Investors have made an $80 million bet that it's feasible to make plastic out of corn and other grain crops.
BioAmber Inc., a Plymouth-based biotech company that plans to convert agricultural crops into a material used in the manufacture of plastics, completed an $80 million initial public offering Friday, which was at the low end of its expectations.
Proceeds of the offering will be used to build a manufacturing plant in Sarnia, Ontario, 60 miles northeast of Detroit, according to company filings with the Securities and Exchange Commission.
BioAmber's business model is to make a basic constituent of industrial plastic by fermenting agricultural crops such as corn or wheat. The company said in SEC filings that it believes it will be less expensive to make the plastics component from crops than from oil, as is widely done today.
The result of BioAmber's fermentation process, bio-succinic acid, is currently being produced in "a large-scale demonstration facility" in Pomacle, France, the firm said in SEC filings. BioAmber sold 227 metric tons of the acid to 19 customers in 2011 and 2012.
The company said its bio-chemicals "can serve as 'drop-in' replacements for existing petroleum-based chemicals, addressing what we believe to be a more than $30 billion market opportunity." BioAmber said it would address several large chemical markets, including polyurethanes, personal care products, de-icing solutions, resins and coatings, food additives and lubricants.
"We believe we can produce bio-succinic acid that is cost-competitive with succinic acid produced from oil priced as low as $35 per barrel," assuming a corn price of $6.50 per bushel, BioAmber said in its filing.
On Friday, the price of oil was $96.04 a barrel on the New York Mercantile Exchange, and corn was $6.36 a bushel.
Because BioAmber is a development-stage company, it lost $30.9 million in 2011 and $39.5 million in 2012, the firm said in SEC filings.
"We expect these losses to continue" as the business is expanded, BioAmber said. To become profitable, the firm said it needs to execute its manufacturing expansion strategy, including the construction of the Canadian plant.
The public offering followed several rounds of private investments that raised a total of $87 million since the company was founded in 2008 under the name DNP Green Technology. The firm became BioAmber in 2010.
The offering sold 8 million units at $10 each, with each unit including one common share and one warrant to purchase half of a common share (using a price of $11 per common share.) The units will trade on the New York Stock Exchange under the ticker symbol: BIOAU.
BioAmber's IPO marks the first initial public offering of a Minnesota-based operating company since Proto Labs went public in February of 2012.
The amount BioAmber sought in the public offering was lower than the $120 million or more the company had originally sought. Earlier this week, the price range for the offering was lowered to $10 to $12 a unit from the previously planned $15 to $17.
The company, which has 54 employees, also has offices in Montreal and a contract manufacturing operation in France.