Amyris Expects Huge Sales Growth In 2015

Jim Lane The first of the “2010-12 IPO kids” completes its transformation to a lively, product-driven commercial company with revenues in fragrances, emollients, solvents and fuels. In California, Amyris ( AMRS ) announced Q4 2014 revenues of $11.6 million and $43.3M for the full year, a 5% increase over 2013, and Q4 net income of $58.0 million and $2.3 million for 2014 as a whole. The company noted that product sales increased by nearly 50% despite lower than expected fuel sales in the second half of the year, due to drop in crude oil prices and currency headwinds. Collaboration and grant revenues were lower due to timing of government-funded project completion and previously outlined shift from upfront to milestone collaboration payments. “2014 was a transformative year for Amyris. We delivered on the promise of our technology by manufacturing at industrial scale two breakthrough molecules now used in a range of product sectors — from consumer care to transportation. We realized record-low production costs at our Brotas industrial biorefinery, further reduced operating expenses and, with successful financing efforts, achieved our strongest year-end cash position in three years,”said John Melo, President & CEO. “In 2015, we expect to build on our track record by expanding our renewable product portfolio and, more importantly, expanding our collaboration partnerships into new markets, such as biopharmaceuticals. Based on our plans and current performance during the first part of the year, we expect to achieve positive cash flow from operations in the first quarter, paving the way to exceed $100 million in total revenues for the full year,” concluded Melo. In announcing the full-year results, Amyris highlighted: • Record-low farnesene cash production runs below $2.50 per liter due to robust yeast strain performance and continued operational improvements at our industrial biorefinery. • Better-than-planned cash production costs for our first fragrance molecule, meeting critical milestones for a leading collaboration partner. • In marketing, the company introduced several new products, including a new emollient under our Neossance line; a high-performance solvent for industrial cleaning under brand name Myralene; and renewable jet fuel with our partner TOTAL, now included in global aviation specifications. • Operationally, Amyris upgraded the Brotas plant during current sugarcane inter-harvest season, “allowing us to continue our focus on reducing production costs in 2015.” New financing At the same time, Amyris announced that it entered into a Common Stock Purchase Agreement under which Amyris may from time to time sell up to $50 million of its common stock to Nomis Bay Ltd. over a 24-month period. Amyris will control the timing and amount of any sale of common stock to Nomis Bay, and will know the sale price before instructing Nomis Bay to purchase shares. When and if Amyris elects to use the facility, the company will issue shares to Nomis Bay at an undisclosed discount to the volume weighted average price of Amyris’s common stock over a preceding period of trading days. The company’s cash had dwindled to $43.4M by year end. “This facility provides us with a flexible source of common stock financing as our business grows, allowing us to strategically manage whether and when to draw on the facility based on market dynamics and other considerations,” said Melo. Analyst reaction Cowen & Company’s Jeffrey Osborne writes: “Amyris posted soft Q4 results, with revenue of $11.6 mn down 25% y/y and non-GAAP EPS of ($0.40) below Street of ($0.29). Soft product sales were a function of timing and a decline in fuel sales due to oil economics. The shift of collaboration revenues to contract milestones provides better perspective going forward. Management guided $100+ mn revenue for ’15, carried by an expected record Q1.” Raymond James’ Pavel Molchanov comments: “Recommendation. After a period of retooling while in the “overpromise and underdeliver” penalty box, 2013-2014 were Amyris’ first years with operations truly in commercial mode. There is visible scale-up progress, but the historical reliance on partner-based R&D payments makes quarterly financials choppy. There was a sizable miss on the top line, with product sales falling from 3Q’s $11.5 million to only $4.7 million, partly due to dollar headwinds. Cash on hand ended the quarter at $43 million, down from $69 million as of 3Q.” “Over the past month, Amyris entered two brand-new market segments – both in the high-value, non-oil-levered category. January marked the launch of industrial cleaning products based on the Myralene renewable solvent platform, with the goal of selling into the auto service market and other industrial end users. “Even more intriguingly, the microPharm discovery and production platform aims to provide the pharma industry with an integrated process for developing therapeutic compounds. While microPharm may seem like a departure from Amyris’ business focus, it’s worth recalling the company’s past (pre-IPO) work on antimalarial drug precursors.” What does it cost and what does Amyris make on farnesene? As Osborne noted: “Management has guided an ASP range of $6 to $8 per liter for 2015…with continued farnesene cost reductions, which is now below $3 per liter in cash production cost.” What is the product mix expected in 2015? Fragraces 30-35% Emollients 20-25% Solvents/cleaning 10% Fuels 10% Collaboration revenues 20-30% The Digest’s Take We’ve watched Amyris through its period as the #1 Hottest Company in the sector, through a value-crash after delays in getting to commercial-scale production volumes, it’s “Comeback of the Year” period in 2013-14 as it put production right, and now into its first strong commercial flowering. A sense of excitement has returned to the Amyris story — it’s become more about product surprises and the upside than operational surprises and the downside. The cash production cost remains high. $2.50 per liter is going to drive some exciting returns in niche markets such as fragrances — and pharma opportunities will abound — but the larger markets in chemicals and fuels will have limited exposure to Amyris products for now. Bigger and better? Back in 2010, Amyris released some interesting figures on its performance — of course, these were before full-scale production got underway in Brotas. At the time, the company disclosed that it had reached 16.8% farnesene yields. Maximum theoretical is 30%. We haven’t heard much lately about actual production yields, but usually somewhere around 85% of theoretical is a reasonable limit in day-to-day operations, and that would put Amyris at around 25% yields. Product recovery rate in 2010 was already 95%. So that leaves the company with a pound of product from four pounds of sugar, which would cost $0.56 (at the current sugar price of $0.14 per pound) – and with 7 pounds of diesel in a gallon — the big markets in fuels are going to be a tough proposition for some time to come. And that’s not taking into account the operation cost of the facility or the amortized capex. But there are a number of caveats there. Firstly, Brazilian projects do not buy sugar, they make cane sugar and the production price can be somewhat lower, if cane yields are good. More importantly, Amyris may not be making jet fuel from C15 farnesene at all — but rather, might make it from C10 isoprenoids, where the theoretical yields will be much higher. To that end, it’s worth noting that Amyris still has on the books agreements with Sao Martinho to build two new production plants that would each be double the size of its first commercial faciliity in Brotas — overall, a quadrupling of capacity and better economies of scale. In 2012, Amyris CEO John Melo addressed most of these hopes in his springtime address at ABLC, projecting at the time that the company would produce finished products in six verticals — fuels, lubrivcants, polymers & plastic additives, home & personal care, flavors & fragrances and cosmetics. We’ve seen most of those product lines come to life, and the pharma route is a seventh route to revenue for the company. As Pavel Molchanov notes. “The market wants to see more clarity on the pace at which Total will be scaling up its fuels joint venture with Amyris – a prospect we have questions about in the context of the oil and gas industry’s current period of austerity.” In two weeks, Melo will come back to ABLC with another major address — and we’re looking forward to hearing more about the Total JV, the potential for added capacity, the efforts to drive down production costs that open new marlets, and the state of efforts to unlock the large markets in fuels and chemicals that will take Amyris along the road toward “billion-dollar company” status. Especially, the world of jet fuels. Jim Lane is editor and publisher  of  Biofuels Digest  where  this article was originally published . Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. 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