Zymergen disclosed late Tuesday that its CEO Josh Hoffman was leaving after some customers had problems implementing the company’s main product. The shares plummeted more than 68% in after-hours trading following the announcement.
The company, which uses biological processes to make chemicals, said Tuesday that it no longer expected product revenue in 2021. Product revenue next year is expected to be “immaterial,” Zymergen said in a statement.
Barron’s recently highlighted Zymergen (ticker: ZY) as one of three players to watch in synthetic biology. The other two were Amyris (AMRS) and Ginkgo Bioworks, which is planning to go public through a merger with Soaring Eagle Acquisition (SRNG), a special-purpose acquisition company, or SPAC. Synthetic biology is the blending of biotechnology with industrial chemistry.
Zymergen said that Hoffman, who is also a co-founder, had, by “mutual decision,” stepped down as chief executive and as a member of the board effective immediately. The company’s chairman, Jay Flatley, a former CEO of Illumina (ILMN), is replacing him as acting CEO.
“We are disappointed by these developments, and the board and management team are focused on resolving the underlying issues to ensure Zymergen moves forward as a stronger company with a compelling operating plan,” Flatley said a statement.
The news comes more than three months after Zymergen went public in April at $31 a share. Zymergen’s stock rose more than 21% in its market debut to close at $37.65. Shares hit a high of $48.42 later that month and ended Tuesday at $34.83.
Synthetic biology, if it works, could reduce the need for petroleum-based chemicals as well as for plant- and animal-based products, benefiting the environment. Zymergen’s key product is Hyaline, an optical film that can be used in display-touch sensors for personal devices and other applications. The product was in the qualification process with customers.
Zymergen said several target customers during the quarter “encountered technical issues” implementing Hyaline and that this would cause a delay in the company’s commercial ramp. Zymergen said it was also evaluating data for the total addressable market of foldable display applications that indicate “a smaller near-term market opportunity that is growing less rapidly than anticipated,” the statement said.
In May, J.P. Morgan had initiated coverage of Zymergen with an Overweight rating and a $40 price target.
Zymergen has formed dedicated committees and is working with outside experts to conduct a review of its operational, financial, product, and commercialization efforts and is coming up with an updated strategic plan for the company, Flatley said. It has also launched a search process to identify a permanent CEO.
Zymergen is reducing and aligning expenses as a result of its reduced revenue expectations. The company now anticipates total revenue of $5 million to $6 million, all relating to R&D service agreements and collaboration revenue, for the quarter ended June 30. It has about $588 million of cash and cash equivalents on hand.
Write to Luisa Beltran at [email protected]
