Yield10 Bioscience Inc (YTEN) 2011 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Metabolix, Inc. Third Quarter 2011 Earnings Conference Call. Today's call is being recorded. (Operator Instructions) I would now like to turn the conference over to Ms. Allison Townsend.

Thank you. Good afternoon, everyone. Metabolix released third quarter 2011 financial results after the market closed today. If you do not have a copy, one may be found on the website at www.metabolix.com in the Investor Relations Section. Making the presentation today will be Richard Eno, President and Chief Executive Officer of Metabolix, and Joseph Hill, Chief Financial Officer of the Company. They are joined by Oliver Peoples, a Co-Founder of Metabolix and Chief Scientific Officer.

Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be put upon them. The Company undertakes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this conference call. We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks that could impact our future operating results and financial condition. With that I'd like to turn the call over to Rick Eno, President and CEO of Metabolix. Rick?

Thank you, Allison. I'd like to welcome all of you to the third quarter earnings conference call for Metabolix. Today I will provide you with a review of the Metabolix vision and an update of our ongoing activities. Joe will then take you through the financials. We continue to make good progress on our commercialization and development activities, and have maintained a strong financial position.

While I understand that for many of our long-term investors, a Company overview is unnecessary, many of our newer investors find it valuable. I will take about a minute to provide some Company context.

Metabolix is an innovation-driven bioscience company which is focused on bringing environmentally friendly solutions to the plastics, chemicals and energy industries. We are developing and commercializing pathways and products that are intended to lessen the world's dependence on oil, reduce CO2 emissions relative to traditional materials, and address critical solid waste issues. We are founded on hard science and have exceptional capabilities in plant science, in fermentation, microbial and polymer engineering, and in product and market development.

We are leaders in producing and upgrading a broad family of materials called PHAs. PHAs are energy storage molecules found in nature which have a number of useful properties as plastics, and can also serve as a unique source of renewable chemical intermediates.

We currently have deployed our PHA technology across three platforms. First, Mirel, a bio-based and biodegradable plastic currently being commercialized with our partner, Archer Daniels Midland through a joint venture called Telles. Second, industrial chemicals focused on C4 and C3 chemicals; and third, crop-based activities, which include our programs in oilseeds, switchgrass and sugarcane.

I'd like to begin with Telles, a joint venture for commercializing Mirel. We continue to making forward progress in this early growth phase of this business. I will review the overall status of the business primarily addressing market and customer activity, as well as a review of our overall growth plans.

In the Telles venture, we are very focused on a successful launch of the Mirel business. The market for bioplastics continues to be very robust and we have an ongoing stream of inquiries. From this high level of interest we are currently working with about 100 targeted prospects. It is very encouraging to us that these prospects reflect a very diverse range of applications which is reflective of the broad, long-term potential for Mirel.

From this diverse interest we have chosen to focus on the areas which we believe will provide us with the most rapid growth. Consistent with previous calls, these focused areas are primarily in the film markets, which include compost bags, agricultural mulch films, and packaging. This is due to strong market pull for bioplastics in these segments, as well as the characteristics of the Mirel offering. Mirel offers biodegradability in a wide range of environments including marine applications, a higher bio-based content than incumbent film products, and in some cases will improve the physical properties of the film.

While still early in the development of our business, the ongoing orders appear to be validating the Mirel value proposition and targeted price point.

With regards to the milestone of the first commercial phase of Telles, which is based upon the sale of 1 million pounds of product meeting certain quality, customer acceptance, price and order size requirements, we had expected this to occur by year end. Currently, we have shipped just over 50% of this target. Moving forward we are seeing increasing order volumes and expect a qualifying millionth pound to be shipped sometime in the next 45 to 120 days. The milestone will follow by approximately 30 days reflecting typical cash collection terms and customer acceptance.

We are seeing a very wide range in our forecast volume as the difference of just a few truckloads of Mirel across a few customers can move this milestone by several weeks.

