Yield10 Bioscience Inc (YTEN) 2011 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Metabolix Incorporated fourth-quarter and fiscal year 2011 earnings conference call. Today's call is being recorded. (Operator Instructions). I would now like to turn the conference over to Mr. James Palczynski of ICR. These go ahead.

Thank you operator and good afternoon everyone. Metabolix released fourth-quarter and year-end 2011 financial results after the market closed today. If you do not yet have a copy of the press release, one may be found on the website at www.Metabolix.com, in the investor relations section. In addition, for today's call we have several slides that accompany the presentation, and I will note that these are running as part of our webcast, which is also available on our website. The slides will also become available on the Metabolix website, following today's call. Making the presentation today will be Richard Eno, President and Chief Executive Officer of Metabolix, and Joseph Hill, Chief Financial Officer the Company. They're joined by Oliver Peoples, a cofounder 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. Investors are also cautioned that statements in the discussion today, which are not strictly historical statements, constitute forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including the following -- increased risk and uncertainties relating to commercialization of our first and only product, Mirel, due to the termination of the ADM commercial alliance, we rely heavily on ADM for the successful information of our biopolymer commercialization; uncertainties related to our ability to obtain sufficient biopolymer manufacturing and compounding capacity, and to obtain raw materials in sufficient quantities or in a timely manner; uncertainties relating to the price of petroleum relative to the bio-based feedstocks used to make Mirel and our other products and other risks and uncertainties detailed in Metabolix's filings with the Securities and Exchange Commission. 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 today's conference call. With that, I would like to turn the call now over to Rick Eno, President and Chief Executive Officer of Metabolix.

Thank you, James. I would like to welcome all of you to the fourth-quarter and year-end 2011 earnings conference call for Metabolix. Today I will provide you with a review of the Metabolix vision, and an update on each of our three platform areas and then Joe will take you through the financials. 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 sustainable 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 and 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. As a result of our capabilities and work in PHAs, we have assembled a strong IP portfolio as an anchor for our commercial initiatives.

We currently have deployed our PHA technology across three business platforms. First, Mirel, a family of bio-based and biodegradable polymers, second, industrial chemicals initially 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 Mirel Biopolymers. Today I'm very pleased to announce that we have reached a final agreement with ADM on the wind down of the Telles joint venture effective as of today. On the call, I will update you on the agreement as well as the status of the launch of the biopolymers business.

Turning to slide 2 of the accompanying slides. As a result of the termination of the Telles LLC joint venture for PHA bioplastics with ADM, Metabolix retains exclusive rights to all Metabolix PHA technology, and associated intellectual property. Metabolix also retains all existing inventory, both PHA product and compounding raw materials, as well as all product approvals, certifications, and trademarks, including the trademarks for Mirel and Mvera. In addition, Metabolix will get the pilot plant equipment located outside of the Clinton plant. As a result, we now have more than 5,000,000 pounds of inventory to supply core customer needs, a quantity we anticipate being adequate until new production comes online. In addition, we will use the inventory, and as needed, the pilot plant to continue product development focused on high value-added applications.

In connection with the termination agreement, Metabolix is paying approximately $3 million to ADM. Consistent with the commercial alliance agreement, ADM retains its manufacturing plant in Clinton, Iowa, but has no residual rights to Metabolix technology. And given the amount of usable inventory we have obtained, and the ability to access third party sources of fermentation capacity, we have released ADM from its future manufacturing obligation to provide fermentation broth.

For those of you familiar with how the financial construct of the joint venture worked, there was a ledger balance that reflected the money that ADM had put into the business over the years, including the construction of a manufacturing facility, support payments to Metabolix, and certain operating costs. This totaled about $433 million at the end of 2011. It originally would have had to be paid back by the JV, prior to Metabolix receiving 50% of the earnings of the business. That balance has been eliminated. Most importantly, with the termination of the joint venture complete, our exclusivity with ADM for PHA bioplastics has ended, and we are free to speak with other potential partners. We are currently in discussions with numerous companies to discuss partnerships that will allow us to participate globally in the robust demand for biopolymers. I will elaborate on this point in a moment.

