Amyris, Inc.
Q4 2013 Earnings Call Transcript

Published: 26 Feb 2014

[Operator:]

Welcome to the Amyris Fourth Quarter 2013 Conference Call. This call is being webcast live on the events page of the Investors section of Amyris’ website at www.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 Investors section of Amyris’ website. I would like to turn the call over to Joel Velasco, Senior Vice President.

[Joel Velasco:]

Good afternoon. Thank you for joining us to discuss highlights of Amyris’ fourth quarter and full year 2013 financial results, quarter and financial results, our recent progress and business outlook. With me today are John Melo, our Chief Executive Officer; and Paulo Diniz, our Chief Financial Officer. On the call today and on this online webcast, you will hear discussions of non-GAAP financial measures. Reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is contained in the press release distributed today, which is available at 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. We will provide certain forward-looking statements about events and circumstances that have not yet occurred, including projections of Amyris’ operating activities for 2014 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 Amyris’ quarterly report on Form 10-Q filed with the SEC on November 5, 2013. 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 discussions of the relevant risks and uncertainties. I will now turn the call over to John Melo.

[John Melo:]

Thank you, Joel. Good afternoon and thank you for joining us today. In 2013, we delivered our best financial results, technology progress and operational performance to date. As we have done in prior quarters, let me begin with the review of our activities, namely successful technology and production ramp up, the progress in expanding our renewable products portfolio through sales and collaborations. Paulo Diniz will then review the past quarter’s financials in greater detail before we provide some guidance for 2014 and our outlook for the next few years. Let me start with our farnesene production at Brotas, located next to the Paraiso sugarcane mill in Brazil. In December, we completed one year of operations at Brotas, our first industrial biorefinery. During the year, we successfully scaled our production and demonstrated that our farnesene strain can perform as well at Brotas as in our labs in California. As you may recall in mid 2013, we ramped up production in all six 200,000 leader fermenters, utilizing our second generation of farnesene producing strains. The second generation farnesene strains are delivering productivity at scale beyond what is theoretically possible for our first generation farnesene strains. And while we have more to go to achieve our target efficiencies, the combination of continued technological and operational improvements allowed us to reduce farnesene production costs from $12 per liter at the beginning of the year to approaching $4 per liter in the final months of the year. By producing about 3.5 million liters of inspect high quality renewable farnesene, we believe we have put to rest any lingering doubts about our ability to manufacture renewable products. Going forward, we expect further unit cost reductions, though for competitive reasons and the desire of our partners, we will no longer provide updates on per unit production costs or volumes. We calculate that we finished the year with the average of our quality runs resulting in about $3.50 per liter production cost. This provides us with confidence to underpin our 2014 plan. At Amyris, we know that first year scale up is the toughest and we are glad to have the first year of learnings behind us. As we indicated in our prior call, we have taken advantage of our planned annual preventive maintenance during the first quarter to make some performance improvements through the Brotas plant. As of today, we have completed the maintenance work and are ready to restart farnesene production with low cost syrup when the sugarcane harvest begins in mid-March. Of course we built sufficient farnesene inventory during the second half of 2013, which has ensured our renewable product sales are not affected during this period. In addition to our progress with farnesene, during the fourth quarter of 2013 we completed our first industrial scale campaign to produce our second commercial molecule, a fragrance oil for our partner Firmenich. During the final months of 2014, we completed successful scale up and industrial production and since the quarter end, shipped significant volumes of this high value fragrance oil which is being marketed by Firmenich to leading brands around the world under our existing agreement. This versatile and high value fragrance oil produced through fermentation of sugars can be utilized across many consumer care applications from laundry detergents to high-end fragrances. Later this year, building on the successful scale up of production at a specialty contract manufacturer and thanks to some of the improvements we are making at Brotas today, we planned to produce significant additional quantities of our fragrance oils at our own biorefinery in Brotas. This will support our customer needs for greater volumes, while driving significant additional cash margins from our production assets. Going forward, you should not think of Brotas as a farnesene only plant but a true biorefinery to produce fermentation renewable products from sustainably sourced sugars. By using Brotas as a multi- product manufacturing facility focused on production of high value products that our customers need, we believe that we can achieve a cash payback of the Brotas plant in about 2 more years. Put simply, we expect to generate cash margins of about $10 million to $15 million in 2014 and another $40 million to $50 million in 2015 from Brotas, based on our current plans and existing product pipeline. We are realizing our vision of industrializing synthetic biology. We are engineering niche that is producing molecules that solve our customers’ biggest supply challenges. We have successfully scaled to refermentation molecules, four farnesene derivatives and have more than additional products in our pipeline that are contracted with some of the world’s leading brands. Moving from production to our revenues or sit differently, our inflows, we continue to deliver on the two pillars of our business model