This quarter we continued to expand the customer base, which is currently split between Europe and the US. The customer base has now grown to 57 customers, up from 50, with 26, up from 15, now placing repeat orders. Repeat orders are a leading indicator that a customer development program is translating to a successful product market launch. We are still seeing smaller, innovative customers move faster than the larger customers, and smaller initial order sizes at this market launch date than what we expect to see in the long term. We also have a number of potential customers in the development pipeline at a preorder stage, and we have seen steady quarter-over-quarter increase in volume this year.

The ramp-up for some of our key customers has been slower than we had predicted as we are working with them to optimize either the Mirel grade or the processing conditions for the Mirel grade to achieve their specific performance requirements. This will typically introduce an iteration into the customer development cycle. We are encouraged that as these improvements are completed, the final benefits are able to be translated relatively quickly to similar customers.

In addition, we are now beginning to see interest arise separate from our direct market development activities. This is a result of having Mirel in the hands of compounders and formulators who are using the product to address unmet market needs. We expect this trend to continue and to increase in the coming year.

Our pricing guidance of $2.25 to $2.75 per pound of compounded resin is still valid, and we continue to get higher prices in certain niches.

This quarter I would also like to highlight a series of relationships which are illustrative of our progress in the potential of the Mirel product. First, distributorship arrangements. In order to balance the focus needed by our commercial team on our film platform with that of a broad market interest from Mirel, this quarter we have initiated six distributorship arrangements as part of our strategy to cover the market.

In Italy, we have engaged two firms to help us cover the Italian market where bag ban legislation is driving interest in compostable bags. In Northern Italy, we are working with [Technipol], and in Southern Italy we are working with [Plastikemia]. For the broader EU, work has begun with [Telco] and ETAP specifically addressing the markets in Northern Europe, Scandinavia, and Eastern Europe and Turkey. In these geographic markets there is a well established infrastructure for diverting organic waste from landfills into composting and to anaerobic biogas generators as a source of renewable fuel. In these applications, Mirel has unique differentiation in terms of its multiple end-of-life options including home composting and anaerobic digestion capability.

In North America, Entec and Channel Price Alliance have been engaged as our distribution partners. We are anticipating additional distribution arrangements for Southeast Asia, China and South America.

Second, we have announced a new Telles customer, StarchTech. StarchTech is using Mirel in a blend with starch to improve the performance of starch-based packaging supplies. The result is a bio-based, biodegradable packing with better physical properties such as water resistance in the incumbent materials. StarchTech illustrates a theme that we are seeing in the bioplastics industry. Different types of materials are blended together in order to optimize price, performance characteristics for customers. Mirel is typically used as a high-end performance enhancer and is blended with other bioplastics.

Finally, indicative of Mirel moving more broadly into the market, we have a number of market tests either completed, ongoing or planned. These include testing of compost bags on an industrial level in Minnesota, piloting of a zero waste demonstration zone in Wisconsin, ocean testing of innovative crab traps, shoreline replanting using Mirel-based planters, and market testing of bags suitable for anaerobic digestion in Scandinavia.

Mirel is now being tested in numerous countries in applications around the world, and the feedback from those tests will inform our product and market development activities.

Outside of those developments, much is the same for Telles as in previous calls. ADM's Clinton, Iowa polymer plant, the supply source for Mirel bioplastic, is up and running. ADM with Metabolix support is in the process of improving yields, reducing costs, and debottlenecking the facility to increase capacity. This will be an ongoing process and inherent in how we operate the business. We expect the plant to continue to have capacity available ahead of market demand until the 110 million pound per year name plate design is reached.

We have continued to focus in building strategic levels of inventory of our various product grades at distribution points in both the US and in Europe. This has enhanced our assurance of supply to customers and allows us to more efficiently develop new customers around the world.

As we have described in previous calls, 2010 was a transition year as the Telles business was launched, and 2011 is a year when we expect a significant number of customer development efforts will materialize as product purchases. We will provide regular updates on our future quarterly calls to review our progress in the commercialization of this new material.

