Amyris stock sees 20 percent rise after US$300m CBD deal partner reveal

19 Mar 2019 --- Sustainable ingredients company Amyris has revealed LAVVAN as its partner in a US$300 million deal for the development of a new cannabinoid. The announcement comes alongside the preliminary unaudited financial results for its fourth quarter and fiscal year 2018, which ended on December 31, 2018. The results are reportedly “below expectations.” In the hours following the disclosure of LAVVAN as its CBD partner, Amyris’ stock reportedly went up by 20 percent.

US$300m agreement with LAVVAN
Last month, Amyris signed a binding term sheet for the development, licensing and commercialization of a new fermented cannabinoid. The previously undisclosed partner, LAVVAN, is a newly-formed company backed by players from across the pharmaceutical, cannabis and financial sectors, which intends to bring the first fermentation-derived cannabinoid products to market.

LAVVAN is initially to provide lab-based and later commercial scale milestone cash payments in tranches for the development and scaling of technology to produce the cannabinoid. In return, LAVVAN will be granted a license to commercialize these products.

“This agreement is yet another example of a partner coming to us based on confidence in our ability to develop and commercialize fermentation-based natural products at a significantly reduced cost,” says John Melo, President and CEO of Amyris.

Based on its development timeline, Amyris believes it can earn a significant portion of these milestone payments by the end of 2020, with US$20-30 million anticipated in 2019, including a US$10 million milestone payment that is expected to be recognized later this month.

“Amyris brings in the synthetic biology sector, its technology platform that has brought products to market in skin care, flavors, fragrances, sweeteners and now cannabinoids to help improve health and quality of life at reduced cost with consistent quality and sustainably sourced,” Melo explains.

“We look forward to bringing high-quality cannabinoids to the market, beginning with CBD by early next year,” says Etan Bendheim, LAVVAN CEO.

As a string of regulatory greenlights have begun to move the cannabis plant and cannabis-derived products into an increasingly mainstream track, cannabis-derived products may well be the trend to watch in 2019.

According to Innova Market Insights’ data, there is a 34 percent average annual growth in the number of new food and beverage launches with hemp ingredients (global, 2013-2017), with US introductions enjoying an average annual growth of 21 percent over this period.

Financial results for 2018
Reported 2018 Q4 revenue amounted to US$19.4 million, compared to the US$80.6 million reported for 2017’s Q4. The last quarter of 2017 was boosted by a DSM agreement, according to the company.

Amyris notes that 2018’s Q4 revenue should be compared with the same period in 2017 of US$17.7 million when adjusted for the low margin product sales on contracts assigned to DSM and any one-time revenue.

Amyris’ R&D expenses of US$18 million for the quarter were up from US$13 million for Q4 of 2017 due to increased R&D costs for product development and an increase in headcount to support it.

The fiscal 2018 revenue results reached US$80 million, compared to US$143 million for 2017. 2018's revenue should be compared, Amyris says, with the same period in 2017 of US$70 million when adjusted for the loss-making product sales on contracts assigned to DSM and any one-time revenue.

“Our results for the quarter and year are below expectations,” notes Melo. “The negative results for the quarter and full year reflect the inability to recognize revenue for a US$50 million multi-party Vitamin E deal in China during the fourth quarter.”

“Our financial results for the fourth quarter were also impacted by a 30-day delay to our manufacturing scale-up and production of our natural sweetener product. The sweetener issues were quickly resolved in Q1 of 2019 with shipments occurring in the current quarter with strong interest and demand for our sweetener.”

Melo says the company has undertaken a “thorough review of its business plan for 2019” and will take a more conservative approach in assessing likely revenue opportunities. “This is the right course of action to improve our business planning and also our ability to hit our revenue targets,” he notes.

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