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Amyris Inc (AMRS) Earnings Show Much Work Remains

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Investors looking for signs of life from Amyris Inc (NASDAQ:AMRS) may be pleased with the progress witnessed in the company’s fourth-quarter and 2012 full-year earnings released yesterday, but there is still a long way to go before the company is the force in renewable chemicals that was once promised. Did the results hint at more stumbling ahead or is the company finally getting its feet under itself?

It depends on how you view the numbers. Here is a thorough recap of the conference call with CEO John Melo and what investors need to look for in the industrial synthetic biology pioneer in 2013.

The financials
First let’s note the company’s financial results to keep with standard earnings reporting. Amyris walked away from Dec. 31 with the following highlighted numbers compared to the year ago period:

Metric 4Q11 4Q12 2011 2012
Product Sales $36.84 million $3.02 million $129.84 million $49.64 million
Collaborative Revenue $2.8 million $4.7 million $17.15 million $24.06 million
Total Costs and OPEX ($59.3 million) ($42.8 million) ($179.2 million) ($201.8 million)
Net Loss ($59.6 million) ($43.6 million) ($179.5 million) ($206 million)
Loss per Share ($1.30) ($0.72) ($3.99) ($3.62)

Source: Amyris

It doesn’t take much detective work to see that things are still pretty bleak and will remain so for the near term. The coffers held around $45 million in cash in the beginning of 2013, after raising over $100 million in 2012. Revenues were down after a planned withdrawal from the ethanol and ethanol-blended-gasoline business in Brazil, which was necessary in order to focus on ramping up production at the company’s first commercial scale facility in Paraiso (pronounced “Pear-ow-eese-oo”).

While exiting the market has slowed Amyris’ burn rate, losses still managed to top the previous year’s watermark. Finishing Paraiso and furiously testing products for partners were costly expenditures. Amyris wrote off $45.85 million of production assets in 2012 to equilibrate the balance sheet after hardships earlier in the year.

An increased number of shares outstanding gave the illusion that loss per share has improved, but don’t be fooled by dilution. There will be nearly 74 million shares outstanding at the end of the first quarter with currently announced offerings, compared to 46 million at the end of 2011 (not the weighted average).

Cosan Limited (USA) (NYSE:CZZ)

The outlook: financials
Should product sales and production increases go as planned, Amyris expects to be cash flow positive in 2014. Of course, investors reserve the right to be skeptical given the company’s past performance. Things are no doubt improving, however. This year’s cash burn rate of less than $85 million (compared to $115 million in 2012) will be the lowest since going public in 2010.

Combining the lower overhead with increased product revenues and an expected $60 million-$70 million in collaboration funding throughout the year will nudge the company’s financial health toward the black. Even then, Amyris will see a net capex of $15 million-$25 million in 2013.

Management continually fixed investors’ eyes on the latter half of the year during the conference call when asked about improving financial strength and product lineup. Melo says the company will grow gross margins for each of its products as the year progresses and expects to exit the year with positive gross margins for each.

The outlook: production
The good news is that Paraiso opened two months ahead of schedule and is now creating initial quantities of farnesene (Biofene) without problems. In fact, Melo said that last quarter represented the “best technical performance on record.” Who knew having a commercial scale facility up and running could result in such a statement?

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