b'Codification Topic 606 (ASC 606). Under ASC 606, With respect to falsity, the court held thata company can recognize revenue once it has fulfilled all of its performance obligations under a contract, plaintiffs central claim was doomedand need not necessarily wait for receipt of payment. by the lack of allegations supportingHowever, royalty revenues generally may not be rec-ognized until the underlying sales that will generate the the inference that an illicit off-labelroyalty take place. In the first and second quarters of marketing campaign actually took place2018, Amyris reported approximately $48 million in rev-enue, including almost $20 million in royalty revenues. at Assertio. While the complaint allegedThe company touted these results as reflecting strong, some instances of off-label marketing,profitable growth, and noted that royalty revenue from its agreement with DSM was becoming material the court concluded that its allegationsfaster than we expected. In fact, however, much of were insufficient to demonstrate a systemicthe royalty revenue being recognized was based on predicted, rather than completed, sales by Nenter. In or widespread campaign. November 2018, Amyris reported $0 in royalty reve-nue for the third quarter of 2018, but reaffirmed that the company had realized about $20 million in royalty concerning the entire opioid industry, not Assertio inpayments during the first half of this year. However, in particular, failed to adequately support loss causation. April 2019, Amyris announced that it had been operat-Because plaintiffs failed, for a second time, to correcting with material weaknesses in its accounting controls the deficiencies in their complaint, the court concludedand would need to restate several quarterly and annual that further leave to amend would be futile. Onfinancial reports due to a material errorrelated to the April 9, 2020, plaintiffs appealed the district courtsestimates for recognizing revenue for royalty payment. dismissal of their complaint without leave to amendAmyriss stock price fell more than 20%. to the Ninth Circuit. The appeal was fully briefed onIn April 2019, investors filed a putative class action December 14, 2020, and oral argument is scheduledcomplaint against the company and its executives for March 5, 2021. alleging violations of Sections 10(b) and 20(a) and Rule 10b-5 of the 1934 Act. The amended complaint alleged that defendants made false and misleading statements Mulderrig v. Amyris, Inc., Case No.regarding the companys revenue, predictions of future 19-cv-1765, 2020 WL 5903844 (YGR)revenue, and growth based on Amyriss violations of (N.D. Cal. Oct. 5, 2020)ASC 606.Improper revenue recognition Amyris, Inc. (Amyris) is an industrial biotechnologyThe court rejected that these statements company that manufactures and sells products in thewere protected by the PSLRAs safe harbor, health and wellness, clean beauty, and flavor and fra-grance markets. In 2014, the company commercializedbecause (1) even if the statements were and licensed farnesene, a hydrocarbon molecule thatforward-looking in form, in context they the company manufactured using engineered microbes for use in various chemical applications. In Decemberwere based on and intertwined with the 2017, Amyris sold its farnesene manufacturing facility inmisstatements of current revenues, and Brazil to Koninklijke DSM N.V. (DSM). Under the par-ties agreement, Amyris licensed the use of farnesenetherefore misrepresented past or present in the Vitamin E, lubricant, and flavor and fragrancerather than exclusively future events, and markets to DSM for nearly $30 million and assigned to DSM an agreement to supply farnesene to Nenter &(2) the statements were not accompanied Co (Nenter). DSM would pay Amyris a portion of theby cautionary language that meaningfully profits realized by Nenter and paid to DSM, in the form of royalties.address[ed] the risks underlying the Beginning in March 2018, Amyris informed investorsprojections in light of the companys true that it was now reporting revenue based on newaccounting practices.GAAP accounting standards issued by the Financial Accounting Standards Board, Accounting Standard 49'