[Paulo Diniz:]

Thank you, John and good afternoon everyone. Let me highlight some key points for our fourth quarter 2013 results, as well as our full year performance. Looking at revenues from renewable products and collaborations, we finished the fourth quarter of 2013 with total revenues of $16.4 million. This compares to $5.9 million in the fourth quarter of 2012. For the full year, our total revenues reached $41.1 million, which compares with $34.9 million in 2012, which excludes ethanol and ethanol-blended gasoline sales, our business we transitioned out off in 2012. To add a bit more detail, fourth quarter revenues from our renewable product, Squalane renewable diesel and farnesene for performance materials applications were $4.5 million, which is 60% higher than our renewable product revenues in the fourth quarter of 2012. As John described, this fourth quarter sales amount does not include an uptake agreement for 1 million liters of renewable fuel that was signed in December which we’re using nor does it include revenue associated with shipment of our new fragrance oil that arrived at Firmenich in early January of this year. Including these two transactions we have proved as above $12 million for the year so consistent with our guidance. Nevertheless on a GAAP basis, our renewable product revenue for 2013 was $15.8 million, 6% higher than our renewable product revenue in 2012. The other key element of our revenue is grants and collaborations which on a GAAP basis was $10.9 million in the quarter compared to $2.8 million in the same period of 2012. For this full year, revenues from grant and collaborations reach $25.3 million compared to $24.1 million in 2012. However looking at grants and collaborations on a non-GAAP cash basis which is half when we manage our business, cash inflows reach at $54.6 million for the year compared to $61.9 million in 2012. It’s worth noting that in early January 2014, we received an additional $4.5 million of collaboration cash inflows, this collaboration inflows were invoiced by what we received at the end of 2013 and we have got our total cash from collaborations for 2013 to approximately $60 million in line with our guidance. The big differences between the GAAP and non-GAAP collaboration figures are; one, time of revenue recognition and two the total collaboration cash which is treated (inaudible) GAAP purposes and through December 2016 and we are going to probably [execute] final go, no go decision. As John discussed collaboration inflows remain an important pillar of our business model, these inflows provide us with up corresponding to be a strong technical partnership intended to result in product consolidation. Collaborations also generate a long term cash soon, as we capture a portion of the gross margin from the value chain of the product. I will turn now to our cost of goods sold, which includes a $12.1 million for the fourth quarter of 2013 compared to $5.4 million in the same period of last year when we exclude loss on purchase commitment and write-off of production asset. The increases was primarily driven by higher volumes sold and manufacture cost associated with the initial production of our second molecule, our first fragrances oil which was produced at a contract manufacturing facility in the fourth quarter. As discussed in our press release that we also note that we achieved a non-GAAP gross profit of $38.2 million in 2013 representing a 54% gross margin when our total non-GAAP revenues for renewable product and collaborations compared to a gross margin of 33% in 2012 on a non-GAAP basis. Moving on, I must emphasize that financial discipline remains our top priority for Amyris and we continue to focus on reduce our overall operating expenses. Our combined R&D and SG&A expenses were [$27.4] million in the fourth quarter compared to 35.5 million in the same period of last year. For the 12 months our combined R&D and SG&A expenses of $113.1 million for the year were reduced by 26% compared to $152.3 million in 2012. On a non-GAAP basis that is excluding all cash items our combined operating expenses were $84.5 million in 2013 compared to $113.2 million in 2012, also a 25% drop. You can see in our press release we incurred a GAAP loss of $139.4 million for the quarter or about $1.83 per share. However it is very important to note that this number includes $110 million of non-cash or unrealized loss in the quarter from changes in deferred value of derivatives related to some of our outstanding convertible notes, which was a consequence of the appreciation of our stock price in December. When we exclude this loan loss is non-cash loss and other non-cash items such as depreciation, amortization and stock-based compensation our non-GAAP net loss was $19.6 million for the quarter or a non-GAAP loss of about $0.26 per share. Turning to our balance sheet. Our cash balance at the end of 2013 was $8.3 million which compares with a cash balance of $30.7 million at the end of 2012. However it’s important to note that we received $28 million in mid-January from the second tranche of our convertible note financing when added by Temasek. And as one would expect due to our financing activity during the year we ended 2013 with a debt position of $152.1 million which includes the convertible notes issued earlier in the fourth quarter. Also important to note is that the balance of $134.7 million of derivative liability is mostly the result of embedded derivatives in our convertible notes with our new stockholders TOTAL and Temasek. Let me now focus on our 2014 outlook, before turning the call back to John to discuss our long-term outlook. Similar to 2013, we continue to estimate a modest level of capital expenditure for the year, with the target of less than $10 million. These investments will support our strategy to streamline our Brotas plant to accommodate additional molecules as well as enhance our research and development capabilities. We are targeting renewable revenues and collaborations inflows of $100 million to $150 million from grants and collaborations and renewable products for the year. John will detail our strategy to achieve these cash inflows in 2014 and beyond with a critical piece of the strategy is to focus on products that can generate positive margin for us. We remain committed to our heart on financial discipline and our planning for cash operating expenses for R&D and SG&A to be less than $85 million. Again for farnesene, this $85 million operating expense exclude the cash items, such as depreciation, amortization, stock based compensation and loss on expose of fixed assets. Our overall target is for Amyris to keep our robust non-GAAP gross margin of over 6% and to become EBITDA positive during the second half of 2014. In summary, based on our 2014 business plan, which targets; one, blending renewable product sales and collaboration inflows to build out the robust topline; two, operating our large scale manufacturing facility consistently and cost effectively; and three, remaining cost conscious by embracing a better financial discipline. We are confident of our ability to meet our goal and challenge of becoming cash flow positive from operation in 2014. I return the call back over to John for some additional comments and to open the call up for questions.