I am now on slide 3. As we noted on our conference call of January 12, we are launching PHA biopolymers as a Metabolix business, and with the ability to define a new commercial model. There are a wide range of choices and possible models we can deploy with biopolymers moving forward. I want to describe why we are so excited about this biopolymers opportunity. We've been asked by many investors what are some of the things that Metabolix will look at differently going forward, with regards to biopolymers. This is to give you some insight into our early thought process about the launch of our Metabolix biopolymers business.

First of all, from the customer and market perspective, the previous approach was very broad-based. This was due to the large scale of the ADM plant and widespread market interest in PHAs. What we now plan to do is focus on the high valued opportunities, which we have identified through our time in the market. Our priority segments are still being analyzed but will focus on areas where the superior biodegradation and performance characteristics of PHAs are valued. These include agricultural and horticulture products, compost and organic waste diversion applications, including anaerobic digestion, marine and aquatic uses, and sustainable packaging focusing on single-use items. Our launch will initially address existing markets, with segments being prioritized on their ability to quickly base load our manufacturing plant.

The initial design of the ADM plant was about 50,000 tons per year. We are developing a market-entry opportunity in the 10,000 ton per year range, in essence reflecting a semi-workscale initial plant in order to provide product to our strategic customers. This smaller scale can be basically sold out to capacity much more quickly than a larger facility, and provide a demand foundation for future growth. The technology base that was deployed at Clinton was a 2006-era technology-base, which performed well at a world-class industrial scale. However, since 2006 the technology has continued to advance rapidly, and there are numerous elements that were not yet installed at Clinton.

Going forward, we would see elements of this 2012 technology-base being deployed. What does that mean? We expect lower capital, improved yields, and experience we bring from across the entire value chain, from fermentation right down through final product fabrication. With the combination of high valued segments, a smaller scale plant and new process technology, we expect to approach cash break-even much sooner than under the previous model.

The value chain, in the former construct of the ADM deal, had manufacturing operations separate from commercial operations. Now we have the ability to integrate manufacturing with commercial. We also have an ability to integrate chemicals and plastics that we did not have before. That brings us closer to being able to deploy our technology in an integrated bioproducts complex, not too different from the current integrated petroleum-based chemical complex. With regards to the Metabolix earnings potential, the way the joint venture was structured, Metabolix would not generate earnings until the ledger balance is paid off by the Telles joint venture. Going forward, we have numerous different options available to us for how we want to structure a biopolymers venture. We have no clear preference on structure at this point, and are keeping an open mind relative to ideas proposed to us.

I would now like to update you on some recent activities. These are partnering activities, progress with the FDA and enabling out-license of our technology. Partnering activities. First of all, we've experienced significant partner interest to participate with us in the biopolymers business. Inquiries have been received from potential feedstock, fermentation, and offtake partners, and we have reached out to other potential partners. Partners range widely in terms of specific interest, but to give you a sense of the opportunity set, we are in discussions with about 15 potential offtake partners, and considering about 10 different manufacturing options. In recent conversations with investors, we've been asked several questions including the timing of a partnership, possible structures, and the resulting financial implications. With the recent changes in the business, these are fair questions, however we do need some time while we work through the option set so that we can provide you with solid information on our commercial model as we go forward.

FDA clearance. We have continued to build value in our Mirel product line. This quarter we received FDA clearance for food contact applications for the next generation of Mirel technology. Next-generation Mirel technology was developed since the deployment of the original Clinton technology and includes an improved recovery system, as well as reactive extrusion technologies. This new FDA clearance creates broader options for food contact applications, consistent with our next-generation Mirel technology.

