Bio-based chemical IPO window is closing

21 November 2011 00:00  [Source: ICB]

Pic credit: Marc Falardeau

Market concerns about green chemical firms have been magnified by several newly public companies that have seen plunging stock prices. What happens now?

The boom in bio-based chemical initial public offerings (IPOs) has ended, and the company flotation window is closing fast. Several firms that have gone public this year have seen their stock prices plunge, magnifying investor fears about pumping new money into early-stage companies.

"The IPO window has not completely closed but it certainly is narrowing, making it more difficult for companies to go public," says Andrew Soare, analyst at US-based market research firm Lux Research. "Not everyone will be able to raise $100m (€72m) or more."

The recent poor performance of many bio-based chemical and biofuel IPOs, along with the overall downward-biased volatility of the stock market, has dampened investor appetitite for these securities.

Yet most recently, US bio-based chemical company BioAmber filed for an IPO on November 14 to raise up to $150m.

STOCKS AND SHARES
US bio-based chemical company Gevo went public in February 2011 at $15/share. As of November 11, the stock was trading at $7.72 - down by 49%. US renewable fuels and chemicals producer Solazyme went public in May at $18, but the stock was down to 11.33 as of November 11 - down by 37%. US bio-based chemical firm Amyris at $12.53 on the same day, is down 22% from its IPO price of $16 in September 2010.

The lack of profitability of many bio-based chemical firms, although not unexpected at their stages of development, is another factor weighing on sentiment, Soare says.

"The companies that recently went public are still just building facilities - they are not profitable now," he says. "These companies are not yet in the mature stage. How successful they are once they build their plants will dictate the future IPO market for bio-based chemicals."

FRONT-RUNNERS
But for now, several US companies are seeking to pull off IPOs - the front-runners being Genomatica, Elevance Renewable Sciences and Myriant. All have ties with major chemical producers and multiple production platforms. Soare cites Genomatica and Elevance as leading IPO contenders.

"The venture capital and IPO markets are favoring flexible companies," he says. "These are the ones that can produce either chemicals or fuels, or that can produce a wide range of platform chemcials from a variety of feedstocks. Investors want to hedge their bets and are latching onto this theme."

Cathay Industrial Biotech, a bio-butanol producer based in Shanghai, China, canceled its IPO in August, citing adverse market conditions - one month after filing to go public in the US to raise up to $200m.

US-based biofuels company PetroAlgae filed for an IPO in August 2010 but has yet to go public.

Yet others are likely to come to the IPO table, with prime candidates including US bio-based chemical firm OPXBio and biofuels and bio-based chemical companies US-based Virent and Canada-based Enerkem.

If bio-based companies are not able to tap the IPO market for funds, larger chemical companies could fill the funding gap.

On November 1, Saudi Arabia-based petrochemical giant SABIC announced the launch of a new global corporate venture capital arm, SABIC Ventures, in the Netherlands. The arm will invest directly both in seed-stage, early-stage and late-stage companies.

Areas targeted for investment include alternative feedstocks for chemicals and materials, alternative energy and cleantech. SABIC Ventures will target the US, Europe and Asia.

"The organization will have a global reach," vice chairman and CEO Mohammed Al-Mady said. "We are building a global organization with deal flow and investment management support from all over the world."

---

Genomatica
HQ: San Diego, California, US
President and CEO: Christophe Schilling
IPO target: $100m
Initial filing: August 23, 2011
Underwriters: J.P. Morgan, Morgan Stanley, Jefferies, Piper Jaffray, Raymond James
Proposed stock symbol: GENO (Nasdaq)

Genomatica aims to produce high-volume intermediate and basic chemicals from renewable feedstocks such as syngas, conventional sugars and sugars from biomass.

The company is developing a pipeline of manufacturing processes for these chemicals. Its first target chemical is butanediol (BDO), and its second is butadiene (BD).

In 2010, Genomatica also filed a patent on the fermentation-based production of bio-adipic acid using commercially-available sugars.

Genomatica's startegy is to partner with industry leaders through joint ventures and licensing arrangements in order to accelerate commercial production.

The company expects the first commercial-scale BDO plant that utilizes its processes to start high-volume production by the end of 2012.

The plant concerned would be a 40m lb/year BDO facility in Italy in which the company has a joint-venture partnership with local bioplastics producer Novamont.

In 2011, Genomatica has also signed agreements to develop BDO production with US-based food ingredients firm Tate & Lyle, Japan's Mitsubishi Chemicals and Italy-based chemical company Mossi & Ghisolfi.

---

Elevance Renewable Sciences
HQ: Woodridge, Illinois, US
CEO: K'Lynne Johnson
IPO target: $100m
Initial filing: September 20, 2011
Underwriters: J.P. Morgan, Morgan Stanley, Jefferies, Piper Jaffray, Raymond James
Proposed stock symbol: ERSI (Nasdaq)

Elevance produces specialty and intermediate chemicals from renewable natural oils based on its metathesis catalysis technology.

Primary target markets in the specialty chemical industry include surfactants, lubricants, additives and polymers. In addition, the company will produce olefins and oleochemicals.

The company is building what it claims will be the world's largest integrated biorefinery in Gresik, Indonesia, as part of a 50:50 joint venture with Singapore-based Wilmar International, the largest global processor and merchandiser of palm, palm kernel and coconut oils. Commercial operations are expected to start in the second quarter of 2012.

Elevance is also retrofitting an existing biofuels facility it acquired in Natchez, Mississippi, US, into an integrated biorefinery at a cost of $225m.

The company has entered into strategic partnerships with a number of partners - Netherlands-based chemical firm DSM, Switzerland-based chemical company Clariant, US agribusiness Cargill, US-based silica materials firm Dow Corning, US-based catalysts firm Materia and US-based chemical company Stepan.

It aims to have three world-scale biorefineries on line across three continents by the end of 2014, comprising 1m tonnes of production capacity.

---

Myriant
HQ: Batterymarch Park, Illinois, US
CEO: Stephen Gatto
IPO target: $125m
Initial filing: May 27, 2011
Underwriters: UBS, J.P Morgan, Citi, Piper Jaffray
Proposed stock symbol: MYRT (Nasdaq)

Myriant is focused on becoming a low-cost producer of bio-based chemicals, using its proprietary microorganisms (biocatalysts) to convert sugars into chemical intermediates. It has already commercialized lactic acid production with Netherlands-based producer Purac and is now targeting bio-succinic acid, acrylic acid and fumaric acid.

The firm enters into strategic relationships with international companies to accelerate the commercialization of its products. This year, Thailand-based PTT Chemical made a $60m equity investment in Myriant for a 46% stake and the companies are exploring the building of a bio-succinic acid plant in Southeast Asia.

Myriant plans to enter into a joint-development agreement with UK-based catalysts firm Johnson Matthey subsidiary Davy Process Technology to produce bio-succinic acid. Davy would use the chemical to produce butanediol (BDO). Myriant is building a 30m lb/year bio-succinic acid plant in Lake Providence, Louisiana, US, using funding from PTT Chemical as well as a $50m grant from the US Department of Energy. It expects to begin commercial operations in the first quarter of 2013 and to expand capacity to around 170m lb/year by the end of the first quarter of 2014. It is also planning to build bio-succinic acid plants in Germany with local engineering firm Udhe, as well as in China with chemical firm China National BlueStar.

By: Joseph Chang
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly