Two Up: Amyris, Queensland gamble on farnesene for SE Asia

The Digest discovered this hand-written lyric, we think written with a thumbnail dipped in biocrude, near Amyris headquarters in Emeryville, California.

Somewhere north of Byron Bay where Cooktown orchids grow,
and cane is ever-present and the Pioneer River flows
there’ll be a group of smarties along the coastal towns
hawking tonnes of bio farnesene for a zillion yuan a pound

Yes, we’re the ridgy-didges who split our Aussie week
into eighty hours biotech’ing, eighty hours sleep
and eight hours more we’re beach-bound for bonza Queensland rays
and we’ll go the endless scale-up for all our endless days

And Johnny M says Amyris is in historic climb
and 100 million revenues will be coming any time
another plant is all that’s needed, cane’s the way to go
and we’re off Down Under building now that Anna runs the show

In Brizzie we’ve been busy cooking up a deal or two
and China will be getting it when all the yeast is through
We’ll ship it north and price it high as biofene can sell
Me mateys, we’re as greedy as an Araby cartel

Yes, we’re the ridgy-didges who split the Aussie week
into eighty hours biotech’ing, eighty hours sleep
and eight hours more we’re beach-bound for bonza Queensland rays
and we’ll go the endless scale-up for all our endless days

But change the world we will and do it green and right and true
and proudly we will wave the flag that once Eureka flew
‘under the Southern Cross we’ll stand a sprig of wattle in our hands’
singing Amyris, you bloody beauty

Amyris heads Down Under

Yes, Amyris and the Government of the Australian state of Queensland revealed plans this week to accelerate development of a new 23,000 tonne Amyris production plant with support from local partners to produce farnesene for cosmetic emollients, fragrances, nutraceuticals, polymers, and lubricant applications. Sugar cane is the feedstock.

Acceleration of this project, which was first announced on December 6, 2016, came out of the Queensland Government’s Biofutures Acceleration Program that offers support to companies to build commercial-scale biorefineries in regional Queensland. Amyris was chosen based on its legacy expertise in operating such production facilities.

First industrial production of product at the new production facility is expected to occur in 2020. It is anticipated that $60-$80 million in annual revenue would be generated, the partners said. This would potentially give a 2-3 year payback for investors in the production plant.

“Amyris is seeking to replicate its successful biorefinery in Brazil and sees Queensland as an ideal location due to the abundance of sugarcane and close proximity to Asia,” said Queensland Premier Annastacia Palaszczuk. “The Queensland Government’s funding and support for biorefinery projects will create high-value jobs and investment in regional Queensland by using renewable feedstocks to create biofuel and other bioproducts.”

“Our growing demand in China for Vitamins and the Asian demand for cosmetics and fragrances supports a new specialty farnesene fermentation factory in Queensland,” said Amyris CEO John Melo. “The funding from the Queensland government along with the operating expertise and sugar cane base of our local partner make this factory possible and enable savings from our current production in Brazil and the associated shipping costs. Like all our new projects, this factory is expected to be sold out when it starts operating.”

The Queenaland backstory

Last December, Amyris and the Government of Queensland, Australia inked a partnership to create a southeast hub of sustainable ingredients production for the rapidly-growing personal care sector in Asia, while supporting Queensland’s local economy and sugarcane industry. The partnership aims to develop a new production plant with support from local partners. The plant will produce Amyris’s high-value personal care and nutraceutical actives, as well as farnesene-derivative products.

Amyris and the Government of Queensland have successfully partnered on a number of initiatives since 2010 designed to foster adoption of renewable product solutions targeting large global markets while also supporting the development of a Queensland-based biotechnology industry using feedstock from local sugarcane.

Ms Palaszczuk said the proposed Amyris biorefinery was another step towards achieving Queensland’s vision for a $1 billion sustainable, export-oriented biotechnology and bioproducts sector. “Acceleration of the Amyris project came out of the Queensland Government’s Biofutures Acceleration Program that offers support to companies to build commercial-scale biorefineries in regional Queensland to process materials such as agricultural and industrial waste,” she said.

