Amyris Inc (AMRS) 2015 Q1 法說會逐字稿

Welcome to the Amyris first-quarter 2015 conference call. This call is being webcast live on the Events page of the Investors section of

Amyris's website at amyris.com. The call is property of Amyris and any recording, reproduction or transmission of this call without the express 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's website.

I would like to turn the call over to Peter DeNardo, Director of Investor Relations and Corporate Communications. Sir, go ahead.

Thank you, Carmen. Good afternoon and thank you for joining us this afternoon.

With me today are John Melo, our Chief Executive Officer; and Raffi Asadorian, our Chief Financial Officer.

Please note that on this call, 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 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's operating activities and financial results for 2015 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 with the SEC on March 31, 2015. 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 a 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 will now turn the call over to John Melo. John?

Thank you, Peter, and welcome aboard. Good afternoon and thanks to everyone for joining us today.

Today I'm pleased to report the first quarter marked solid progress and execution against our plans to deliver and grow multiyear collaborations, while investing in sales of our high performance, no-compromise, renewable products.

We delivered total cash revenue inflows for the first quarter of $30.3 million. I'm also pleased to report that we delivered on our previously stated goal of achieving positive cash flow, generating $1.7 million of positive free cash flow for the first quarter. This achievement was despite a negative currency impact of cash flow of $1.2 million. Our customers within the cosmetics markets are also reporting very strong end user demand of our products.

Raffi will take you through our financial performance in more detail later, but first I would like to update you on the business results and our progress in the first quarter.

As highlighted on our fourth-quarter call, 2015 is the year for us to focus on strengthening our commercial efforts to accelerate revenues and expand into higher-margin business lines. Following are some of the ways in which we are doing this.

During the first quarter, we doubled our volume of squalane sales and have become the lowest cost and largest applier of squalane to the cosmetics industry. We experienced our strongest growth to date of sales to end customers from distributor inventory, with growth of 140% versus the first quarter of 2014.

This strong growth was represented across all our geographies, with Asian sales growing at 180%, European sales at 200%, and the US at 86%. This compares to about 30% growth for the same period in the prior year and we are continuing to see this end user demand into the second quarter, based on feedback from our customers. Most of this is coming from the confidence cosmetic brands are gaining in the consistent quality, reliable supply, and multiyear price guarantee we are providing.

We have much more production capacity available to sustain this level of growth and are experiencing early signs of market expansion through the wider use of squalane as the leading emollient in formulations, with expansions into hair care, sun care, and other applications, including [fabric]. We expect some of this end-market demand to be realized in our product revenue in the second half of the year, as distributors continue to sell through current inventory.

This is a very good start to the year for squalane and an area where we are investing in additional growth with expansion of sales staff capability and growing our distributor base as we expand our product line by adding a high performance, mid-priced emollient to our product portfolio. We are seeing very strong interest in this new emollient, Hemisqualane, and have already shipped our first order of this product into the Chinese market, where skin care is one of the fastest growing personal care markets in the world.

In fuels, Brazil Diesel de Cana sales remained at about the same volume as prior quarters, with significantly lower revenue in the first quarter, as we completed the transition to our new distributor, Raizen, from BR, the Petrobras distribution company.

To complete this transition, we facilitated the BR inventory transfer to Raizen instead of new product sales from Amyris directly to Raizen. This is now complete and second-quarter revenue will be consistent with prior quarters, with some adjustment for currency headwinds, as the Brazilian real remains weak in relation to the US dollar.

Most of the remaining sales and marketing activity we experienced in the first quarter was related to the introduction of our new products, an important part of growth strategy. And we expect this will start favorably impacting our revenue in the second quarter and lead to potentially significant revenue growth in the second half of 2015.

The new products include the Biossance skin care line; Muck Daddy industrial hand cleaner; Myralene industrial cleaners, our industrial monomers and polymers through our Kuraray partnership; and Neossance Hemisqualane. Combined with the products we make for our partners from our collaborations, these products provide the underpinning to our growth over the next two to three years.

Since the end of the quarter, we have completed a private introduction of Biossance, where we sold out our opening inventory. We will begin official commercial sales of Biossance through our website, biossance.com, at the end of May and are already encouraged by the strong initial consumer response to this product.

