A first-to-market leader in bio-succinic acid comes to the
public markets with its IPO.
Can BioAmber translate a lead in succinic acid’s smallish market
into leadership in a vast array of high-priced renewable
Here’s our 10-minute version of the BioAmber IPO, with a
translation of the risks into English.
In Minnesota, BioAmber
has filed an S-1 registration statement for a proposed $150
million initial public offering. The number of shares to be
offered in the proposed offering and the price range for the
offering have not yet been determined. The lead book-running
managers for the offering are Goldman, Sachs & Co. and Credit
Suisse Securities (USA) LLC. The additional book-running manager
is Barclays Capital. The co-managers are Stifel, Nicolaus &
Company, Incorporated and Pacific Crest Securities LLC.
The company is currently ranked #143rd in the world in the 50
Hottest Companies in Bioenergy. The rankings recognize innovation
and achievement in fuels and are based on votes from a panel of
invited international selectors, and votes from Biofuels Digest
BioAmber, which in the past year lost $12.41M while recording no
revenues becomes the 13th company to file for an IPO in the
industrial biotech boom, which began with a successful listing on
the NASDAQ by Codexis
(CDXS) in 2010. IPOs by Amyris
(SZYM), and KiOR
(KIOR) have followed. In recent months, PetroAlgae (PALG.OB),
Renewable Sciences and Fulcrum
Bioenergy have also filed S-1 registrations for proposed
Here’s the S-1 registration, in a conveniently downsized
10-minute Digest version – with some commentary along the way as
to what is driving value in the BioAmber model, opportunities for
the intrepid investor, and some risks which we have translated
from the ancient and original SEC into modern English.
From the S-1: “We are a next-generation chemicals company. Our
proprietary technology platform combines industrial biotechnology,
an innovative purification process and chemical catalysis to
convert renewable feedstocks into chemicals that are
cost-competitive replacements for petroleum-derived chemicals.
“We manufacture our bio-succinic acid in a facility using a
commercial scale 350,000 liter fermenter in Pomacle, France…We
have produced 487,000 pounds, or 221 metric tons, of bio-succinic
acid at this facility…We believe we can produce bio-succinic acid
that is cost-competitive with succinic acid produced from oil
priced as low as $35 per barrel, based on management’s estimates
of production costs at our planned facility in Sarnia, Ontario and
an assumed corn price of $6.50 per bushel.
“We have secured funding to construct the initial phase of our
next global-scale facility in Sarnia, Ontario and we intend to
build and operate two additional facilities, one located in
Thailand and the other located in either the United States or
“We expect to begin recording revenue from commercial sales of
our bio-succinic acid in the first quarter of 2012…We also intend
to leverage our proprietary technology platform and expertise in
the production of bio-succinic acid to target additional high
value-added products, such as bio-BDO, PBS, de-icing solutions and
plasticizers. In addition, we are also working to expand our
product portfolio to additional building block chemicals,
including adipic acid and caprolactam.
“Since our inception, we have raised an aggregate of $76.1
million from private placements of equity securities and
From the S-1: “Our proprietary technology platform combines
industrial biotechnology, an innovative purification process and
chemical catalysis to convert renewable feedstocks into chemicals
that are cost-competitive replacements for petroleum-derived
chemicals. The development of our current organism was originally
funded by the DOE in the late 1990s, was further developed
and scaled up, and optimized at the large-scale manufacturing
facility in France.
“We believe our solution enables us to address multiple large
chemical markets, including polyurethanes, plasticizers, personal
care products, de-icing solutions, resins and coatings, food
additives and lubricants, that are currently being served by
3 Key Qualities
1. Cost-competitive, renewable chemical alternatives that offer
equal or better performance;
2.. Using less feedstock per ton of output than most other
sugar-based processes for biochemicals other than succinic acid;
3. Significantly lower greenhouse gas emissions than the
processes used to manufacture petroleum-based products by
sequestering carbon dioxide in the process of producing
From the S-1: “First, we intend to replace petroleum-based
succinic acid in applications where it is currently in use, such
as food additives, as well as expand into new applications, such
as plasticizers, where bio-succinic acid has demonstrated superior
performance or economics to incumbent petrochemicals.
“Second, we intend to convert bio-succinic acid to bio-BDO and
THF, which are large volume chemical intermediates that are used
to produce polyesters, plastics, spandex and other products.
“Third, we intend to use our bio-succinic acid in the production
of PBS, which enables this polymer family to be partially
renewable, and modified PBS, or mPBS, which provides these
products with higher heat distortion temperature and improved
“We believe that these three market opportunities for our
bio-succinic acid platform provide us with access to a more than
$10 billion market opportunity.”
Current applications for bio-succinic acid include:
believe the addressable market for plasticizers exceeds $1 billion.
. We believe the addressable
market for polyurethanes exceeds $1 billion.