Let me now move on to the other Metabolix platforms. These are our industrial chemicals and crop programs. These represent meaningful value creation opportunities for us outside of the Telles joint venture with ADM.

In industrial chemicals, we are leveraging our PHA gene technology to enable chemicals that are currently being product from fossil fuels to be produced from renewable raw materials. We are utilizing a fermentation process and an efficient thermal recovery process to produce our targeted chemicals which we call FAST, fast-acting selective thermolysis. The PHA approach is a unique platform which enables a pipeline of chemical product opportunities for Metabolix.

Our competitive assessment has indicated that our PHA fermentation technology, plus a simple recovery process results in a highly competitive production platform for bio-based chemicals.

We have selected the C4 family followed by the C3 family of chemicals as our entry strategy into this space. Our technology is unique in that the same basic process can product both families of products with only relatively minor tailored purification modifications based on the specific molecule being produced.

We have also established intellectual property around the C5 family of products, but as many of you know, this is a smaller market than the $10 billion C3 and C4 market, and as such it is currently a lower priority for us.

We continue to move ahead well in our industrial chemicals platform and are meeting all of our milestones. Let me recap our milestones and our progress.

First, samples of our C4 product were sent to customers in Q1. This, as you know, was completed. Second, feedback from C4 customers in Q2. This has also been completed. We received very favorable feedback from targeted customers both with respect to purity of product and successful conversion of our product to key derivatives. We noted that additional sample shipments were to be made in Q3 in order to extend the testing. This was completed and the feedback on the product quality, again, was very positive.

Our third target was to be ready to begin engineering for a commercial facility by the end of the year. This means we will have proven out all key technology elements at a size which allows the process to be scaled up to commercial levels. We are still on track to complete this milestone.

Our fourth target was to produce tonnage size quantities of our C4 product to allow our customers to test product in large scale trials. We are on our way to completing this milestone.

This quarter we also successfully scaled up our C4 chemicals fermentation process to the 15,000 gallon, or 60,000 liter scale. This is very significant. The process worked as we predicted and will provide broth for us in recovering tonnage size quantities of materials by the end of the year.

Over the past quarter we continued work with our C4 chemicals joint development partner, CJ ChielJedang, towards commercialization of the C4 chemicals platform. We are actively involved in site and market analysis, as well as reviewing the feedstock markets.

We are also now in a range of discussions with potential feedstock manufacturing and offtake partners for our C3 chemicals program. There is a high degree of market interest around bio-based C3 chemicals. Our developments here obviously leverage much of our C4 work in equipment and technology and development, and this will follow our C4 program by about one year.

Across our Industrial Chemical activities in both C3 and C4 programs, we are continuing our strain development research as we move towards commercial yield targets, and are also evaluating second generation, or cellulosic sugars as possible feedstocks. We will keep you informed on progress but feel comfortable with the milestones that we have communicated to date.

Our third Metabolix platform is our crop-based activity including our programs on oilseeds, switchgrass and sugarcane. All in all, we are excited about this platform as we can see the pathways we are developing ultimately replacing capital intensive operations, such as oil and gas exploration and production, refining olefins and polymerization by producing polymer directly in crops. Our crop programs offer numerous options to produce low cost chemicals, plastics and fuels in a very sustainable manner.

This past quarter we made progress on our work on the $6 million Department of Energy grant for development of our biomass program. This funding work will allow us to work on increasing the PHA levels expressed in switchgrass and conduct pilot testing of the production of chemical intermediates via our FAST process. In this approach we will feed biomass containing PHAs to our FAST recovery process, recovering commodity chemicals, which can serve as a basis for maleic anhydride, butanol and propylene, among other products. Our residual is a densified biomass suitable for firing on site, converting fuels are being effectively transported to other uses.

