bioamber\'s marathon to commercial success

BioAmber (OTC:BIOA)
A technology has been developed that allows the production of acetic acid using a fermentation process based on renewable starting materials.
The main raw material is sugar obtained from corn. Succinic acid (
C4 with similar structure-
Binary acid)
Defined by the Department of Energy (\"DoE\")
As one of 12 high value-added chemicals from biomass in 2004. Succinic acid (\"SA\")
Today, it does not have significant commercial significance in itself, but it can be used as a renewable functional alternative to other chemical building blocks in several large-scale applications.
These substances include Polyamide (
Used as a technical polymer and fiber)
And polyester (
As used as a polymer in packaging materials and polymer films)
Every billion dollars in the market.
In addition, SA can also be converted to 1-4butanediol (\"BDO\")
Millions of tons have been produced today.
BDO is used as a raw material for coatings and polymers or converted into other large capacity C4-
Chemicals, such as fluorine ether (THF)
Used as an industrial solvent.
Background and business plan bioamber developed a production process for SA and demonstrated technical feasibility in pilot plant scale.
The next step is to transfer the process to commercial scale production.
The company has built and recently launched a full-scale plant with an annual output of 30,000 tons at an existing chemical plant in Sarnia, Canada, which began operations at the end of 2015 in the third quarter.
The final cost of the plant is expected to be $141.
5 m, with Mitsui, Japanese chemical group (OTCPK:MITUY).
Both partners own the Sarnia joint venture, which BioAmber holds a 70% stake and the remaining 30% is held by Mitsui.
On October 2, BioAmber announced the successful start of production with product quality and fermentation performance that exceeded expectations.
BioAmber has signed a contract with Vinmar International Ltd.
A large chemical distributor of Mitsubishi Chemical and ptt mcc Biochem joint venture (OTC:MBGCF)(Japan)
And PTT Public Limited(OTCPK:PETFF)(Thailand)
Focus on biotechnologypolymers.
Vinmar promises to receive 1 out of 3 of 10,000 metric tons or Sarnia nameplate capacity in 15 years.
The ptt mcc contract covers 5,000 tons from 2015 to 2017.
BioAmber\'s future expansion plan aims to build a larger plant with an annual output of 70,000 tons of SA, 70,000 tons of BDO and 30,000 tons of THF.
The cost of such a factory is estimated at about $500.
Factories that will also be located in North America are now expected to be put into production --stream in 2018.
This is a year later than the previous plan, which also includes two other large factories with similar production capacity in 2020 and 2022.
Based on SA and BDO\'s cumulative capacity of 1 billion tons, this will result in sales potential of more than $500,000 in 2022, assuming that all plants are operating at full capacity, with an average long-term selling price of $2.
SA 00/kg, $2. 50/kg for BDO.
BioAmber\'s initial growth plan (March 2015)
Source: Overview of BioAmber.
Factories 3 and 4 are no longer part of the forecast, and the current business plan predicts that when the second plant reaches full capacity, revenue will grow from $6 m in 2015 to $534 in 2020.
BioAmber\'s current business plan Source: Overview of BioAmber.
The two main questions that determine the success of BioAmber\'s ambition are whether the SA market will evolve as expected and whether the conversion to BDO is technically and economically viable.
In addition, BioAmber is not the only participant, and several competitors, including global chemical companies, are working on similar or possibly better processes.
Whether it\'s chemical or biological, any new process
Compared to the processes already established, technology must demonstrate that it is suitable for large-scale industrial production and its competitive power.
In general, large-scale industrial fermentation processes such as bio-amber using biomass as a raw material can be considered as an established technology today.
These processes are part of a \"white biotechnology\" or industrial biotechnology that uses living organisms to produce useful chemicals.
The first obstacle to commercial success is to identify the most suitable organism for the selective and high-yield production of the required products.
The next key steps are to scale up the process and plant design to manufacture in a cost-effective manner. Space-
Time yield and separation and purification from reaction media are key challenges that need to be addressed.