Finally on biopolymers, as a leader in the development of bio-based polymer technology, Metabolix has assembled a broad intellectual property portfolio covering key elements of making and using advanced biomaterials, including biopolymer blends. For areas outside of our technical and commercial focus, we are amenable to licensing arrangements that provide Metabolix the opportunity to receive licensing income, and pave the way for the introduction of new materials to the marketplace. With that interest, we recently issued a sub-license under a University of Massachusetts patent we control for biopolymer blends to NatureWorks, a global leader in the PLA biopolymers industry. This intellectual property helps NatureWorks expand the market for bioplastics, through blending its PLA product with other bioplastics.

Let me now move onto the other Metabolix platforms. These are our industrial chemicals and crop programs. In industrial chemicals, we are leveraging our PHA gene technology to enable chemicals that are currently being produced from fossil fuels to be produced from renewable raw materials. We are utilizing a fermentation process, and an efficient integrated thermal recovery process to produce our targeted chemicals, which we call FAST, fast-acting selective thermolysis. The PHA approach is 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 produce 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 evaluate other applications of our PHA fermentation and FAST recovery process.

I am now turning to slide 4, which provides an overview of the recent accomplishments in our chemicals platform. 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 2011 progress. First, we sent samples of our C4 product to customers in Q1. This, as you know, was completed. Second, we generated 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 chemical derivatives. We noted that we made additional sample shipments in Q3 in order to extend the testing. This was also completed, and the feedback on the product quality was again very positive.

Our third target was to be ready to begin engineering design for a commercial facility by the end of the year. We are ready to do so, having scaled up fermentation to 60,000 liters and gained ongoing operating experience from our recovery facility. Our fourth target was to produce tonnage quantities of our C4 product to allow customers to test product in large scale trials and we've completed this also. Also, since our last earnings call, we have validated that our C4 chemicals process is expected to be cost-competitive with petroleum-sourced BDO at oil prices above about $90 per barrel. Our GBL product cost is expected to be at the low end of the petroleum-based cost curve. Over the last quarter, we continued work with our C4 chemicals joint development partner, CJ CheilJedang, towards commercialization of the C4 chemicals platform. We're actively involved in site and market analysis, as well as reviewing the feedstock markets.

Now on to our C3 chemicals program. We are also now at a range of discussions with potential feedstock, manufacturing, and offtake partners for our renewable C3 chemicals technology. There is a high degree of market interest around bio-based C3 chemicals, where acrylic acid is a key derivative market. Our developments here obviously leverage much of our C4 work and equipment. Technology development is expected to follow the C4 program by about one year.

Our third Metabolix platform is our crop-based activity, including our programs in oilseeds, switchgrass and sugarcane. Long-term, this is an exciting opportunity and historically, we have leveraged government grants and academic research look operations to move this work forward. 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.

Slide 5 is focused on the DOE grant. This past quarter, we made progress in our work on the $6 million Department of Energy grant for the development of our biomass program. This funding will allow us to work on increasing the PHB levels expressed in switchgrass and conduct pilot testing of the production of chemical intermediates via our FAST process. PHB is one of the key PHA structures, which we can express in the leaf tissue of plants. In this approach, we will feed biomass containing PHBs to our FAST recovery process, recovering commodity chemicals which can serve as a basis for maleic anhydride, n-butanol and propylene, among other products. Our residual is a densified biomass suitable for firing on site, converting to fuels, or being effectively transported to other users. This quarter, given the termination of our relationship with ADM, we have scaled back our efforts for our oilseed crop camelina. The business model for PHB and camelina was based on the production of biopolymers, as opposed to biochemicals. We are in the process of capturing intellectual property deemed in our work in camelina, and later this year, we will be evaluating the possibilities of monetizing that intellectual property.

Finally, from a corporate perspective I would like to mention that we recently added two individuals to our Board of Directors. We named Celeste Beeks Mastin to the Board in January. Celeste has a very impressive background and track record in chemicals and performance materials, and yesterday we announced that Matt Strobeck was returning to the Board. We're delighted to have him back and will benefit from his experience as a biotechnology investor. That wraps up the business review, and I will now turn the call over to Joe for a review of our financial results for the quarter and the year.

