Amyris, Inc. Announces Plans to Increase Production Capacity by 400%

A newly amended Joint Venture Agreement sets Amyris on the path to $1 billion in product revenue by the end of the decade. The company generated an estimated $20 million in 2013.

Feb 22, 2014 at 1:56PM

Synthetic biology pioneer Amyris (NASDAQ:AMRS) quietly announced its intentions to increase production capacity by 400% by the end of the decade. It wasn't a starry-eyed prediction, either: Brazilian sugarcane producer Sao Martinho S.A. signed on to an amended joint venture agreement to build two new commercial-scale production facilities that are twice as large as the one currently being ramped by Amyris in Brotas, Brazil. Additional production capacity will surely be announced, built, and ramped in the six-plus years required to bring all of the potential capacity online, so what should investors make of the news?

Let's make a deal
Many investors seem to have forgotten that Amyris and Sao Martinho originally entered into a JV agreement in April 2010, which formed a joint venture named SMA Industria Quimica (or SMA). The JV even completed a majority of the construction of its first commercial-scale facility. After learning that biology is difficult to scale (an emphasis on gene expression rather than actual fermentation processes), CEO John Melo halted construction to focus on honing his company's process at Brotas. That was the right move at the time -- and has helped Amyris reduce its extraordinary cash burn rate -- but it left investors suspended in uncertainty.


The biorefinery at Brotas. Image: Amyris.

According to the original JV agreement, Sao Martinho reserved the right to exit the JV and leave Amyris on the hook for construction and feedstock supply if the biorefinery didn't begin operations by the end of 2013. That was obviously an impossible goal to meet, especially considering that Brotas was operating at only one-fifth of nameplate capacity at the end of the third quarter. The deadline came and went with only a brief acknowledgment that the pair was working to extend the original agreement.

Now, nearly two months after the original deadline, Amyris and its feedstock partner have decided that they're all-in on developing a commercial relationship despite a bumpy ride to this point. Under the amended agreement, operations at the semi-completed SMA biorefinery will begin no later than March 31, 2017. A second facility of similar size will be built and begin operations no later than April 1, 2019.

Long-term production picture
It may be a long way off, but it adds clarity to the long-term picture for Amyris investors. What does a 400% increase in production capacity look like? Considering that Brotas will have 40 million liters of annual nameplate capacity, each new facility will add an additional 80 million liters of annual nameplate capacity.


Nameplate Capacity (Liters)

Nameplate Capacity (Metric Tons, Farnesene)


40 million

32,520 MT


80 million

65,040 MT


80 million

65,040 MT


200 million

162,600 MT

Source: Amyris quarterly conference calls, author calculations.

Keep in mind that farnesene is just one of the molecules being targeted by Amyris. The first flavor and fragrance molecule will be produced at Brotas this year, while additional flavor and fragrance molecules, isoprene, and muconic acid will follow. That will jostle nameplate capacity around (each molecule has a different density and production profile) slightly.

Additionally, Amyris originally stated that Brotas would have a nameplate capacity of 50 million liters -- and that the SMA facilities would be twice as large -- but recently stated that nameplate would only represent 40 million liters. Was this an error? A smooth way to tell investors that production capacity would be reduced? I'm not sure, so I used the more conservative numbers above and will continue to do so until I learn otherwise. Either way, an annual nameplate capacity of 162,600 MT would bring in $1 billion in revenue with a conservative average selling price of $5 per liter. Not a bad step up from the estimated $20 million in product revenue reeled in for 2013.

Foolish bottom line
The announcement to extend deadlines for SMA was tucked away in an SEC filing -- not announced by Amyris in a press release. That's probably for good reason: Plenty of things can go wrong between now and the end of the decade that would derail the amended JV agreement. It's far from a slam dunk. However, investors should be encouraged that partners such as Sao Martinho have remained committed to the company's technology platform despite the initial hardships faced with production to date. Simply put, agreeing to complete construction at the first semi-built facility was easy. Agreeing to build a second facility that's nothing more than a blueprint today is a powerful testament to Amyris' disruptive potential.

Amyris may be too ripe of an energy investment, but...
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Maxx Chatsko has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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