Also, this quarter, given our experience with the oilseed crop camelina, we are seeing considerable interest for Metabolix as a potential developmental partner for the commercialization of this crop. As many of you know, camelina is receiving increasing interest as a biofuels crop by the USA and DOE. Our team is now supporting the delivery of one recent DOE ARPA-E grant, are in discussions around others.

In summary, during this quarter we continued to move forward across all three of our platforms. In Telles, we continue to make steady progress on expanding the customer base for the Mirel business, optimizing the product, and can see more than sufficient demand for selling out Clinton 1.

In Industrial Chemicals, we are meeting our milestones and see our FAST process as advantaged. In our crop-based businesses we are executing against our grant from the Department of Energy and continue to move the science effectively ahead. We are very enthused about the potential for the Company and the broad scale deployment of our PHA platform.

With that, I will turn the call over to Joe for a review of the financial results for the quarter.

Thanks, Rick, and thank you to everyone for joining us today. I would like to quickly review our financial results for the third quarter ended September 30, 2011. As always, we managed our finances with an emphasis on strict cash flow management. We have maintained this focus into the third quarter with $87.2 million in cash and investments. For the third quarter we used $7.8 million of cash for operations. This represents a slight increase from the $7.1 million we utilized in the year-ago third quarter.

This was an increase in cash used in operations of $1.9 million from the $5.9 million we utilized in the second quarter of 2011. This increase related to decreased cash receipts from related parties and changes in working capital related to accounts payable and accrued expenses.

Through the first nine months of 2011 ending September 30, net cash used in operating activities was $23.1 million. That is compared to net cash used of $23.9 million for the comparable period of 2010. The year-over-year decrease in cash usage for the first nine months of 2011 is primarily attributed to increased cash receipts as a result of an increase in related party reimbursements and royalty payments.

Total revenue for the third quarter was $500,000 versus $46,000 in the year-ago third quarter. During the three months ended September 30, 2011, revenue primarily consisted of government grant revenue. The quarter-over-quarter increase was primarily generated from work performed on the Company's new $6 million renewable enhanced feedstocks for advanced biofuels and bioproducts grant and the existing blow molded bioproducts from a renewable plastics grant.

Total revenue for the nine months ending September 30, 2011 was $1 million, compared to $300,000 in the same period of 2010. And the year-over-year increase was primarily generated from work performed on the government grants, as well as royalties earned under a license agreement with Tepha, Inc.

For the three months ended September 30, 2011, total operating expenses were $10 million as compared to $10.1 million in the comparable quarter in 2010. Research and development expenses in the quarter were $6.2 million as compared to $5.9 million for the comparable quarter in 2010. The $300,000 increase was primarily due to an increase in contracted research related to product development from Mirel Bioplastics.

SG&A expenses for the quarter were $3.9 million versus $4.2 million in the third quarter of 2010. The decrease of $300,000 was primarily attributable to greater patent filing costs incurred during the three months ended September 30, 2010 compared to the respective period in 2011.

Through the first nine months of this year, total operating expenses were $30.2 million as compared to $29.8 million for the comparable period in 2010. For the nine months ended September 30, 2011, total research and development expenses were $18.4 million as compared to $17.9 million for the comparable nine months of 2010. The $500,000 increase was primarily attributable to increases in contracted research related to Mirel product development and the Company's industrial chemicals program, employee compensation, and related benefit expenses, and consulting services partially offset by a decrease in material production costs.

For the nine months ended September 30, 2011 and 2010, total selling, general and administrative expenses were $11.9 million for both periods.

Our net loss for the third quarter was $9.6 million, or $0.28 per share. This was consistent with our plan and compares to a net loss of $10 million, or $0.37 per share in last year's third quarter.

GAAP net loss for the nine months ended September 30, 2011 was $29.2 million, or $0.96 per share compared to $29.3 million, or $1.10 per share in the same period of 2010. This decrease in net loss is mostly driven by an increase in grant revenue.