We also completed the early market introduction of our new Muck Daddy hand cleaner to automotive repair shops in the Denver area at a small trade show held by our distribution partner, Autoforce, one of the largest auto parts and tire distributors in the US. This was a very successful early introduction, with over one-third of the buyers present choosing to switch to Muck Daddy from their current industrial hand cleaner. We are planning an official market launch of Muck Daddy to the automotive industry in Chicago in early July.

We're expecting significant contribution from both of these products to our second-half revenue.

Also during the quarter we signed a letter of intent with Fosun Pharma, a leading publicly listed pharmaceutical company in China, to establish agreements for Amyris to supply a precursor to an active pharmaceutical ingredient and to develop additional target molecules of interest. Without going into too much detail while discussions are ongoing, this move is in line with our strategy to focus on the pharmaceutical market as an additional growth platform for Amyris.

As you may recall, Amyris was founded on a project to develop artemisinin, an effective drug use for treatment of malaria. This agreement will also explore other applications for the precursor compound beyond the treatment of malaria, and we expect it to serve as a strong re-entrance for Amyris to the field of pharmaceuticals.

We are in active discussions with other large global pharma companies, and have had meetings with almost a half dozen of them. Some have already expressed a high level of interest in the potential of our microPharm platform for generating target diversity as well as screening for and manufacturing successful molecules. We expect our first agreement to be completed by the end of the year and continued strong demand could generate several agreements in 2016.

In addition, in the first quarter we entered into an agreement with Genome Compiler Corp., a leader in computer-aided design and collaboration platforms for the synthetic biology industry. This agreement calls for Amyris's automated lab service to be integrated with Genome Compiler's online designs, tools, and ecommerce platform to enable customers in the pharma and biotech industries to leverage a comprehensive platform for all their synthetic biology development needs.

The first quarter was another successful quarter for our flavor and fragrance ingredient activity. We received several milestone payments and several annual collaboration payments. We're on track for around $35 million to $40 million of combined product revenue and collaboration inflows from this segment in 2015. This compares to about $25 million in 2014.

In cooperation with our partners, we will have four molecules in commercial sale stage by the end of this year for this segment. This is an increase of three molecules from the single molecule we commercialized in 2014.

We also made additional progress on our collaboration with Braskem and Michelin for the development of renewable isoprene to, among other potential uses, give Michelin a sustainable sourcing channel for poly-isoprene for the production of quality tires using a high-performance, environmentally responsible material. We are continuing to deliver significantly ahead of schedule on our milestones for this project.

And finally, after the quarter ended we have restarted our industrial fermentation plant, Brotas, after our annual scheduled maintenance during the sugar cane off season. The plant had a very successful restart, and is operating contamination free and meeting or exceeding our operational targets. We expect to end the year with farnesene production cash costs under $2 a liter and have visibility on farnesene production under $1 a liter within the next 24 to 36 months. This could not be accomplished without the amazing effort and leadership of our manufacturing team and all of our team in Amyris's Brazil operation.

With our technology continuing to deliver product supply solutions to our partners and our manufacturing platform performing very well at industrial scale, our focus is now fully on growing our top-line sales through expansion of our product portfolio, access to greater value downstream and closer to consumers, and deepening our collaboration portfolio into new markets where our technology can deliver breakthrough performance for our partners.

Let me explain each of these active growth activities. In assessing our current portfolio, we've realized that when you consider all the current collaborations and the most probable scenarios from our collaboration pipeline, excluding fuels, our portfolio represents what we believe is about $1 of annual product revenue at maturity for each dollar of collaboration revenue we achieve from our partners.

We believe this could potentially represent about $500 million of annual product revenue from products we're developing for our partners. This excludes products we produce and sell outside of collaborations, as illustrated by our Biofene platform and our products into the cosmetics and performance material markets.

Our technology platform and collaboration business model illustrates the power of partnering with large companies who are leaders in their markets. We are extending this model to multiple applications, where product sales with partners give us market access that would be difficult for us to achieve independently.

We are expanding our existing collaborations in the flavor and fragrance market, and also into commodity markets that are facing significant headwinds, like ethanol, to help them further reduce production costs. In commodity markets we expect to participate with a royalty from production cost improvements.

We're expanding into pharma by applying our high throughput system to help provide additional target diversity while using our best-in-class scale-up and production platform to make initial test material and provide low-cost API precursors.

We expect the combination of these activities to deliver three to five new or expanded multiyear partnerships this year. These partnerships that we call collaborations deliver cash inflows in the first three to four years, and then recurring revenue in cash from renewable product sales that are typically 10-year or longer relationships.

While we're developing the technology and scaling up the production for these partnerships, the GAAP reporting for the revenue is not fully predictable. This is why we report these as inflows, the cash amount paid and reported as inflows when received. The translation of these inflows to GAAP revenue varies based on the type of agreement and whether it's milestone-based, technology-delivery-based, or some mix of the above.

The timing relationship is improving as Total becomes a much smaller part of our collaboration portfolio. We currently have about 10 collaboration partners, with a good mix of inflows from each partner, and market segments representing over 20 molecules contracted, some of which have already been commercialized.

These collaborations have delivered over $215 million of inflows over the last four years, and we expect to average between $60 million and $70 million of annual collaboration payments through the end of this decade.

These partnerships more than pay for our direct R&D expenses and provide us with significant revenue growth as each of the products reach commercial production and result in annual revenue and margin growth. About $20 million of our $50 million to $60 million of product revenue this year is expected from collaborations that have reached commercial production.

Our expanding product portfolio drive the next dimension of our top-line growth. We've indicated that we would be introducing two to three new products annually.

This year we are introducing three new molecules from collaborations: One new molecule for the cosmetics industry and two new brands to sell directly to end users, Biossance as a skin care brand to end consumers, and Muck Daddy as an industrial hand cleaner to the more than 10 million industrial workers that get their hands dirty with oil and grease every day. We expect these products to represent $25 million to $35 million of renewable product revenue growth in 2015.

Our final top-line growth driver is our expansion downstream to access more of the value available for our proprietary products, our farnesene-derived, best-in-class, no-compromise molecules. These are products where we have a performance advantage and are the low-cost producer. Here's why we are moving nearer to the end consumers with our farnesene derivatives.

Between our fragrance ingredients and cosmetic ingredients, we are participating in about $2 billion of end market revenue. This reflects Amyris capturing about 1% of the final product sales revenue when you consider the product revenue we generated from these end markets in 2014.

Through a deeper understanding of the end markets, we've realized that ingredient providers like Amyris realize 1% of the end market revenue, formulation providers about 5% of the end market revenue, and products sold through distributors about 30% of the end market revenue.

After much work within consumers and with people working in industrial environments, we believe we can make a significant, positive impact on their lives while doing less damage to the environment and improving our top-line growth. There are more than 10 million people who spend their work day working with oil and grease on their hands. Through a combination of regulatory changes and low-quality formulations, they are not happy with their current hand-cleaning products. They are frustrated with products that leave their hands feeling rough and have an after-smell of petroleum while, in many cases, not doing a good job cleaning their hands.

Our new brand, Muck Daddy, deals with these issues head on. We have a unique formulation that meets VOC regulations, cleans as well as their old products used to, and leave the hands soft, without the petroleum after-smell. We are making a difference by delivering a no-compromise product to these customers.

We expect our industrial performance products to grow from around $1 million in 2014 to around $10 million in 2015. This includes our Myralene industrial solvent product line and our direct sales through the Muck Daddy brand.

Biossance is our brand for consumer care. We are launching The Revitalizer later this month and have several additional products slated for introduction before year end. We also plan on additional lines extending into hair care, sun care, and spa, to be introduced in 2016. We've completed early testing with over 600 consumers and received very strong interest in the product, with over 70% of consumers agreeing that Biossance is better than the products they are currently using.

Over the last year we've hired a team with a strong track record of developing and launching products into these markets and are very pleased with our progress. We expect our two new brands to support our direct sales product portfolio, while our distributors continue growing our ingredient and formulation sales into the cosmetics industry.

We expect our total cosmetic sales to grow from around $10 million in 2014 to around $25 million in 2015. This includes our continued strong growth in Squalane, the introduction of Hemisqualane, and our direct-to-consumer products sold through the Biossance brand.

We have a strong track record of developing disruptive technology, scaling and consistently improving our production cost performance. We have lowered our production costs of farnesene from over $19 a liter in 2012 to around $2 a liter this year, and tracking towards below $2 a liter by year end.

The same discipline and focus, with the addition of strong sales and marketing skills, is driving our top-line growth. We expect our renewable fuel sales to remain around $10 million for this year, with new product volume from renewable jet sales and then some currency headwind from Diesel de Cana in Brazil. We are most encouraged from our latest technology performance that provides visibility to less than $1-a-liter fuel production costs in the next 24 to 36 months.

Now, let me turn the call over to Raffi to discuss our first-quarter financial results before we provide our business outlook for the remainder of 2015.

Raffi?

Thank you, John, and good afternoon, everyone.

To help explain our numbers and results, we've included some slides that will help everyone follow along.

During the first quarter, we continued to make more progress toward bolstering our financial condition. Most notably, we are pleased to have exceeded our stated target of achieving positive cash flow for the quarter, with net cash flow of $1.7 million, exceeding plan despite a negative currency effect of $1.2 million.

We also were pleased to have completed the previously announced upgrade to our Brotas plant during the seasonal shutdown, and we are now ramping up production. As a result of these improvements and introducing better strings, we expect to pick up where we left off at the end of last year and continue to realize lower production costs as highlighted on our fourth-quarter call.

Now, let me take you through our first-quarter results in more detail. If you turn to slide 8, I will take you through our collaboration inflows. As John noted earlier, collaboration partnerships are an essential part of our business model and a key innovation engine for future growth.

With that in mind, we expect our collaboration revenue inflows, a non-GAAP measure, to be approximately $50 million to $60 million for this year. Just as a reminder, collaboration revenue inflows represents the cash received from collaboration partners related to an agreed payment such as milestones or up-front payments.

In the first quarter of 2015 alone, we generated collaboration revenue inflows of $28.2 million compared with $15 million for the first quarter of 2014, so we are on a solid track to achieve this goal.

Cash revenue inflows, another non-GAAP measure, is the sum of collaboration inflows and product sales. The difference between cash revenue inflows and GAAP revenues is the revenue recognition accounting for collaboration of revenues. If you turn to slide 9, we have provided a reconciliation to GAAP collaboration revenue from collaboration inflows.

As a result of revenue recognition rules, the collaboration inflows can differ significantly from GAAP revenue. Historically, approximately 70% of collaboration inflows were recognized into revenues, which can fluctuate quite a bit within a quarter. However, we expect this to be more closely aligned in the rest of the year, given the expected terms of some new agreements, as well as how the existing agreements are structured. This correlation is expected to increase to the 90% range, although it will vary depending on how agreements are finally structured.

Moving on to total GAAP revenues, on slide 10, total GAAP revenues for the first quarter 2015 were $7.9 million, an increase of 30% over the same quarter last year. Revenues for the quarter consisted of $5.8 million in collaboration and grant revenues plus an additional $2.1 million in product sales.

Collaboration revenues were up significantly from $3.2 million for the first quarter of 2014, due to Amyris achieving additional collaboration milestones while product sales were down 26% over the same period a year ago. Product sales in this quarter consisted mainly of cosmetic sales, which increased 53% over prior year.

Offsetting this increase in cosmetic sales was a decline in our flavor and fragrances products and diesel sales. The first quarter 2014 flavor and fragrance sales included the initial shipment volumes of our first flavor and fragrance product, while additional flavor and fragrance shipments are not forecast until the second half of this year.

The decline in diesel sales was the result of a change in distributor and the related rebalancing of their inventory levels, despite solid end user demand for our diesel product in Brazil. Accordingly, we expect diesel sales to return to normal levels going forward.

Our average selling price of product in Q1 was $9.98 per liter, which exceeded the $6 to $8 per-liter range provided on our fourth-quarter call. The driver of this favorable variance is attributed to the mix, as our cosmetic product sales exceeded the fuel sales by a larger margin than planned.

