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Based in Plymouth, MN, BioAmber (NYSE:BIOA) scheduled a $128 million IPO with a market capitalization of $294 million at a price range mid-point of $16 for Friday, May 3, 2013.

BIOS is one of five new IPOs scheduled for the week of April 29. The full IPO calendar is here.

  • S-1 filed April 12, 2013.
  • Manager, Joint Managers: Credit Suisse
  • Co Managers: Société Générale; Barclays; Pacific Crest Securities.

Summary
BioAmber converts renewable feedstocks into chemicals that are replacements for petroleum-derived products. BIOA generated $15 million in sales for 2012, but lost $39 million. BIOA also expects to sell 43% of itself on the IPO, which is an high percentage and may limit future financing opportunities.

Four other companies that process renewable feedstocks to make substitutes for petroleum-based products have all traded down since their IPOs: Amyris Inc (NASDAQ:AMRS), Gevo, Inc. (NASDAQ:GEVO), KiOR Inc (NASDAQ:KIOR) and Solazyme Inc (NASDAQ:SZYM).

Here are some comparative observations:

. BIOA's expected IPO market cap is in the middle of the range.

. All five companies are currently losing money.

. BIOA's price-to-book is second lowest.

Valuation Ratios

IPO Mrkt

Price/

Price/

Price/

Price/

% offered

Yr ended Dec 2012

Cap (MM)

Sales

Earnings

BkVlue

TangibleBV

in IPO

BioAmber (BIOA)

$294

128.0

-7.5

1.9

2.1

43%

Glossary

Conclusion
Pass on the BIOA IPO. The sector is weak and BIOA lost $39 million in 2012.

Business
BioAmber converts renewable feedstocks into chemicals that are replacements for petroleum-derived products.

BIOA currently is selling its first product, bio-succinic acid, to customers in a variety of chemical markets.

Currently boi-succinic acid is produced in a large-scale demonstration facility using a 350,000 liter fermenter in Pomacle, France.

BioAmber has produced over 1.25 million pounds, or 568 metric tons, of bio-succinic acid at this facility from inception to December 31, 2012. BIOA has sold 144,500 pounds and 356,900 pounds of bio-succinic acid to customers during the years ended December 31, 2011 and 2012, respectively.

BIOA believes it 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 the planned facility in Sarnia, Ontario and an assumed corn price of $6.50 per bushel.

BioAmber expects its first facility to be mechanically complete in 2014, at which time BIOA plans to begin commissioning and start-up. BIOA also intends to build and operate two additional facilities over the next three to four years.

BIOA also intends to leverage its proprietary technology platform and expertise in the production of bio-succinic acid to target additional high value-added products, such as bio-based 1,4 BDO, bioplastics, de-icing solutions and plasticizers.

Raised $89 Million
Since inception, BIOA has raised an aggregate of $89.0 million from private placements of equity securities, shares issued by a subsidiary and convertible notes.

Payments
BIOA has made the following payments and are obligated to make the following milestone payments:

• Under a commercial license agreement with Cargill entered into in April 2010, BIOA has paid no up-front, annual or royalty payments to date.

• Under a development agreement with Cargill entered into concurrently with the license agreement, BIOA has paid $250,000 in up-front, annual or royalty payments to date. The agreement also contains three milestone payments totaling approximately $1,050,000 that are payable after each milestone is completed. The first two milestones have been completed and were paid and BIOA expects to complete the third milestone and record the related $500,000 milestone payment in 2013.

• Under a technology license agreement with Celexion entered into in September 2010, BIOA has paid $275,000 in up-front, annual and royalty payments to date. The agreement also contains milestone payments totaling $2.0 million, a portion of which is payable after each milestone is completed.

• Under a license agreement with DuPont entered into in June 2010, BIOA has paid $375,000 in up-front, annual and royalty payments to date.

• Under an exclusive commercial patent license agreement with UT-Battelle and UChicago Argonne entered into in 2009, BIOA has paid $682,500 in up-front, annual and royalty payments to date.

• Under a license agreement with NatureWorks entered into in February 2012, BIOA has received no royalty payments to date nor has BIOA had to make any royalty payments to date.

Competition
BIOS expects its advanced bio-based specialty chemicals to compete with petrochemical equivalents that are proven in the market and manufactured by established companies, such as Gadiv Petrochemical Industries Ltd., Kawasaki Kasei, DSM and numerous small Chinese producers including Anqing Hexing Chemical Co. Ltd, and Anhui Sunsing Chemicals Co., Ltd.

In addition, BIOA's products will compete against other companies in the bio-based specialty chemical industry, both early stage companies, such as Genomatica, Inc. (for bio-based 1,4 BDO) and Myriant Corporation (for bio-succinic acid), and established companies, such as a collaborative venture between DSM and Roquette Frères S.A. and a collaborative venture between BASF and Purac (both for bio-succinic acid).

Myriant

S-1 filed August 12, 2011

Myriant expects that its products will compete in the industrial biochemicals market. The major U.S. and European companies in this market include BioAmber, Royal DSM N.V. (through a joint venture with Roquette Fréres S.A.), BASF (through a partnership with Purac) and Genomatica.

Petro-based chemicals might be a bitter (and expensive) pill to swallow for some, but Myriant has a sweeter alternative.

A recently formed biochemical company, Myriant aspires to make chemical intermediates, including biosuccinic acid and lactic acid, from corn-derived glucose, sugarcane-derived sucrose, and cellulosic sugars in biomass. Its proprietary technology uses biocatalysts and a fermentation process to make chemicals (used by industrial and other manufacturers) that serve as a substitute for traditional petroleum-based chemicals. Myriant boasts that its technology can potentially produce lower-cost chemicals and consume, rather than produce, CO2. Formed in 2009, the company filed an IPO in 2011.

Geonomatica

Latest S-1 filed February 10, 2012
Genomatica is developing chemicals derived from sugar, a renewable feedstock, instead of fossil fuels. Genomatica's chemicals can be used as a building block in a variety of synthetic products.

To date, it's produced small batches of bio-butanediol (Bio-BDO), an intermediate chemical used in spandex, urethane foams found in shoes, and engineering thermoplastics used in electronics and automobiles.

Competitors: The industrial chemicals market is highly competitive. In this market, Geonomatica expects to face vigorous competition from the traditional, largely petroleum-based chemical companies making the same chemicals, with companies seeking to produce these chemicals using more sustainable methods (such as companies focusing on the use of succinic acid to produce BDO) and with companies seeking to produce alternatives to existing chemicals, which alternatives could be substitutes for the chemicals we expect to produce with our partners. In addition, some end-users of chemicals, including BDO, produce their chemical requirements internally.

In the BDO market, potential competitors include BASF Corporation, or BASF, Dairen Chemical Corporation, or Dairen Chemical, ISP, INVISTA and LyondellBasell. Geonomatica said in its filing that it may also compete with companies such as BioAmber Inc., Metabolix, Inc., Myriant Technologies, Inc. and Royal DSM. In the butadiene market, potential competitors include Formosa Petrochemical Co., LyondellBassell, Shell Chemicals Limited and TPC Group Inc.

Use Of Proceeds
BIOA expects to net $116 million from its IPO. IPO proceeds are allocated as follows:

$80.4 million to complete the construction of a planned facility in Sarnia, Ontario; and

The balance for working capital and other general corporate purposes.

Disclaimer: This BIOA IPO report is based on a reading and analysis of BIOS's S-1A filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: BioAmber