Amyris Inc (AMRS) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Amyris third quarter 2012 conference call. This call is being webcast live on the Events and Presentations page of the Investors' section of Amyris' website at www.amyris.com. This call and accompanying the slides are 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 the webcast replay of this call by going to the Investors section of Amyris' website.

I would now like to turn the call over to Joel Velasco, Senior Vice President, External Relations.

Thank you. Good afternoon. Thank you for joining us to discuss highlights of the Amyris' recent progress and outlook. With me today are John Melo, Chief Executive Officer; and Steve Mills, Chief Financial Officer.

On the call today and on this 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 or in the supplemental materials, which are available on the Company's website at investors.amyris.com. The current report on Form 8-K furnished with respect to our press release is available on the Company's website and on the SEC website.

We will also provide certain forward-looking statements about events and circumstances that have not yet occurred, including projections of Amyris' operating activities for the remainder of 2012 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, available on the SEC website at www.sec.gov and the Risk Factor sections of Amyris' quarterly report on Form 10-Q filed with the SEC on August 8, 2012. Amyris disclaims any obligation to update information contained in these forward-looking statements, whether as a result of the new information, future events or otherwise. Please refer to the Amyris' SEC filings for detailed discussions of the relevant risks and uncertainties.

I would now turn the call over to John Melo.

Thanks, Joel. Good afternoon and thank you for joining our quarterly update call. As I did last quarter, let me start with highlights of our recent accomplishments and then provide some additional context for what you should expect from us in the coming months.

First, our farnesene plant located at Paraiso in Brazil is entering its final stages of commissioning with considerable progress across all areas of the plant. We remain on budget and on target with planned commercial production at Paraiso expected in early 2013. In parallel, we have achieved our fermentation efficiency targets at our contract manufacturing operation at Tate & Lyle in Illinois to support demand.

Second, we continue to see significant improvement in our synthetic biology platform, thanks to a new generation of strains, with higher yield and productivity. Our process is working at industrial scale as in the lab, and we are achieving our internal manufacturing targets.

Third, our product demand pipeline remains strong and our customer feedback continues to be very positive. We expect our increased production in 2013 to meet anticipated demand for not only existing products, squalane, globally and diesel in niche markets, but also provide renewable farnesene for new emollients as well as certain polymers and lubricant applications.

Fourth, the improvements to our cost structure over the last several months are bearing fruit. Our production and operating costs are better than expected and continue to improve. We've made considerable progress on renewable product and collaboration revenues. We plan to close additional funding before the end of the year.

Now, let me review in greater detail our progress in these four areas. First, our farnesene plant at Paraiso is in the final stages of a successful commissioning and on target for initial commercial production in early 2013. We have made considerable progress at Paraiso in the last quarter. When we last spoke at the end of July, we had achieved mechanical completion of the main aspects of the plant.

To date, we have successfully completed a range of critical milestones from automation testing of our Cleaning-In-Place, CIP; and Sterilization-In-Place, SIP; systems for aseptic fermentation to a number of regulatory approvals, including biosafety and other environmental permits. Over the last few days, we have begun the sterile hold phase. All activities on the critical path to commercial production are on track and on budget. I continue to visit the site on a monthly basis, often with Board members and partners. We remain confident that we are on the right track for Paraiso commercial production in early 2013.

We continue to use the Tate & Lyle facility in Illinois as our CMO, contract manufacturing operation. During the past quarter, our process development, engineering and manufacturing teams have also made a number of process design improvements, which improved the quality of our feedstock mix and met our target performance and cost levels. As a result of these process modifications and improved strains, we've had a marked uptick in yield, productivity, and recovery in our fermentation runs. Also, we've validated these improvements at our pilot plant in Brazil, which is operating as a scale model of our Paraiso plant.

In summary, we are achieving our production performance targets at our CMO. Paraiso commissioning is in final stage and on track for commercial production in early 2013. Our strains are achieving our targets at industrial scale.