Thanks, Rick, and thank you all for joining us today. Turning to slide 6 of the accompanying slides, I will now focus on the financial results for our fourth-quarter ended December 31, 2011. Is always, we manage our finances with an emphasis on strict cash flow management. We have maintained this focus, and ended the fiscal year with $78.4 million in cash and investments. For the fourth quarter, net cash used in operating activities was $8.6 million, which represents a planned increase in cash usage of $7.8 million used in during the third quarter of 2011, and is an increase over the $8.1 million used during the comparable period of 2010.

Net cash used in operating activities reflects the Company's activities in sales and marketing development, as well as research and product development. The increase in net cash usage for the fourth quarter 2011 primarily related to increased piloting activities in our chemicals program. For the full year, net cash used in operating activities during 2011 was $31.7 million, compared to $32 million for 2010. The decrease in net cash usage relates primarily to an increase in grant revenue received in 2011.

I will now give some additional detail on the Company's financial results for the fourth quarter of 2011 ended December 31. Total revenue for the fourth quarter was $400,000, versus $100,000 for the comparable period of 2010. Revenue in both quarterly periods resulted from revenue recognized from license fees and royalties and government research grants. Revenue for the full years 2011 and 2010 was $1.4 million and $400,000, respectively. The year-over-year increase was primarily generated from work performed on the Company's new renewable enhanced feedstocks for advanced biofuels bioproducts grant and an existing global bioproducts from renewable plastics grant.

Total operating expenses in the fourth quarter of 2011 were $10.1 million, versus $9.6 million for the comparable quarter 2010. Selling, general, and administrative costs in the fourth quarter of 2011 were $4 million versus $3.8 million in the fourth quarter last year. Research and development costs were $6.1 million, versus $5.8 million in the fourth quarter of last year. Net loss for the fourth quarter was $9.6 million, as compared to a net loss of $9.5 million for the fourth quarter of 2010. For the full year, total operating expenses were $40.3 million, an increase of $900,000 from the 2010 level of $39.4 million. For the full year, research and development expenses were $24.4 million as compared to $23.7 million for the comparable year-ago period. This year-over-year increase is primarily attributable to increases in contractor research related to Mirel product development, and the Company's industrial chemicals program, employee compensation and related benefits, partially offset by a decrease in material production costs.

For the full year, total selling, general and administrative expenses were $15.8 million as compared to $15.7 million in the year ago period. Our net loss for the full year ended December 31, 2011 was $38.8 million compared to $38.8 million in 2010. As in previous quarters, the fourth quarter loss is greater than cash used in operating activities, as a result of non-cash expenses including depreciation and stock-based compensation expense. Our net loss per share in the quarter was $0.28 compared to a net loss per share of $0.35 in the year-ago period. For the full year of 2011, the net loss per share was $1.24 compared to $1.45 in fiscal 2010. As I mentioned, our cash level at December 31, 2011 was $78.4 million. This compares to $87.2 million as of September 30, 2011 and $61.6 million at year-end last year. In 2011, we raised $49.3 million net proceeds in an offering of common stock and we continue to have no debt.

We are now on slide 7 of the accompanying slides. After termination of the ADM commercial alliance in the first quarter of 2012, we restructured the biopolymers business, and downsized operations to more appropriately align our 2012 business priorities and strategic plans with current cash and investment resources. We are retaining a core team in our biopolymer group to provide continuity with the technology manufacturing process and markets, while we continue to work closely with customers during this transition to understand their product needs and to match them to available inventory. We reduced our spend levels on our oilseeds crop, camelina, and focused our crop efforts on achieving the milestones on our $6 million DOE grant, which offers a transformational approach for producing renewable chemicals.

