Amyris: Biofuels Digest’s 2015 5-Minute Guide

January 4, 2015 |

5-Minute-Guide-logoCompany description:

Amyris is a global renewable products company providing sustainable alternatives to a variety of non-renewable resources. Amyris uses its innovative bioscience technology to convert plant sugars into hydrocarbon molecules. Amyris creates ingredients and is commercializing its No Compromise products in the flavors and fragrances, cosmetics, specialty fluids, polymers, lubricants, and fuels industries. Amyris Brasil Ltda., a subsidiary of Amyris, oversees the establishment and expansion of Amyris’s production in Brazil. More information about Amyris is available at www.amyris.com.

Rankings

50 Hottest Companies in Bioenergy: #11, 2014-15

30 Hottest Companies in Renewable Chemicals: #3, 2014-15

Awards

Won Biofuels Digest’s 2012 Special Editor’s Award: Amyris, comeback of the year

The Issues

In November we wrote: “We have become so accustomed to receiving obituaries of Amyris that recently we wondered if the famous old saw in fact read, “Send not to know for Whom the Bell Tolls, it Tolls for Amyris.” It is therefore enough to startle the angels when the quarterly earnings roll in and we read that not only is Amyris alive and well, sales are up 177% for Q3 (compared to Q3 2013), the company is expanding to a second molecule, and expects “cash payback on its Brotas plant” by 2016.

It is tempting to see the story of Amyris as one of unexpected redemption, a rescue from Hades effected by the miraculous intervention of Olympian gods, as if Orpheus had gone down to the underworld and rescued biobased farnesane from certain oblivion.

But it probably is more of a mundane case of Chicken Littles amongst industry observers— the plant was not ready for prime-time when first launched, a gigantic learning curve was embarked on in the harsh light of public company reporting, and what we are seeing is success delayed, rather than the deliverance of a soul from the underworld. Turns out that Chicken Little, in looking at the 10-Ks and declaring that the sky was falling in, was wrong yet again.

Now, if the company spent a considerable amount of time in the penalty box, that it understood — this market in these times is always happy to whack a technology stock that mistimes the forward projection of its arrival at break-even. There is little doubt that the Amyrisians up in Emeryville would like to have arrived in 2012 where they are today, and that they have been chopped up in the public markets for running the trains late .

Markets and Molecules

On the molecule front, Amyris is now selling, via its global distributor network, a second renewable ingredient under its Neossance brand. Neossance Hemisqualane is a pure, plant-derived, light emollient with high spreadability and proven performance characteristics. Amyris touts that “this ingredient addresses the mid-price emollient market with better performance and competitive pricing compared to existing products in this large and growing market.”

Chief Business Officer Zanna McFerson adds: “Building on the success of our Neossance Squalane product, and after positive reaction from more than fifty customers who sampled our new hemisqualane product, we are expanding our Neossance portfolio of ingredients with another high performance solution for the cosmetics industry.”

Now, we’ve written much about food vs. fuel — who hasn’t? But there’s been less written about “face vs fuel” which is to say, why are companies like Amyris that were supposed to make jet fuels and diesels on the road to massive impact on bottom line and society, making emollients?

Keep in mind that squalane is a hydrocarbon, and a terpene — and if you visited ABLC Net this past week you would have received quite an earful regarding the bridge between flavorings, fragrances and high-performance fuels that exists in the world of terpenes. There must be more than 50,000 of them in nature — and when you are delighted by the fresh scent of Ponderosa Pine as you trek through California’s natural wonderlands, you are in fact getting a whiff of terpenes. They are advantaged hydrocarbons, as well, when it comes to super-dense fuels — and farnesane, which is Amyris’ primary pivot point, is already a source of fuels via its partnership with Total and we may well see some large-scale production of same before the end of the decade.

But for now, Amyris is all about generating business, and as most of us holiday shoppers have observed, fragrances are selling at just a teency bit of a premium over diesel. Like $100 for 3.5 ounces, vs $3.50 a gallon.