[John Melo:]

Thank you Paulo. Our technology and scale of success in 2013 enables us to focus on profitable revenue growth. Production volume was an important proof point for our technology and manufacturing capabilities. But we did not believe it is the key value driver for our business going forward. The two key drivers that value for our business and our stockholders are sales of high value products that solve customer needs and generate strong cash margins and the flexibility of our Brotas plant to produce multiple molecules to meet the needs of our customers and deliver industry leading returns. We are not a single molecule company trying to use complicated chemistry to adapt a single molecule into many markets. Our high value products are selected by our collaboration partners developed, scaled up and produced by us and then finished and marketed with or by the partner. This is a business model that is working for us. As I said before, we have over 22 molecules contracted with multiple partners and are inactive negotiation or at the final agreement stage with several others. Our business model is clear, we partner with the world’s leading consumer brands to engineer microorganisms to make products that sustain their growth and enable them to beat their competition. We are applying our inspired science to deliver sustainable solutions for a growing world. The products we make are better performing than their alternative raw material source. Our products are designed to perform better, cost less to make, and provide a consumer a better choice. These brands pay us to build a product pipeline and we earn a long term annuity from the margin of the products we produce for them. Our business model is working as evidenced by our results against our guidance to you last year. Our renewable product sales increased by nearly 50% year-on-year and we maintained an average selling price of over $7 per liter, better than we expected earlier in 2013. As I noted earlier, our farnesene production costs dropped from $12 per liter at the start of 2013 to below $5 per liter with the average of our best performing runs achieving around a $3.50 a liter production cost. We delivered on our target of $85 million in cash OpEx which was mostly covered by nearly $60 million in collaboration funding. We kept our CapEx under $10 million. We continue to expect to achieve cash flow positive from operations during 2014 and to become profitable during 2015. Our business and financial plan is driven by our commitment to producing and delivering high value products to our customers. Instead of producing high volumes, we are focusing on maximum revenue and cash margin from our first plant and our collaborations and delivering industry leading cash gross margins and sales growth. Based on our current product pipeline, we expect Brotas to deliver $300 million to $400 million of renewable product revenue by the end of 2016. We will continue to focus on our farnesene production to high value markets, enabling us to use the extra availability to produce our first fragrance oil at Brotas which we expect to increase our cash gross margin as well as support our cash payback for the Brotas plant to as little as two years from now. As I noted earlier, our payback calculations are based on $50 million of product cash gross margin in 2014 and over $50 million of cash gross margin in 2015. We expect to maintain a healthy cash gross margin for the next three to four years with renewable product revenues doubling each year and collaboration revenues reaching $60 million to $70 million annually. We expect our year-over-year cash OpEx to remain relatively flat with any increases coming from annual inflation and from expense growth required to support the additional collaboration needs of our partners. In recent weeks we announced the signing of our agreement with São Martinho, the world’s most efficient sugarcane processor to continue our joint venture