During the first quarter of 2012, in connection with the windup of the Telles joint venture, Metabolix agreed to waive its right to ADM fermentation services, and is making payments to ADM of approximately $3 million. In return, ADM and Telles agreed to transfer to Metabolix all of Telles' inventory which refers to PHA-related inventory of greater than 5 million pounds, raw materials for compounding, the trademarks owned by Telles, including Mirel and Mvera, and all product registrations, certifications, and approvals for Telles' PHA biopolymers.

Metabolix retains ownership of the pilot plant equipment used for the development of PHA biopolymers and will assume certain Telles contract rights and obligations. Metabolix has no further performance obligations in connection with the commercial alliance, and as a result, approximately $38.9 million of short-term and long-term deferred revenue at December 31, 2011 will be recognized by Metabolix during the first quarter of 2012. As a result of ADM's termination of our Telles joint venture and our subsequent decision to restructure our operations, we anticipate total cash usage during 2012 to be in the range of $28 million to $30 million.

This cash usage takes into account ongoing net operating expenses, one-time restructuring charges of approximately $1 million, primarily from employee termination benefits, and the payment of approximately $3 million that Metabolix is making in connection with the settlement of the wind-up of the Telles joint venture. Additionally, we have scaled back our spending on crop programs, with our main focus right now on the $6 million DOE grant we received in 2011 to use switchgrass to co-produce crotonic acid and biomass and deemphasizing our spend on oilseeds.

We continue to believe we have adequate financing to fully support our development activities for at least the next two years and anticipate ending 2012 with cash and cash equivalent balances of $48 million to $50 million, and anticipate ending 2012 with an annual cash usage run rate of about $24 million. That is excluding any additional partner funding, grant revenue, or other source of income, including inventory sales. Since much of our development work is discretionary, we can manage our cash usage commensurate with our technological progress and partner interest. With that, we will open the call for questions.

(Operator Instructions)

We will take our first question from Jeff Zekauskas with JPMorgan.

Do you have any tentative targets for your Mirel production this year?

Production or sales, Jeff?

Either.

The access to the inventory allows us to begin to develop those plans. As we mentioned in the call, having that inventory allows us to serve customers, it allows us to base-load a future manufacturing plant, but we have not gotten to the point where we actually have any in a position to actually provide any guidance at this point on sales levels.

And you mentioned I think earlier on about a relationship so that you would have access to a 10,000 ton production facility.

I think what you are referring to is, as we look at Metabolix launching the biopolymers business, the type of facility that we are looking at would have a scale in the range of 10,000 tons as opposed to 50,000 tons. We do not yet have a specific facility in mind, and as we mentioned in the prepared remarks, we are looking at about 10 different manufacturing options. So I would use 10,000 tons as a level of expectation of what we are thinking about for an initial PHA polymers facility without necessarily having a specific facility uniquely targeted at this point.

So the idea is that over time, you might want to buy or build a facility at that scale?

That's right. That's exactly right. Buy, build, partner, and the type of facilities we are looking at have, for example, fermentation capacity already in place. Some have outside battery limits. Utilities in place. There are other options that are coming forward that do not have those type of infrastructure advantages in place, so that is the process we're in now, is sorting through a number of options using on the order of 10,000 tons as a reasonable initial plant that would provide a foundation for growth, and allow us to serve our customers, and get to a strong financial performance with that asset quickly.

And secondly, as you proceed with developing your various projects, in the light of the change in your relationship with ADM, are you also pursuing options having to do with the sale of the Company concurrently? That is, is this a two-stage process or a two-part process where you are looking at the options of sale or merger on the one hand and a growing and building independently on the other? Or have you really focused simply on the rebuilding of your manufacturing capacity, and the continuance of the current business model?