As I mentioned, our cash level at September 30 was $87.2 million, and we continue to have no debt. We continue to believe that we have adequate financing to fully support our development activities for at least the next two years.

I would like to reiterate from last quarter's call that when we reached the commercial milestone of the agreement with ADM, we will ship approximately $4 million of quarterly operating expenses from our P&L to the Telles joint venture. When this occurs, we will also begin to offset cash usage as we receive royalty income of Mirel sales of approximately $0.10 to $0.12 per pound, which would amount to approximately $12 million per year when the Clinton plant is operating at its full design capacity.

While the split of Telles's operating profits does not occur until the ledger balance is fully paid down, the combined effect of both of these events will have a significant positive impact on the Company's cash flow. As of September 30, 2011, the ledger balance was $425 million. This $4.7 million increase in the ledger balance from June 30, 2011 was primarily attributed to operating cash needs at Telles.

Thank you, everybody, and I believe we are now prepared to take questions.

Thank you. (Operator Instructions) Our first question comes from JinMing Liu with Ardour Capital.

Hi, Rick and Joe. I just want to clarify one thing here, if I understand correctly. Right now you guys have a strategy to sell PHA directly to compounders so they can produce more diversified products. Is that what you guys are trying to do or you guys still stick to compounding [biocell] that sell the final products?

Good question. As you know, we've got a direct sales force team, which is responsible for developing a number of customers, but the interest is very broad. So, we have a combination of channels by which the product is getting to the market. First, through that direct sales team, and that direct sales team is primarily handling the 100 or so prospects that we refer to.

In addition to that, there are a handful of compounders that we are working with that are actually developing their own channels for the material to the market and that is a relatively small number, but there are compounders working with the material particularly in blends with other bioplastics.

And then finally, as announced on this call today, we have a series of distributors who are helping us cover the market for Mirel. The ones we have announced today are in North America and Europe, primarily, and we are now examining options for South America, Southeast Asia and China. So, JinMing, we're looking at all three channels, but the predominance, what we've done so far is through our direct sales force. But now with the product optimization we have undergone, we now feel comfortable extending that a bit more broadly.

Okay. Just a related question here. If you sell PHA directly to compounders, are you going to charge a slightly lower price?

Yes, that's right. The $2.25 to $2.75 per pound is for compounded material. So, if we're selling to a compounder the resin that is not compounder, it would be at a lower end of that range or lower price. We don't have enough experience to actually provide guidance in that. And, as I noted, it's only a very small part of our mix right now.

Okay. With your commercial milestone funding, what the next thing, I believe, is the break-even level which at that moment you guys will start to pay down the CapEx or capital costs to the Clinton facility. Can you at this moment share with us what level of revenue from Clinton that will reach that break-even point?

No, we're not quite ready to do that at this point, JinMing. We are clearly looking at that. I think our thought process is similar to yours. The first thing is let's get the milestone, the first milestone taken care of. The next thing, you're right, you're exactly right -- move the business towards the break-even point and then it's sellout the plant. But right now we have been very focused on that first milestone and we will provide comments on the other milestones in the future.

Lastly, just a quick one. With what's going on in Europe and the fact there is no better regulation on usage of bioplastics, do you see any negative impact of the sales in Europe with what's going on with credit crisis over there? And have you observed any positive movement in the US?

In Europe, we were actually discussing that a bit today. There is a -- we have not seen a big impact from all the, I'll call it turmoil maybe, a strong word in Europe, but all the activity in Europe. We have not seen a big impact as of yet. The big issue for us launching a new material is really just having successful trials with early adopting customers, many of whom are in Europe. There may be a couple of cases there of the portfolio in Europe. I'm thinking maybe two customers or so, where we're seeing potentially a touch of slowdown from the market, but the vast majority of the impact has more to do with the launch of the new material than the economic situation in Europe.

