Amyris, Inc.
Q1 2017 Earnings Call Transcript

Published: 16 May 2017

[Operator:]

Welcome to the Amyris First Quarter 2017 Conference Call. This call is being webcast live on the Events Page of the Investor Section of Amyris' website at amyris.com. This call is the property of Amyris, and any recording, reproduction or transmission of this call without the expressed written consent of Amyris is strictly prohibited. As a reminder, today's call is being recorded. You may listen to a webcast replay of this call by going to the Investor Section of Amyris' website. I would now like to turn the call over to Peter DeNardo, Director of Investor Relations and Corporate Communications.

[Peter DeNardo:]

Thank you, Krystal. Good afternoon and thank you for joining us this afternoon. With me today are John Melo, our Chief Executive Officer; and Kathy Valiasek, our Chief Financial Officer. Please note that on this call, you will hear discussions of non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures is contained in the financial overview slides of the company presentation, or the news release distributed today, which is available at investors.amyris.com. The current report on Form 8-K, furnished with respect to our press release is also available on our website as well as on the SEC's website at sec.gov. During this call, we will make forward-looking statements about events and circumstances that have not yet occurred, including projections of Amyris' operating activities, anticipated transactions we are contemplating and are closing, our strategic plans regarding potential transactions, and the anticipated financial impacts on our business and financial results for 2017 and beyond. These statements are based on management's current expectations, and actual results and future events may differ materially due to risks and uncertainties, including those detailed in the company's recent SEC filings and the Risk Factors section of its Annual Report on Form 10-K filed on April 17, 2017. Amyris disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise. Please refer to the Amyris SEC filings for detailed discussion of the relevant risks and uncertainties. Before we begin today, I'd like to note that included in our webcast is a slide presentation we will refer to in today's presentation. I'll now turn the call over to John Melo. John?

[John Melo:]