To my next point, our synthetic biology platform has reached new milestones with a new generation of yeast strains performing better than our first-generation strains in lab scale, and new product and feedstock opportunities are emerging.

About a year ago, our research and development team began working on a second-generation metabolic pathway for our yeast strains to deliver higher performance, particularly as we scaled up our industrial production of farnesene. Initial results from the lab fermenters show that these second-generation strains exceed the performance of our first-generation strains to date. This breakthrough gives us confidence that we can profitably produce our desired molecule, farnesene, at scale for chemical applications and provides visibility for longer-term commodity fuels markets.

In addition to developing a new, improved metabolic pathway to produce farnesene in yeast, our team has delivered two other important milestones. First, we have developed farnesene strains capable of utilizing cellulosic sugars with similar yields as conventional sugars. We have always said, we seek to be feedstock agnostic and we have shown ability to produce farnesene from cellulosic sugars at pilot scale at rates similar to conventional sugars. We will be ready for the day when cellulosic sugars [aren't] cost competitive at scale with conventional sugars.

Second, in our last call, we announced, we have delivered test samples of our fragrance oil to our partner, Firmenich. During the past quarter, we made considerable progress in improving those fragrance oil-producing strains. In fact, our strain performance is ahead of our projected timeline for delivery that was agreed with our partner. This progress provides further proof that the investment in our synthetic biology platform, not just for farnesene, but also for making compounds like this fragrance oil is paying off.

To summarize, our high-performance, second-generation strains underscore our confidence and furthers our visibility. Two of our renewable compounds, artemisinic acid and farnesene, are being produced consistently and reliably at industrial scale. And our third, a fragrance oil, will be in production next year and that's what differentiates Amyris.

We are not producing one molecule and trying to push it into as many markets as possible; we have a platform to make the specific molecules that our customers and partners need. We have the partners and collaborators that can take these high-performance pure molecules and transform them chemically into many other products. We engineer yeast to make what we want and through industrial fermentation, we are making large volumes of exactly what we expected.

I would now like to update you on our finished product sales before turning to Steve for a review of our financial results and funding. We continue to enjoy considerable product demand from our customers and partners. Currently, our renewable diesel in Brazil and our cosmetic emollient, squalane, globally. We have a number of additional product opportunities in the coming year to coincide with the ramp-up of our production at Paraiso.

First, on fuels, we continue to deliver renewable diesel to nearly 300 public transit buses in Sao Paulo and Rio. We have now logged over 11 million kilometers or about 7 million miles with a blend of Amyris' renewable diesel. Thanks to the success of our efforts on fuels and the superior performance of our no-compromise renewable diesel, we are now starting to supply corporate fleets and have a number of other public transit authorities interested in using our renewable diesel in Brazil.

We have recently received an order from the US Navy for further scale testing of our renewable diesel against their marine diesel. And with our partner, Total, we are in advanced stages of testing our renewable jet fuel for the required ASTM certification.

Second, on squalane, our best-in-class cosmetic emollient, we have cemented our position in the market with a high-quality, differentiated product and continue to expand our markets in Asia and Latin America.

As anticipated on our last call, we have developed two new emollients to complement our current offering. This portfolio of cosmetic ingredients is generating considerable interest from both distributors and formulators. We expect to finalize agreements for the new emollients with customers in the coming months.

As we continue to develop our diesel and squalane opportunities, we remain focused on new opportunities for using Biofene, our renewable farnesene, as a building-block chemical for finished products. Our partner, Kuraray of Japan, continues to make significant progress introducing a polymer made with Biofene, which they have named Liquid Farnesene Rubber, LFR, to the tire industry. They have received their first order for LFR for the development of tires from a leading global tire manufacturer. We expect to accelerate shipments next year. We have eight additional of the world's leading tire manufacturers conducting product testing with very positive early results.