Personal Care Products
believe the addressable market for succinic acid and succinate
esters in the personal care industry is approximately $500 million.
. We believe the addressable market
for de-icing solutions exceeds $500 million.
Resins and Coatings
. We believe the addressable market for
resins and coatings exceeds $500 million.
. We believe the addressable market for
food additives is approximately $200 million.
. We believe the addressable market for
lubricants is approximately $100 million.
C6 Building Block Chemicals
From the S-1: “We expect to use our flexible technology platform,
including our partnership with Celexion, to expand our product
base to C6 building block chemicals, starting with bio-adipic
acid, by leveraging our extensive experience developing, producing
and marketing bio-succinic acid. We also plan to produce biobased
caprolactam and biobased hexamethylenediamine (HMDA). We
believe the addressable market for adipic acid is approximately
$6.5 billion. We believe the addressable market for
caprolactam is approximately $14.5 billion. We believe the
addressable market for HMDA exceeds $3 billion.”
Rapidly Expand Our Global Manufacturing Capacity.
Target the Large and Established BDO Market.
Develop Next-Generation Succinic-Derived Products.
Continue to Reduce the Cost of Our Products.
Expand Product Platform to Additional Building Block Chemicals.
The Commercialization Plan
From the S-1: “In order to support our growth, we plan to rapidly
expand our manufacturing capacity beyond the current production at
the Pomacle, France facility. We have entered into a joint venture
with Mitsui to finance, build and operate a manufacturing facility
in Sarnia, Ontario through our Bluewater Biochemicals, Inc.
subsidiary in which we own a 70% equity interest and Mitsui owns
the remaining 30%. The joint venture agreement also establishes
our intent to build and operate two additional facilities with
Mitsui, one located in Thailand and the other located in either
the United States or Brazil.
“For future facilities, we expect to enter into agreements with
partners on terms similar to those in our agreement with Mitsui
and we intend to partially finance these facilities with debt. We
expect to use available cash and the proceeds of this offering to
fund our initial facilities, as well as our commercial expansion
and product development efforts. For additional future facilities,
we currently expect to fund the construction of these facilities
using internal cash flow and project financing.”
The Risks, Translated from SEC-speak
Among the lowlights of reading S-1 registrations are the endless
pages of risk disclosures (in BioAmber’s case, 28 pages of them)
couched in an alloy of SECspeak and legalese. We offer these
excerpts from the original S-1, and a translation into English,
prepared by our Digest lexicologists.
In SECspeak: ”We have a limited
operating history, a history of losses, anticipate continuing to
incur losses for a period of time, and may never achieve or
In English: “Our
investors have grown tired of losing their money, and have
encouraged this IPO in the hope of losing some of yours.”
In SECspeak: “We may not obtain the
additional financing we need in order to grow our business,
develop or enhance our products or respond to competitive
In English: “Now that we
are losing some of your money, you might run out.”
In SECspeak: “The funding,
construction and operation of our future facilities involve
significant risks, which may prevent us from executing our
In English: “The Titanic
is, after all, practically unsinkable.”
In SECspeak: “Our prior success in
developing bio-succinic acid may not be indicative of our ability
to leverage our bio-succinic acid technology to develop and
commercialize derivatives of bio-succinic acid and other bio-based
building block chemicals.”
In English: “To make the
real bucks, we got to make all that other stuff that we haven’t
actually practiced making yet.”
In SECspeak: “Demand for our
bio-succinic acid, bio-BDO and other bio-succinic acid derivatives
may take longer to develop or become more costly to produce than
we anticipate, and technological innovations in our industry may
allow our competitors to produce them at a lower cost, which may
reduce demand for our products.”
In English: “We may be
kidding about everything in this IPO, except the bits about how
tough this market is to crack.”
In SECspeak: “We are dependent on our
relationships with strategic partners, licensors, collaborators
and other third parties for research and development, the funding,
construction and operation of our manufacturing facilities and the
commercialization of our products and our failure to manage these
relationships could delay or prevent us from developing and
commercializing our products.”
In English: “Help, I need
somebody, / Help, not just anybody, / Help, you know I need
someone, / Help!”
In SECspeak: “Our inability to
adequately protect and enforce our intellectual property, or to
prevent the operation of our business from infringing the
intellectual property of others, may make it difficult or cost
prohibitive to carry on our business as currently planned.”
In English: “We bring
knives to what may well become a gunfight.”
BioAmber as it sees itself: 7 Competitive Strengths
Platform that Addresses a Large Market Opportunity. We
own or have exclusive rights to specific microorganisms, chemical
catalysis technology and a unique, scalable and flexible
Selling Commercial Product Today. We
have sold bio-succinic acid to 12 customers in 2011. We believe we
are the first and only company selling bio-succinic acid products
in commercial quantities.
