How soon will the potential of three of the hottest companies in the field be realized?
What are the key milestones coming up for the industrial biotech’s Gold Dust Triplets?
In Colorado, Gevo reported its Q4 and full-year 2012 results this week — and now the Q4 news for the gold-dust trio of Amyris, Solazyme and Gevo is in — certainly the most highly-heralded three in the boomlet of cleantech IPOs in 2010 through early last year.
Today. we’ll look at those results briefly — but more importantly we would like to note the considerable fog which equity analysts are wading through in valuing the companies for the long-term. Fog that we believe is starting to lift — and the timing of that lift is where we would like to direct your attention to today.
For sure, it’s been a roller coaster ride.
Amyris originally opened in 2010 at $16.50, once traded over $30, but is trading at $2.97 today. Analysts at Raymond James, Piper, Cowen and Baird all have the stock rated at Neutral with targets between $3.32 and $4.00.
Gevo opened in 2011 at $15.50, once traded at a high of $26.36 and is trading today at $1.95. Analysts have the stock rated between Neutral and Outperform with targets between $3.00 and $9.00 — now, that’s a wide range.
Solazyme debuted two years ago this week at $20, once traded at a high of $27.47, and is trading today at $8.55. Analysts have the stock rated between Outperform and Underweight with targets between $5.00 and $10.50 — again, a wide range of values and we have a situation where analysts are recommending both “buy” and “sell” with seemingly no one in the middle.
Some of this — all analysts agree, is classic “sector compression” — where investor interest in giving lofty valuations to companies has evaporated based more on investor sentiment than a case of companies missing fundamental milestones.
But there have been slow-downs in scale-up — affecting Gevo and Amyris, and accounting generally for why these stock values have been more compressed.
When exactly will the fog lift — when will we have a materially clearer idea of the value of these companies? For early-stage companies it is much more about milestones rather than the kind of reporting on volume and price that drives quarterly reporting.
The fog-lift timetable
Q2 (June): Commissioning of phase 2 of the Solazyme Roquette joint venture’s Lestrem facility.
Q4: The Bunge Moema is expected to start production in Brazil.
Q2 2014 (Latest): Production starts at the Clinton, Iowa plant (with Archer Daniels Midland ).
Still in the fog: Timing of conversion of non-binding sales agreements with the likes of Qantas and Dow into binding contracts— a must for this year.
Q2 (May): Next quarterly results should give the first really clear look at renewable product margins not obscured as in the past by the legacy ethanol business, legacy inventory and limited plant output in 2012.
Q1 or Q2 (expected): A definitive agreement with Firmenich for the flavors and fragrances markets.
Q4 (latest): Amyris is expecting to generate $60M-$70M in collaboration funding from partners to offset its burn rate. If not, it will be forced to raise more money for scale-up and potentially dilute the share value.
Q3 and Q4. Amyris begins initial shipments under its Novvi lˇubricants JV and increases shipments with Kuraray. Lookm also for updates on shipments of specialty fluids (through the JV with Total).
March 20. A pretrial conference in the Butamax-Gevo patent dispute is expected should include a decision on claim construction that could heavily influence the patent trail.
April 1. Patent trial begins — resolution could be within the month. Raymond James’ Pavel Molchanov writes “we are of the view that Gevo enters this process in a substantively advantaged position. The reason is simple: last year, both the trial court and the appeals court firmly rejected Butamax’s request for a preliminary injunction against Gevo, with both courts explicitly finding that “plaintiff (Butamax) does not hold a valid patent, nor would defendant (Gevo) infringe if it did”.
Q2. Though Gevo is not guiding on specific dates for re-start at Luverne beyond a bland “sometime in 2013,” analysts expect restart in Q2, reaching full production by Q4.
Still in the fog: Start date for conversion of the Redfield (SD) plant, and the exact structure of future conversion agreements (e.g. how the value of a license turns into revenue).
Q4 2012 Financial results
Revenues for the fourth quarter of 2012 were $1.9 million compared to $17.2 million in the same period in 2011. The decrease in revenues resulted from the company suspending ethanol production at its Luverne, Minn. facility in May 2012. The net loss for the fourth quarter of 2012 was $13.2 million compared to $14.2 million for the fourth quarter of 2011.
Total revenue for the fourth quarter ended December 31, 2012 was $8.4 million compared with $14.9 million in the fourth quarter of 2011. Fourth quarter GAAP net loss attributable to Solazyme, Inc. common stockholders was $24.6 million, which compares with net loss of $15.6 million in the prior year period.
Aggregate revenues for the quarter ended December 31, 2012 were $5.9 million versus $41.5 million in the fourth quarter of 2011. Of the $5.9 million in aggregate revenues during the quarter ended December 31, 2012, $3.0 million related to renewable product sales compared to $0.7 million for the same period in the prior year. GAAP net loss attributable to common stockholders for the quarter was $43.5 million ($0.72 per share) compared to a loss of $59.4 million ($1.30 per share) in the same quarter of 2011.
Category: The Business Case