We also made progress with Total and exploring new short-term opportunities for farnesene-derived products. As planned under our partnership announced in late July, we expect Total to test our compounds for certain applications in the fields of specialty fluids, polymers and base oils. We anticipate one of these opportunities will lead to an uptake in 2013. The success of our technology investment and our differentiated product portfolio has resulted in 180 patents issued to date and 340 patents applied for globally.

In summary, we appreciate the interest and commitment we continue to receive from our customers and partners. They continue to validate the strong attractiveness of our no-compromise products, high-performance, cost-effective, renewable products that have a positive impact in enabling sustainable growth. Our plans for commercialization remain on track.

Let me now turn the call over to Steve Mills for a brief overview of our financial results before some comments about funding. Steve?

Thank you, John, and good afternoon. As you will have seen from our earnings release, we reported a loss for the third quarter of $20.3 million or $0.34 per share, a significant improvement over the results from both the prior year's third quarter as well as from the past few quarters. Amyris' third quarter financial results reflect the results of the activities that John just described to you and are consistent with the strategy that we outlined for you earlier this year.

Financial highlights for the quarter include the transition out of the ethanol and ethanol-blended gasoline business; an amended agreement with Total, including $30 million of new funding and the related accounting ramifications of the amended agreement; the finalization of the construction at Paraiso and the ongoing commissioning process; increased sales revenues from our renewables product portfolio; and continued reduction of our OpEx cash burn rate.

Total revenue for the quarter was $19.1 million, down from $36.3 million in the third quarter of 2011. This decline in revenue was principally due to the Company's planned transition out of the ethanol and ethanol-blended gasoline business and this transition is now complete. Partially offsetting this decline were increased revenues from brands and collaborations, primarily related to the amendment of the Company's collaboration agreement with Total. As a result of this amended agreement, we were able to recognize as revenue about $8.8 million of collaboration revenue related to cash we had received from Total in prior quarters.

Revenues from the sale of Amyris' renewable products, squalane and biodiesel, also continued to grow during the quarter. For the third quarter, our weighted average selling price of renewable products increased to $8.99 per liter compared to $8.08 per liter last quarter.

Our cost of products sold also declined for the quarter, principally due to the cost associated with the lower sales volumes relating to the Company's planned transition out of the ethanol and ethanol-blended gasoline business.

On a sequential-quarter basis, our costs related to the production of our renewable products was also down significantly, as we intentionally produced minimal amounts of farnesene in the third quarter, while we commissioned Paraiso and as we undertook planned plant and process improvements at Tate & Lyle that will improve operational efficiency and lower production costs. This work at Tate & Lyle is now complete and we're back in operation.

During the third quarter, we continue to take steps to lower our operating expenses. Excluding the impact of the non-cash stock-based comp expense, our combined R&D and SG&A expenses were down 28% from last year's third quarter and down 15% from the previous quarter, due principally to lower personnel-related costs.

Turning to the balance sheet, our cash balance stood at approximately $44.4 million at quarter end. We had the following significant cash-related items during the quarter. We received $30 million from convertible notes issued related to the amended Total agreement; we repaid bridge loans related to the Paraiso project and we secured permanent financing for the plant. We also had CapEx, net of disposals, of about $5.5 million for the quarter, principally related to Paraiso. As we look forward, we expect additional CapEx spending for the fourth quarter to be around $12 million.

As to the larger cash flow picture, we are committed to becoming cash flow positive by the end of 2014 and we will need to secure additional funding to support our cash needs between now and then. To reaffirm what we said on last quarter's conference call, we will need to raise cash in the fourth quarter in order to fund our operations beyond the fourth quarter of 2012. We are currently in the midst of this fundraising activity.

We look forward to speaking to you in February about our year-end results. At that point in time, we should be in a much better place to give you more forward-looking information.

I'll turn the call back over to John for his closing remarks.

