Elevance files for $100m IPO

A busy IPO (initial public offering) season this year as Illinois, US-based Elevance Renewable Sciences joined the ranks of Myriant, Genomatica, Gevo, Amyris, Solazyme, Codexis and Metabolix.

The company submitted its S-1 form to the US Securities and Exchange Commission (SEC) late Sept. 20 noting its intention to raise $100m on the NASDAQ stock exchange under the symbol ERSI. The company incurred a deficit of $188.8m as of June 30 as it continues to invest in R&D, expand manufacturing capacity and build product lines.

A little bit of a background about Elevance, the company was formed in 2007 with $45m funding from US agribusiness Cargill and catalyst technology company Materia. (Correction: Most of the funding came from venture firm TPG while Cargill and Materia essentially contributed their IP, receiving minority shares/ownership in return).

Cargill is currently Elevance’s major feedstock supplier (mainly plant-based oils such as palm, soybean and rapeseed oil). Materia supplies its ruthenium catalyst — which can only be obtained from a limited number of producers in a limited number of geographic sites, according to the filing.

Another risk the company noted is the infringement lawsuit between Materia and Evonik Degussa. If readers recall, Elevance put out a statement in July 2010 settling their own issues about Evonik’s metathesis technology. In the S-1 Filing, Elevance said it has licensed certain patents from Evonik regarding specific types of catalysts for olefin metathesis chemical reactions for $300,000 scheduled to expire on December 31, 2012.

Now onto the good parts of the story, Elevance is focusing on both the renewable-based specialty chemicals (surfactants, waxes, petrolatum, lubricants and additives, building blocks for specialty polymers and coatings), and intermediate chemicals (olefins, oleochemicals).

Here are some of their key milestones:

2007-2008:

  • Acquired Cargill’s NatureWax business and intellectual property developed as part of a collaboration between Cargill and Materia;

  •  Partnered with Tetramer Technologies, LLC to develop and commercialize renewable specialty chemicals;
  • Partnered with Dow Corning to market naturally derived ingredients in personal care applications;
  • Opened pilot facility in Illinois, including approximately 7,000 square feet of laboratory space.

2009:

  • Established the commercial viability of process
  • Completed multiple toll metathesis production runs for personal care and performance waxes business;
  • Met universally accepted compost specifications for certain coating applications when blended with paraffin;
  • Demonstrated the viability of fuel additive products produced at pilot plant scale;
  • Achieved a 50% reduction in catalyst usage in metathesis reaction;
  • Filed a provisional patent application for biorefinery process;
  • Refined and metathesized drum quantities of mustard, palm and jatropha oils, demonstrating feasibility for biorefinery use.

2010:

  • Completed first toll production run involving the conversion of 40,000 pounds of feedstock into specialty chemicals and intermediate chemicals;
  • Formed the Wilmar JV to construct world-scale integrated biorefinery;
  • Entered into a joint development agreement with Stepan to evaluate and commercialize surfactants, antimicrobials and polyurethane polyols based on specialty feedstocks;

2011:

  • Completed a toll production run converting one million pounds (450 metric tonnes) of feedstock into specialty chemicals and intermediate chemicals;
  • Acquired an 80m gal/year biodiesel facility in Natchez, Mississippi and commenced engineering to repurpose the facility into a biorefinery;
  • Entered an agreement with Clariant and sold commercial quantities of specialty chemicals to Clariant for the production of polymer additives;
  • Announced a collaboration with DSM to evaluate unique monomers for production of specialty bio-based high performance thermoplastic materials for DSM’s engineering plastics portfolio;
  • Filed eight patent applications on lubricant and additive products;
  • Refined cold flow product and providing samples to a prospective partner for evaluation;
  • Entered into a licensing agreement with XiMo Ltd to use its proprietary molybdenum and tungsten metathesis catalysts in the field of natural oils;
  • Announced a collaboration with Hutchinson Worldwide to evaluate the use of renewable products as processing aids in Hutchinson’s rubber compounds;

As mentioned earlier, Elevance’s technology is based on metathesis catalysis — a chemical reaction that uses selective, high efficient catalyst (such as ruthenium) that can break down and recombine molecules into new chemicals. The company is looking to produce novel, di-functional molecules like 9-decenoic acid methyl ester and 9-dodecenoic acid methyl ester (among others). I am not a chemist so I’m sure the chemical figures below will make more sense to them how the technology works.

Elevance said their biorefinery produces three main product streams: one for specialty chemicals and two streams of intermediate chemicals – olefins and oleochemicals (specifically alpha and internal olefins, C10 olefin, C16-C18 fatty esters, and di-functional C10-C15 fatty ester building blocks). 

Elevance estimates potential addressable market of $176bn worldwide for its targeted specialty chemicals products. The company estimates total size of the oleochemical market at $38bn in 2010 and intermediate olefin market at $7bn in 2008.

Their key proposition is producing lower-cost renewable-based high value specialty chemicals and direct replacement intermediate chemicals. In the oleochemicals market, Elevance said their process can provide a cost-competitive alternative to imported palm kernel oil and coconut oil (key oleo feedstock coming mostly from southeast Asia) by using locally sourced soy or rapeseed oil in the Americas or Europe.

In the intermediate olefins market, Elevance said for each metric tonne (or pound) of intermediate olefins produced, their process can reduce average conversion cost net of feedstock from $313/tonne (14ct./lb) when using conventional processes to $63/tonne (3ct./lb) without subsidies, mandates or green premiums.

“To produce a similar range of intermediate olefins via conventional technologies would require at least one additional major processing step and would require approximately $2,300/tonne ($1.04/lb) of production capacity if constructed in the United States. This cost is more than six times what we estimate the Mississippi facility will cost to repurpose.”

Finally, in terms of operations, Elevance plans to have 3 commercial biorefinery facilities by the end of 2014 with combined annual capacity of 1m tonnes (2.2bn lbs). The 185,000 tonne/year JV facility with Wilmar in Gresik, Indonesia, (expandable to 370,000 tonne./year) is scheduled to start in the second quarter of 2012.

The biodiesel facility in Natchez, Mississippi, US, is currently being repurposed into an integrated 280,000 tonne/year biorefinery which is scheduled to start in the second half of 2013.

“We expect construction of our first two facilities to cost $165-360/tonne (7c.-16c./lb) of annual production capacity compared to $920-2,300/tonne (42c.-$1.04/lb) for conventional facilities. We have established strategic partnerships with market leaders to accelerate the commercialization and rapid deployment of our technology.”

Elevance expects to also operate its third biorefinery in South America by the end of 2014. The company is already evaluating sites by having discussions with petrochemical and agricultural processors for potential partnership and offtake opportunities.

By the way, Elevance’s Andy Shafer will be presenting at the ICIS Asian Surfactants Conference on November 10-11 in Singapore. The company is commissioning its JV biorefinery in Indonesia at around the same time as the ICIS conference. That might be the only time Elevance can speak about their current strategies given the quiet period during an IPO filing.

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