plant and to extend their option for a second plant. We expect both these plants to support our growth in the performance farnesene and lubricants businesses and expect these projects to be funded by the JV and our collaboration partners. The combination of these two facilities with São Martinho, represent the equivalent capacity of four Brotas plants. In closing, let me address our longer term outlook. We aim to end this decade with the world’s leading brands no longer thinking of bio based materials as alternative but thinking of them as the first place they look to solve their supply needs and to help them win in the market. We believe brands will shift how they think about chemistry. Instead of making do with the chemistry they have, they will use synthetic biology to make the chemistry they need to win in the market while doing less damage to our planet. Our aspirational goal is to be in 90% of all households by the end of the decade. We are enabling brands to access the chemistry they need at a lower cost and with reliable access to supply. We are disrupting the traditional chemical intermediate suppliers by delivering a better and more sustainable solution. We first achieved this with artemisinic acid to help stabilize the market for the world’s leading anti-malarial. We have provided stability for the squalane market and are now the leading solution provider in the fragrance ingredient business. We are the only company in this sector that has successfully scaled and commercialize three different fermentation molecules and have demonstrated synthetic biology at industrial scale. Through many lessons, we have built a track record of delivering breakthrough technology. First, we help develop artemisinic acid strains that Sanofi is currently using to make one-third of the world’s leading cure for malaria with our technology. With our fragrance oil, we have delivered high quality product to Firmenich and its customers, and of course farnesene for everything from fuels to base oils to polymers for the tire industry and squalene as best in class emollient. 2013 was an exciting year for Amyris and 2014 promises to be even better. We have much more to do and a strong pipeline of agreements to deliver on. Karen, would you please open the line for questions?

[Operator:]

Certainly. (Operator Instructions) And our first question comes from the line of Jeff Osborne from Stifel.

[Jeff Osborne:]

Great, thank you. I just had a couple of questions on the guidance. I was wondering if you could talk about your expectations for cadence of revenue through the year, John or Paulo with the shutdown in the first quarter, I imagine there is a little bit of slowdown there, are you going to make everything up through the inventory that you’ve built up?

[John Melo:]

I think the way to think of it is I would expect the first quarter to be fairly in line what we’ve seen as a run rate coming out of 2014 and then growth in the second half of 2014.

[Jeff Osborne:]

Okay. And then to help me understand the payback analysis that you’re referring to at the $15 million this year; is there a way you could divulge what the cash losses were for 2012 and ‘13, just so we can reconcile the numbers over time for Brotas?

[John Melo:]

Yes, we actually finished fourth quarter positive. And I think we can probably get to the total number for the year. Paulo, I don’t know if we have it in front of us, but if not, we can follow up with that number for you.

[Jeff Osborne:]

Okay, perfect. And then I had a couple of fundamental questions, but the only other guidance question was on the OpEx of $80 million to $85 million. How do we think about the split of R&D and SG&A for the year, is there any moving pieces relative to recent trends there?

[John Melo:]

No, I think it’s fairly constant. I think we saw the moves through the year and it stayed constant as we finished the year. And we don’t see any real shift going into the first quarter.