Thank you, Steve. I would like to provide an update on our strategy and funding. At the end of our last call, we told you to expect the following during the second half of the year. Additional funding, successful commissioning of Paraiso, continued reduction in cash burn and steady increase in renewable product sales. We have made considerable progress on those four areas to date. Let me expand on our progress.

First, on funding. During this past quarter, we strengthened our relationship with Total, which remains focused on technology development and commercialization of fuels. Total has contributed $30 million under our agreement in the third quarter and remains committed to Amyris' technology platform with another $52 million pledged over the next two years.

Second, on Paraiso. We are on track for successful commercial production in early 2013 as planned. The lessons learnt from our CMOs and the improvements in our technology and processes will help deliver on profitable, predictable production at Paraiso in the coming quarters.

Third, on cash burn. We have made considerable strides in our efforts to reduce our expense profile. As Steve explained, we have had a step change in our OpEx without sacrificing performance. We know there's more to do here and view the progress so far as sustainable for our business.

Finally, on sales. We have generated commercial sales of renewable products with two products, diesel in Brazil and squalane, globally. Although these volumes are limited by our deliberate production ramp, we are developing additional long-term collaborations that result in product opportunities and commercial commitments. For instance, in the flavors and fragrance area where we have had tremendous technological breakthroughs, we are in advanced discussions with multiple partners for expanded collaborations that provide revenues, while adding to our product portfolio.

To sum it up before taking your questions, during the third quarter, we continue to see the results of our focused manufacturing strategy with lower operating costs, improved efficiencies and growing sales of our renewable products. We realized tremendous improvements in our technology platform with a new generation of strains. Our product commercialization activities remain on track. Our industrial-scale farnesene production facility at Paraiso is in the final stages of a successful commissioning. We remain confident about commercial production in early 2013 and achieving cash flow positive in 2014.

Eli, would you please open the line for questions?

Yes, sir. (Operator Instructions) Smitti Srethapramote, Morgan Stanley.

Thank you, Steve. I have two quick questions for you. First is on the second generation of strain that you just announced. At what scale, have you been able to produce farnesene using the second-generation strain, and will this be used -- utilized when Paraiso ramps up in early 2013?

Smitti, good afternoon to you. We expect -- or right now, we're working with that second-generation strain at 2 liters and we expect somewhere in the first few quarters of Paraiso start to transition to strain to Paraiso.

Okay. Great, thank you. And then, maybe just a follow-up on the capital raising that you guys are in the midst of right now. Approximately how much money are you guys targeting?

We're not disclosing that at this time.

Okay, thank you.

Thank you. James Medvedoff, Cowen and Company.

Good afternoon.

Hi, James.

Hi. Let's see. So I guess, I'm going to just press a little further on that funding question. What was it that caused the accounting treatment to trigger that $8 million sort of catch-up accounting on the revenue line from the Total money?

We've been receiving cash from Total over a period of time prior to this quarter. The accounting rules based on the agreement that we had in place with Total at the time basically made us record that as a liability until such time that we did eventually release that. The new amendment allowed us to free it up a bit earlier than we had expected. So it was really based on the agreement as they were and the agreement as they were amended.

I see. Then, of the $30 million, how much is yet to be realized in revenue?

I think we've got -- I think you possibly could have two items mixed up. The $30 million that came in in September of 2012 has been recorded as convertible notes. The $8.8 million that we recognized had to do with cash that came in in quarters prior to September 30.

I see, so there in nothing additional from that catch-up accounting treatment?

Not from a cash perspective.

Okay. And then, just one final one on the cash. If there is $44 million of cash on the balance sheet and I think you said $12 million of CapEx expected in the fourth quarter, what is the urgency to add cash so quickly right now?

We certainly have continuing OpEx as well, and we know that we're in this business for a long time. So we're going to need to get some funds right in this quarter to be -- to put it in a place to really be comfortable running the operations going forward.

Okay, thanks.