BioAmber has developed such a process and biological production technology. based SA.
The Sarnia plant will be the final proof of its work on an industrial scale.
The conventional process for the synthesis of SA is the catalytic reduction of CIS diammonium.
N-alcohol or benzene is used as a raw material that is readily available from naphtha.
BioAmber claims that even in today\'s low oil prices, it has a significant cost advantage over conventional synthesis.
Given that SA is still a relatively expensive specialty chemical and is relatively small in size, it is likely to be true.
However, in order to find the large quantities of applications required, as a functional alternative to petrochemical products, the price must be reduced to be competitive.
The conversion from SA to BDO and THF is very similar to the existing process, and a traditional catalytic chemical process called hydrogenation will be adopted.
One drawback here may be the purity of the creature. based SA.
The catalysts used in the hydrogenation process are very sensitive to trace impurities that may exist during the fermentation process because they can deactivate the catalyst.
This may require a complex purification step or can significantly reduce the catalyst turnaround time.
BioAmber has authorized the state-of-the-
Art catalyst technology from Johnson Matai Davy technology, a global leader in the field of BDO/THF catalysis.
The market for biological Amber primary products is relatively small (
About 60,000 tons per year in 2012)
But it is expected to grow rapidly.
At present, SA and its derivatives are used as raw materials for food or as starting materials for pharmaceutical, pesticide and pigment.
The key success factor for future growth will be that SA has found high volume applications that replace the other diacids used today.
This is a potential scenario that leads to a compound annual growth rate of 30%, which, as outlined in BioAmber\'s business plan, could grow the SA market to 665,000 metric tons in 2020.
From a technical point of view, SA can replace other chemicals as building blocks in materials for a wide range of established large-scale applications.
However, SA will not directly replace existing chemical products, but new products based on SA must be developed first.
To be competitive compared to existing solutions, these materials need to have the same or superior performance at a similar cost.
Another increasingly important advantage from a sustainability perspective is that they are based on (At least part)
Renewable resources.
This means that the price of SA must drop sharply in order to replace the existing technology.
SA has been a specialty chemical for $6 until today-
9/kg is banned for large scale applications required. The pre-
The necessary condition for strong demand growth is expected to be much lower prices.
High volume applications require cost, which is comparable to other chemicals to be replaced.
Therefore, the long-term average price of BioAmber is $2.
In its forecast, price levels should indeed make SA an economically viable alternative.
Before reaching this target price, the most important aspect of SA value proposition is the renewable nature of the product. in some application areas, it is reasonable for \"green\" products to have at least a certain price premium.
Major Applications of Renewable Chemicals, especially biological chemicals
Polymer was found in the consumer goods industry.
With the improvement of environmental awareness, the demand for sustainable products is increasing.
Examples that already exist are ingredients in household and cleaning products and packaging materials.
The drivers based on the increasing use of raw materials for renewable raw materials are consumer goods companies that develop corresponding product claims for marketing and advertising purposes.
Coca-Cola\'s \"plant bottle\" is a good example of a PET polymer that is partly based on renewable raw materials.
Beyond PBS (
Poly Diester)
A biodegradable polymer consisting of SA and BDO. Utilizing bio-
The polymer is made from SA and BDO and is completely made from renewable raw materials. In end-
At least to some extent, the higher cost of eco-friendly materials is acceptable.
This is not usually the case in industrial applications.
The product must be executed and cost savings are required as much as possible.
Therefore, any SA-based product must show the same cost
Performance compared to traditional solutions.
The market for dingaldehyde has been established and the larger chemical market can start production from SA, mainly BDO and THF.
BDO is a basic chemical, with recent market research estimating a market size of 2 million tons in 2013 and an estimated Compound annual growth rate of 4. 8% to 2.
In 2020, it was 7 million tons, worth $7. 0B.
A similar conclusion was reached in the second study and the market forecast was 2.
