Amyris cuts production target

I actually saw tweets last week about Amyris’ announcement to scale back its 2012 farnesene “Biofene” production but I wasn’t sure if I should wait further for the company’s fourth quarter earnings results, which will be out on February 27, before posting this.

However, given that I will cover NatureWorks’ bioplastic conference “Innovation Takes Roots” in Orlando on February 20, and the Jefferies Global CleanTech Conference on February 22 and 23, PLUS, Gevo and Solazyme will also post their quarter earnings results in the next few days, there will be lots more news piling up my draft box (Codexis‘ earnings result that came out on February 7 is already waiting in there…)

So let’s get on with this one.

 When Amyris announced its unexpected “not-so-positive”earnings guidance on late February 9, several investment firms downgraded the company such as Deutsche Bank, Morgan Stanley, Piper Jaffray, Raymond James and RW Baird. The company’s shares dropped 29% to $6.93 on February 10, well below it’s previous 52-week low of $8.77.

Amyris told analysts that:

  • It is scrapping its plans for its second industrial-scale production facility, which is owned by penicillin producer Antibioticos S.A. in Leon, Spain. Instead, Amyris will only complete its initial industrial-scale plant project in Piracicaba, Sao Paulo, where it has formed joint ventures with Paraiso Bioenergia and Grupo Sao Martinho. Last year, Amyris received $12.6m in financing from the Brazilian Development Bank for the Piracicaba project. 

  • In conjunction with the cut, it will no longer produce 40-50 million liters of Biofene the company projected for 2012. Amyris said it has produced over 1m liters of Biofene from three contract facilities -Biomin in Piracicaba, Brazil; Antibioticos in Leon, Spain; and Tate & Lyle in Illinois, US. The company set production target at 9m liters in early 2011 and was reduced to 1-2m liters in the latter months. 

  • Another in conjunction, Amyris will not be able to forecast positive cashflow this year and instead needs to raise additional equity financing. The financing is expected to close in the coming weeks, according to Amyris.

  • The company will also eliminate reporting production forecasts on its quarterly earnings, and instead will only provide production results and updates on their progress. 

  • Another big change is refocusing its Biofene commercialization in higher-margin markets like polymers, cosmetics, flavors and fragrances, and branded consumer products, instead of higher-volume markets such as biofuel and base oil. Development in the biofuel/base oil areas will instead be pursued through joint ventures with partners “capable of driving these products to scale,” the company said. Amyris, emphasized, however, that it is not stopping its relatively small scale biofuel production, where some of is already being used to make diesel fuel for buses in Sao Paulo (supply contract ends in 2012) and Rio de Janeiro (fleet test ends in July 2012)

“We showed conclusively that our technology does work at scale, but also learned that it takes time to translate from peak yield levels in the lab to maintaining those yields over longer operational periods in the field. Our priority is now to establish reliable production across our facilities. We need to retain flexibility in how we optimize between production volume, cost, customer demand and cash, rather than driving to deliver a predetermined production volume.” – John Melo, CEO.

More information will be shared next week during Amyris’ presentation at the Jefferies CleanTech conference as well as the company’s quarterly financial results on February 27.

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