You're welcome.

Thank you, sir. Vishal Shah, Deutsche Bank.

Thanks. Steve, I wanted to just understand the cash burn comment. You said your cash burn has gone down. Can you just maybe talk about what your cash burn will be in the fourth quarter and how should we think about cash burn as you start ramping up Paraiso? Thank you.

I think as we look at the fourth quarter, we don't see any significant difference from the rate that we've been running. Again, we continue to look for ways to optimize and get more efficient, but there haven't been any significant changes as we see here in the fourth quarter. I think that the biggest item will be the timing of the CapEx, as you mentioned, and as I mentioned earlier. We had commissioning costs related to Paraiso in the third quarter and we expect those to be similar in the fourth quarter. So I don't see anything significantly different cash burn wise.

Okay, great. And then, do you remind us what your CapEx will be for the year, for 2012, if you assume $12 million for Q4?

I will find that. I don't have that added. It should be right in the cash flows here, just a second.

And as you sort of think about that, I mean, how do you see 2013 CapEx shaping up?

Well, we don't see significant expenditures in 2013. The bulk of the money spent in 2012 were on Paraiso, our Sao Martinho joint venture, and to get our CMOs up and operating. We don't see similar needs at all for 2013 and believe CapEx will be significantly down.

So less than $50 million?

I would think substantially less than that.

Okay. And then, as you think about the funding situation, I know you had said last quarter that you were working with a few strategic partners in, say, sectors like the chemical industry. I mean, are you still following that path or are you exploring other options as well?

We are continuing that path. We have a significant number of collaboration partners in the pipeline. In addition to that, like we indicated in the last call, we're also going to -- we will also be pursuing additional sources in addition to the collaborations. So we actually have both very active. And as Steve mentioned, expect to have that complete before year-end.

Thank you very much.

Thank you. Jeff Zekauskas, JPMorgan.

Hi, good afternoon. What was your cash flow from operations in the quarter?

Just a second, Jeff. I am just flipping the page here. I've got --

Thanks, Steve.

I don't want to misquote. It was about -- a use of about $28 million.

Okay. You talked about getting better yields in your strains and you thought you might use some of those strains at Paraiso, but when Paraiso was up and running, how many leaders of farnesene do you expect it to produce on an annual basis?

Jeff, it's targeted at 50 million liters per year. It'll step up to that level over a three-year period.

Right. What about next year though? What about in 2013, how many liters do you think you can get out of that facility?

We are not providing any guidance on volume at this time.

Right. I don't mean on volume, I mean on your -- what you expect of your strains.

I think Jeff, this is Steve here.

Sure.

I think two things, I would add. One is that we're going to be ramping that facility up during the year.

Yes.

Six permitters in and we're going to open it up with two and certainly going to gauge how fast we move with volume based on how we see the ramp-up go.

Right.

It'll also be tied to the demand for the product. So we're going to manage that accordingly.

Okay. Now, is it the case that this really will begin to ramp up in the second quarter of 2013 for seasonal reasons or would you be selling any material amount of product in the first quarter of 2013?

We expect to start before mid-2013, I think, we've said early 2013, Jeff. And we are operating year-round at that site, not just for the season.

Right, but you expect to really scale it up come April, is that right, or do you expect to really scale it up come January?

No, we expect to start early in the year, we expect to run for most of the year at the two tanks. And based on how the process evolves, we could expand from the two to the six. But we're not actually connecting that to any specific time of the year.

Okay. So lastly, so you're going to run two of the six fermenters, so that means that your capacity, all things being equal, will be a third of what it would produce if it were optimally producing?

Well done, Jeff.

Okay. Thank you. Just I've been working on my fractions. Okay. Thanks very much, guys.

Thank you.

Thank you, sir. Mike Ritzenthaler, Piper Jaffray.

