Amyris Inc (AMRS) Q3 2020 Earnings Call Transcript

Amyris Inc  (NASDAQ: AMRS) Q3 2020 earnings call dated Nov. 05, 2020

Corporate Participants:

Han Kieftenbeld — Chief Financial and Chief Administration Officer

John Melo — Director, President and Chief Executive Officer

Eduardo Alvarez — Chief Operating Officer

Analysts:

Colin Rusch — Oppenheimer — Analyst

Amit Dayal — H.C. Wainwright — Analyst

Presentation:

Operator

Welcome to the Amyris Third Quarter 2020 Financial Results Conference Call. This call is being webcast live on the Events page of the Investors sections of Amyris’ website at amyris.com. This call is the property of Amyris and any recording, reproduction or transmission of this call without the express written consent of Amyris is strictly prohibited. [Operator Instructions] You may listen to a webcast replay of this call by going to the Investors section of Amyris’ website.

I would now like to turn the call over to Han Kieftenbeld, Chief Financial Officer of Amyris. You may proceed, sir.

Han Kieftenbeld — Chief Financial and Chief Administration Officer

Thank you, Greg and good morning, everyone. Thank you for joining us today. My name is Han Kieftenbeld, I’m the Chief Financial Officer for Amyris. With me today are John Melo, President and Chief Executive Officer; and Eduardo Alvarez, Chief Operating Officer.

Please turn to slide 2, please note that on this call you will hear discussions of non-GAAP financial measures, including but not limited to underlying sales revenue, gross margin, cash operating expense and adjusted EBITDA. Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures is contained in the financial summary section slides of the accompanying presentation or the news release distributed today, which is available at investors.amyris.com. The current report on Form 8-K furnished with respect to our press release is also available on our website as well as on the SEC’s website at sec.gov.

During this call, we will make forward-looking statements about events and circumstances that have not yet occurred including projections of Amyris’ operating activities and their anticipated financial impact on our business and financial results for 2020 and beyond. These statements are based on management’s current expectations and actual results and future events may differ materially due to risks and uncertainties, including those detailed from time to time in filings Amyris makes with the Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Amyris disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or otherwise. Please refer to the Amyris’ SEC filings for detailed discussion of the relevant risks and uncertainties.

Before we begin today, I’d like to note that included in our webcast is a slide presentation, we will refer to in today’s presentation. Slides will be available as part of the webcast replay as well as posted on the Investor Relations sections of Amyris’ website following the call.

I’ll now turn the call over to John Melo. John?

John Melo — Director, President and Chief Executive Officer

Thank you, Han. Good morning, everyone and thank you for joining us today. This morning, Eduardo Alvarez, our Chief Operating Officer, will share operational performance highlights and Han Kieftenbeld, our CFO will review our financial results. I’ll start by providing a business overview and sharing the progress we’ve made on our strategic priority. I’d like to take a moment to acknowledge the resilience that our business and employees have continued to show in the midst of the global COVID-19 pandemic.

We are all discovering and learning new ways of working and operating. This pandemic is also accelerating consumer trends that we were already experiencing, but are now driving our business growth at a much faster rate. For example, consumers are much more focused on sustainability, their personal health and skincare. This is at the core of our consumer brands and also our ingredient supply into beauty and personal care markets. Consumers are buying much more of their needs through direct to consumer brands. Our direct to consumer activity is now delivering more than 60% of our consumer revenue. Before the pandemic, this was at about 40% of our consumer revenue. Of course, not all COVID factors to the business are beneficial, and we are experiencing challenges in maintaining timely delivery through our supply chains.

In the third quarter, we experienced delays at our key contract facility in Brazil that negatively impacted our revenue for the quarter. This is a finishing facility that does downstream process for one of our key new ingredients where we are the only Company in the world to produce the ingredients for one of our key partners. We have since kind of put production and are delivering 15% more production of this ingredient than we have planned for the year. Eduardo will cover this in more detail in his section.

During the third quarter, we provided a financial framework to help guide your expectations and our annual performance. This is a way of thinking about our business portfolio, our growth and the earnings potential of our business. We said we would double our consumer revenue yearly and deliver 60% to 70% gross margins on this revenue. As of the third quarter, we are more than tripling our revenue year-to-date from the consumer brands. We are delivering gross margin at 67% which is within our target range and Biossance is on track for its first quarter of profitability in the fourth quarter. We expect somewhere around $3 million to $4 million of profitability.