The key to all this

In a word, China. Amyris’ China sales have been doubling, and the company expects to generate $50 million or more in revenue over the next 12-18 months from its sales into China. The biggest news there is farnesene-based Vitamin E oil, and there are opportunities to supply intermediates and ingredients for the large and fast growing Chinese food ingredients market.

The rate constraint

As we reported earlier this year the Brotas plant’s farnesene-producing capacity is sold out through 2020. But as we asked then, how can a plant with a nameplate capacity of 40 million liters be sold out on a revenue of $77M, especially when that revenue consists mostly of “collaboration payments” that usually extend beyond product production to include product development costs.

Let’s start with a $2.50 per liter farnesene price, and let’s simply focus in on reported production revenue, which reached $15M in  Q4 2016. That translates to 6 million liters of production and a 60% plant utilization. If the actual farnesene price is higher, the utilization rate could be lower.

We highlighted production rate in this article on hard times and bright prospects at POET-DSM, and we’ll highlight it here as well. Since we don’t have complete transparency on the business — we have to make substantial room for the possibility that there is simply so much switching time between campaigns that the problem is one that can be solved by building more specialized capacity.

Which is Amyris’ current plan, as a matter of fact. The company has broken ground on Brotas 2, which will focus in on flavors & fragrances. And now we have this farnese plant announcement for Queensland.

The wow technology story

Last month, we reported that Amyris had completed strain engineering and optimization to 26 key metabolic precursors across multiple organisms – including many different pathways beyond terpenoids allows Amyris to develop an industrial-scale fermentation process for virtually any biological molecule. That work is funded in part through a multi-year agreement with the US Defense Advance Research Projects Agency, the famed DARPA that gave us everything from kevlar to the Global Positioning System and the Internet — the goal in this $35M agreement with the Biological Technologies Office was to create new research and development tools and technologies — compressing the time to market for any new molecule by at least 10-fold in both time and cost.

The Amyris financial backstory

Last month, Amyris reported Q1 revenues and Jeff Osborne at Cowen & Co noted, “Amyris reported revenue of $13.0mn, well below our estimate of $37.1mn due to much lower collaboration payments than we had anticipated.

At the time, we liked one item more than anything. In Q1 2016, product sales were $5.2M and the cost of product sales were $11.2M, and a number of informed observers became alarmed that the company was losing money on every product produced, and that growth would be unsustainable. But the company has staged a turnaround in that critical metric. In Q1 2017, product sales were $13.2M and the cost of product sales were $12.8M.

For Amyris, the big hit was Biossance and the big miss was Ginkgo. In the case of the former, sales are expected to reach $10M in 2017, but in the case of the latter a mysterious milestone payment was missed.

We noted that:

“Amyris has been pushing back it’s time to $100M in revenue for some time. It missed in 2016 a plan to reach that threshold and 2017 will need to quickly get on track. Wall Street may well be able to put the past in the past with all forgive if Amyris can break out and hit that $100M revenue threshold, and even with a strong second half, the company will need to reach something like $30M in Q2 revenue to maintain belief, given the 2016 miss.”

The best news on Planet Amyris? Amyris says “double the revenue” is in sight with Nenter Vitamin E Partnership as a DSM Vitamin A partnership was unveiled last month, and DSM led a $47M investment round into the company in recent weeks.

Queensland’s progress

We have seen quite a lot of expressions of interest.  “A total of 120 parties recently indicated interest in biorefining in Queensland through the program<‘ said Ms Palaszczuk, “ and 26 submitted detailed expressions of interest. The Queensland Government is leading Australia’s bio-economic revolution through the Advance Queensland Biofutures 10-Year Roadmap and Action Plan.”

The Bottom Line

Good news for fans of Amyris eager to see growth. Equally good for fans of Queensland’s bio-future. Now, comes the time to translate talk into steel in the ground.  Steel made from good ol Aussie iron, of course.