Right. Good afternoon, guys. Just kind of a follow-up to some of the other cash questions. The CapEx left on Paraiso, you said, $12 million in the fourth quarter and I'm sure that you have a budget for next year, little fixes and things like that, can you talk what that is?

So we're in the midst of our 2013 planning, I don't have that number ready to talk about, but I will on the next call.

Okay.

As I said earlier, we're not even going to be close to -- we don't expect even be nearly close to what we spent this past year. It should be a relatively --

Fair enough. Okay, that makes sense. And then, so the grants in collaboration revenue going forward, is that -- that's basically a way for our vehicle for Total, the collaboration with Total to flow into the income statement, is that -- where should we expect that to be over the next couple of quarters?

I think, as John described, we expect that collaboration revenue line to grow over time. Right now, it's -- we don't really see much more activity from Total through that line right now. We've got our funding -- and our cash funding and expected funding, we see coming through as debt, not as revenue, at least at this point in time. We [set] that up as a convertible note. So most of it's going to be the ongoing collaborations that we have in place now with a variety of customers, including flavors and fragrances and things that John talked about, but several of the new collaborations that we're pursuing right now. So we see that line item growing in 2013.

And as you roll out the fragrance oils, is that -- that can be a CMO kind of activity as Paraiso focuses on farnesene?

What we actually expect is in the immediate frame, 2013 and 2014, that will be CMO and then it will transition to a specialty molecule manufacturing pad at Paraiso.

Okay. Okay, interesting. And then, I was wondering if we could look at just the gross margins on just the farnesene in the quarter. Obviously, there's the cost of goods line, but I wondered how much of that was from the ethanol -- that little ethanol piece that was left over.

Well, I can tell you that the ethanol-formulated gasoline, basically, is a very low-margin business. So, if you take the related revenue amount out of that, you'll see that it leaves that margin line close to breakeven.

Okay. All right. Thanks, guys.

Thank you, sir. Ben Kallo, Robert W. Baird.

Hey, John, Steve.

Hi.

I wanted to take a step back as we've gone through a lot of details. John, you've been through a lot in the past 18 months. How do you feel where you are right now compared to maybe your last call, the progress you've made? And then, as we look out some of the opportunities for funding, Steve, do you have to give up a piece of the business to get funding or sort of some of the step in there that provides funding as a partnership? And then finally, on the new strain, what does that really mean to us? Does that mean lower cost, does that mean faster to market, what does that mean?

Great. Ben, I will actually hit your first and last and then let Steve take the middle of the question. I think there's a word and I'll explain, the word I'd used is survive when I think about the last 18 months. And the way I'd explain that is, I mean, we basically thought we had strain, markets, production, everything wonderful, and then we went into the reality of what it takes to actually scale up and produce products at industrial scale.

I think we're now on the other side of that. It feels much more comfortable, and I have a very good view now and a confident view, not based on expectation, but based on the reality we've gone through in the last 18 months, for having transitioned the Company from a R&D company to a commercial and industrial fermentation company. And we've done that throughout as you've seen over the last 18 months, both in our process, our plants and our people. And so, I think I'd say I'm feeling optimistic and more on a solid foundation than I've been in my almost six years here.

And then on your last piece regarding the new strains, what I would say is, what they will do is accelerate our time to additional and bigger markets than what we had with the old pathway. And then secondly, they give us greater confidence in being able to achieve the ultimate target yield and productivity and access in the fuels market. But in the short term, it's really about access to more markets faster as a result of the new pathway and the new strains.

Ben, I'll pick it up on your funding question, and I think we've really got several balls in the air and your questions are right on. One, it's everything from equity, debt to collaborations to partnerships to pieces of the business. So I think all those things are in consideration. I think that it's one of the unique attributes that Amyris has where we have an ability to make a variety of products and participate in a variety of market places which gives us an opportunity to work with specific customers for funding opportunities [for] particular partner.