Our fourth quarter consumer revenue is expected to run at an annualized revenue run rate of about $100 million. Our consumer brands are delivering strong business results and we have a robust pipeline of products and new brands in the Clean Beauty markets that we expect to continue the strong track record. We have the brands that are meeting the consumer need for clean, sustainable skincare and baby care, and we are delivering industry-leading growth in these markets and doing it, cost efficiently. We indicated that we would grow our natural ingredients business at 60% to 80% yearly, and deliver 45% to 50% gross margin at scale from this business. As of the third quarter — as of the third quarter, our ingredient business is delivering 25% year-to-date growth. The addition of new ingredients that we expect to launch in the fourth quarter will get our annual growth rate in our target range.

Our natural ingredient business is delivering what we expect and is expanding significantly this year, with the introduction of four new ingredients, which have the potential to generate an estimated $25 million this year, with strong gross margins. Three of these four new ingredients are shipping for the first time in the fourth quarter, squalane for vaccine adjuvant, clean ethanol for use in personal care and perfumes, and CBG as an ingredient and also formulated into several consumer products that we are launching. Our largest and most mature ingredient business is the supply of squalane for our cosmetics ingredient business.

This business delivered $7.5 million of revenue in the third quarter and $3.7 million of adjusted EBITDA. This is a 49% adjusted EBITDA margin for a business that is growing at over 40% year-over-year. We also said we would have strategic deals from time to time as we simplify our portfolio and monetize certain parts of our technology. We are currently in strategic discussions regarding four different components of our portfolio with three different parties, to determine the best future fit of certain products and established value enhancing long term commercial and technology partnerships for you and attractive end markets.

As an example, this includes fermentation based natural protein. We plan to cover these in more detail during our upcoming Virtual Investor Day in December. We have a clear set of strategic priorities that are focusing our business. First one is to invest in high growth clean beauty consumer brands. We are the leading supplier of clean ingredients to the beauty and personal care industry and we have two brands that are setting the standard and expectations for consumers. We are delivering the best performing products that are sustainably sourced and loved by consumers around the world. We are just scratching the surface of our potential in beauty, both direct to consumer and an ingredient sales to these markets. We are aggressively expanding internationally, which China set for a fourth quarter introduction for Biossance and Pipette, each with different partners to best access their respective Chinese consumer.

We are transitioning the beauty industry to clean. We believe that in the future, the consumer will not have to choose between clean and non-sustainable beauty products. The industry will only work with clean ingredients and only sell clean and responsible products to the consumer. Just last week for example, we announced the formation of a new company, the clean beauty collaborative with model entrepreneur, Rosie Huntington-Whiteley. Further solidifying our place in the clean beauty markets beyond our Biossance and Pipette brands. Rosie has over 11 million Instagram followers, has a great sense of what a great performing clean color cosmetic product should be and is the perfect partner to disrupt the color cosmetics segment within beauty. We are well advanced in the product development and have several of the world’s leading retailers in discussion with us to support and launch our brand.

Color cosmetics needs a great clean product offering and we are the right company with the right partner to bring this to market. Biossance has an estimated current market value of around $600 million. We achieved this in around four years with about $45 million of total investment. We believe we can achieve this type of return in half the time with a partner like Rosie. We are already demonstrating a much faster time to this type of return for the Pipette baby brand based on the current revenue ramp of Pipette. We have the leading pipeline of products and technology in the synthetic biology industry, our current technology pipeline includes vitamins, HMOs and cannabinoids and is in process of expanding to fermentation based proteins and the fastest time to market and lowest cost production of monoclonal antibodies.

An exciting example of how we are leveraging synthetic biology across multiple applications is through squalane, a rare molecule that is currently mostly sourced from shark liver oil. Using our technology, we produce a semi-synthetic squalane for vaccine adjuvants, skin care supplements and human nutritional supplements. It takes 500,000 sharks to supply enough squalane for 1 billion vaccines. Through our technology and fermentation, we can make the same amount of squalane from 10 hectares of sugarcane. We can do this in less than one month and for less than one-third of the cost of the shark based product. We can deliver a product at equivalent purity with none of the dangerous impurities that the animal source provides. We can do this consistently every time. We are not dependent on figuring out exactly what ocean this shark came from or what it’s been eating to understand the impurities in the oil. This is the value of our technology at scale. The sugarcane field repeats the same production every year. The sharks don’t produce any more squalane after you kill them, and they don’t provide further value to the ocean ecosystem.