It's much more the latter, Jeff. We have extensive experience in these PHA markets. We have technology that is rapidly advancing. It's a fantastic growth market, so we are clearly focused on launching that, and seeking a range of models to do so. And we see a significant amount of opportunity in renewable chemicals, and we think this PHA fermentation platform we have, coupled with the thermal recovery process, is an outstanding platform from a cost-competitive perspective and a scaling perspective, and our partner interest seems to have validated that. So we've had no discussions, we've had no discussions on any sale or merger of the Company.

Okay, thank you very much.

Thank you, sir. And next we will hear from Mike Ritzenhaler with Piper Jaffray.

Good afternoon. A couple questions around the inventories and the use. First, the payment of the $3 million. Is that going to happen all in one chunk in this first quarter?

Yes, it will.

And the acquisition of the 5 million pounds, some simple math, looks like it's less than $0.60 a pound. Is that significant somehow, or is it reflective of the cost to produce the resins or the market value of the resins or something else?

That was a negotiated agreement, Mike.

Okay. Are the inventories a mixture of various grades, or is it a single grade? I'm trying to ask about whether the inventories will enable the Company to address all the end markets or if it's a few that have to be segmented?

It's a series of grades, Mike. So part of what our job going forward is to match those grades to appropriate customers, which as we mentioned in the prepared remarks, the primary objective is preparing to base-load a manufacturing asset very effectively. So there is a process that our team is undergoing, mapping the customer interest to the varying grades, and determining how to best match the product to the customer. So it is a series of different grades. There will probably be some blending we'll want to do with certain of the grades also, so there is some rework and allocation we may choose to undertake as well, but that process is just beginning.

And can you give us a sense of the pace, maybe by month or something like that, of sales prior to the ADM event, and then post? Do you expect any change in the pace of sales?

No. I think it's similar to the question Jeff just asked, just having gotten the inventory, we are now able to speak quite openly with customers around their plans and start to prioritize volumes relative to customers, at which point we will have a better sense of the sales level but this process is really, the process just closed today, which allows us to begin those discussions going forward.

Sure. Okay. Thanks.

Thank you sir, and next we will hear from JinMing Liu with Ardour Capital.

Thanks for taking my question. First is a question related to your inventory as well. If you sell some of this PHA, so you're going to record revenue with the unit price of $2.50 but on the cost side, are you going to put in the cost of $0.60 per pound or what?

Hi JinMing, this is Joe. You are right, as we recognize revenue, it will be reflected in the financials -- as we sell product, it will be reflected in the financial statement as revenue. And we are finalizing the accounting of just how the inventory is going to be accounted for. But you are right. That $3 million is going to be booked as inventory for sale, at various valuation levels for different components of what is in the inventory.

How about the CPU, a ballpark number of $0.60 per pound for the projection for these 5 million pounds? Just for your 5 million pounds inventory.

For modeling purposes, that's okay to use.

Okay. And next question is related to your choice of a potential of the 10,000 kilotons of PHA production capacity. So is that something I want to understand, why you choose 10,000 metric tons. Is that potential partner have some industry standard fermentation capacity you can use, or that is based on some future projections for CapEx or construction time? What is your thought process to determining --

Yes, JinMing, Rick here. Again it's an order of magnitude capacity we are looking at. And we got there from two perspectives. One is, looking at the fixed versus variable cost structure of fermentation-based assets and understanding the dynamics of our technology. And as you know, when you get to lower capacity levels, the fixed costs become much more of a burden. As you get to the higher capacity levels, it takes more time to fill the asset out. So we looked at those, and we balanced fixed variable cost structure and 10 kilotons seemed about right in terms of the right balance, given typical scale of fermenters and how we see those loaded.

And we compare that with what we had seen in the market while we had the Telles joint venture and we could point to pretty specific opportunities leading up to that capacity, mostly in existing defined markets, which gives us the comfort that we should be able to load it up to a cash breakeven situation relatively rapidly, we anticipate. So both from a market perspective and a cost perspective, that is the range we are looking. If an opportunity comes to us that is attractive, available fermentation capacity, a bit less, a bit more than that, we will clearly look at it because that would -- and infrastructure I should add, that would accelerate our time to market with those type of existing facilities. So it is what we are using to screen assets that are out there, but the final capacity may vary a bit depending on circumstances and partners.

