose aside so stevia like just think of the stevia bush so why does coke or pepsi or whoever cola maker use cane sugar which we know in this country we have an obesity problem diabetes problem all the thing why do we use this thing that we know is bad for us, by the way. I have a sweet tooth, so I'm allowed to say it. Like, I know what I'm eating is not good for me, right? Part of the reason is that Reb A, and Reb, I always mispronounced the name, but it's Rebaudino Cide or something A, exists in the stevia plant. It's in the leaf of the bush. It is 300 times sweeter than sugar. So you would say, oh, wait, this is naturally

occurring. Why don't we use it? Well, the answer is it's only 2% of the stevia bush. And the way that you get it out is you muddle it down and you get inevitably the stem and the like other parts of the of the plant which create a bitter aftertaste some people think it tastes like liquorish i think it's just bitter um so coke in other words it's like okay we want to replace uh cane syrup we know we know that what we use for corn it's just not it's not good for us so we want to replace that with a naturally occurring uh healthier version 300 times sweeter meaning i would need one 300 to get to same. But I don't want to add this and then have to add to my label another thing, meaning a masking agent, to cover that bitterness. So that's why Reb A kind of at scale is never

taken off. Now, there is something else in the stevia bush, which is 0.1% of the stevia plant or less, called Reb M, which is what Amherst is focusing on. Reb M versus Rev A, it's round numbers about 10x more expensive. And Amherst came out. And you can literally, if you look at vials, like regular stevia sweetener is like yellowish, it's just tinted, their rev M is clear. Like there's no impurities, it's really scalable. And where they found, so they have two different verticals. One is the consumer and the other is kind of in that other ingredient section. And in the ingredient section, they discovered that where sweetening really matters is in

things like gluten-free bread. So if you actually go to the supermarket and look at gluten-free, you realize that to compensate for how dry gluten-free can get, they just dump sugar into it. So it's actually, while arguably important for people with celiac, really bad from a diabetic's point of view to be consuming a ton of sugar, a ton of sweetener.

Amaris developed a partnership with a company called A.B. Mari. This is the private company, but the big baker in America, they do the McDonald's hamburger bun. If you ever look at like the breakout of calories in a Big Mac, the bun is a huge part of it. So these guys made it, A.B. Mari made a deal with Amherst say, okay, we're going to get you involved in our baking because we need to cut the sugar. Like, this is a national pandemic that Amherst can help. What's really interesting from that is that agreement, which came last summer, was a shot across the battle. And so others, including Ingredion, which is another public company earlier this year, made an agreement with Amaris. They, Ingredion had bought a company called Pure Circle, which was doing Stevia. But they ran out of supply. And they realized going back to the Core takeaway from this call, volume at scale matters.

They realized they could not produce what they want. Ingredion deals with Coke and Pepsi to the beverage side. They came out and said, Amherst, we need a partnership because we need to be able to scale. So I'm not telling you today, Andrew, that they're in Coke and Pepsi. All I'm saying is Ingredion has a relation with Coke and Pepsi. Ingredion came to Amherst to say help. And if you listen to the CEO of Ingredion on his first quarter call, I mean, he was euphoric about their involvement, which is really wonderful. So, again, time will tell.

It's really hard to train. Like, my dad's a sweet and low drinker, right? So when he rips his pack open, how do you train someone that you only need one 300? Like, there's a cognitive dissonance that's going to happen. But my hope is that, you know, if you think about it, you get the same sweetness with a lot less calories. We're doing good, again, for the country, SRI. Perfect. Okay, so let's go to some, actually, let's do some of the parts first.

So we've talked out some of the parts a couple times. Let's do some of the parts so just people can think about. And again, I think this is something where, you know, it's basically developing drugs. They're not drugs. The products can be involved in drugs. So if they develop one that could be a hit, I mean, your numbers can go off the charts very quickly. But let's just talk today. How do you look at the sum of the parts here?

So let me kind of start the sum of the parts by talking about just public market valuation analysis, meaning you mentioned Ginko and Zimergen, these crazy multiples, round numbers. they're coming out at 100 times revenue. There is an argument to those of us that are schooled in valuation methodology that a revenue multiple is not a real multiple. It's kind of the last refuge of the scoundrel. It's when there's no widget coming out. Like you don't, this is, okay, well, like a SaaS company in many ways, like they don't make anything that's a service.