The Financial Analysts

Cowen & Company’s Jeff Osborne writes:

“Amyris reported strong operational improvements in 3Q. Product revenue of $11.5 mn was up 177% y/y due to strong fragrance strains; however jet fuel sales appear to be ramping slowly due to regulatory delays. The company now expects to be cash flow positive in 2015 versus late 2014, due to a change in collaboration inflows. Brotas appears to be running well and cash cost is targeted at below $3/L.

He added: “Amyris introduced a new farnesene strain at the Brotas refinery during the quarter, which should allow sub-$3/L production costs. We were pleased to see the company transition from making high ASP fragrance oil to farnesene without any issues or elongated downtime. The plant has run smoothly for 3 months, which should allay some investor fears after an up down initial 15 months out of the gates.”

Looking forward, Cowen & Co expects: “About $30 million of renewable product sales in 2014 and a doubling of that in 2015, with a cadence of $10 mn per qtr in 1H15 and $20 mn per quarter in 2H15, as 6 new molecules ramp. Management reiterated that Brotas will have reached a cash payback by early 2016 as the company focuses on maintaining a total cash gross margin structure over 60% Osborne warns: “We are keen to see how the company handles marketing 1 molecule in 1H14 to 2 currently to 8 by the end of next year. (aided by an ASP of ~$10/L with gross costs below $3/L).

Raymond James’s Pavel Molchanov writes:

“After a period of retooling while in the “overpromise and underdeliver” penalty box, 2013-2014 have been 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. In addition to updates on the production ramp-up at the Brotas plant, the market wants to see additional clarity on the pace at which Total will be scaling up its fuels joint venture with Amyris. We maintain our Market Perform rating.

Molchanov highlights that expectations were “on” for Amyris to reach break-even in late 2014 on a cash basis:

“The clear-cut aim was for cash flow to finally turn positive in 2H14. Following 3Q’s cash burn, the updated timeline is for this milestone to be reached not right away but rather on a full-year basis in 2015. Lower near-term collaboration inflows are the main culprit for the pushout. He adds: “It’s worth noting that Amyris is deliberately running Brotas to avoid complications, particularly after the painful experience of 2011-2012. Margins are emphasized over volumes, and, as such, our model projects late 2015/early 2016 for achieving full nameplate capacity at Brotas.”

On the recent downturn of stocks in the sector: “The stock has, of course, shown weakness amid the oil price selloff – as have essentially all other companies in the broad category of petroleum substitutes. As a sentiment trade, it’s understandable, but as a practical matter, there is virtually no linkage between the prices of oil and farnesene/squalane. The current focus for Amyris – and plenty of others in the bioindustrial space – is high-value materials rather than commodity fuels, and until Amyris establishes a meaningful footprint in the fuel market – unlikely until 2017 at the earliest – the direct read-through from oil prices for production economics is minimal.”

Major Investors

Amyris’s stock is traded publicly on the NASDAQ stock exchange under the symbol AMRS.

Technology

Amyris has developed genetic engineering technologies that enable modification of the way microbes process (i.e., metabolize) sugar. By controlling these metabolic pathways, Amyris is able to design microbes, primarily yeast, to be tiny living factories that convert plant-sourced sugars from crops such as sugarcane or sweet sorghum into target molecules. Using its industrial synthetic biology platform, Amyris develops yeast strains designed to produce a broad range of molecules. The first molecule that Amyris is focusing on is Biofene, Amyris-brand farnesene, a hydrocarbon building block that can replace petrochemicals in a wide variety of products in the cosmetics, flavors and fragrances, consumer product, polymers, lubricants and fuel markets.

Feedstocks

Amyris can use a broad range of plant sugars to produce its products. Amyris expects to scale production initially using Brazilian sugarcane as a feedstock.