Okay. Do you have a projection of capacity from a 10,000 ton facility by itself?

We don't have that yet. We have ranges we have looked at, but just to outline the wide range of capital potential, everything from a brownfield they call it, meaning that the site exists with idle fermentation capacity and sufficient utilities, ranging all the way up to a greenfield facility would be one dimension by which the capital would be affected. The other dimension which is pretty significant as well, is in what geography the plant is constructed. US versus South America versus Asia. So there is a wide range, and it's a little premature to say here's the number, because the number could be dramatically different depending on which model we actually pursue.

Okay. Thanks for that. And my last one. You mentioned that because of the termination of the relationship with ADM, you can look at multiple opportunities including integrate PHA production with chemicals. So what kind of impact will that approach have, on the impact on your commercialization of the C4 chemicals?

It's a good point. The fermentation system that we use for Mirel biopolymers is virtually identical to that which we will use for C4 chemicals and potentially C3 chemicals. As we look at a biopolymers launch facility, particularly if there are existing fermentation assets there, those assets could potentially be run on our PHA strains for C4 or C3 chemicals as that biopolymers plant is ramped up. So we would have -- and the fast recovery technology, we anticipate being a far less capitally intensive then the polymer recovery technology, so it gives us an opportunity to take advantage of a multi-product site, optimize capacity utilization, and spread fixed costs. Clearly that's early stage of our thinking but it something that we are able to do now that we hadn't spent a lot of effort on before, given the nature of our previous relationship.

Thanks.

Thank you, sir. Next we will hear from Laurence Alexander with Jefferies.

First question is of your previous Telles customers, or customer relationships, have any ended?

Well the Telles contracts were terminated with the demise of the venture. So we've had to formally terminate those contracts, but as I mentioned we have 15 or so potential downstream partners we're talking with. There still is a high degree of interest and differing forms of that interest in terms of maintaining market development with Mirel. But from a contractual perspective, those contracts were with Telles, and they therefore had to end because Telles has ceased to exist.

Maybe you should come at it from a different angle. Have any of the publicly-disclosed downstream partners not renewed discussions? Or should we view them all as still in play?

I couldn't answer contract by contract by contract. But with be access to the inventory, what we are doing is reaching out to customers to understand their needs and their requirements, and we are looking carefully at how the deployment of that inventory translates to a sales ramp-up of a biopolymers facility. So, discussions will be occurring with all of those previously-announced customers, some of which I'm sure will be part of a launch plan and others for either our choice or theirs may not be, but that process will proceed over the coming months.

In the past, you have discussed how there is a certain amount of trial volume that would be required for any particular customer before actually having commercial sales to that customer. As you look at the 5 million pounds of inventory, is it reasonable to assume that all of that will be monetized, or is there a significant portion that we should assume will effectively not be monetized because it would just be used for trial volumes? And then as a follow-on on the same theme, is there are a point in time in this year where you would be disappointed if you did not have a commercial production partner, because obviously, you'd be losing momentum with your various potential downstream customers?

On the first question I think it was JinMing that asked about the pricing. I would just assume that inventory volume is used. And we will let you know otherwise as we get into it, and begin to look at grades relative to customers. But the intent is that we will use that primarily for customer development activities and sales. That is not to say there may be some developmental material in there.

But I would certainly assume that that's used at this point in time. And no, we have not picked a date that this is the date that we become disappointed in not having a manufacturing partner. But we are just moving ahead as rapidly as we can, the assessment of about 10 different options for manufacturing right now.

When you do announce a partner, just so that we can appreciate the trade-offs associated with that partner, what would be -- could you give a very very rough flag of a benchmark for how much a greenfield capacity for 10,000 tons would cost in the US?

