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Metabolix, Inc. Q1 2010 Earnings Call Transcript

Metabolix, Inc. Q1 2010 Earnings Call Transcript

Metabolix, Inc. (MBLX)

Q1 2010 Earnings Call Transcript

April 28, 2010 4:30 pm ET


Laurie Chute – IR, ICR

Richard Eno – President and CEO

Joseph Hill – CFO

Oliver Peoples – Chief Scientific Officer and VP, Research


Laurence Alexander – Jefferies

Alex Potter – Piper Jaffray

JinMing Liu – Ardour Capital

Ian Horowitz – Rafferty Capital Markets

Jeff Osborne – Thomas Weisel Partners

Pamela Bassett – Cantor Fitzgerald


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Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Metabolix first quarter 2010 earnings conference call. Today's call is being recorded. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. (Operator Instructions)

I would now like to turn the conference over to Ms. Laurie Chute. Please go ahead, ma'am.

Laurie Chute

Thank you and good afternoon, everybody. Metabolix released first quarter 2010 financial results after the market closed today. If you do not have a copy of the press release, one may be found on the website at 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 everybody 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 would like to turn the call over to Rick Eno, President and CEO of Metabolix. Rick?

Richard Eno

Thank you, Laurie. I'd like to welcome all of you to the first quarter 2010 earnings conference call for Metabolix. Today, I'll provide you with a review of the Metabolix vision and a broad update of our ongoing activities. Joe will then take you through the financials.

We continued to make good progress on our commercialization and development activities and have maintained a strong financial position. For those of you new to these calls, Metabolix is an innovation-driven bioscience company, which is focused on bring 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 and plant science in fermentation, microbial, and polymer engineering and in product and market development.

We currently have three business platforms. First, Mirel, a bio-based biodegradable plastic currently being commercialized with our partner Archer Daniels Midland through a joint venture called Telles. Secondly, Industrial Chemicals, initially focused on C4 chemicals. And third, crop-based activities, which include our programs in switchgrass, oilseeds, and sugarcane.

I'd like to begin with the Telles business, our joint venture for commercializing Mirel. We have made steady progress since our last call. I'll provide an update on the Clinton plant, the food contact notification process with the FDA, and a broad description of our expectations for the coming year.

The Clinton, Iowa plant is the production source for Mirel, our first commercial product. As described in our previous call, the initial phase of the plant has been commissioned and is in operation. Initial product has been evaluated by the Telles technical team, deemed successful, and has been shipped to customers and prospects.

Based on analytical testing, the product appears indistinguishable from that produced in our pilot facility. This is encouraging in that it illustrates to us continued success in the scale-up of the technology and bodes well for the implementation of next-generation technology.

Over the next year, the ADM Clinton team, with support from Metabolix, will continue to improve and optimize the operational efficiencies at the facility. There are also several technology enhancements, which are currently in late-stage development including next-generation microbial strains and recovery technologies. We will now move to aggressively implement these enhancements at the Clinton plant to reduce operating costs, improve capital efficiency, and extend the market potential for Mirel.

We are currently maintaining our guidance for the capital cost for the Clinton plant as north of $300 million. It is important to think of this capital investment in the context of growing the Mirel business including a potential future expansion of the plant. Consistent with most process facilities of this type, we currently estimate that about two-thirds of the Clinton 1 capital investment will be in the actual processing equipment; in our case, fermentation and recovery; and about one-third of the capital investment will be in supporting infrastructure and utilities including electrical and cooling water services, control rooms, maintenance facilities, and basic site development.

As we've mentioned before, Clinton was selected and laid out with the vision of a 4X expansion. As such, a good portion of the supporting infrastructure investment to support future expansion is being made with Clinton 1. We expect that the economics of expansion beyond 110 million pounds per year will reap substantial benefits from this Clinton infrastructure.

We should also benefit from a more normal environment for the cost of construction materials and labor than what was experienced while ADM was proceeding with the construction of the majority of the plant in 2007 and 2008, as well as the application of the next-generation technology that I mentioned to enhance capital efficiency.

I'd now like to provide an update on the FDA process for food contact. The FDA process for food contact requires the submittal of a dossier, known as a food contact notification or FCN, which is made up of the results of a number of extraction studies conducted under specific guidelines, as well as a thorough review of a range of polymer characteristics. In addition, there are usually formal requests for additional or clarifying information. Once the clarifying information is submitted, the FDA has up to 120 days to reject the FCN or it will become active.

Consistent with the timing described in our last call, we are planning to bring injection-molding products to food contact markets in Q2. This will enable us to sell into applications such as cutlery and injection-molded food storage containers. We expect to bring thermoforming and film products to food contact markets in the second half of this year. This will enable us to service applications such as coffee lids and yoghurt cups, and film for using storage bags. We expect to submit additional notifications to the FDA as new Mirel grades are developed and the technology continues to advance.

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