Thank you, Peter. Good afternoon and thank you for joining our call. Today I'll review our results for the first quarter, review the strategic and financial transactions we announced last week and provide our outlook for 2017. I'll start with review of our results which Kathy will cover later in more detail. The first quarter was the fifth consecutive quarter where we more than doubled our product revenue over the prior year. We are very pleased with the performance of our products and partnerships and the strong demand we are continuing to experience for each of our products. We have now introduced more than 10 products to date, that are each delivery more than $1 million in annual product revenue. And we have three brands that are on track from more than $10 million annual sales. We also have our first three [ph] molecule in pharmacy, where we expect our first molecule of $30 million or more in annual product sales this year and well on our way to $100 million in annual sales from that three molecules. We have the highest product revenue of any company in our sector and we are just started. Several of our competitors have indicated in their quarterly filings that they are struggling to get adoption or that they get weak demand from their customers. We are working hard to keep up with our customer demand with each of our key segments and each of our partners increasing their 2017 orders during the first quarter. I'll cover this in more detail and also provide more detailed guidance later during our call. Our collaboration payments also remained strong over first quarter of 2016, but as we said before are choppy and not very predictable by quarter. Our partnerships and each payment have been consistent on a yearly basis and are a key differentiator for our business model over our competitors. We expect these payments to be slightly over the high end of our $50 million to $60 million range this year. These partnerships and their relative payments are a strong example of the market leadership we've demonstrated with our technology platform. We deliver solutions to our partner supply channels. A key partner mentioned to me in the last several weeks, you are our product innovation pipeline. We appreciate the trust our partners have in us, this trust comes from being the fastest to market with predictable timing and cost to engineer, scale and produce better products that deliver better economics and product differentiations to our partners. This is very different than some of our competitors doing business with related companies and restructuring their contracts to drive revenue. Our collaboration revenue comes from market leaders where we are delivering products that help them gain competitive advantage and where we're both pointing [ph] to the value share arrangements in our collaboration agreements. After the quarter ended we announced our most material partnerships to-date in terms of alignment with our strategic direction and growth opportunities. Our partnership with DSM includes production at world class -- at our world class fermentation factory, scaling strategic products and developing products for health and nutrition segments. This partnership is the direct result of our demonstrated market leadership in nutraceuticals and is structured to provide Amyris with a long term financial stability both our partners and investors are seeking. This is the most material partnership we've entered into since our IPO and in relationship with OPaL [ph] before the IPO. We had referenced this partnership during our last call and this is a great example of the choppiness in our collaboration revenue. We expect it to close this quarter -- to close this deal before the end of the quarter. It took a month longer structure, this is more long term and very product focus. We will deliver the value we expected from this partnership starting later this year. Our product sales increased 164% over the first quarter of 2016. Our product sales will deliver more revenue in our collaborations this year for the first time since we decided to exit the ethanol trading business and shift away from renewable fuels. We'll more than double product revenue this year to over $60 million and are on track to deliver over $160 million of product revenue in 2018 with most of this coming from current partners and products where we are experiencing significant traction. Let me explain in more details the key drivers of our revenue of what you can expect. First, we recorded record quarterly Biossance sales following the grand successful launch into Sephora. Biossance is delivering high growth. Sephora told us this is one of the most successful independent brand launches they've ever experienced. This is the business that generated about $500,000 in total retail sales in 2016 and is on track for over $10 million this year and could be $20 million in retail sales for next year. This revenue has little impact on our production capacity. We enough production at straight lane to more than meet this retail revenue without any stress on current capacity. We really like this business and it's fully in our control. It has excellent gross margins and it's making a real difference to the health of our customer's skin and the health of our plan. It's also an easy business to find the customer and I like that. The customer for this business is everyone over 20 years old that cares about healthy skin. We are just scratching the surface of the potential for this business. We are in less than 40 Sephora stores, we are in the sephora.com store, the vitalsignes.com store and have several shows on the home Shoppe network. Each of these channels is performing very well and our focus is additional reach to consumers through more channels and more doors. As a result of our strong channel partnerships and early retail success we have one of the lowest marketing cost in skin care today. We are investing less than $0.40 for every dollar of revenue and have very strong customer loyalty re-purchase rates. Customers, consumer love our product and some of our products we can't make fast enough to keep in stock. We are making a product that truly does make your skin healthier. We are about real science behind the product and not just another brand store. Our history is about better help and access to