Economics at Large Scale. We expect to produce
bio-succinic acid at our planned facility in Sarnia, Ontario that
is cost-competitive with succinic acid produced from oil priced as
low as $35 per barrel.
Limited Exposure to the
Availability and Price of Sugar. Our process requires
less sugar than most other renewable products because 25% of the
carbon in our biosuccinic acid originates from carbon dioxide.
Established, Diverse Customer
Base. We have entered into supply agreements for the sale
of over 84,000 metric tons of bio-succinic acid and its
derivatives over the next five years.
Third-Party Commitments for
Global Manufacturing Expansion. We have signed an
agreement with Mitsui to jointly build a facility in Sarnia,
Ontario…[and our] agreement with Mitsui contemplates the
construction and operation of two additional facilities.
Experienced Management Team with
Strong Track Record. Our management team consists of
experienced professionals, possessing on average over 25 years of
relevant experience in scaling up, manufacturing and
commercializing chemicals, at Cargill, DuPont, INVISTA, Dow
Corning, GE, Royal DSM and Genencor.
Financing to date
From the S-1: “We issued 11,659 shares of common stock, 33,655
shares of preferred stock and warrants to purchase 18,769 shares
of common stock at exercise prices between $37.52 and $100.00.
“On February 6, 2009, we issued secured debentures and
warrants for 18,760 shares of common stock at a per share cost of
$50.00 for aggregate consideration of $938,000.
“On June 22, 2009, we issued in a private placement a
secured convertible promissory note and warrants for 5,970 shares
of common stock to FCPR Sofinnova Capital VI for gross proceeds of
“On October 22, 2009, we issued in a private placement an
aggregate of 59,702 shares of common stock at a per share cost of
$201.00 for aggregate consideration of $12 million.
“On February 1, 2010, we issued 5,000 shares of common stock
at a price of $201.00 per share to Shanghai KEQI and Sinoven LLC.
“On November 23, 2010, we issued secured convertible promissory
notes in a private placement for gross proceeds of $4 million. The
promissory notes were converted into 10,833 shares of common stock
and warrants to purchase 2,707 shares of common stock at an
exercise price of $369.14 with a ten-year term.
“On April 15, 2011, we issued in a private placement an
aggregate of 121,904 shares of common stock and warrants for 2,707
shares of common stock at a per share cost of $369.14 for
aggregate consideration of $44,999,643.”
“On November 4, 2011, we issued in a private placement an
aggregate of 20,061 shares of common stock at a per share cost of
$997.00 for aggregate consideration of $20 million to
Naxamber S.A., FCPR Sofinnova Capital VI, Mitsui & Co.,
Ltd. and Clifton Equities Inc.”
The bottom line
Well, it really comes down to this. There isn’t much of a market
in succinic acid. About 40,000 metric tons and $300 million. About
the capacity of a standard ethanol plant – one. So, you have
to take it, on essentially BioAmber’s say-so, that they can use
their low-cost succinic as a base from which to chase everyone’s
else’s high-priced other stuff.
On the side of belief, there’s a range of management talent and
expertise at BioAmber that Wyatt Earp would have been proud to
lean on at the OK Corral. Plus, you have the say-so of Mitsui, a
Japanese trading house of long lineage and a distinct “no dummies”
hiring policy. And, there’s a nice first-mover advantage.
But then there are the risks. For one, that Verdezyne might wrap
up bio-based adipic acid before BioAmber gets there, as Genomatica
might wrap up BDO. The risk that BioAmber might not get to C6
building blocks as fast or cost effectively as they hope.
Outside of the C6 platforms, there’s $3.8 billion in addressable
markets cited in the S-1. Figure 20 percent for the bio-based
products in the near-term, that’s around $700 million. How much of
that can BioAmber lock down in the near-ish term to provide
meaningful cash flow to finance further expansion, and how much do
they need to lock down to provide returns commensurate with a $150
million cash raise in the IPO?
So, it’s a bet – on a pre-revenue company with a hot technology
and a meaningful market – if it can get there. Like many
IPOs in this space this past year, it’s a financing event for the
company’s expansion, rather than a liquidity event for the current
investors. The current investors – well, they’d like to spread the
risk by broadening the investor base before the company pushes
through to commercial scale. It’s an oft-told tale – nothing
daunting in that, per se.
Like a first-mover advantage in succinct acid, one that may
translate into a lead in some of the biggest markets that will
come by in renewable chemicals? Here’s the train for you.
If the risks are high, the rewards will be high for the daring
investor who throughly vets the opportunities in the market, as
well as the aptitude of the magic bug for all the work ahead that
BioAmber has scheduled it to do.
The complete S-1 registration statement.
All 200-or-so pages in all their glory. The
complete S-1 registration statement is here.
Jim Lane is editor and publisher
of Biofuels Digest.