On a some of the parts basis, and I'm just going to cheat and look at my comp sheet here, you know, Zimurgen's trading at 38 times 21 sales. Ginko's going to come public at 115 over 100%. 800. Amherst today, 13 times sales. So like that dichotomy, and the other thing on this comp sheet that's fascinating is you look at every other comparable public company. So this is Berkeley Lights, Cadexis, that's the hardware side, twist we mentioned Zimergen, DNA Y, Codex DNA came public last week. They're doing desktop printing of DNA. You add all that up cumulatively. They have 487 million and 21 estimated revenue.

Amra standalone, 400 million of revenue. Now, huge asterisk, 150 million of that is asset sales, which is what gets us to the conversation on some of the parks. So we already, you can make an argument given that it's almost July. We should use 2022 numbers, which would make the numbers higher, but we don't need that for our purposes. So we already talked about Biosan's 100 million baseline revenue. I think it's going to be closer to 13, 140 for revenue this year, just given it's growing

at 3x year on year. What happened with Biosans is that everyone got locked down. We all did Zoom calls. We're all exhausted of Zoom calls. But everyone wanted to look good and you couldn't go out and spend. So one of the things that actually had growth last year, and this is not just specific to Amherst, this is every beauty company, was people spending on topical things, skincare to make themselves look better in a Zoom environment, which, by the way, makes sense.

But coming out of it, when the reopening is happening, people are so desperate to go shopping that the internet portion where Amherst gets upwards of 80% gross margins because they just cut out the middleman, you kept that and then you added on top of that Sephora where the other capacity growing, Target, all these other storefronts. They just launched in China. These were things that did not exist going to COVID. So they're growing 3x year-on-year right now. I mentioned that the outset. They had 52 million in Biosan's revenue last year. The streets at 100 million this year. That infers that they're strong. this quarter historically, the fourth quarter has like a negative year on your number. So

like I'm pretty comfortable with saying let's give a billion and five kind of value to that range. Today, it will be even more last year. You then got to look at the other products. And once you cross the 25 million dollar revenue threshold, you get these kind of drunk elephant take out multiples eight times. So six, eight in that range. Pipette, we mentioned as the baby version of biosons, they're not there yet. They're at 10, 15 million of revenue. So they're not The revenue is not included in that Biosan. No, that's just Biosan's. So I'm doing just the consumer portion first, then we'll go to ingredients and the other parts.

So Biosan's the big one. Everything else, including the five brands built this year, you can add, you know, call it 30 to 40 million of revenue and call it five to seven times. So you're at another 250. You know, so you're at a billion seven, call it in asset value there. You then got to look at the ingredients, like the ongoing ingredients portion. mentioned in passing. They did a sale to DSM. Now, what's really interesting is like vanilla, for example, they were contracted to deliver vanilla out to 2025. They did essentially a discounted cash flow of that. But the range, they sold several molecules that they produced. And by the way,

when I started looking this company five years ago, they were making one to two to three molecules a year. Today, they're making six molecules at scale. Okay. So like, that's, that's a seismic change. And they have a takeout on those molecules, at least according to these recent three deals that they did, somewhere between 15 and 25 times sales. So, like, there's a lot of wiggle room in what that could be. But if you assume $130 million in ongoing revenue and you kind of put a range there, you get $2 billion plus, I mean, easily. And then you got the pipeline where they're as a business line. So they recognize that $150 million of sales as revenue because part of their business model, is you come to me and say, hey, can you make this for me and then sell it to me?

And by the way, the best part of those sales deals is, yeah, you sold vanilla, but you're still producing it with amorous. So I got the upfront payment, but I'm getting the stream of cash flows along the way. If Coke buys, I'm just throwing Coke out. I didn't say that. I didn't say that. I hear, but if Coke buys vanilla from them, has Coke locked up them as the sole supplier for vanilla, or could they go to Pepsi and say, hey, you want to make Pepsi vanilla?

we've got the vanilla product. Like, is it single source or can they sell it to have everyone? It tends to be, you're paying this. I mean, you're paying 25 times. You're paying that for the premium of being the guarantee. But DSM has a sorted history with Amherst. They had two board members at some point, and they had to have like a shadow board

because they kept buying things from Amherst. So they had to not, I mean, you can't negotiate against yourself. So they would kind of recuse themselves. DSM, because of this chemical maker, and they understand what Amherst is doing became the purchaser of last resort in many cases. But DSM also realized they bought a plant from Amherst four or five years ago and realized just how hard it is to make this stuff.