As fuels ramp back up to a normalized level, we expect ASP to fall back in line with the range previously provided.

Moving down the P&L to cost of products sold, which we have broken down for you on slide 11, for Q1 our cost of products sold was $6.6 million compared with $6.2 million for the first quarter of 2014.

There are three main components of our product cost of sales. First, it includes the actual cost of the production of our products; second, when the plant is not operating at normal capacity and certain overhead costs are charged directly to the P&L in the period and not absorbed into the production costs of our products, which we term excess capacity; and, finally, any charges or benefits related to inventory provisions.

Increase in cost of products sold for the first quarter of 2015 is due to an inventory reserve reversal, benefitting the first quarter of 2014, plus higher excess capacity charged to the P&L in the first quarter of 2015 related to the seasonal shutdown of Brotas and the Company's Gylcotech facility for upgrades and maintenance. We expect the excess capacity costs to decline throughout the rest of the year as our facilities get back on line with production.

Furthermore, as we sell inventories with lower production costs we will see the benefit come through on our P&L through the upcoming quarters.

The product cost of sales in the first quarter of 2015 related to product that was produced in the second quarter of 2014 which was at a higher cost than current production.

We are currently moving back into production at Brotas, and we continue to believe we should see cash production costs, excluding excess capacity charges, of farnesene below $2.50 per liter, which for comparison, our average farnesene cash product costs for 2014 was $3.40 per liter, with an average of below $3 per liter achieved in the fourth quarter of the year.

The lower production costs will mainly be realized in our P&L in Q3 and Q4 of this year as we continue to sell through our higher-cost inventories that were produced earlier in 2014, the achievement of which will support reaching our expected cash margin targets for the year.

For the quarter we posted a non-GAAP gross margin, including collaboration inflows, of 82%. This was up from 73% for the first quarter of 2014 and compared with a negative 41% for the prior quarter. Please refer to the reconciliation of our GAAP to non-GAAP financial information table in our press release for more details.

Moving now to our operating expenses illustrated on slide 12, combined R&D and SG&A expenses were flat at $26.4 million for the first quarter of 2015 and the first quarter of 2014. These amounts include certain noncash expenses, such as depreciation, amortization, and stock-based compensation. On a non-GAAP basis, which excludes these noncash items, our combined R&D and SG&A expenses were $21.5 million for Q1 of 2015 and compared with $20.4 million in the first quarter of 2014.

This increase was due to a severance charge of around $400,000 taken in the first quarter of 2015, plus a planned increase in headcount supporting our commercial function, which is focused on the planned launch of our two new consumer products, Biossance and Muck Daddy.

As we previously mentioned, we continue to maintain our focus on cash generation while holding to our target of around $85 million in cash operating expenses for 2015.

For the first quarter, we reported a net loss of $52.2 million, including a noncash loss related to a change in the fair value of derivatives of $17.4 million, or $0.66 per basic and diluted share. This compared with net income for the first quarter of $16.4 million, or $0.21 per basic share and on a diluted basis the Company posted a net loss per share of $0.34. Our adjusted net loss for the first quarter of 2015 was $32.2 million, or $0.41 per share, and compared with a net loss of $28.1 million, or $0.37, for the same period in 2014.

Turning to our balance sheet on slide 13, our cash, cash equivalents and short-term investments at March 31, 2015, was $44.9 million, an increase of $1.5 million from the $43.4 million at December 31, 2014. Net working capital declined during the first quarter as we worked down the inventories since there was little production in Q1, with collection and timing of payments favorable during the quarter.

In summary, we're pleased with our progress in the quarter and as we continue to work towards achieving our targets for the year we will begin to transition over to increasingly providing GAAP information. As you're aware, historically the GAAP numbers have been quite bumpy and this is why we have historically provided non-GAAP financial information, which management believes is important to gaining a good understanding of the business trends.

As we work through the accounting for historically complex arrangements, I intend to try and transition away from predominantly communicating non-GAAP information to GAAP information to make it easier for everyone to follow the business trends. I don't intend to eliminate non-GAAP information, as it is relevant to understanding the business, but instead it will be increasingly used as supplementary information.

