Previous Statements by MBLX
» Metabolix's CEO Discusses Q3 2011 Results - Earnings Call Transcript
» Metabolix CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Metabolix CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Metabolix CEO Discusses Q4 2010 Results - Earnings Call Transcript
We refer all of you to our recent filings with the Securities and Exchange Commission, including our quarterly Form 10-Qs filed during 2011, and 10-K for the year ended December 31, 2010, for a more detailed discussion of the risk that could impact our business and 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? Richard P. Eno Thank you, James. Good evening and thank you for joining us in this important call this evening. As I’m sure that you are aware, Metabolix today announced that the Archer Daniels Midland Company, ADM, has given notice of termination for the Telles LLC joint venture for PHA bioplastics. The effective date of the termination is February 8, 2012. In tonight’s call, I will describe this event and its implications to Metabolix. I will address the ADM termination and what it means, the focus of Metabolix moving forward, and the restructuring impact on Metabolix. I will also address some questions that I believe will be important to you, and we will also take questions at the end of the call. I’d like to begin with the ADM termination and its implications. Telles LLC was established as a 50-50 joint venture between Metabolix and ADM in July 2006. The objective of the joint venture was to commercialize our unique family of bio-based biodegradable PHA bioplastics. To supply the joint venture, ADM constructed and operated a polymer manufacturing facility in Clinton, Iowa with a design capacity of 50,000 tons per year. Metabolix provided all of the enabling intellectual property, and was responsible for establishing compounding operations for the venture. As of early 2012, the joint venture has had ongoing sales activities in the U.S., across Europe and in other countries around the world. As of October 2011, the venture was working with approximately 100 customers and prospects, with 57 customers and 26 repeat buyers. The business has continued to expand since October.
ADM recently undertook a strategic review of its business investments, and made the decision to terminate their participation in the joint venture. They have always had this right, as we have previously disclosed. We learned of the decision this week and did not expect it. ADM indicated that projected financial returns were too uncertain as the basis for their decision. As a result, ADM will retain its manufacturing plant in Clinton, Iowa.The Metabolix PHA bioplastics technology works well at commercial scale. In particular, the fermentation scale-up and performance was exceptional, as was feedback from the market. That being said, capital costs were more than anticipated and projected future operating costs, including raw materials costs, were uncertain and as you know, the times for commercializing this new innovative material have been longer than anticipated. The terms of our agreement with ADM are very clear with regards to the implications of the termination. ADM no longer has the obligation to fund the joint venture, nor supply PHA product. All intellectual property flows back to Metabolix. Metabolix will retain sole rights to all PHA bioplastics technology, including intellectual property rights and trademarks, the Telles joint venture is wound down. The obligations of the joint venture to pay back the ledger balance, which stood at $425 million as of the end of Q3 2011, are eliminated. Therefore, Metabolix will have no ongoing obligation under the ledger account, which was funded by ADM to finance the Clinton plant and certain Telles operating costs. Our exclusivity with ADM for PHA bioplastics will be ended and we will now be able to discuss a range of alternative business models with potential partners around the world. Unfortunately, another implication of the termination is that in the very near-term, it is highly unlikely that we will be able to supply our customers with commercial quantities materials due to the lack of a commercial manufacturing asset. We will be working with each of our customers and prospects to manage this transition as effectively as possible. Read the rest of this transcript for free on seekingalpha.com