Again, we keep coming back to this. The secret sauce is producing at scale. So DSM in this last iteration says, you guys do it. You guys do it. And that, I think, is indicative of a lot of the deals to come. So you've got to think of an upfront cash flow plus payments over time. And I'm not DCFing as part of this kind of broad conversation. And then the last thing, which is, and by the way, those are the royalties and things,

but like I can't see what future revenues are. So I don't give any money for royalties. But, you know, what's the pipeline worth, right? And we mentioned in passing that they tend to have 100% success rate and they're doing six a year. If you assume 50%, which is like it's unrealistically conservative. You know, you're growing and you say you kind of do per year, 50% success. You'd go out to 25 value that back. You got another five or seven dollars a share just on that portion alone. So all of those, some of the parts, and the denominator is 330 million shares.

I mentioned this company has more stock. And I do want to come back to the ownership because I think John Doors a crucial piece of this. Yep. The denominator is 330. They've got a net cash balance sheet. The balance sheet for, I'm including option cash in that, by the way. The balance sheet for a long time was a nightmare. I think we said at the outset, they had a 14 percent cost of debt. They were just surviving. They were in survival mode. Round numbers, they exited 2019 with 300 million of gross debt. They will be out of the third quarter of this year with less than 100 million of debt. And so, like, it's effectively cleaned up. Every player in synthetic biology, Ginko the most, because they got $2 billion of cash, has a net cash balance sheet. So it was a real outlier for a long

time. And part of the reason people would dismiss it is that Amherst was net debt for a long time. that has now changed. So I kind of like put that in the, you know, the bucket in the past. And that's not part of it. Anyway, if I use those numbers, you can get north of $20 a share really easily on 21 numbers. If I start using 22, I'm well into 30. When I look at the trading dynamics of this stock, it's a volatile stock. Like it's in the stock twits, you know, top 25 up there with AMC and all the other meme stocks.

It's not inconceivable that we see a $30 stock, not that I'm projecting it, obviously, this year. But when I kind of talk about it, I forget if I said this, you know, when we spoke previously or now, like the way I look at this is we're not going to know for eight, 10, 15 years if this really comes to fruition, in which case you put it in your kids account and I don't care if you buy it at 10, 15, or 20, just do it. the reason I'm comfortable with saying it's going to be around in a decade is that John Dore, founder of Kleiner Perkins, and this is going to tie back to the AWS thing we said at the outset, founder of Kleiner Perkins, richest venture capitalist in hers history, right? First investor, early investor in Amazon, early investor in Google. He's not on the board of Amazon anymore. He's not on the board of Google.

He's on the board of Ambrose. And he loves these little companies like Enphase is another one, which is a solar company, doing transformative things, and if you include his debt and kind of convert debt, he owns about 43% of the company. So I would argue, although it's never been explicitly said to me, because he's a believer, and he would tell you, if you look back at kind of TED talks, interviews of him, how he's made his money. He didn't make his money in the IPO of Google or Amazon, right?

AWS wasn't on the radar when Amazon came public. He made his money 10, 15 years in. And I think that's really instructive. AWS. I just want, let me finish AWS thought. Go ahead. Go ahead. So you mentioned AWS. Amazon makes its money effectively in two ways. AWS and private label, right, on Amazon when you buy things. The one thing that Amazon has not made money in ever really is skincare. They don't have a white label skin care brand. I know nothing other than the fact that John Doors is a pretty good link between Bezos and John Mello, the CEO of Amaris. And I would imagine at some point, conceptually, that's something that they would consider exploring.

So are you saying Amazon considers buying them or just Amazon considers using them for a white label? I mean, it doesn't move the needle, right? This isn't a whole food. This doesn't move the needle for Amazon. So why wouldn't you just, you know, let, again, let these guys do the work. Yeah. Buy your white label. I think that makes more sense.