Before handing the call back over to John, I'd like to update you on our potential financing paths. As you know, in April we filed a universal shelf registration statement. The shelf gives us some flexibility as we intend to continue to opportunistically consider financing sources when they make sense for Amyris and its stockholders.

I'd also like to note that we expect in the coming days to file resale registration statements for our previously announced equity line of credit and separately for some of our existing investors. The resale registration statement filing for the existing investors is in response to our obligations to those investors under existing registration investor rights agreements. That registration statement will cover common stock underlying securities that are already outstanding.

Let me turn the call back over to John now for a review of our outlook, and then we'll open it up for questions.

Thanks, Raffi.

Now I'd like to provide you with our business outlook for 2015. We continue to expect to achieve cash revenue inflows in the $100 million to $110 million range for 2015, and expect it to be balanced between collaborations and renewable product revenue.

Our product sales are expected to expand through multiple channels, including direct-to-consumer for our Biossance brand and through U.S. Autoforce and U.S. Lubricants for our Muck Daddy product, both of which will be officially launched in the coming weeks.

Combined with the introduction of three new fragrance molecules and additional shipments of our existing fragrance molecule in the back half of the year, we expect product revenues to accelerate into the third quarter and fourth quarter. These new products should favorably impact product gross profit margins closer to our goals of 50% by the end of the year.

Finally, as previously mentioned, a reduction of customer inventory levels of our cosmetic and fuel products in the first and second quarters of 2015 will have a positive impact on our second-half product revenues, as our product revenues are expected to catch up with customer demand and sell-through.

We're very pleased with our positive free cash flow in the first quarter, our strong demand and sell-through to end customers, and the successful restart of our Brotas facility. Our product portfolio is expanding. We are in process of two terrific product launches, and we have a deep and high quality collaboration customer pipeline. We are fully focused on our top-line growth while remaining disciplined with our operating costs.

I would now like to open the line for any questions you may have. Carmen?

Thank you. (Operator Instructions) Sven Eenmaa; Stifel.

First I wanted to ask in terms of the second-quarter revenues, what is the mix expected to be there? And what is the ASP level expected to be?

And then, the second question there is, as you launch the new products and get more into the second half of the year, what should we model in in terms of the pricing mix and gross margins as those products start to ramp?

And the final question is, with the new products there is obviously some upfront marketing expenditures. How should we think about OpEx levels in the second quarter?

I think between Raffi and I we'll try to address some of the questions. So let's give it our best shot. I think on the ASP and revenue mix, I'd expect fuel to stay flat on a volume basis if we look at the last couple of quarters and then going forward. And then I'd expect higher-revenue products coming in in the second half of the year.

So, I would say ASP in the second quarter will be slightly lower and the high end of the range we had given. I think we've given 6 to 8. And in the second half of the year, I'd expect ASP not to be very far from what we delivered in the first quarter.

I think on the OpEx question -- and then I'll turn it to Raffi -- we are focused on being really very disciplined and managing our costs internally. So I don't expect overall OpEx to climb. I'd expect it to stay fairly flat to where we are, as we look at cost opportunities internally to fund the investment in marketing expense going forward.

Okay. And then, I think your second question, Sven, was on the new product launches and the expected margin on those throughout the year, if I'm correct?

Yes. That's correct.

Yes. So the majority of the impact will be seen in Q3 and Q4. We will launch, as John had mentioned, at the end of Q2 on the cosmetics product and in early Q3 for the Muck Daddy product. Those are significantly higher margin products than we are selling today.

We do expect an uplift in Q3/Q4 gross margins on that, combined with some of the lower-cost production in inventory currently that will be coming through. We're still selling through Q2 of last year inventories, and we'll sell through in Q2 of 2015 some of the Q3 inventories. And then we'll start benefiting from some of the lower-cost production at the end of last year and then what we'll start producing actually in the second quarter of this year.

So I would expect that we're ramping up quite a bit to hit those targets that we had previously stated on gross margins.

Great. Thank you.

And just to add on to that, the excess capacity costs will go down quite a bit in Q2, Q3 as we ramp up production.

