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Tracey Panek

Biochemical startups hitting up Wall Street

by Tracey Panek | Dun & Bradstreet Editor

November 28, 2011 | 1 Comment »

Lately I’ve noticed more than a handful of biochemical firms are filing IPOs. Many of these companies are developing plant-based alternatives to petrochemicals to reduce our country’s dependence on oil. Petrochemicals, and their renewable cousin biochemicals, are found in most household products, from laundry detergent and cleaning products to hair gel and makeup. They’re also used to make plastic, something the world can’t get enough of, and biodegradable plastic is becoming more in demand.

The thing is, a biochem startup needs a lot of money to build a chemical plant and get its operations up and running. Sure, Wall Street investors have been known to throw money at Internet startups and new technologies that don’t have a lot of operational costs besides renting that overpriced real estate in Silicon Valley. For the most part, initial research and development funding for these biochem companies have come from government loans and subsidies at both the state and federal level. After that, companies generally look to venture capital and private equity firms for growth, but at this stage, all a biochem startup has is a test batch and an optimistic attitude. Venture capitalists outside the tech industry (like First Reserve and Nth Power) tend to invest in somewhat established companies.

So that’s why these biochem startups are turning to Wall Street. I figured they’d make the rounds of Big Chemical companies (BASF, Dow, DuPont) hoping to get bought. But it appears they’d rather first try to raise money to build their own plants and step out on their own. So here’s a look at them:

Solazyme filed a $100 million IPO in March and ended up raising $197.5 million when it went public two months later. Solazyme makes plant-based oils that cost a third as much to produce as fossil fuel. The company has already signed up the US Navy and the Defense Dept. to buy 170,000 gallons of microbial fuel.

KiOR filed a $100 million IPO in April and ended up raising $150 million when it went public two months later. KiOR makes crude oil using renewable, non-food biomass like wood chips and switch grass. Unlike ethanol and biodiesel, its fuel is completely interchangeable with fossil fuels and can be pumped directly into engines. The company plans to use its IPO proceeds to build a plant in Mississippi.

Myriant filed a $125 million IPO in May and has yet to go public. The company plans to make biosuccinic acid and lactic acid from corn and sugarcane and hopes to use whatever proceeds it raises to build a plant in Louisiana.

Cathay Industrial Biotech filed a $200 million IPO in July. The Chinese company is already somewhat established, as it has two production facilities for its two products — long-chain dicarboxylic acids (LCDAs), used in nylon, plastic, and lubricants; and biobutanol, an industrial solvent used in paint and pharmaceuticals.

Genomatica filed a $100 million IPO in August. The company plans to make two chemicals — biobutanediol, a chemical used in spandex, urethane foam, and thermoplastics; and biobutadiene, which is used in tires, carpet, and latex products. Genomatica’s manufacturing plans involve joint ventures with larger, more established firms that have their own plants.

Mascoma filed a $100 million IPO in September. It plans to make an enzyme used in cellulosic ethanol that can lower the production cost of making corn-based ethanol by one or two cents per gallon. Mascoma signed a deal with Valero to develop a biorefinery in Michigan and has plans for a second plant in Alberta, Canada.

Elevance Renewable Sciences also filed a $100 million IPO in September. The company is using palm, soy, and rapeseed oil in lieu of the petrochemicals used to make oleochemicals and olefins. Elevance, which arose out of a research collaboration between Cargill and Materia, is building a biorefinery with Wilmar in Indonesia and has plans for a second plant in Mississippi.

The sole Canadian, BioAmber, makes biosuccinic acid, which is used in polyurethane, food additives, lubricants, cosmetics, and personal care products. BioAmber filed a $150 million IPO in November and hopes to use the proceeds to build two chemical plants in Ontario and Thailand.

Catherine Colbert

Some of the agriculture co-ops our team covers are developing biofuels, so thanks for sharing your insight so that I can better understand biochemical companies.

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