the best treatments. This is a good example of the real impact of our technology. The second big driver of product revenue growth is our pharmacy for use to make Vitamin E oil. This is a partnership we've entered in China and is performing better than all of us expected. This represents around $15 million of our increase in product revenue for 2017 over 2016. And it is as expected to represent over 30 million of 2018 product revenue. This is a great example of white cost leadership and product performance matters. Using [indiscernible] as the raw material to make Vitamin E results in over 30% cost advantage and better performing product and process than the alternatives. This has provided our partner with a significant competitive advantage. Our partner has indicated a desire to purchase over 90% of our [indiscernible] production for the next two years as they expand their current capacity for Vitamin E oil. We are considering this [indiscernible] as we consider the highest value opportunities to use our existing manufacturing capacity. This is another critical point of the stipules about our business in comparison to many competitors. We are an optimization and value driven business, not in volume and utilization business. We generate more revenue and create more value by using our limited capacity to make the highest value products and to access the best value share opportunities, not by making the most volume of a single molecule. We can generate anywhere from $50 million to $160 million in product revenue and value share using our current capacity based on the products we chose to make, and the amount of [indiscernible]. Our third value driver for us. Arc [ph] fragments and active cosmetic ingredient business continues to perform very well. We expect 50% to 60% revenue growth in this business this year and also the commercialization of three new products. This is our best year ever in terms of new products and a trend we expect to continue for the coming years. Our two existing products continue to perform better than expected and our customers continue to expand products in development with us. In addition to our 2017 revenue as noted on our last quarterly call and in recent announcements we continue to execute on entering the $90 billion sugar market with healthy sweeteners that are focused on replacing sugar through our technology. Based on the progress of our development work, we expect industrial production of several leading healthy sweetener products in 2018. We believe we're on track to be the low-cost leader of natural white sweeteners with low calories that are substantial and naturally sourced. We're excited about the partnerships in this segment and the early response from product testing. We expect this segment to represent over $50 million of 2018 product revenue. In addition to these products in our core focus markets our performance materials through Kuraray for the tire industry and through Novvi for industrial lubricants are also performing very well. Our Kuraray business will be doubled what we expected this year as a result of additional tire manufacturers adopting our liquid Farnesene rubber and the better than expected success from our fast tire partner launching. And finally, last week we took another significant step towards funded our company through sustainable self-funding and simplifying our balance sheet. The financing and debt reduction transactions to be detailed by Kathy was born out of Royalty SM approaching us with a desire to have access to our technology which supports DSM's strategic markets and help nutrition and materials. For Amyris, DSM's channels, end market access and keen understanding in selecting the right products for the animal nutrition, human nutrition and consumer health markets provide significant strategic value. This new relationship is expected to be relatively similar to our partnership with Nenter where we've experienced quick success in growing with them in the nutrition market. We expect to replicate that success with DSM and leverage each other's key strengths to grow in a high growth global markets for animal and human nutrition as well as consumer health. In summary, we're pleased to have put Amyris on much solid financial footing, in fact the strongest [indiscernible] the company has been on since our IPO and we have lowered our debt by one third while gaining the leading company in health and nutrition as a leading shareholder and strategic partner. So, now let me summarize. Product revenue matters, it is the indication of how well our strategy is working and the impact we can have on the health of the planet. Our product revenue is predictable and is growing at a better rate than we expected; we are the leading product revenue generator in our sector and we're not having an issue with customers and consumers wanting our products. Collaborations are the key to our product success. Our partners select products that are strategic and provide them with competitive advantage. The revenue from collaborations is choppy quarter-on-quarter, but predictable over the full year. We've the leading product and partner portfolio in our sector and it is and has been delivering significant value. The sweetener opportunity is the significant step up for Amyris. DSM is a deep strategic partner that understand and is the leader in health and nutrition markets. The sweetener business and the DSM partnership provide us with significant competitive advantage and can be the real difference maker for our technology platform having deep impact on the health of our clients. Our competitive advantage comes from having the leading technology platform in our sector; we designed and engineer chemistry for a healthier planet. We use nature's biology to produce to deliver lowest cost products that are strategic to our product mix. We are establishing strong leadership positions in large markets that are probative in every day consumer lives. Our focus on healthy nutrition, personal care and performance material markets and our mission to make better products for healthier planet is starting to really deliver. Each of our key partners has increased their orders in the first quarter. Now let me turn to Kathy for a detail review of our financial results and then I'll provide our outlook for 2017. Kathy?