I think that was asked before, and I think at this point, we will hold off from defining that number until we get just a little bit further along in terms of the nature of the relationships we establish. And again, as we pointed out we are looking outside of the US also.

Okay lastly. How steep is the cost curve for GPL?

GPL cost curve mirrors the butanediol cost curve pretty well. So if you're familiar with that, it's got, like many cost curves it's got a few low-cost producers, it's got a tail at the high end. The nice thing about our GPL product is that the metabolic pathways we use go right to GPL. Then we have to add some conversion costs, as you know, to get to butanediol, which is the primary article of commerce in the C4 market. But the C4 technology we have through GPL is very low cost, and as we mentioned, the butanediol technology is in the cost curve right with the petroleum-based materials, at what we see about $90 a barrel and above, net obviously we spent a lot of time correlating sugar prices with crude oil prices, but by our assessment and other assessments, it's a very competitive technology.

Thank you.

Thank you, sir. We will take our final question from Jeff Osborne with Stifel Nicolaus.

Just a follow up on the BDO question. The $90 figure that you mentioned, is that current cost curve or is that the projected cost curve?

What we do, Jeff, is we look at a range of different oil prices and sugar prices, because there is, as you well know, there have been some correlation between them. And from historical data and looking ahead, as we look at the crude oil price going above $90, we see at that point the lines cross in our technologies generating a 15% return at everything above that line. So it's more at the point that which those lines cross, where the renewable technologies becomes advantaged versus petroleum technologies based on historical correlations of sugar and crude oil pricing.

Got you. And just three other quick ones here, for Joe. Did I hear you right that $24 million was the run rate for cash burn exiting 2012?

Yes, that's correct. That is our current projection.

And that is excluding--.

Okay. And then a lot of discussion on the 10,000 ton facility are on CapEx dollars, but could you just, since you did just kind of lock down the prior design in 2006 or '07, could you just maybe touch on what you think the order of magnitude of cost improvement per pound would be roughly, is it 20% or 30% better or worse than that or less than that? Any kind of ballpark that you can throw out? As we look at you focusing on these high ASP markets that you are addressing, but as this new plant is announced and opened up, what type of cost improvement do you think you'll be able to achieve versus what Clinton was at?

I mean when you look at -- a lot depends on your local utility pricing and all that, but something in the order of $0.20 a pound or $0.25 a pound is not unreasonable given new strains and given improved utility cost. But again, a lot of that will depend on which technologies that we deploy and local utility costs and so on.

Got you. And the last one for me. Could you touch on when -- I missed the news on your agreement with NatureWorks, but could you touch on when you would expect any shipments to that or potential customers announced that would be looking at a PHA PLE blend?

The way that works, they have now, NatureWorks now has the ability to blend its PLA with other materials, other bioplastics. So they will determine the pace at which that license is used. They will determine the commercialization strategy. The point being is that, we are amenable to seeing technology that we control being utilized in the markets to grow bioplastics, and we are amenable to NatureWorks doing that. Specifically, they are focused on the PBS blend with PLA for this specific opportunity, but we don't have a projection of when their sales will actually occur. But we are glad to see that someone can make use of that license, and that they can grow the bioplastics business, which is good for all of us.

I understand. Thanks for the clarification there.

Thank you, sir. That is all the questions we have at this time. I would like to the turn the conference back over to Management for any additional or closing remarks.

Well, I would like to thank you all for attending our call today. In numerous ways, we see our technology portfolio very well aligned with the global trends toward sustainability and the use of renewable materials. We are well-positioned to build value in each of our Metabolix platforms. Most immediately, the access to the Mirel product inventory will help us to develop a customer base for our launch of this unique and innovative material. We anticipate tangible progress across each of our business areas in the coming quarters, and look forward to keeping you informed. Thanks again for joining the call, and I hope you all have a nice evening. Thanks.

Thank you, sir. And that does conclude today's conference. We thank you for your participation. Have a good day.