Yeah, I think that makes more sense. No, the one thing I was going to say is the thing I'm really kicking myself here for having missed this because it's 10 bagger over the past year or so is John Doar, not only is he a big believer, but he was basically financing them and buying stock hand over fist to finance them. And just, you know, when you see that type of VC making that bet, yeah, you know, it was, it was an existential bet a couple years ago, right? The balance sheet was awful. They hadn't done some of these one-off deals. But when he's pumping money in there, it might have been an existential set, but it was definitely. I don't know, I don't know what his balance sheet is, but I imagine a billion dollars plus that he put into this is not insignificant. Like,

it's a real number. And so, like, that was in the darkest days. And this is one of these really weird stocks. And we should maybe just touch on management as well because that's a pushback that that was the first pushback I was going to hit. Yes. Yeah. But in the darkest days, this was one of these things that I just, and your viewers

may not know, but you and I both know Jacob Rubin and his Eros, ESGC argument, which I own some as well, is essentially that the CFO, Andy Warren, have put in $3 million, is not going to let it go to Nill. running the refi process. Like, that's a really good argument for why that stock could have potential. It hasn't yet. But Jacob, I believe you, buddy. In the case of amorous with John Doer, last November, and this is funny, and this is like the secret to happy life, of all my clients or my people in my life, my friends, my wife has the lowest cost basis on Amherst of everyone, which is like amazing. Because she heard me for five days talking to people being like, you're missing the big picture,

right? And this is, like you said, where it goes from two to, uh, to 20. Let's talk about management. The hardest thing, and Andrew, I'd be curious to hear your thoughts on this. But when I, you know, like you, I meet with hundreds of companies a year and we kind of get through it. The difference on me is I do a lot of UK companies. There's a lot of U.S. companies that are listing in the UK, which is a whole different podcast we could do. I saw you had, I read your letters and I saw you at GAN, which I missed that. I think Jeremy Raper even came on here and pitched to me. I missed that, but I hit on another one. We can talk about that another time. But yeah, yeah. But by the way, that's an up and coming thing that

no one sees yet, which is U.S. companies listing in the U.K. because they don't have quarterly filing requirements, meaning if you're a $10 million revenue or less, you don't need to do a 10-Q, like that makes a credit. It's been a greater. This is another one. I miss Tremmer International. They had a long, long history, and they did this weird merger, and they went over to the UK. And just yesterday or two days ago, they did an IPO back into the U.S. because they finally hit the size that they needed. Right. It's like AAA ball and then you scale. By the way, the number one name of this, and I was their first U.S. investor, Rina, analytics, RNLX, which every one of your listeners should look at. It's the next exact sciences,

but that's a different podcast. In our business, the hard thing, and people always laugh at me when I kind of describe our business as poetic, where they're like, what are you talking about? It's numbers. Well, it's really easy to get to what the numbers are. Like, you can teach a monkey to look at a P&L or balance sheet. And the hardest thing I have teaching younger people is the apprenticeship takes five or seven years. In other words, year two, you know enough to be dangerous. It's kind of like you with synthetic biology right now. You know enough to be dangerous. You can talk about it at a cocktail party and come up and say, oh, let's talk about ginkgo, right?

But the true hard thing is knowing judgment, experience, knowing when to apply or when things aren't the same, right? It just takes time. It's flying time. And so the hardest question that I have as a portfolio manager is very simply, are you a good person, right? Because even a sociopath, when you first meet them, I say, yeah, I'm a great person. Maybe they would hesitate for a second before, and that's a hint. They're a sociopath. They're not hesitating.

Well, that's true. That's a good point. But the point is, I would rather put a little bit of money in, see if you deliver, put more money in and pay up. Like, that seems to me like a really logical, cognitive way to invest. In the case of Amaris, this answered my question in a way that I've never said. So Jason Kelly is CEO of Ginko. He's a wonderful salesman, and he's heralded for being a wonderful salesman. John Mello, CEO of Amherst, is a wonderful salesman. And he is totally, people, despise the fact that he's a wonderful salesman. So it's a really interesting dichotomy that I think is pretty inconsistent. But there's a PM out of Chicago. I'm not going to name him, but he files 13Ds. You could look into it. And the very first time I ever spoke to him, I asked him a question. I said, so what do you think of John Mello?