[Kathy Valiasek:]

Thank you, John, and good afternoon everyone. We are pleased to have recently announced some key strategic and financial transactions that we have mentioned on our last earnings call. This inquisitive series of agreements were up to 95 million in equity financing led by Royal DSM and including other investors, some of which have previously engaged in equity and/or debt investors in Amyris. Tranche [ph] one of approximately 47 million closed this past Thursday and the second tranche of up to 48 million which is subject to approval by DSM's managing board is expected to close within ninety days of last week closing. This second tranche is also led by royal DSM and will include other investors. Of each closing DSM will gain one board fee. Since our last call we have improved our cash liquidity in our balance sheet and are in the process of reducing our debt by approximately 75 million, deploying less than about 20 million in cash to achieve the reduction. Aside from our term loans for our facilities we now have current maturities of approximately 6 million. Together with the debt reduction and the cash from the closing of tranche two we feel we are well on our way to sustainability. Now let me take you through to our first quarter results following which I'll detail the financing we announced last week and how it effects and simplifies our adjustment capital structure. First quarter revenues were 13 million compared with 8.8 million for the first quarter of 2016. While collaborations were down somewhat due to the timing of inflows, the top line performance due to continued growth in product sales. Product sales were 8.3 million up 154% over 3.1 million for the first quarter of 2016. This increase was the result of Vitamin E sales which continue to ramp, liquid [indiscernible] shipments to our [indiscernible] as well as the shipment to one of our fragment partners and growth within our [indiscernible] related sales. Collaboration revenues of $4.7 million were about $1 million lower than the year ago quarter due to the timing of milestone inflows and the delayed signing of new partnerships. We anticipate that Q2 2017 revenue will increase sequentially and quarter-over-quarter driven by anticipated strong product demand and milestone based recognition of [indiscernible] collaboration revenue. And we anticipate the same level of revenue ramp from Q2 through Q4 as we experienced last year. Adjusted gross margin, which excludes depreciation inventory position and excess capacity charges was 1.3 million compared to an adjusted growth margin of 5.1 million to the same period a year ago. This was impacted by our need to run the [indiscernible] plant through what has historically been a seasonal shutdown period to the plant every year in Q1 due to the rainy season and at the same time the annual shutdown of the sugar mill adjacent to our plant. For the third time we needed to run straight through the season in order to maintain customer demand and ship on time. As a result the VHP [ph] molasses at higher cost than sugar were used in addition to higher cost incurred due to the rainy season. We expect our adjusted gross profit and margins to dramatically improve for the second quarter as we're now out of the seasonal issue that impacted cost. I will also note that our anticipated balance share on products shipped in Q1 somewhat offset adjusted gross loss reported for the quarter as we achieved recognition for the value share. For the first quarter of 2017 selling, general and administrative expenses were 12.8 million compared with 12.3 million for the same period last year. Here we continue to keep these expenses in check despite the 47% quarter-over-quarter increase in total revenue. This was offset by higher R&D expenses that came in at 14.8 million compared with 11.9 million for the same period last year due to collaboration activity with DARPA, Department of Energy and Ginkgo Bio works. Adjusted operating expenses representing combined R&D and SG&A expenses excluding stock based comp and depreciation and amortization were 24.1 million, this was up from 19.9 million for the year ago quarter primarily reflecting collaborations related R&D activity. Net loss for the first quarter of 2017 was 37.4 million or $0.13 per basic and dilute shared compared to the same period last year of 15.3 million or $0.07 per basic and $0.12 per diluted share. The significant driver of the quarter-over-quarter increase in net loss was tied to much lower gain from the change in fair value of derivative in Q1 of 2017, up 2.3 million compared with 21.7 million in Q1 of 2016. Adjusted net loss for first quarter 2017 excluding these items and stock based compensation was 38.2 million or $0.13 per basic share. This compared with an adjusted net loss of 34.7 million or $0.07 per basic share and $0.17 per diluted share for the same period a year ago. Now let me take a moment to review our debt at March 31st as well as the impact of the tranche one financing and debt conversions that we announced this past Thursday. After that I'll take you through what we believe will be a much improved capital structure once we complete our planned second tranche financing. As previously mentioned we have been able to reduce our debt significantly since our last call. In connection with [indiscernible] transaction we had convertible debt holders convert approximately 7.1 million from total amount of debt and also certain shareholders converted their loans to equity of 29 million in principle. Also since March 31st we had debt holders convert 24 million into equity at conversion prices ranging from $1.14 to $3.74. Additionally, we paid cash of less than 20 million to the entire certain short term note. The net reduction in process related to these transactions totaled about 75 million or overall about 30% reduction in debt. We have also extended the term of one of our notes to 2018 in the amount of 3.7 million. [Indiscernible] term loan for our facilities we now have current maturities of approximately 6 million. The net significant debt maturity is not until Q4 of 2018. As we announced last week we closed of approximately 47 million in equity financing, 25 million coming from our new long term strategic partner DSM and 22 million from other financial investors. The transaction structure was fairly complex due to NASDAQ rules allowing for sale of equity at a discount in excess of 20% only with a shareholder vote which we expect to hold during the first week of July. The preferred stock holding and financing will be automatically converted to common stock within 90 days of shareholder approval. The transaction was priced at a 20% discount to market. Discount and used transactions that fairly typical, especially within our industry and given the recent volatility in our share price. Together with our anticipated revenue growth a cash from tranche one of our recent financing and the expected cash from tranche two and the progress we have made to restructure and reduce our debt, we feel that Amyris is now on a path to sustainability. Looking forward we are encouraged by the progress we have made towards strengthening Amyris to create a better financial foundation for our rapidly growing company. Now I'll turn the call back to John.

[John Melo:]