We expect to generate first sales of this product in the fourth quarter, and we expect the first full year revenue in excess of $50 million from this one molecule. We expect to sell this molecule not only as a vaccine adjuvant, but also as a nutritional supplement and as a supplement for skincare from within. Our third strategic priority is to make our supply chain, the lowest cost and most resilient at delivering natural and sustainable ingredients from fermentation. This is what Eduardo and his team are great at. The delivery during the pandemic is a great example. It hasn’t been perfect as we witnessed in the revenue impact to our third quarter, but the circumstances and conditions are challenging.

Our partners, Givaudan and [Indecipherable] have both commented on how we are one of the most dependable partners in their supply chain. This has meant great performance for them and for us during this time. We are now one of the top 5 suppliers have ingredients to each of these companies in the world and we are quickly expanding our business. Our fourth strategic priority for the year is to significantly improve our balance sheet, earnings and cash flow which Han will provide more color on. The fourth quarter is on track to be another record quarter for us and an important quarter in terms of profit, along with the expected progress on the simplification and focus of our portfolio with our strategic review. We believe the potential strategic transactions that are currently in process will help us pay off our debt faster, invest in our consumer brands and further accelerate our growth and eliminate the need for any major new financing while retaining our highest value assets for continued long-term growth and sustainable financial performance. In other words, we continue to see a very robust future for growth and profitability in our business.

At Amyris, we are delivering on the promise of synthetic biology. We have learned to adapt quickly and remain focused on execution and transformation, continuing our mission to deliver synthetic biology based solutions for a healthier planet. We are applying the power synthetic biology through our industry-leading portfolio of platform molecules driving speed to market and enabling disruption across the health, wellness and beauty markets.

And with that, I will turn the call over to our Chief Operating Officer, Eduardo Alvarez. Eduardo?

Eduardo Alvarez — Chief Operating Officer

Thank you, John and good morning, everyone. In the third quarter, we saw robust operational performance despite the challenges of the COVID-19 pandemic. At the start of the pandemic, we built up inventories for selected products to provide flexibility and resilience for our ingredient customers. During the third quarter, we leveraged this inventory position to meet the growing demand for natural ingredients, while we scaled our 10th product and introduce our 11th product successfully. As John just mentioned, we did experience some COVID-related delays for our 10th product in natural flavor ingredient that we introduced in the fourth quarter of last year.

Our contracting site that finished this product had three operators affected by COVID. We also experienced delays in the delivery of crucial new equipment. Both of these factors delayed production for our new flavor ingredient by 25 days consisted and [Phonetic] estimated 60% of this production into the fourth quarter. I am pleased to report that we just completed the campaign delivering 15% more volume than plan excelling in product quality and [Technical Issues] all product and volume produced.

We continue to enable innovation and commercialization through the scaling of our 11th ingredient, our first cannabinoid. This production campaign is ongoing and we are pleased with the performance to date. We also leveraged our manufacturing network to complete successful production campaigns of our other ingredients across 10 sites on three continents. We remain focused on operations excellence, putting our employee safety first while operating effectively and satisfying our customers’ needs. We delivered our third consecutive quarter of squalane cost improvements, and we are producing squalane at our lowest cost, unit cost ever. For RebM, we completed key process improvements that we mentioned in the second quarter and reduced our RebM unit cost production by 50%.

In the third quarter, we also invested in a robust consumer operations platform. Our traffic in Shopify is in the top 0.5% of all digital brands that use that platform. We deployed a new cloud ERP system to support growth in our consumer brands, Biossance, Pipette and Purecane, and also to create a more resilient, integrated and scalable consumer service infrastructure. As John mentioned, 61% of our third quarter Biossance revenue came from our own e-commerce channel. A trend that we anticipate will continue. With these changes and capabilities in place, we are well poised to deliver what we believe will be a record fourth quarter for our consumer-facing businesses.

Finally, let me conclude by commenting on our new plant at Barra Bonita in Brazil. Our construction is progressing well. We remain on track to commission the plant by the end of 2021. And during this quarter, we competed very important advances in utility connections to the site, civil foundation work and the design and order of long lead equipment. Our capital expenditure budget for the plan of $70 million remains as planned, and this plant will favorably impact our future margin profile for many of our ingredients products. Our team is fully focused on delivering a very strong fourth quarter with safety and purpose.