So, as a result, I think we're not seeing that as a big impact at all on our business. It is largely execution of getting the product in the hands of people and having successful trials. And in the US we continue to see -- the interest we see primarily is around marine degradable plastics and development of composting infrastructure. Of course, the infrastructure US lags that of Europe and in California, of course, where there is quite a bit of activity.

Okay, thanks.

We'll take our next question from Laurence Alexander with Jefferies.

Good afternoon. I guess first question is do you have yet any sense for capital costs for what a demonstration plan for the C4 platform might entail, or how are you discussing capital intensity with your potential partners?

We have not talked externally about capital costs. The complication, Laurence, is that as you know, our primarily development partner at this point, CJ ChielJedang, and part of the analysis we're doing with CJ is an examination of whether it makes sense to integrate our C4 technology into their existing sites. As you know, they have sites in Brazil, Indonesia and China. So, as part of the exercise with them, we are looking at the utility capacity in their sites, the availability of fermenters, the plot space for recovery technology. And all of those aspects will influence the amount of capital required. Obviously, if we are able to reuse assets and take advantage of existing infrastructure, that is going to result in a substantially lower model for capital entry. In addition, CJ is looking at new sites, too, and that would then you get you back to more of a grassroots or integrated grassroots type facility. So, there is a wide range, Laurence, based on what model we pursue, and that's the work that we are executing with CJ right now.

And then two questions on the Telles JV, and this is sort of coming at the cash break-even point somewhat indirectly. How long can Telles survive with its financing structure before -- without hitting break-even. That is, if it were to ramp up to 30%, 40%, 50% utilization rates? How long could it survive in that mode without using further capital? And separately, are you -- with the volumes that you shipped to date, are you still seeing the data and the feedstock costs from ADM roughly in line with the cash costs around $1.25, $1.50 per pound?

There is a lot there in your question, Laurence. I think the first part of it, the Telles financials, as you know, in Joe's remarks he talked about the change in the ledger balance, which had to do with the funding requirements for the Clinton plant. So, obviously with ADM we are working very carefully to minimize cash usage there. So, that is more of an ongoing discussion with ADM as we optimize the production portfolio, what we are producing, what levels we run at in order to manage cash there. So, that is just an -- I'd answer that by saying it's an actively managed subject there. So, I think that would be probably the best way to deal with that.

And just to summarize the second question again for me, Laurence, just to make sure I answer it correctly.

I guess in terms of triangulating the gross margins or the potential cash generation on the business, has anything changed in your -- in sort of either the inputs or your assessment of the plant's capabilities?

Right, right. I think that everything we have told is consistent with where we see the business ultimately going. If it's quite obvious to anyone familiar with these businesses that at low levels of production where we clearly are now, the margin structure is nowhere near what it's going to be at higher levels of production. But we've not seen anything that causes us anything substantially different than what we've talked about in the past. And clearly there is a lot of work to do as we have noted in the remarks. We are improving yields, we are lowering costs. We've got, as I said in earlier calls, next-generation technology we are looking at, and all that is just part of continually looking ahead to how we drive costs down. So, we're seeing it consistent with what we said in the past, but there is a lot of work to do to get there, both from the sales side and on the manufacturing side.

And then lastly on the oilseeds, that was for a while a program that seemed to be moving fairly quickly. The emphasis now on the C3, C4, is that just because this program is turning out to be easier or has the other program run into a bottleneck?

No, no. We've always -- we try to describe the Company across the three platforms -- the Telles, industrial chemicals and oilseeds. I think the C3, C4 program is moving very fast for a number of reasons. It's a very innovative recovery technology that we have developed over the last year or so. It's building on the fermentation expertise we have gained in launching the Telles business. So, with all that it clearly -- and there is a lot of market interest there. That is moving fast.

The crop programs by their nature move a bit slower, but the oilseed program continues to hit its internal targets, and our Saskatoon operation is doing well. I don't know if you want to comment anything more on that Ollie?