Thanks Kathy. While we still have a lot of work to do we've made significant steps to solve legacy issues regarding our capital structure and our debt overhang. This will simplify our company, reduce interest expense and provide greater clarity to our stakeholders and partners that we engaged with on really moving forward to long term product innovation. This will also enhance our ability to continue our growth fast and to lead the company in the sector for 2017 and beyond. The [indiscernible] of our technology platform is known and our ability to mutually succeeded with our partners is evident by our strong relationships with partners like [indiscernible], DSM, [indiscernible] and many others. This reputation is why partners like Mentor and DSM have approached us and it has and will continue to support for the growth for Amyris. Let me now turn to our outlook. Our product revenue has delivered five consecutive quarters of doubling year-on-year revenue growth and we expect this strong growth to continue and to be predictable. We expect product revenue for 2017 up over $60 million and over $160 million in 2018. We expect collaborations for 2017 to be in the high end of our $50 million to $60 million annual collaboration revenue range. The collaboration revenue is choppy and not predictable by quarter. That is expected for full year delivery for 2017. We expect total revenues of between 115 million and 125 million for full year 2017. This equates to over 100% product revenue growth over 2016 and another strong year of performance with our collaboration partners and the resulting payments from these partners. For 2018 we expect total revenue to exceed 210 million. The majority of our product revenue growth between 2016 and '17 is derive from our sweetener [ph] products, Vitamin E oil, and the values share of our ingredients business. All of our other products are also growing, but have a less material contribution to our business. For 2018 we expect continued material growth from these key products. The additional benefit from the three new products we are launching this year in our ingredient business and the first year of product revenue from our sweetener business. So in summary first we are demonstrating clear leadership in our sector. We're delivering material product revenue growth our competitors are not. Secondly our product revenue is predictable and our collaboration revenue is choppy quarter-on-quarter. We are the leading partner and product portfolio in our sector and year-on-year our collaborations are delivering. The best of our business model are value share components is just starting to drive cash for the company. We generated less than $1 million last year in value share, for 2017 we'll generate between $7 million and $10 million and for 2018 we expect $30 million to $40 million in value share. This is pure margin from the sharing of the cost benefits we delivered for our customers. Thirdly, we now have three significant step out opportunities in our portfolio. Number one, our skin care line is delivering products consumers want, we are selling out our stock. It is a product line where we control our destiny. Second, Farnesene is delivering a real breakthrough molecule; it is on track to become our first $100 million molecule annually over time. Thirdly, key partner in health and nutrition with DSM. We are very excited about the depth of knowledge and the success they have had in the food and nutrition markets, connectively our best in class technology to combine for accelerate growth in this segment. Lastly, we've the best cash position since our IPO and the lowest net debt that we've had in over three years, we're well positioned to be self-sustaining from a cash position and a much more attractive partner for our collaborators and investors, there is no other shoe to drop. Thank you for your continued support and your continued help in making the world healthier. We've succeeded in [indiscernible] becoming a successful fuel -- renewable fuel company and now have the necessary traction to thrive and have the positive impact that we aspire for a healthier planet. I'd now like to open the line for any questions you may have. Krystal can you help us?

[Operator:]

Thank you. [Operator Instructions] And our first question comes from Sameer Joshi from Rodman and Renshaw. Your line is open.

[Sameer Joshi:]

My first question is that you repeatedly made the comment that you're differentiated from -- and you've seen success in your products that your competitors have not. What do you attribute this to, like what is the reason that you're seeing success and whereas others are not being able to capture market share?

[John Melo:]

I think it is early Sameer. So, I hope -- hold hope and I think the industry in the world needs all of our competitors to succeed in getting their products to market. I think our difference is, we've been doing this for ten years; we've over $1 billion invested in the company and we built a platform that is now a very predictable; we're not a single product company. We basically take what customers need for their business, we engineer it, we scale it and we produce it. The fact that we've a predictable platform, the fact that we're now engineering products for our customers in less than one year, at a cost that's less than $900,000 per molecule. Those two data points I think are step outs in our industry and we are not done yet. I mean there is still a long ways to go. I think the other part is the factory, the fact that we can actually tell the customer, we are going to engineer, producing and deliver it to you is something no one else in the industry has been able to achieve. So I think the fact that the platform is what it is, its predictable, its low cost and delivers what customers want, and the fact that our factory can churn those products and deliver really takes us out of the group of competitors that I recall companies doing science experience and [indiscernible] companies that are actually delivering real commercial success. If you look at product revenue, the only competitor that was even near us, was Intrexon and they delivered less product revenue than we did in the last quarter and they have flattened out with their product revenue. So I look at that and think that is a perfect example of a company to have lot of science, lots of experiments, with no real traction in delivery products to market.

[Sameer Joshi:]

Speaking of production capacity, Brotas 2 was ground broken in January, can you give us an update on the progress of that build out?

[John Melo:]

Sure than development is going very well. We are on track to have the plans completed build out by begin this 2018. I would expect in the fourth quarter of '18, I would expect first production in the first quarter of '19.

[Sameer Joshi:]

And the outlook you have given for 2017 and some of it for 2018, it can all be achieved do you think the existing capacity at Brotas right?