5 million metric tons worth $7. 5B in 2017.
According to these studies, the average price of BDO is $2.
80/kg can be estimated.
The long-term average price of BioAmber is $2.
BDO is 50/kg in its business plan.
BDO is a very attractive market for bio-Amber as the company can quickly sell a large number of bio-Amber
If BDO is able to provide the appropriate quality at a competitive cost, it is based on BDO.
The global market for BDO is quite solid, with the four largest companies, BASF, Dairen, Lyondell and Shanxi Sanwei, accounting for more than 50% of the market.
Assuming that in the traditional hydrogenation process, the fermentation-derived acetic acid can be directly converted into BDO and THF, then the product should be the same as the synthesized product, so the quality should not be a problem.
Cost competition is the most critical aspect of biotechnology.
The route is based on BDO through the Taric acid.
The maximum theoretical chemical yield when converting SA to BDO is 76%.
This is determined by the molecular weight of two different molecules (
There are M. W.
BDO of 118 and 90).
The difference of 24% of 28 units or starting materials is water, and water is made-
Products in the hydrogenation process.
In other words, balance 1 based on this quality.
Assuming a conversion rate of 31 kg, 1 kg of the acid is required to obtain 100% of the BDO.
In mass chemical production, the cost of raw materials accounts for the main share of the total cost.
The traditional chemical process is from shun Ding benzene (\"MAH\")
, Can be obtained from cheap raw materials, such as zhengbuic acid or benzene.
Maximum yield when converting MAH with MW.
98 to BDO is 92%, so there is only 1.
The 08 kg of Conversion requires 1 kg MAH and the Conversion rate is 100%.
This calculation shows that less MAH is needed when used as a starting material, so SA must be cheaper in order to be more cost competitive.
Another conclusion is that the price is $2.
SA 00/kg, $2.
50 kg/kg of Bio or THF, BioAmber should focus on selling SA because the profit of this product will be higher.
According to the management of BioAmber, bio-
The BDO-based route is not only cost-competitive compared to the traditional route, but also aims to achieve overall cost leadership.
Considering the low efficiency of the raw materials and considering that the MAH process has been ahead of the learning curve for many years, this goal seems quite optimistic.
To make matters worse, other players are working on alternative routes for a creature
Headquartered in BDO, using
A step-by-step fermentation process that directly converts sugar into BDO.
Genomatica, a San Diego-based biotechnology company, developed the technology and authorized it to BASF.
The obvious advantage of this process is that it avoids expensive detours through SA, so it can be considered disruptive if technology works on a large scale.
Just recently, BASF and genmatica announced the expansion of their licensing agreement to allow BASF to build a world-
Scale production facilities with an annual output of 75,000 tons.
While fermented synthetic SA does seem to be a cost-competitive alternative to traditional processes, it is doubtful that downstream conversion into BDO from an economic point of view.
If it turns out, the cost of biotechnology
The basis of BDO is higher, and the main attribute of the product is its renewable characteristic.
This does not rule out that it will find its market, but the overall potential will become smaller, limiting its use to applications that defend the biotechnology premiumBased on characters.
The competition pattern is not the only player in the field of biology. based SA. BASF (OTCQX:BASFY)
Together with Purac, a joint venture \"successful\", Purac is the world leader in lactic acid chemistry and a division in Corbion, the Netherlands.
This partnership seems to be ideal for developing SA potential: BASF combines financial strength with engineering knowledge to play a role in large-scale industrial processes.
In addition, the company has access to potential customers in various industries and the ability to develop new SA-based products.
Purac expertise in the field of industrial biology
Combination of technology and applied knowledge
How in the PLA field (
PLA)
Polymer makes it an ideal partner for BASF.
The first complete success
The scale of production capacity of 10,000 metric tons SA production plant is put into production-stream in 2014.
Other competitors include privately owned Myriant, which started production at 30 million. (
13,600 metric tons)
2014 production plant in Lake Providence, Los Angeles.