With that, let me turn the call over to Han to review the financial results in more detail. Han?

Han Kieftenbeld — Chief Financial and Chief Administration Officer

Thank you, Eduardo. On slide 8, our financial highlights for the quarter. Starting with sales revenue, our portfolio shift continues as we are seeing a larger share of revenue from product both consumer and ingredients compared to revenue from collaboration and grants. As I discussed last quarter, we continue to provide a further breakdown of our sales revenue performance and you will see this in an upcoming slide, also to help with a like-for-like comparison, we have classified last year’s one-off transaction of Vitamin E, along with the 2019 Lavvan collaboration revenue under other, so that you can more easily see the underlying performance of the business.

Our underlying total revenue for the third quarter was $34 million well up versus the prior year quarter, with $31 million coming from products, a new record demonstrating 58% year-over-year growth with sequential growth of 19%. We have now seen three consecutive quarters in 2020 where consumer revenue tripled year-over-year. This was led by our Biossance brand, which made up approximately 85% of consumer revenue. Also Pipette, still a young brand set a new record for its core baby and mother care portfolio. For ingredients, our versatile squalane product accounted for 39% of revenue with the remainder primarily coming from flavors and fragrances.

Gross margin of 41% or $14 million in margin dollars was supported by strong improvement in product margins. On an underlying basis, gross margin improved 25 percentage points or $7 million year-over-year. Product related gross margin of 35% of revenue grew $11 million with a $9 million — $9 million improvement from consumer and $2 million from ingredients. Quarter 3 consumer margins were 70% and ingredients operated at 10%. We saw continued growth in consumer margin due to a higher share of sales coming through our direct to consumer e-commerce platform. Cash operating expense was $43 million, a $5 million or 10% improvement versus the prior year quarter. This decrease in operating expense was related to improvements in G&A and R&D expense, which were in part reinvested in marketing to support growth of our consumer brands.

T&E expense was down due to COVID-19. Sequential cash operating expense was flat for the three quarters of 2020 despite continued top line growth. On an underlying basis, adjusted EBITDA was a negative $33 million and improved $10 million versus the prior year quarter due to strong sales growth, improved gross margins and lower operating expense. So, let me put it altogether. Product sales growth was $11 million, partly offset by lower collaboration revenue of $4 million for a net positive from revenue of $7 million. Product cost of goods sold was up $2 million and operating expense was down $5 million for a net positive of $3 million.

These factors combined delivered a $10 million year-over-year improvement in adjusted EBITDA. Interest expense of $7 million was down $10 million or 61% from the third quarter of 2019, a function of lower debt and a lower effective interest rate of just over 8% after having renegotiated debt expense down on a number of instruments. We reduced our overall debt significantly, which currently is at $175 million versus $240 million in the prior year quarter, and $297 million at the beginning of the year, a 41% reduction.

Lastly, our cash position was $38 million as of September 30. Q3 cash outflows included finalizing the catch-up and certain debt and current obligations. We also invested significantly in the support of our ingredients campaigns to produce both existing products and scaling up of new ingredients such as CPG which Eduardo referenced in his overview.

Let’s turn to slide 9. This page represents the underlying basis for our key financials that I just discussed. I will not repeat the comments I made related to the quarter strong performance, but rather make a few points regarding the year-to-date, which shows a similar improvement pattern for all key financial metrics as compared to Q3. Sales revenue year-to-date of $89 million grew 48%, again driven by strong product revenue. Gross margin dollars grew more than 250% due to a combination of sales growth and improved margin economics for both consumer and ingredients. Like Q3 operating expense was also down year-to-date and adjusted EBITDA improved $30 million, mostly from the aforementioned margin improvement.

So let’s move to slide 10. Here we are showing a breakdown of our sales revenue and more details on previously. Inside consumer, we are reporting our wholly-owned brands, Biossance, Pipette and Purecane. Under ingredients, we report our business to business portfolio, including flavor and fragrance ingredients, RebM, our alternative sweetener and squalane our largest selling ingredient for cosmetics and clean beauty end markets. Collaboration and grants includes revenue from R&D partnership programs.

As I commented earlier on the call, the other category includes the one-off 2019 Vitamin E transaction and 2019 Lavvan collaboration revenue. Year-to-date revenue growth is very strong for the product category with consumer more than doubling year-over-year. Again, mostly driven by our Biossance brand.