[Jeff Osborne:]

Perfect. And then the two other questions I had John were on the fragrance production on the contract manufacturing side, it sounded like, if I heard you right, some of the -- was just timing of production and then delivery to the customer was I guess an issue in terms of revenue recognition for the quarter. But can you just talk about kind of a longer term plans? A, confirm that the timing was the issue, if I understood you what you were saying correctly but also more importantly just talk about moving from contract manufacturing to Brotas over time and when you would expect that to be done to then drive that margin appreciation that you referenced.

[John Melo:]

Yes, great question. It was clearly timing. We had the production complete by the year end and did not have the shipment leave aside and therefore could not recognize it as revenue. And then regarding the transition, we actually had our people operating at the contract manufacturing facility, got very comfortable with the process. And to just to make it clear for everyone, it’s actually a very light process, almost identical to the farnesene manufacturing process, which gives us great comfort in going into Brotas. So people from Brotas very like process and then we’ve given ourselves plenty of space to mitigate any risk and we expect to produce the first fragrance molecule during the middle month, probably the July, August timeframe in Brotas.

[Jeff Osborne:]

Okay, good. And then last question I have was just on the squalane market, you indicated that your hope was to grow it from $180 million to $300 million annually. How do you do that? I guess my understanding was that a lot of the shark oil production and kind of tough olive crop that people have had has led to some reduction in terms of tons produced. Are those just products that exhibit the market that you can reinvigorate them from years past or how do you go about growing a total market with a new molecule? Is it just all based on cost or do people have to create new SKUs using their product and it might take some time?

[John Melo:]

A little bit all. I’ll have to break it down into three parts. The first part is, which we think we’ve achieved now is just stabilizing the market making sure the slippage goes away because people don’t have to worry anymore about not having enough supply. And I think that we’ve accomplished and are actually well engaged with the leading brands in the world in that regard. The second is applications that switch out of squalane to lower quality emollients when supply was challenged historically. And that is a big shift of the growth we see over the next couple of years is purely not new, but applications coming back to using the emollient that they’re familiar with that have switched out before. And that’s really driven by stable supply and competitive pricing. And I think the third, which is the one we are probably most excited about is we see several new applications emerging that in the past were of interest, but because of the cost and supply, squalane was not available for them. So I’ll give you three examples or maybe two examples, one is [soaps] where squalane is actually a great emollient to use in soaps, but traditionally people wouldn’t do it because of supply and cost challenges. And then other is wipes. Having an emollient life squalane in a wipe does both help refresh the skin and make it softer. So those are just a couple of new applications, a couple of old applications coming back and then stabilizing the market and seeing a lot of share come to us because of supply stability and price stability.

[Jeff Osborne:]

Thanks. And I appreciate all the detail. Thank you.

[John Melo:]

Welcome.

[Operator:]

Thank you. And our next question comes from the line of Brian Lee from Goldman Sachs.

[Britt Boril:]

Hi. This is Britt Boril on for Brian Lee. Thanks for taking the question. I was wondering can you give us any idea of split between your renewable product sales for squalane and other products like I guess your biodiesel and how we should think about that mix going forward with fragrance oil?

[John Melo:]

We have not provided that, but I will give you a simple [hollow] to think about, it’s more revenue than volume which is kind of a third to third to third. Think of that squalane, a third of the revenue, fragrances are third and then other, which includes fuels and other applications about a third, but that is a broad range, I’m just giving you a way to think of revenue and it doesn’t necessarily connect the volume directly because of the price points that we have for those markets.

[Britt Boril:]

Okay. Thank you. And then does the 2014 revenue guidance include that $50 million or so of renewable products that weren’t supposed to sighted for 4Q ‘13, but the timing issues?

[Paulo Diniz:]

Yes, it does include. But again, very probably we are going to be having the same situation at the end of 2014.

[Britt Boril:]

Okay. And then maybe just can you talk about what steps are left in the regulatory process for the jet fuel approval?

[John Melo:]

Joel is probably the best to jump and he has been -- of the process with our commercial team. Joel, do you comment on that?