[John Melo:]

Yes, we will be using -- we are using this year a little bit and more next year, contract sites to meet all of our demand. So basically, when you think of it is contract sites will be a bridge to Brotas 2 in 2019. And we identified those and are already starting to detect trends for some of those contract sites.

[Sameer Joshi:]

Just one more before I move on to the debt transaction. Can you give us an update on the noncore assets? Are you getting any revenues or generating any revenues from the "noncore assets" that you are holding for sale?

[John Melo:]

One of the things that happened is one of those noncore assets, that we classified as noncore has become a significant revenue driver for us. So I would say the only noncore that we have now is already something that we have started bringing in other investors too and we will continue, which is really our [indiscernible] joint venture. And as a equate business we think lubricants are great future, especially the newer lubricants but we think our role in that business is purely as a supplier and we are seeing significant demand and interest from industrial companies wanting to invest and become partners in that business place. We did that already last year, we will continue to do that this year, and as a result we will continue to take down our ownership and just focus on being a supply for that industry.

[Sameer Joshi:]

And you mentioned sweetener product do you think it will be introduce in 2018 and you will have some revenue from that in 2018?

[John Melo:]

We expect about 50 million or so in revenue from sweeteners in 2018; that is a partner project so we're not saying that because we hope to fill the market ourselves, we actually are partnered with people who are very integrated with the market, have existing supply agreements and are help against to get the product soon and ensure that we're the best in class.

[Sameer Joshi:]

Just so a clarification from Kathleen on the debt, so 75 million of debt is being reduced, only 20 million cash is being used, so roughly 65 million is converted or retired, how should we look at it that remainder 55 million?

[Kathy Valiasek:]

55 million to 60 million is correct.

[Sameer Joshi:]

And has it already occurred or is it -- will it occur after the 90 day second closing? Sorry elimination of --.

[Kathy Valiasek:]

This is all already occurred.

[Sameer Joshi:]

Oh, so the 75 million debt is either converted or repaid already?

[John Melo:]

Correct, correct.

[Operator:]

Thank you. [Operator Instructions] And our next question comes from Jeff Osborne from Cowen and Company. Your line is open.

[Jeff Osborne:]

Just a couple of questions, I'm trying to sum the numbers that you gave to get to the 60 million, So if I heard you right, for product revenue, you're talking about 10 million this year in Biossance revenue. 20 million, I think I heard you see in Vitamin E and then on the value share for ingredients, I think I heard 7 million to 10 million, so I think I'm missing $20 million to $25 million, can you just help me where would that be coming through?

[John Melo:]

Yes, I'll give you the numbers, we've may have -- as giving you a little bit more ranges. So let me give you the big buckets, flavors and fragrances, 14 million and this is a purely product revenue right Jeff? So, flavors and fragrances 14 million, skincare around 20 million because you covered Biossance, but skincare includes Biossance and Neossance, where it's now called Afranova [ph] our JV with the Japanese, Nikkol Chemical. And then the Vitamins which is about 24 million for the year. So, before you get to any of our industrial products, you're in about 56 million in product revenue for '17. And then the rest will get us bit over to 60 million because it's the polymers, the Kuraray, it's the Farnesene supplied to Novvi and then some other smaller businesses that we have, the major of them the 56 million really covers the heart of our business. Skincare, [indiscernible], and fragrance.

[Jeff Osborne:]

And then I imagine it somewhat confidential, but the 50 million to 60 million in collaboration funding, can you just kind of go through in rank order the major partners to get that, obviously came in little lower than we were expect in Q1, you mentioned that the timing is difficult to predict, but can you just walk through who the top five guys are in kind of order or size or magnitude? And then just any color from modeling, if that's based on the milestones that you expect to achieve, do you think that's more back end loaded in the second half of the year or is there one big item next quarter, how should we be thinking about that please?

[John Melo:]

Let me try to take you through it, and I want to highlight Jeff, we also more are bit disappointed. We had everything in place for what we expected in the first quarter and one of our partners Nikko Bioworks fails to make the milestone payment to us and that’s really the big difference we have in the first quarter. So from a delivery standpoint and a technology partnership standpoint we really did everything we expected in the first quarter. Just wanted you to know that that, it's not because of a technical mix it's actually a failed payment that we are working through. But let me take you through what the top looked like, so think about Farnesene, DARPA, [indiscernible], Pure Circle and DSM being our five top collaboration generators and think about all of those being fairly needful. There is a couple outliers, but they are all north of 5 million with exception of couple of outliers.

