Key Takeaways from BioAmber’s IPO Filing

Another day, another biochemical S-1. BioAmber, a biobased succinic acid producer based in Minneapolis, announced yesterday that is has filed for an initial public offering of up to $150 million.

The move isn’t too surprising, given the pace in which the company has racked up partnerships and the general momentum late-stage biochemical start-ups have built in 2011 (For more on the latter, see recent CW cover story Green Chemicals: Coming to a Supply Chain Near You). The company has partnered with Mitsui & Co. to build up to three commercial-scale plants. Downstream, it has deals with Lanxess (whose Sarnia, ON site will be home to BioAmber’s first production unit) for the development and sale of non-phthalate plasticizers based on succinic acid and; and has been named exclusive succinic acid supplier to Mitsubishi Chemical’s planned polybutylene succiniate (PBS) joint venture plant in Thailand.

Items of note from the filing:

  • The company has secured supply agreements for the sale of over 84,000 m.t. of biobased succinic acid and its derivatives over the next five years. According to previous announcements, the Sarnia site will bring 17,000 m.t. of annual capacity online in 2013 and double that figure by 2014 once a Cargill yeast technology is introduced. The facility in Thailand, still in the feasibility stage, is expected to bring about 65,000 m.t. of annual capacity online in 2014.
  • In addition to biobased succinic acid and 1,4-butanediol (made from succinic acid using technology licensed from DuPont), the company is developing biobased routes to adipic acid and caprolactam.
  • The total addressable market for BioAmber’s products is $34 billion.
  • The company believes its succinic acid is cost-competitive with oil priced at $35/barrel.
  • In addition to the Sarnia and Thailand units, Mitsui and BioAmber are planning a third facility in either North America or Brazil that will be similar in size to the Thailand unit.
  • The company posted zero sales in the first half of 2011, but expects to begin recording revenue from commercial sales in the first quarter of 2012 (the company has been operating a 350,000-L production unit operating at Pomacle, France).
  • The company is collaborating with Solvay to develop aliphatic and aromatic esters of biobased succinic acid for use in PVC in an effort to develop a renewable, phthalate-free plasticizer solution to Solvay’s PVC customers. I’ve been following BioAmber since 2009 (back when BioAmber was still a DNP Green Technology/Agro Industries Recherche et Developpement joint venture) and this was news to me.
  • What was NOT news to me: BioAmber has competitors. Several of them. Some of them enormous chemical companies planning large-scale units of their own (table). However, as a BioAmber exec told me earlier this month, “We need to have a number of players moving forward to build the confidence the industry needs to move away from petrochemicals and adopt renewable chemicals in a meaningful way.”

Toray Produces Renewable PET Fiber

Toray Industries says it has produced laboratory-scale samples of 100% biobased polyethylene terepthalate (PET) fibers. The company, which says it is the first to reach this milestone, used para-xylene that partner Gevo (Englewood, CO) derived from isobutanol, and commercially-available monoethylene glycol (MEG). The news closely follows Toray’s June announcement that it had produced 100% renewable PET resin, again using p-xylene produced by Gevo.

PET that is partially renewable is already being produced on a large scale; Coca-Cola sold 2.5 billion PET bottles in 2010 that were made with sugarcane-derived MEG, which makes up 30% of PET, and hopes to use completely plant-based PET by 2020.  Purified terepthalanic acid (PTA), produced from p-xylene and oxygen, makes up the other 70% of PET, but has not been produced renewably at large scale.

So far, only a few firms have announced they are pursuing biobased p-xylene. Gevo expects to begin commercial-scale isobutanol production next year at two retrofitted ethanol plants, and its agreement with Toray includes a supply contract for p-xylene sometime in 2012 or thereafter.

Virent Energy Systems (Madison, WI) unveiled a biobased p-xylene process in June. The company operates a 10,000 gallon/year demonstration plant at Madison, and is in talks with potential partners about a larger-scale unit. It hopes to have commercial-scale production by the end of  2014.

PepsiCo announced in March that it had developed the world’s first 100% renewable PET bottle, but did not disclose where it was getting either its MEG or p-xylene. [I suspect Gevo, since the company’s results for the first ended March 31, 2011 noted it had provided sample volumes of biobased p-xylene to multiple “international brand owners” for the production of a 100% plant-based bottle made from PET]

Toray says the success of this trial, “albeit under laboratory conditions,” is proof that polyester fiber can be industrially produced from fully renewable biomass feedstock alone.

Biochems: the darling of cleantech investment

Private funding for biochemicals firms is holding firm, despite waning interest in clean technology as a whole, according to Lux Research (New York).

U.S. venture investments in biobased chemicals and materials are, so far, on pace to meet last year’s total of $806 million, Lux says. Other clean technology markets have not fared so well since the 2008-09 recession. Alternative fuels investment fell 5% in 2010, and venture funding for smart grid, energy storage, and electric vehicles fell 43%.

“We’ve seen a lot of areas of cleantech investment go down in the last year, so the fact that biobased chemicals and materials funding is still robust is a nice surprise,” Mark Bünger, a director at Lux, told CW. Some of the decline in clean tech investment can be attributed to the economy, but there has also been waning interest in new technologies from the venture community, Bünger says.

He expects venture capital in biobased chemicals to peak in 2-3 years. Biobased chemicals and materials, while far from dead, is already a mature market, and start-ups and investors each need to retool their strategies. “The industry no longer offers daredevil innovators grand challenges that attract risk capital and venture finance,” Bünger says. “Its challenges today lie in day-to-day dilemmas of running a mature, mundane business, and the payoffs are more predictable.” The industry is now highly relevant to corporations, regulators, and consumers, he adds.

For more on venture investment in biochemicals and materials, see CW‘s Green Chemicals: Coming to a Supply Chain Near You

Biochemical Industry Growth Spurt

How quickly they grow. A report, released recently by Lux Research (Boston), says venture funding in biobased chemical and materials hit a peak of $806 million in 2010, but the size of recent acquisitions and flurry of public offerings indicate it has matured past its “pre-commercial childhood.” Gone are the days of the grand challenges that attract VC funds; mundane day-to-day operations and challenges have arrived (I’ll have more on the future of biobased chemicals and materials funding later this week, following an interview with Lux Research Director Mark Bünger).

The report’s arrival was particularly timely for me, since today I added Cobalt Technologies, a Mountain View, CA-based start-up developing a biobased n-butanol process, to my growing list of companies with significant chemical industry partnership deals (table).  I first wrote about Cobalt in 2009, when it was still called Cobalt Biofuels and the recession was in full swing. Today, the company announced a partnership with Rhodia to develop n-butanol refineries based on bagasse throughout Latin America. The deal is a big step for Cobalt as it scales up its technology (I spoke to CFO Steve Shevick today; more on that later as well; there is a game on tonight). Rhodia gains potential access to  biobased source of n-butanol for solvents production (and stays in step with Sasol, which recently secured most of Gevo’s isobutanol production capacity for the next two years for its own solvents business).