[Joel Velasco:]

Sure. I mean I think the regulatory process that’s industry led all around the world and it’s started, we’ve submitted the report to the ASPM and then we expect the ballot I believe begin today or yesterday and there are several committees there to review. Our expectation is that this will take a few months. At the same time in Brazil, the oil and gas agency has to -- once ASPM has approved has to basically co-define into their laws and that will take a few weeks, but they have been fully briefed in the system. So our expectation is assuming we get all the OEM support in the coming months, we should have approval, but it’s going to be a lot of steps to jump through.

[Britt Boril:]

Okay, great. Thanks for the color. I will hop back in the queue.

[John Melo:]

Thanks Britt.

[Operator:]

Thank you. And our next question comes from the line of Pavel Molchanov from Raymond James.

[Pavel Molchanov:]

Hey guys. In the filing about the joint venture with TOTAL for fuels I think you had said that a final investment decision can be made anytime between now and kind of early 2017. Is that still the case and can you give us any more clarity on where in that three year cycle you expect TOTAL to actually pull the trigger?

[John Melo:]

Hi Pavel, I would, I think it’s still the case and I don’t think we’re in a position to really speculate on that. What I’d say is I expect us to build the business together as much as we can at a point where we need volume beyond what Amyris can supply; TOTAL is going to be in a place to make a decision regarding CapEx investment in the joint venture to build the plant. And I don’t think any of us are in a position to speculate when we think that would occur.

[Pavel Molchanov:]

Okay. And then follow-up on with regard to fuel, so you’ve said you’re at $3.50 per liter for the best run obviously to sell fuel in any sort of mainstream commodity market you would have to be at least half or ideally even a third of that. Is there a realistic trajectory to getting to $1, $1.50 a liter kind of cost to sell fuel?

[John Melo:]

Pavel, I am going to speak with a different hat on for a second, I am on the board of the fastest growing fuel marketer and Midstream Company or one of the fastest growing in the U.S. And I am not looking for any fuel that’s priced in that range and we have no interest in it. So I can tell you that our conclusion is in the U.S. market specifically especially with the abandoned production of gasoline in the Midwest and the Gulf Coast, there is a little desire for anything other than taking down the RFS standard, taking less and less renewable fuel and frankly making it as cheap as possible which is probably more like the $0.70 to $0.80 liter range which isn’t something that we have any desire plan.

[Pavel Molchanov:]

Okay. And is it your sense that in geographies outside North America you don’t have to be anywhere near $0.70 to $0.80?

[John Melo:]

Correct. I mean Brazil is a good example, but we don’t like to build the businesses, a business dependent on kind of the market forces or the regulatory forces that are in place in those markets. But the fact is that the basics in those markets are quite interesting. They are short, they have to import a lot and they have a real strategy around sustainable fuel as a way to bridge the gap around the shortest that they’re dealing with both in gasoline and in diesel. And we see jet around the world, that’s quite interesting because a lot of the airline companies view using renewable jet as a great opportunity to demonstrate their commitment and interest and reducing the carbon footprint overtime. But we also don’t see that as being mainstream fuel, we use it, we see it as being niche fuel as we spoke about in the past.

[Pavel Molchanov:]

Alright. I’ll leave it with that. I appreciate it.

[Operator:]

Thank you. And our next question comes from the line of Jeff Zekauskas from JPMorgan.

[Silka Koopf:]

Good afternoon. It’s Silka Koopf for Jeff. How are you?

[John Melo:]

Hi Silka doing well. Thank you.

[Silka Koopf:]

A couple of questions, the first one is on the guidance. So it looks like that you’re expecting maybe $40 million in product revenues next year and like $60 million to $75 million in collaboration revenue. Of the collaboration revenues, how much is committed already today through TOTAL and IFF and other partners and which collaborate -- and what part of the revenue are still collaborations that you plan to sign?

[John Melo:]

Yes. Over half of the collaborations are either already under contract or in the final stages of contracting. And then the second part of your question Silka, could you repeat that for me?

[Silka Koopf:]

I think well it’s just like tied together, I was just wondering like how much is already committed and what still needs to be signed?