So as we advance discussions with various partners, we're really looking for what's the best value for the shareholders and for Amyris long term. And it's something that we wrestle with and deal with as we negotiate with and discuss this with all the folks. So we've got all those pieces in the air right now.

All right. And one more if I can, you guys get the knock of new molecule farnesene, the adoption time that it's going to take for all these different end markets could be too long that you guys can't make it, but you guys have been out there producing for CMOs for a couple of years now and they have been seeing these markets. Is the time for us to start knocking you on that time to market, have you actually opened up some of these markets with farnesene as an end molecule, can you talk about that a little bit?

Sure, Ben. Good -- great question. I'll give you two examples rather than a speculation, and the first one is, look for farnesene rubber where we've now advanced to the point of a tire manufacturer saying, I'm now ready to start making a tire. And I think that is a big step. And the way to think of it is to enter a formulation is an 18 to 36-month cycle. And like you've highlighted, we've been into that cycle now for 24 months in many of our markets.

And I think squalene is another great example of -- squalene, we're about 12 months, a little more than 12 months into marketing it globally. We have a little bit more than about 12% of the global market, and we're growing very rapidly and have significant demand for it.

So, I think we are beyond that. There are still applications we need to go through the cycle on. So, it's not like all of our applications and products we're complete through the cycle. And in some of these applications, we are helped a lot by our partners, and I think the fragrance oil is a great example, where it's a very specialized application, the partner has fantastic skills in both the regulatory as well as the market adoption, as well as being a large consumer of the product globally. So we think of it as we've already successfully gone to market with artemisinic acid, with farnesene as a base, with squalane as a derivative of farnesene, and now have made significant progress on liquid farnesene rubber.

We are at the end of the cycle for several of our products and about mid-cycle for a few others, and we don't have that barrier at this point. Our barrier at this point is bring on the volume at the right cost and start building up revenue.

All right. Congrats on perseverance, John.

Thanks, Ben.

Pavel Molchanov, Raymond James.

Hi, guys. First just a quick housekeeping item. In Q1 and Q2, you provided farnesene volumes. I think it was something like 300,000 liters in the June quarter. Can you give us the Q3 number?

The Q3 number was quite small. It was 60,000 liters or so. As we said earlier, we really weren't running any of our facilities at production capacity. We were working on our processes and procedures that take a while. So that's -- minimal numbers this quarter, but that was part of the plan.

Okay. And then let me shift gears, look at your kind of 2014 year-end comment. What are the key assumptions behind positive cash flow by the end of 2014? So presumably Paraiso running at full scale by that point and what else?

Really Paraiso had taken a while by that point, and then the collaborations we have in the pipeline.

Okay. I think you mentioned on the last call that your target for Sao Martinho startup was mid-2014. Is that still the case?

We don't expect to realize revenue or commercial volume until 2015 from Sao Martinho. So the 2014 target and what we're tracking to does not include Sao Martinho volume.

Okay, even exiting the year?

That is correct.

That's correct. Okay.

From a commercial and planning perspective.

Understood, okay. I appreciate it, guys.

Thanks.

Thank you. Jeff Osborne, Stifel Nicolaus.

Great. Good afternoon, John. Couple of quick questions, on the Tate & Lyle facility in Illinois, are they using the same size fermenters that you folks are using in Paraiso?

Yes, about the same, about 200,000 liter fermenters.

Okay. And then on the new strain, I know a couple of questions have been asked. But you mentioned even at the 2-liter scale reaching kind of the cost points and yield points that you're hoping for on the diesel production side. If my memory is right when you went public I think the goal was to be in the kind of 22% to 24% yield range to cost-effectively produce diesel. Is that an indication that you're in that yield ballpark even at this smaller scale production?

No. It does say that these strains and what we've seen in them, especially the fact that they've now surpassed the first generation, we've got a clear visible path to get there and are confident of being able to do that, but we are not at that level today.