What's your take on the CEO? And he said, I never met him. I said, what are you talking about? You own 6% of the company. You never even talked to the guy. He says, yeah, but let me tell you a story. So they're C-O-O, who is, by the way, part of the secret sauce, Eduardo Alvarez. He said, Eduardo is a neighbor, he's a good friend.

He came out of retirement to work with John Mello. And here's a sentence. I've never my career heard before. He said, he is the most ethical person I've ever met. If John Mello's good enough for Eduardo, he's good enough for me. And by the way, like, Andrew, that's like the angels coming down and being like, oh, my goodness. Here's the third party way of saying you can trust. And then when I talk to other companies, because I talk to everyone in the space, like

Creo, and then they say, oh, Amherst has the yeast pathway locked up for cannabinoids. We can't touch it. Like, that doesn't benefit them. Like, that's validation. And so you start to get triangulation of data points. And I kind of view John Mello, I'm invested in this company because of John Mello, to be totally clear, that is anathema to what a lot of the retail kind of scuttlebut is. I view John Mello as a lowercase S, lowercase J, Steve Jobs,

which is people forget Steve Jobs was fired and loath before he came back and became Steve Jobs. And we're kind of in that, you know, nadir to a cent point where he's going to be realized that he's building a multi-billion dollar brand that's going to help the world and make a difference. And I think that's wonderful. And I'm just glad to be part of the journey. That's fantastic. But let me provide a little pushback. And I'm happy to ship in here as well, but, you know, the most common pushback I got was on John Mello and they said this guy is promotional. He has missed targets. He's always saying next year is going to be the big year and then he's missing the targets. And that was the biggest piece of pushback I got. I can provide some thoughts, but I would actually like to hear. I'd obviously like to hear yours. You know, what would you say to someone who's pushing back on that? So he's obviously been more enthusiastic than the business has born. And that's wonderful. But the difference is he's been in the mud.

Right. Jason Kelly can say a lot of things right now, like we talked about. Make a PowerPoint. Make a number up five years. No one's going to chastise you. You got at least two quarters of reporting before people start to realize in the case of Zimurgeon and Ginko, the emperor, has no clothes. But let me give you a tangible public example. The former CFO of Amherst, she left to go with the company called Local Bounty that just came public via a SPAC last week that Charles Schwab is backing Leo 3. And Cargo actually did their first ever pipe as part of it. In the darkest hours of Amherst when they weren't going to make payroll, and this is public, this is in a queue, Kathy, the CFO lent the company a million of her own dollars to make payroll. I have never in 25 years seen a CFO show up and say, I believe in what these guys are doing that much. I want to be part of it. So, yeah, you can make that argument that John overpressed, but I would make the counter argument that if he's bringing in people like Eduardo, who is a secret sauce, Sam O side and Kathy, who believe in what he's doing, he's doing something right. And my counter would be Amherst for the past 15 or 20 years. It was so small, it was effectively a startup, right?

And like, I think brilliant entrepreneurs, you need to get people to buy into your vision. And, you know, Elon Musk, super controversial. You know, I think he's flat out lying in filings before, but that's part of the charm, right? He goes to his employees and he says, we're going to Mars by the end of this year. And his employees are all gung-ho going to Mars. yes, I get maybe, maybe John's been saying, hey, we're going to do 200 million in revenue next year and the ultimate number comes in 75 or 100, but that's because he's so bullish and he's pushing his team. So it is a fine line, right? There is a fine line between lying, deceit and that. But to me, when I look at this is a guy who, to go back to the first thing, this was founded because he could deliver a million malaria vials a year, right? Or he helped deliver a million malaria vials. Like this guy who actually, as you said, he's in the dirt, he's in the mud, he's building things. And I just tend to think the line. between fraud and entrepreneurial or small, but I think he's obviously proven that he's way further on the entrepreneur side. That would be my personal thing.

