Solazyme IPO analysis

Let’s visit a bit on how Solazyme has been doing since it went public on May 26. I received this interesting analysis from the Buckingham Research Group on their June 7 coverage of Solazyme but unfortunately, I will not be able to share the report completely so I’ll just post some of the more interesting analysis from this equity research.

Solazyme’s initial IPO price was $15-17 when filed and has subsequently raised to $20/share, which then rose 20% post-offering to between $24/share. The offering size was also increased 10% from 10m shares to 11m. The company has a market cap of $1.1bn eventhough it has minimal product sales yet.

Interesting so far? Buckingham Research noted several recent industrial biotech IPOs for peer comparison:

As far as economics for Solazyme’s microalgae products, the company believes that it can produce algae oils at a cost below $1,000/tonne ($3.44/gal) scale at current corn and sugarcane prices – including anticipated financing and facility depreciation. The blog previously mentioned Solazyme’s production is currently being outsourced to 3rd party contract operators of 75,000 liter fermenters although the company also purchased a facility in Peoria, Illinois, with 128,000 liter fermenters (2m liter/year total capacity).

Buckingham Research believes the initial 2m liter capacity is targeted at higher value, lower volume product applications such as nutritional and essential oils where product price of the algae oils can range between $2,000-20,000/tonne for nutritional supplements, and $20,000/tonne++ for essential oils for skin and personal care applications.

About 750,000 liter fermenters, meanwhile, are expected to be used for commercial fuel ($1,000-2,300/tonne) and chemical products ($1,800-5,000/tonne). Solazyme is expected to pursue mostly partnership arrangement for larger volume fuel and chemical products manufacture and marketing.

During the recent ICIS Surfactants conference held last month, I recalled Solazyme’s Walter Rakitsky wishing that they are already mass producing their oils because of the prices of US mid-cut fatty alcohols (a surfactant feedstock) estimated at around $3,500-$4,300/tonne in April.

As far as ownership post-IPO is concern, here is a snapshot from Buckingham Research:

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