Let me make a few comments related to Q4, before I hand off to John. I outline the components of the P&L and the drivers clearly on the previous pace. We expect the year-to-date growth trajectory for product revenue to continue into Q4 and collaboration revenue is expected to continue at the Q3. In addition to the current growth pattern, we anticipate a strong fourth quarter for our consumer business due to the holiday shopping season, and our ingredients revenue will be helped by the first sales of new ingredients that John referenced earlier.

We anticipate operating expense to be in line with Q3. Lastly, we continue to contemplate closing strategic transaction in the fourth quarter as John discussed. All of these factors are expected to help advance bottom line earnings and cash flow.

With that, I’ll turn the call back over to John.

John Melo — Director, President and Chief Executive Officer

Thanks, Han. Our leadership in the fast growing and attractive health, clean beauty and sustainable wellness markets continues to be driven by consumer preferences for clean, safe and sustainable products from brands they know and trust. We supply many of these brands and we have two of the leading brands to help consumers in this time of need and beyond. Our ability to quickly adapt to global needs and work to scale what we believe are market-beating ingredients and consumer branded products that provide exceptional performance has been invaluable, especially with regards to the work we are doing to supply the pharmaceutical industry and our work to develop a second generation COVID-19 vaccine.

We are in the process of accessing a $10 million grant from Portugal to fund our vaccine development through Phase 1 trials. We are investing $60 million this year in R&D and process development to develop and commercialize a pipeline of products that address consumer needs and that are clean, safe and sustainable. The combination of partner collaboration payments and our expected one-time strategic licensing transaction covers most of this investment. We have several strategic opportunities ahead where we expect to self-fund our growth and simplify our business, and we encourage everyone to please be on the lookout for information about our upcoming planned Virtual Analyst and Investor event in December. We will be sharing more information on this in the coming weeks.

Now, let me open the call up for questions. Greg, can you help us?

Questions and Answers:

Operator

Ladies and gentlemen we will now begin the Q&A session. [Operator Instructions] Our first question comes from Colin Rusch with Oppenheimer.

Colin Rusch — Oppenheimer — Analyst

Thanks so much guys. You have to forgive me, I’ve got four questions, so I’ll try to be quick about it. First, can you quantify the impact from manufacturing issues to revenue in the quarter?

John Melo — Director, President and Chief Executive Officer

Quantify — Colin, by the way, good morning. The third quarter impact for manufacturing issues are really delays in supply chain and the COVID cases at the site are somewhere in the $4 million to $5 million.

Colin Rusch — Oppenheimer — Analyst

Okay. That’s incredibly helpful. All right. Second, regarding the four development molecules. I mean, what can you tell us about those molecules from an application perspective? And secondarily, what’s your expectation for monetizing those? Are those things that you would be able to monetize this year or we’re going to see the modulation happen next year or over time?

John Melo — Director, President and Chief Executive Officer

When you’re — when you’re referring to the four development, you mean the four strategic transactions that we articulated?

Colin Rusch — Oppenheimer — Analyst

Yes, correct.

John Melo — Director, President and Chief Executive Officer

So for those transactions, those are actually, two of them are development molecules where we actually will start realizing benefit immediately from partner payments. And then two of them are existing molecules that were actually transitioning or selling the production and the production and the value of those molecules to the partner. In one case we are realizing a long-term royalty off the sale and the other, we’re not. And both, when I think about the combination of these transactions, our expectation is somewhere north of $200 million.

Colin Rusch — Oppenheimer — Analyst

Fantastic. And are you expecting those things to close in the quarter? Is it going to drift into 2021? Are you seeing something of that? In which…

John Melo — Director, President and Chief Executive Officer

It’s four different — yeah, a good question, Colin. It’s four different, call it, product areas and or molecules and of the four at least one, we expect to close before the end of the year and then the others. We expect to roll into the first quarter.

Colin Rusch — Oppenheimer — Analyst

Fantastic, that’s super helpful. And then with the IDRI relationship, obviously if there is so many opportunities with these guys. Could you talk about the cadence of development and the strategy and timing around monetization of those collaborations? Obviously, proving out molecules, getting it into testing might be a long arduous process, are you looking to develop these things and move into licensing discussions fairly early in the development process? How should we think about that?