Yeah, and I would never make the, like, I think Elon Musk and Buffett are like the two American businessmen that can do no wrong. Like the SEC can't go after Tony Stark. Like Elon Musk is Tony Stark. That's kind of how I view it. John Mello is that next tier up, which are these real visionaries that are dragging an industry behind them. I mean, again, Zimurgeon, founded by Amherst alum, you know, Creo hiring their chief science. officer like everyone is kind of coming through emeryville california where they're based and they buy into the vision and i think uh we forget often when we're so quick in our culture to just chastise people when they miss like you know for example this this 150 million dollar deal

that they just did in the first quarter um because of some last minute accounting issues it was like 146 or something round numbers like that it worked out to in the queue and like you're chastising this guy over four million dollars but he actually just created a transformative deal that's going to set the paradigm for, I would argue, not only every deal Amherst is going to do, but probably every deal Ginkgo is going to do. Like, you can imagine as they're doing Zimerging Ginkgo, like, well, this is a great idea. Let's get paid in a cash flow stream along the way. And that didn't exist before him. So that is the hard part. And by the way, this whole space is still startups. Let's be very clear. It's been around for 18 years. It's still a startup, right? We're not at 10 billion,

20 billion, but we're going to get there. And the nice thing about introducing it to your followers now is we've gotten rid of a lot of the hair that existed for the last five years, that people wouldn't touch it. And now we're at a point where I'm not arguing Amherst ever goes to 100 times revenue. I don't think any company should be 100 times revenue. But what I'm arguing is when the divergence is so wide, you know, the little country song, let's meet in the middle. It's going to meet somewhere. And, you know, just bringing back to what you said earlier, you think synthetic biology right now is the internet 15 or 20 years ago. And, you know, yes, Amherst has had a big run, but if you think this is early stages, if you think this whole thing is

a startup, and they are the leader, they are the people who everyone else in the industry is coming from, like the runway and the opportunities here are just unbelievable. Is there anything, is there anything else that you think we should have hit on, that we didn't hit on any last thought you want to leave with listeners and everything? I mean, the curse on Amherst is there's always so much, and I'm sure your comments are going to be filled with things that I forgot to say. You know, but the truth is, I think. the industry is really exciting. I think it's great. If nothing else, it's a good cocktail party. I'm sorry we'd have a drink to raise during it. But I just want to remind your viewers

that this all started by you saying, hey, I really want to talk about Ginkgo. And I said, sure, we'll talk about, we'll talk about Ginkgo. But I also want to introduce you to something that I think is more transformative and delivering three to five to seven years faster than Ginkgo. It's 100% true. And look, I, you know, I try to do about probably eight hours of work on companies before I do a podcast on him and I started doing it and within 30 minutes I was like oh my god this is super interesting eight hours is not going to be enough it's not enough eight weeks but uh Randy look this has been fantastic one of the most interesting companies I've I've forget podcast one of the most interesting companies I've looked at you obviously have great

knowledge on it appreciate you coming on here I've got R&LX down so we're going to have to have you on because there's another big one no no and that conversation about MSit no joke no one this is another thing and really really quickly just because I do want to do the plug on MCIT. President Obama introduced this idea, which then President Trump, on the last day of its administration, put into place,

which basically solved a problem of how do people get paid. The problem in life science companies was, yeah, the science is great, and you do 18 months or two years to get through FDA, then how do you get paid? And then that's when the companies would dilute and founders would get screwed and all this stuff because if you want Medicare,

the largest payer, CMS, to pay for everything, You got to do what's called the National Coverage Determination NCD, another 18 months and two years. What MCIT does, and no one has picked up on this. Barron's just sniffing around. Bill Alberts, the reporter there, every company that files today with the FDA is trying to go for breakthrough designation because now, according to MSIT, which goes effective December 15th, if you get FDA approval, four years of guaranteed coverage nationally. I have just solved the biggest problem in life science, which is payment.

And the company, Renolytics, that we talked about, is solving chronic kidney disease. We can do another one on that. But the point is, you're going to see a seismic shift and how companies approach the FDA, and no one has picked up on it yet. That's tremendously interesting. But I don't think we have time for it here. But Randy, this has been fantastic. I'll be sure to include links to find, Randy's not on Twitter.

He's one of those Luddites, but I'll be sure to include links to find Randy. We mentioned some stuff. They'll be in the show notes. but Randy really appreciate you having really appreciate thank you Andrew looking it was a lot of fun we'll do we'll do another cocktail party at some point soon okay appreciate it man bye