Got you. Okay, and just the last question is, if we kind of fast forward six months from now and think about the 2Q earnings call and Paraiso is up and running for a couple months, how are you folks going to articulate what kind of the startup costs are in terms of your cost per liter? I imagine that would be bumped up for a couple quarters in a row, as you just have some teething pains and fits and starts, but is that something you're going to break out separately, because I would imagine at that Tate & Lyle is running a little bit more smoothly and that would then be offset on the margin side by start-up ramp costs throughout 2013, and as you've articulated, things would be much better in 2014.

But, again, just trying to get a sense of are you going to separately break out what those startup costs are so we can look at what the contract manufacturing side of the business is doing from a margin perspective separately?

Yes. We -- a couple of points, and then I'll let Steve comment on what to expect regarding how we report. We are at a stable process and understand stable economics at Tate & Lyle. We expect, based on the transfer of technology and what we're seeing during the commissioning phase at Paraiso, very quickly attaining that same level of performance and our whole focus on the, I'd say, very measured ramp-up during 2013 is really to ensure that we set ourselves up for success in 2013.

So it's not necessarily that we think it's going to take two to three quarters to stabilize based on everything we've achieved so far and what we're seeing. And I think -- and my last point will be where our production stability is today, where our production costs are today is a significant step change from where we were at the beginning of this year. So our ability and our visibility on both the startup at Paraiso and the current performance at Tate & Lyle don't give us the view of a steady state hope we get there the evolution in 2013.

Got you. Okay.

And I guess, just to build on that a bit. I haven't completely thought through what the reporting model is going to look like. I am pretty sure that we will not break out each plant separately. But we want to be in a place where we can give all the readers of our financial statements and our analysts' good visibility on what our expectations are. So the extent that we've got startup and other related costs, I think we'll find ways to be able to share those with you.

Got you.

Just haven't completely thought it through yet.

And one last quick one for you, Steve, the $8.8 million this quarter in revenue, was there any cost associated with that or is that a 100% profit?

There were no current cost associated with that. Again, that had to do with cash in prior periods.

Got you. Thank you.

Brian Lee, Goldman Sachs.

Hey, guys. Thanks for taking the question. And I apologize, I jumped on late, so if you've answered these, again apologies. I was wondering what drove the improvement in product cost quarter-on-quarter, and I guess what trajectory could we expect from this level into early next year?

I think two things on the product cost, one, we continue to transition out of the ethanol and ethanol related gasoline business. So that was a big chunk of the cost. And then on the renewable products, we just didn't have much activity there. And we purposely -- we only had Tate & Lyle, and we purposely had Tate & Lyle down for the quarter as we implemented process and equipment changes there.

So looking forward, the fourth quarter will, again Tate & Lyle would be the only production facility that we have running a little bit of the downstream processing, it's at some of our other CMOs, but most of it would be Tate & Lyle. And I don't see at this point in time a lot of activity and a lot of cost there based on what we look forward to the rest of the year. So I think there shouldn't be much change from Q3.

Okay, that's helpful. And then maybe just a quick follow-up, and I may have misunderstood this. But I have thought on the renewable product side that some of the Q3 volume, if not a lot of it, was being shipped out of inventory. So I'm curious wouldn't that have been at costs that are similar to Q2 maybe, I'm missing something here?

It would have been shipped out of inventory but Q2, especially early in Q2 had costs related to some of the other CMOs and the other activities as we built that inventory up. And the downstream processing cost that we had to take the farnesene in to squalane. So we had just additional cost in Q2. But you're right, virtually all of the shipments and the sales that we had in Q3 came out of inventory.

Okay. Thanks a lot.

You're welcome.

Thank you. And that does conclude our time for questions. I would now like to turn the program back over to John Melo for any closing remarks.

Thank you, Eli. And I'd like to thank all of you for your time today and your interest in Amyris. Have a good afternoon or evening.

Thank you, sir. And again, ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day. Attendees you may disconnect at this time.