[Jeff Osborne:]

And then any thoughts on timing just from a modeling perspective should we backend load the year or did you have a line of side that maybe Ginkgo comes in 2Q and some other bigger chunky or checks?

[John Melo:]

I would say fourth quarter is going to be good, but I think the second and third are going to be balanced and the second and third, one second Jeff, you could think of the second and third each around the 10-ish level in collaborations and then obviously a pretty big step out in the fourth quarter, really as we become really active with DSM.

[Jeff Osborne:]

And then I know you highlighted that you produced for value and not units or utilization levels, but that being said, can you just talk about what the utilization is in Brotas currently? I think I heard you say you took in underutilization charge, but I just wanted to understand how you are looking at running the plant? And then also I have a curiosity how was -- I assume you switched over to Kane and no longer using molasses how was that change over in feed stock?

[John Melo:]

I'll let Kathy talk about the utilization charge. Let me give you both answers how utilization is looking and then specifically what happened with the switch over to cane syrup. The utilization is, we are operating around the clock and getting as much up time as we can, the only time we are down on the plan is when we are switching from one molecule to another. And each molecule switch is call it on average about 10 days or so, five on the front five on the backend and that is to serialize a plant for running another molecule. So that’s actually -- when we think about downtime of the plan it is all to do with molecule switching, I think obviously that matters a lot to us, molecules were switching too are very large revenue generators but not significant volume. But that’s point one is like when we run pharmacy we are running pharmacy at 80%, 90% up time. When we're running each molecule running that way what brings upside down our utilization is really when we switch molecules. So just keep that in mind. I think for the question on the feedstock we've switched over to the syrup, everything we've seen so far in the switch has gone very well, back to what we expect. So I don't expect any major issues and as you've noticed sugar prices are back where they should be, so this should be a very good year for us as far as unit costs are in the -- or during the season.

[Jeff Osborne:]

And then the -- Kathleen do you have a comment on the underutilization charge or so?

[Kathy Valiasek:]

Well it's just say about quarter-over-quarter, so much less than it was in Q1 '16, [indiscernible] that as you said that we have to run full stop. So it was relatively small compared against 2016.

[Jeff Osborne:]

And then the last one I had is just a clarification, the restatement of Q4 revenue, how much of that flow through in Q1 and if it didn't flow through in Q1, how do we think about that flowing through the P&L in 2017?

[John Melo:]

It was zero in Q1 and that the numbers I gave you Jeff don't include any of that flowing through. I look at that as a bit of a gift; it's not something we had planned for and therefore the revenue that comes in from that will just be a move from what we had in '16 to '17. And we expect that adjustment to come through in the second quarter. It will be incremental to what I gave you as are view for second and third quarter collaboration revenue

[Jeff Osborne:]

And that [indiscernible] again is 9 million to 10 million, in round numbers?

[John Melo:]

It was 10 million.

[Operator:]

Thank you. [Operator Instructions] And we have no further questions from our phone line. So, I'd now like to turn the conference over to John Melo for any closing remarks.

[John Melo:]

Thank you, Krystal. We promised you in our last call that we expected to complete certain strategic and financial transactions that will have a material impact on our business. Well change is difficult at times, these subsets provided both capital, reduced the complexity of our capital structure, already reduced our debt by significant amount and improved our balance sheet. We've not yet started to communicate the commercial value of the relationship with DSM and that will be forthcoming as DSM and us work through the specifics on products time-to-market and what we will end up doing together. We could not be more excited and see it as a significant step forward for our company as well as a healthier planet. I'd like to note that Amyris will be hosting its first Annual Biotech Summit tomorrow at our headquarters here at Emeryville. The summit includes -- will include investors, partners and key guest speakers and it promises to be an exciting event showcasing our Biotech is disrupting high growth markets. The primary portion of this event will be video cast live and we hope many of you'll have a chance to view the program we've planned. In closing I'd like to especially thank our partners and our investors for their key support in aligning Amyris on its mission to support a healthier planet for sustainable better performing products. Thanks again and have a great afternoon.

[Operator:]

Ladies and gentlemen thank you for participating in today's conference. This does conclude the program you may all disconnect. Everyone have a great day.