[John Melo:]

I think that’s probably true. What I just said, half is contracted or in the final stages of contracting. And I think on the product side from a revenue perspective it’s probably about the same if not slightly better, just to give you a sense of the overall revenue outlook.

[Silka Koopf:]

And in terms of production volumes, how much can Brotas produce today on annualized basis and what do you think the utilization rate will be in next year?

[John Melo:]

I try to break that down. So a good, very good question. I would say it can produce a lot more than we need today. I can also give you another data point which is our exist rate for the year kind of gives us good confidence to be able to achieve about a million leaders or better of monthly production if we’re doing just farnesene. And I think the key message we gave during release script was basically that because we’re going to be doing multiple molecules, actually we will not be fully utilizing the plant for production, because we want to ensure we give ourselves plenty of space for transition and in light of the space that we have and the productivity that we’re achieving with the technology that actually we can produce all the volume we need by only producing during the time that we have access to lowest cost electricity and raw material.

[Silka Koopf:]

Thanks that’s helpful. I’ll get back in the queue.

[Operator:]

Thank you. (Operator Instructions). Our next question comes from the line of Mike Ritzenthaler from Piper Jaffray.

[Mike Ritzenthaler:]

Hey good afternoon.

[John Melo:]

Hey Mike good afternoon.

[Mike Ritzenthaler:]

How much does the cash contribution or the cash production cost from Brotas change during the cane harvest versus the [fellow] months? And is the plan to have sort of an annual shutdown like this to do maintenance in 1Q?

[John Melo:]

I think -- I don’t really want to forecast a lot….

[Mike Ritzenthaler:]

Hello, hello.

[Operator:]

Sir, you are still connected, one moment.

[John Melo:]

Hey, can you hear me?

[Operator:]

And Mike, your line is open again.

[Mike Ritzenthaler:]

Okay, great, yes. I am still here. The question was around the cash contribution sort of seasonality as we go through the year and I was curious about kind of your annual plans, might just be interested in your thoughts?

[John Melo:]

Yes, I was going to really break it down on to two parts. First our outlook for whether or not we make this a regular routine. And I really don’t want to talk to that because a lot of that will depend on the ramp up of the high value or high cash contribution products. I think your second question, kind of what does the cash impact, cash cost impact look like profile look like through the year, you can think of it as you know probably somewhere around $0.60 to $0.75 differential in our production cost from having the end season versus out of season impact.

[Mike Ritzenthaler:]

Okay, that’s helpful. On the mix in the quarter of volume, you had kind of alluded to a third, a third, a third in the previous question. I was curious about the contribution from Novvi that’s been running about a quarter of volume, I was wondering if that had changed meaningfully in the fourth quarter?

[John Melo:]

It did not changed meaningfully in the fourth quarter. And again the way that we are at it into 2014 is we actually look at that as upside into our forecast in 2014.

[Mike Ritzenthaler:]

Okay. One last one from me on the joint venture with Sao Martino, as you look out over the next couple of years as volumes improve is the contemplation to finish what you had and build a new plant and is that kind of a 2017, 2018, later this decade kind of an event?

[John Melo:]

It’s different for both projects I think the project that’s currently 46% complete, our idea there is to have that in production sometime by the end of 2016 and then the other project is probably sometime in 2018, just to give you a sense of phasing and how we are looking at those projects. And the key trigger for the first project is again we see significant interest and demand from the tire industry. Assuming that continues to progress well we expect to see our first industrial tires been produced with our raw material inside of them by the end of this year and that will start to trigger more demand that will then lead us to making sure we have Sao Martino operating in 2016.

[Mike Ritzenthaler:]

That makes sense. Thanks for the clarity.

[John Melo:]

Thanks Mike.

[Operator:]

Thank you. And I have no further questions in the queue. I would now like to turn the conference back for any closing comments.

[John Melo:]

Very good. Thank you, Karen and really appreciate your help. I would like to thank everybody for their time today and continued interest at Amyris. And we’re excited that we now have the startup year behind us. We have successfully started up. We’ve launched another molecule and really excited about what 2014 has ahead of us. Thank you.

[Operator:]

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone have a good day.