John Melo — Director, President and Chief Executive Officer

Yeah. Look, our mission is not to be in the vaccine business long term. We are working with IDRI and then looking at a lot of the datas, especially Moderna’s data on their mRNA vaccine. We realize there were some very specific advantages in the mRNA technology that IDRI had been developing for the last several years. When we realized that, we then actually added several consultants that are specialists in the vaccine world kind of some of the world’s leading thinkers on vaccines, and they validate some of our insights and thinking. One simple example is the IDRI RNA platform requires 1,100 times less RNA and actually has much higher efficacy based on their approach to the mRNA technology.

We thought of that as critical to actually having a sustainable mRNA platform that actually could be applied, not only for the current pandemic, but for future pandemics. A platform that can quickly understand and adjust or adapt to dealing with whatever the antibody is for the specific response to any specific buyers. So when we — when we started to assess that and realize that, we realized that — and by the way, in addition to all that, the platform actually, one of the differentiating aspects is how it uses an adjuvant, and how that adjuvant uses our squalane in the application. So we realized advancing a platform like that, number 1 is critical for the world, because in looking at all the current data around current generation COVID vaccines, we don’t see any that is actually a vaccine for the entire world.

We see a lot of vaccines for rich people, we see a lot of vaccines in trial that we think will be good, but may be at 50% to 60% from an efficacy perspective. So we think the world needs a vaccine that’s got very high efficacy around COVID-19, but also around potentially other pandemics. And then secondly, a vaccine that’s much lower cost and much easier to scale, which is what we think the IDRI vaccine is. We then started to talking to potential partners to fund the vaccine development, and we found that in Portugal, the Portuguese Government was very interested in advancing a vaccine like this and being part of actually getting this vaccine scaled. So that’s what really drove us to do the IDRI agreement.

The IDRI agreement gives us exclusive access to at least the four — the first four indications from this platform, which COVID-19 is one of those, and our focus is getting through Phase 1 trials demonstrating what we believe to be true about this platform and then finding the right pharmaceutical partner to be able to really scale it and take it to the world. So that’s — that’s our logic, that’s what we’re doing around the vaccine and again very strategic, and that it connects back to a platform that we think could become the dominant mRNA platform that then drives further demand for our squalane as an adjuvant in vaccines.

Colin Rusch — Oppenheimer — Analyst

That’s incredibly helpful. And then the last one is really about adjuvant conversations outside of IDRI. Can you give us a sense of the scale and maturity of the pipeline of those opportunities?

John Melo — Director, President and Chief Executive Officer

Look, we have five active conversations, two of which I would call near the contract stage, meaning they’re currently doing final acceptance of the product and assuming that everything goes well, and we have no reason to believe it won’t. I’d expect at least one of them to start taking product before year end. So very advanced, and we’re looking at what is the best route to market, especially now that we see that the squalane is actually used as a nutritional supplement in many parts in the world and really divided into two sections, developing countries that need a quick boost of nutrition every day, kind of like, the daily vitamin for kids in school that need nutrition and then secondly, for the Japanese and South Korean markets that takes squalane as a supplement and their current sources chart squalane and we believe there is an advantage to replacing that source in those markets.

So we actually see two very different markets, a supplement market for nutrition and then inside out skincare and then the adjuvant market. And I just gave you the update on adjuvant, and I see us advancing very quickly on the nutritional side during 2021.

Colin Rusch — Oppenheimer — Analyst

Thank you so much.

John Melo — Director, President and Chief Executive Officer

Thanks, Colin.

Operator

The next question comes from Amit Dayal with H.C. Wainwright.

Amit Dayal — H.C. Wainwright — Analyst

Thank you. Good morning, guys.

John Melo — Director, President and Chief Executive Officer

Good morning.

Amit Dayal — H.C. Wainwright — Analyst

Just with respect to the fuller strategic transactions, John, are you looking to complete all of these by, say, the first quarter of 2021?

John Melo — Director, President and Chief Executive Officer

We think there is a high probability, it could be that one of them, lingers beyond that, but right now, I would say we’re on track for at least one before the end of the year and then the rest in the first quarter.

Amit Dayal — H.C. Wainwright — Analyst

Understood. And then the $200 million, you expect to sort of generate from these efforts, could you give us a sense of where we could be with our balance sheet and other initiatives in terms of applying these proceeds going into next year.