Reverdia is a joint venture between DSM, a Dutch multinational chemical company, and Roquette, France.
It runs the world\'s first large
Production of SA scale plants using 10,000 metric tons of renewable resources.
If SA becomes a successful renewable platform chemical and the optimistic market outlook becomes a reality, global demand will be large enough for at least a few major suppliers.
Many customers are seriously starting to consider that the prerequisite for SA-based new products is to supply them on a large scale at a reasonable price.
In this regard, the presence of competitive and alternative suppliers contributes to the development of the SA market.
However, the introduction of SA-based technology is likely to take longer than expected, so financial strength is an obvious advantage, which holds a place in the hands of large global enterprises such as BASF or DSM.
In addition, world-scale factory construction is highly capital-intensive and requires hundreds of millions of dollars in investment.
Economic feasibility and short term
The average long-term price is $2.
SA 00/kg, $2.
The 50/kg of Bio and THF is the basis of the BioAmber business plan, and it seems appropriate to allow these products to enter large-scale applications, and whether the company can make a profit at these price levels is still a problem.
At least for BDO and THF, I doubt this is the case.
Before considering further expansion, the main goal of BioAmber must be to fill the Sarnia plant and make it profitable.
This will also determine the company\'s opportunities to increase capital or attract investors for the large factories it envisioned at the time.
The next few quarters will be crucial as the company has to demonstrate that it is able to manufacture SA in accordance with the specifications of the commercial scale.
Second, the market will monitor how sales grow and how much cash can be generated by operations.
BioAmber aims to have a target operating profit margin of 40% for Sarnia.
At the second-quarter earnings call, the company said that with the Sarnia plant running at full capacity, BioAmber could receive positive cash flow as a company.
Up to now, BioAmber has only received a small amount of sales from pilot plant materials.
After raising more cash through public offering of common stock in the second quarter, BioAmber\'s cash balance was $48. 7M on June 30.
It was also mentioned during the call that it had signed or paid a contract for 50% of the capacity in the fourth quarter and reached a supply agreement on the balance of available capacity.
Production during ramp is 2015
The rise time will be quite small, so the actual development of the business in 2016 will be very important.
While BioAmber emphasizes that 50% of the 30,000 tons of Sarnia capacity has been sold under fixed contracts, investors do not know the details of these contracts, if the growth in the final market is less than expected, under what conditions these commitments may be canceled.
BioAmber has been listed on the New York Stock Exchange since 2013.
Climb to a whole
The stock hit a record high of $14 in early 2014, falling until the company announced its successful launch of Sarnia in early October, causing the stock to soar.
BioAmber and existing market research are optimistic about SA\'s growth potential, but reality shows that adaptation of new technologies is often longer than expected.
Other potential products BDO and THF can only be obtained from the second plant, and if SA-based processes are cost-competitive, they should enter the market soon.
Conclusion bioamber has an ambitious growth plan, depending on the biological
Based on SA in the first step and later found a new application as a renewable chemical building block, cost
Competitive large-scale biological manufacturing
Take BDO and THF.
After successful implementation of the technology, these technologies are cost competitive compared to traditional processes, and cost competitive compared to competitive biotechnology
Based on the path will play the long-term decisive role of biological Amberterm success. Near-
In the long run, developing the SA market quickly enough and making the Sarnia factory profitable will determine the company\'s future 2-3 years.
Statement: The opinion expressed by the author in this article is not an investment proposal, any material in this article should be treated as general information, not as a formal investment proposal.
Before making any investment decisions, investors should also use other sources of information to draw their own conclusions and consider seeking advice from brokers or financial advisers.
Disclosure: I/we have no positions in any of the stocks mentioned and no plans to start any positions in the next 72 hours.
This article was written by myself and expressed my views.
I received no compensation (
In addition to Seeking Alpha).
I have no business relationship with any stock company mentioned in this article.