Products

Renewable fuels, lubricants, polymers and plastic additives, consumer products, flavors & fragrances and cosmetics.

Offtake partners

As part of its go-to-market strategy capitalizing on the flexibility of its proprietary molecule, Amyris has entered a number of off-take and co-development agreements with partners in specific, high-value vertical markets such as cosmetics, consumer products, flavors and fragrances and lubricants. Amyris has an offtake agreement with Shell for the supply of Amyris No Compromise® diesel, with M&G Finanziaria S.R.L. to incorporate Biofene® as an ingredient into M&G PET processing and with The Procter & Gamble Company for use of Biofene in certain specialty chemical applications within P&G’s products. Amyris also has co-development agreements with companies in a variety of markets, including with Total to develop renewable jet fuel and with Kuraray to develop polymers to replace petroleum-derived feedstock such as butadiene and isoprene, allowing Amyris to target high-value markets while ramping up production of renewable diesel.

Past Milestones

·         December 16, 2014: Amyris Renewable Jet Fuel Receives Regulatory Approval in Brazil

·         November 10, 2014: Amyris Launches Second Innovative and Renewable Ingredient for Cosmetics Industry

·         October 16, 2014: Amyris Receives Green Chemistry Innovation Award From U.S. Environmental Protection Agency

·         September 24, 2014: KLM picks Amyris-Total renewable jet fuel as climate takes center stage in NY and at the UN

·         September 9, 2014: Braskem Joins Amyris and Michelin to Accelerate the Industrialization and Commercialization of Renewable Isoprene

·         July 31, 2014: First International Commercial Flight Completed With Newly Approved Amyris-Total Aviation Biofuel

·         June 16, 2014: Total and Amyris Renewable Jet Fuel Ready for Use in Commercial Aviation

Future Milestones

1. Build and operate two additional productions sites in Brazil (SMA and Paraiso).

2. Remain on track for target production costs while meeting increasing customer demand.

3. Add C5 and C10 molecules along with new products and customer agreements.

Business Model

Amyris partners with biofuel producers to build new, “bolt-on” facilities adjacent to existing mills, instead of building new “greenfield” facilities, thereby reducing the capital required to establish and scale production, while simultaneously offering partners the opportunity to diversify and grow their product lines. Each of these steps in the production process – from the feedstock, through fermentation, to recovery and finishing – use processes that are already used by other industries today, enabling cost-effective scaling of production. Amyris’s streamlined production process employs an innovative take on established infrastructure and allows for lower start-up and capital costs and more efficient processes. In addition, Amyris’s partnership model incorporates cultivating long-term relationships with customers and co-developing ingredients with them to meet specific product development goals.

Competitive Edge:

Biofene provides a number of compelling advantages when compared to other renewable chemical and fuel alternatives, most notably that it is an oil. It can therefore be a drop-in replacement for many petroleum products, and it fits into the existing petroleum transport and distribution infrastructure. It is also an extremely flexible molecule that, with a few simple finishing steps, can replace petroleum derived chemicals in a number of markets, including ingredients in cosmetics, polymers, lubricants and consumer products, and renewable diesel and jet fuel. Amyris’s technology has been designed to be feedstock-agnostic and its platform is extremely flexible; Biofene is just one of thousands of molecules that Amyris can produce.

Research, or Manufacturing Partnerships or Alliances: Amyris is a member of the National Advanced Biofuel Consortium under the Department of Energy (DOE) and NREL as well as a recipient of an Integrated Biorefinery (IBR) grant from the DOE. Amyris has ongoing research collaborations in Australia, Brazil and the U.S., and is a founding member of the Advanced Biofuel Association (ABFA), Biotechnology Industry Organization (BIO) and Diesel Technology Forum (DTF), among others. Amyris has manufacturing partnerships with Glycotech, Biomin, Sao Martinho, Tate & Lyle and Antibioticos.

Category: 5-Minute Guide

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