John Melo — Director, President and Chief Executive Officer

So starting with the fourth quarter, our expectation is that having with this first transaction done, will obviously turn us profitable and give us a good cash position to end the year. And then with the transactions in the first quarter, we would expect to pay down most of our debt and be able to fully fund the Company to profitability and likely in light of the way the portfolio get simplified with these deals, I’d expect us to be very close to net income positive if not net income positive in ’21.

Amit Dayal — H.C. Wainwright — Analyst

That’s good to hear. Are looking to do something or anything with any of our consumer brands on this front? Just new molecules…

John Melo — Director, President and Chief Executive Officer

No, these are — good clarification, our consumer brands and then our supply to the cosmetics industry I think two of our most robust and profitable businesses as of the fourth quarter are not impacted by this at all. You can kind of think of this as divided into two parts, one part is providing access to our platform for a market that’s growing very rapidly that our platform is very good for which is plant based proteins made from fermentation. I think the second is, there is actually several additional zero calorie sweetener molecules that are very interesting to the market that our platform is also very good for, that are included in this.

And then on the other end, there are a couple of ingredients that we sell that we’re the leaders in the world for, and these ingredients actually are now in what I call kind of maintenance mode. If we produce, we sell, they generate margin and are super attractive to some of the supply industries. So, we’re in discussions with a couple of the largest ingredient companies in the world who are very attracted by these ingredients and willing to pay significant multiples to access these ingredients. So that’s the way to think about it. A couple of existing ingredients and then platform access for a couple of categories that are about significant for future upside in markets where the platform is very good for and we are — we would not pursue ourselves, so we have partners who are actually significant in those end markets.

One is well, they’re significant in those end markets and we’re looking at these deals with those partners. There is no deal that we’re pursuing that the counter party isn’t either the number 1 or number 2 player in the world for the end markets we’re playing into.

Amit Dayal — H.C. Wainwright — Analyst

That’s good to hear. With respect to the fourth quarter outlook, fourth quarter 2020 outlook, consensus is calling for around $85 million in revenues, is that kind of where you think the quarter might end up?

John Melo — Director, President and Chief Executive Officer

We think the $85 million without a significant strategic transaction is where we’ll end up. And then with one of the bigger transactions, not the biggest, one of the bigger transactions will be well over that $85 million. That’s kind of the range. We have — I would call that low end and I’d call some upside based on one of these transactions we’re dealing with being on the bigger side of the range that we’re expecting.

Amit Dayal — H.C. Wainwright — Analyst

Thank you for that. Just one last question, on the Lavvan litigation front, are there any updates that are meaningful that you might want to share?

John Melo — Director, President and Chief Executive Officer

No, we really have no meaningful update, I think everything at this point is working as our legal strategists and advisors have indicated. We are working through the — the court system, and we expect that we will have some indication from the court system, hopefully sometime in the month of November. And again we — that’s that where we’re at, but nothing really meaningful from what we’ve already said publicly.

Amit Dayal — H.C. Wainwright — Analyst

So basically, I mean going into the end of the year, given that we already sort of in mid-November now, you should be expecting a lot of dues flow around all of these developments that you are pursuing.

John Melo — Director, President and Chief Executive Officer

Yeah. I will tell you that, a bit to my strike [Phonetic], this is not where we expect it to be. We started the year with one strategic transaction. It was very critical. It was about simplifying a piece of our portfolio with one of our existing partners. And during the big, starting really at the beginning of the third quarter, we’ve been approached by more folks than we expected and for deals that we were not expecting to do so. I can tell you that where we are right now is more strategic activity with inbound inquiries than we’ve ever had action in the history of the Company and our focus is just on making sure we don’t take the eye off basic operations while actually optimizing the deal flow that we are managing through right now.

Amit Dayal — H.C. Wainwright — Analyst

Understood. Thank you, John. That’s all I have.

John Melo — Director, President and Chief Executive Officer

Great.

Operator

This concludes today’s question-and-answer session. I would like to turn the conference back over to John Melo for any closing remarks.

John Melo — Director, President and Chief Executive Officer

Thank you, Greg. Really appreciate the call. I appreciate everybody that took the time to be on it. Thank you for joining the call and your support in Amyris. We look forward to the future interactions and updates. We hope that most of you take time to join us for the December Virtual Analyst and Investor Day, where we will be updating you further on what we’re doing with the technology. What’s happening on the consumer side and progress on our strategic transactions. Wish everybody, good health and stay safe. Thank you.

Operator

[Operator Closing Remarks]