Metabolix Q1 results highlight portfolio of commercial activity

By Katie Fletcher | May 14, 2015

On May 13, Metabolix Inc. released its first quarter financial results for the year, reporting a portfolio of opportunities the company is developing and commercializing for its PHA performance additives, pure PHA resins and PHA/PLA blends.

"Our lead generation efforts continue to bring in new projects in our target application spaces: PVC (polyvinyl chloride) processing aids and performance additives, PLA (polylactic acid) modification, functional biodegradation and barrier coatings for paper,” said Joseph Shaulson, president and CEO of Metabolix. “As a result, we have a solid portfolio of commercial activities currently underway. While we won't convert every opportunity, we are excited about the commercial portfolio and expect to see the revenue line begin to pick up later in the year as we continue working hard to convert development projects to recurring sales of Mirel specialty biopolymers in 2015.”

The company began the call by highlighting progress made with its Mirel polyhydroxyalkanoate (PHA) biopolymer production. Metabolix shared that capital upgrades in biopolymer recovery are nearly completed, the supply chain is coming together with a new two-year toll fermentation services agreement and a contract extension with a recovery contractor, as well as plans to ramp up amorphous-PHA production to support commercial activities.

News that the company decided to significantly increase pilot production capacity for its PHA biopolymers was reported during Metabolix’s year-end results in March. “So far in 2015, we’ve made excellent progress on that plan, and I’m happy to report that we’ve now nearly completed the planned capital upgrades at our contracted biopolymer recovery facility.”

Johan van Walsem, chief operating officer of Metabolix, provided a more detailed review of commercial activities. Walsem went through various market opportunities for PVC modification, PLA modification and PHA resins for functional biodegradation. Metabolix has been exploring markets where the company enhances PVC recycling or improves PVC processing. Markets where PHA is used to modify PVC include backing materials for flooring, jacketing for wire and cable applications, building materials such as railings and vinyl siding and roofing membranes. “We see a lot of opportunity in this area for PHA and we will continue to work closely with our PVC customers to move their products to completion,” Walsem said.

Several ongoing customer developments where Metabolix is improving the performance of PLA while preserving PHA’s bio-content and compostability include applications in packaging, personal care, compostable food service wares, organic waste diversion and dental equipment—specifically injection molded tips for the end of the instrument the dentist uses to spray water or air. “PHA can be used to extend the application range for PLA into a diverse range of applications by improving key properties,” Walsem said. “These are just some of the projects we are working on for PLA modification. Compared to PVC, these projects can move on a faster timeline, and we expect to continue to generate interest in this application space.”

The last list of markets Metabolix is working on developing and commercializing opportunities for is with its PHA resins for functional biodegradation applications. Used alone, PHA is biobased and biodegradable in soil and water. The company believes this attribute provides a unique value proposition. Five applications were mentioned during the earnings call. First, pellets in filtration cartridges for water treatment in small aquariums, second injection molded PHA spheres for delivery of proprietary additives for the treatment of pond water, third extruded lube systems for railcar wheel lubrication, fourth injection molded pots for hydroponics plants for pond algae clean-up, and lastly artificial bait and lures for the fishing tackle market.

In Metabolix’s last earnings call, the company’s new alliance with Honeywell was discussed for developing and commercializing marine biodegradable ingredients for cosmetics and personal care products based on its PHA biopolymers. “Our team has been working closely with Honeywell on the development and launch of the first products,” Walsem said.

Walsem provided the example of a few Metabolix team members joining Honeywell at an in-cosmetics show in Barcelona, extending the company’s interactions with potential customers.

Regarding the company’s earnings, Metabolix reported $13.3 million as its cash balance at the end of the first quarter, and is still anticipating total cash use of approximately $23 million in the year, including the $6.8 million of cash used during quarter one. The company reported a net loss during the quarter from continuing operations of $5.8 million, or 4 cents per share, compared to a net loss from continuing operations of $7.5 million, or 21 cents per share, for the first quarter of 2014. Total revenue from continuing operations in the first quarter was $600,000, unchanged from the prior year period.  The revenue consisted primarily of revenue from government grants, with $100,000 in product revenue recognized during both the first quarter of 2015 and 2014.

Metabolix shared key milestones at the end of the investors call. First and foremost, Shaulson said, the company is focused on converting commercial development projects to commercial sales. “In that regard, we look forward to seeing Honeywell launch its first product based on our Mirel PHA biopolymers.”

Shaulson said the company is excited to ramp-up pilot biopolymer production after the capital modifications at the recovery facility are complete and regular supply of broth from its fermentation partner has begun. He said the company also intends to keep working on plans for a commercial-scale plant. The remaining key milestones include Metabolix’s intent to secure additional financing, regain NASDAQ listing compliance and plan to spin out its crop science program.

“We have a lot going on in commercial development,” Shaulson said. “I think it’s important to point out that these are not just ideas on where our PHA biopolymers might be useful, these are real opportunities that we are working on with real customers. Some are already commercial on a small scale and others are on a much larger scale and in various stages of development. It’s probably safe to say we won’t convert every project to commercial success, but we are certainly excited about the portfolio and the potential it presents for building a successful specialty biopolymers business.”