No, I think that's basically it. I think we are building off the Mirel plot from the C3, C4, and this has just moved very quickly and therefore it is closer to market. Given the interest of Wall Street and things that are close to market, it seems to make a lot of sense to mention that. So, it's simply a matter of how we are utilizing the resources, the fact that C3, C4 just moves faster.

Thank you.

(Operator Instructions) We'll now hear from Jeff Osborne with Stifel Nicolaus.

Great. Good evening. Most of my questions were answered, but over the last couple of quarters you talked about a shortage of a raw material that impacted -- I think it was in the first quarter, that you hoped to have resolved this summer. I just was wondering if you could give an update on that?

Yes, Jeff, that's basically resolved. As of, I believe it was August-September time frame things started coming back in the market and that's largely resolved. That is no longer an issue for us.

Excellent. And then I think in the past you have also talked about kind of a mid 2013 reaching full utilization of the Clinton 1 facility. Is that still the target or with the slowness of some of the acceptance here of the customers and finding the right formulation, should that be pushed out in our models?

We have not updated or provided new guidance on that. We are largely focused on this initial milestone, which as you rightly point out, it has taken longer than we expected to get there largely through the optimization of products. Then just to give you some color on that, as you optimize the film product, there is all sorts of things that we're doing and making very good progress on, whether it's the puncture resistance of the bag, the strength of the bag, and so on. And with those behind us, as we get those behind us, the strategy that we are deploying is the translation of those updated products across many, many similar accounts.

So, what that implies is somewhat of an inflection point that leads to a period, we believe, of stronger growth for the business, and we haven't yet been able to forecast that with enough accuracy. It's pretty challenging to be able to provide much more color on the sellout of the plant. So, we are pretty much focused on the launch of the business and getting the first commercial sale milestone behind us, as we have been talking about on the last few calls.

Makes sense. And just two other quick ones, one for Joe. How should we think about the grant revenue, kind of the rhythm of the quarters here over the next four to five quarters, especially now that you have that $6 million grant? Should it be running at this run rate or a little bit more acceleration as you hit more milestones in 2012?

I think fairly flat would be okay to be modeling that.

Okay. And then the last question was just about a year ago, I think it was the second or third quarter call last year, you talked about preliminary discussions of expansion at Clinton given some of the issues you talked about on this call and past calls about getting up to the commercialization stage. I imagine those were put on the back burner, but how do we think about that over the next six to nine months? Do you restart that process or do you look elsewhere in the world?

We would say look elsewhere in the world; what do you mean by look elsewhere in the world?

Instead of expanding in Clinton, would you use palm oil or something else that maybe has a better cost structure for you?

No, no. The clear focus right now is on getting the business launched. The ADM team has done a very nice job of getting quality product in the hands of the commercial people. Our acceptance rate of the product in the market has been very, very high. We're optimizing the plant. So, we have not -- because of where we are, we're not yet focused on expansion. However, we have done a lot of thinking and continue to do work on next generation strains and recovery technologies, so as we move toward that.

With regards to looking someplace else in the world, as this business grows, as we see the potential out there, the capital investment made in Clinton, I believe it will be the right business decision to continue to build that out in Clinton prior to looking at an alternative site. The ADM sourcing situation is very, very good for sugars in North America. There is room at the site to expand, and I think it would make a lot more business sense to continue to build that footprint out as opposed to moving to another site and starting basically the supporting capital all over again. But that would be a decision that would have to be jointly made by Metabolix and ADM.

Makes sense. I appreciate all the detail.

And ladies and gentlemen, that does conclude today's question-and-answer session. I'll turn the call back over to management for any closing comments.

I'd like to thank you all for attending our call today. As you can tell, we are pleased with our progress and have a lot of enthusiasm about the long-term potential for each of our Metabolix platforms. We anticipate much more progress across each of these business areas over the coming quarters, and I personally look forward to keeping you informed. Thanks again for joining the call. We appreciate that, and I wish you all a nice evening. Thank you.

Ladies and gentlemen, that does conclude today's conference. We thank you for your participation.