Okay. Great to know. Thanks.

Pavel Molchanov; Raymond James.

So, based on your Q1 inflows of $30 million and your full-year guidance, does it follow that Q1 was kind of the high water mark for the year?

Pavel, this is John. I'd say no. I'd expect Q3 and Q4 both have the potential to surpass Q1, and I'd say Q2 will definitely be lower than Q1.

Okay. Understood. And is that purely based on Total or your other partnerships as well?

Actually, predominantly others. So, the way to think about the inflows part, the collaboration part, is we've been guiding to the $50 million to $60 million in collaborations. And imagine that we have about half that number done and the other half split evenly across three quarters. And then, the product revenue significantly stepping up in Q3 and Q4 and then being up Q2 over Q1.

Okay. That's useful. You also spent a lot of time today talking about everything other than fuel. And clearly there are interesting opportunities there. But is there kind of a deemphasizing of fuel market for you guys? And is that obviously premised on what's happened to oil prices?

Actually the contrary. We are in the middle of several moves with our fuel technology which we'll announce in subsequent quarters. And I think all of that, especially in light of our new visibility on sub-$1- a-liter fuel production costs, I think you'll see a new emphasis on fuel for us.

All right. I'll leave it there. Thanks.

(Operator Instructions) Thomas Boyes; Cowen.

With Muck Daddy you kind of outlined how you were going about attacking that market. For more of the cosmetics angle that's launching in the second half of this year, what kind of distribution strategies are you looking at? And is it something perhaps [seen] other companies look, like QVC? Or how are you going out there and moving that product?

On the Biossance, as you can imagine, we're using a multi-pronged channel approach, initially focused on online, very quickly moving into retail, moving into hospitality, moving into private labeling, and then talking in active discussions with a couple of the online shopping channels for presence on one of those channels before year end.

Excellent. Great. That was it for me. Thank you very much.

Kenzie Barry; Goldman Sachs.

You mentioned that your cosmetic product was gaining confidence because of the multiyear price guarantee you were providing. Is there any more color you can provide around that?

Great question, Kenzie. I'll start with one of the problems in that market has been significant price volatility, a lot of quality variability, and inconsistent availability of the product, which actually over the last five or six years has really frustrated many of the large brands that use the ingredient in their products.

So we have focused on solving the three issues. One, we've been a consistent provider, reliable supply, for the last three years. Our quality in the last 24 months has been absolutely consistent.

And then we realized that to really shift the dynamic in the market we should offer price guarantees, which is something that I think we're uniquely positioned to offer based on our manufacturing process. And we've seen that in the last two quarters significantly shift demand for the product.

And the way we approach it is really simple. We simply guarantee large-volume buyers that they can lock in prices for anywhere from three to five years. And we also ensure that if there's a significant price move downwards in the market that they'll get benefit of that. So there's really little to lose and a lot to gain by locking in a flat price for three to five years based on the volume for the large-volume customers.

Okay, great. That's really helpful. And one more question -- is there any visibility you have into the recipe life cycles of your customers? Are any of them coming up on the period they would be looking to redo some recipes that you could work into?

Another great question. It's a very high turnover market. If I think about cosmetics today, and a lot of the products we supply ingredients into, they're literally turning over all SKUs in three years. So that means every year one-third of the SKUs turns over. And as you can imagine, that's been a favorable thing for us, to see ourselves go into new formulations through those cycles.

Okay, great. Thank you.

(Operator Instructions) And I'm not showing any further questions and I would like to turn the call back to Mr. John Melo for any closing comments.

Very good. Thank you, Carmen. And thanks, everyone, for joining us and your continued interest in Amyris. We're very pleased with our execution during the first quarter of the year, as we ramp up our momentum for the second half and as we take our new products to market and start to see some of the benefit of that showing up in our results.

I look forward to reporting our second-quarter results sometime in August. And in the meantime, we'll be presenting at the Cowen & Company 43rd Annual Technology, Media & Telecom Conference in New York on May 28, and we hope to see some of you there.

Thank you and have a very good rest of your day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program and you may all disconnect. Have a great day, everyone.