If you remember the 1981 film Excalibur, there were numerous uses of what was described as the Charm of Making:<\/p>\n
An\u00e1l nathrach, orth\u2019 bh\u00e1is\u2019s bethad, do ch\u00e9l d\u00e9nmha<\/p>\n
Which roughly translates into Modern Bioeconomyese as, \u201cO Lord, give me the power to make lots of succinic acid.\u201d<\/p>\n
If you\u2019re not chasing biosuccinic or at least salivating over it, check your pulse. DSM, PTT, Mitsui, Roquette, Corbion, Vinmar and BASF are just a few of the major players around the world chasing it.<\/p>\n
In part, that\u2019s because there\u2019s a market for succinic and a sustainable option is a tasty one, as you can see, for so many. But there\u2019s this idea floating around that one of these days succinic is going to become a gateway, platform molecule, that there are going to be more uses for biosuccinic acid than a set of Ginsu knives.<\/p>\n
The story was about technology development for the longest time, and then the Building of the First Commercial, over which investors chanted more pagan incantations than a Viking funeral.. Now, several small commercial plants have been built \u2014 Myriant completed one in Louisiana that is as wrapped in mystery nowadays as the quest for the Grail. Succinity is in the mix \u2013 a JV of Corbion and BASF, and Reverdia is there, a JV of Roquette and DSM. And there is BioAmber, which has been racking up partners and customers with the ease of Tiger Woods rattling off birdies in the 1997 Masters. But then, a sudden management change, and a delay from PTT in building their own plant which required the succinic offtake.
\nThe Fortunatelys and Unfortunatelys<\/p>\n
All of which leads us to the occasion of BioAmber reporting its Q1 result \u2014 given the PTT situation, an unsurprisingly lackluster sales figure and a Q1 loss of $10.5M compared to a loss of $8.1M for Q1 2016, and inside of that expanded loss are a host of storylines about this fascinating biosuccinic producer, of the fortunately and unfortunately type.<\/p>\n
Fortunately, sales of bio-succinic acid were $2.1 million, a 46% increase over the same period last year.<\/p>\n
Unfortunately, as Cowen & Co\u2019 Jeffrey Osborne noted, revenue fell \u201cbelow our and the Street\u2019s low estimates.\u201d<\/p>\n
Fortunately, \u201cKey partner PTTMCC has once again began taking delivery of bio-succinic, which was an obstacle for the company in 4Q16 and 1Q17,\u201d adds Osborne.<\/p>\n
Unfortunately, G&S ballooned from $2.6M to $4.9M, driven by one-time severance costs in connection with the departure of the CEO and CFO for a total of approximately $1.2 million, and additional non-cash stock-based compensation expense of $1.2 million resulting from accelerated vesting of stock-options associated with the departures.\u201d Yikes, that\u2019s a big payout for the dearly departed.<\/p>\n
Fortunately, \u201cthere were 7 new clients that began buying bio-succinic acid in the quarter, and the plant attained a new throughput record, briefly surpassing 70% and saw a further reduction in variable costs relative to the previous quarter.\u201d
\nThe rise of Mitsui<\/p>\n
Which brings us to the most unusual aspect of BioAmber\u2019s results this quarter, which was that sales expense plunged \u2014 despite rising sales \u2014 to $642K from $1.2M because of the \u201cexpanded commercial role that Mitsui has assumed, particularly in Asia, which allowed the Company to reduce the size of its global commercial team.\u201d<\/p>\n
A sales expense of something like $200K per month sounds more like a satellite operation of Mitsui \u2014 a production plant that Mitsui doesn\u2019t happen to fully own \u2014 than a freestanding company. The good news is that BioAmber\u2019s future is tied to a motivated powerhouse in Mitsui. The bad news is that BioAmber\u2019s future is tied to a motivated powerhouse in Mitsui \u2013 whither goes thou, so shall I, as the saying goes.<\/p>\n
The Mitsui relationship is going to be under incredible scrutiny because, in so many ways, the future of the company as a financial entity \u2013 with an expected EBITDA of $45.6M in 2020 according to Cowen & Co\u2019s estimates goes back to \u201cmore news flow in 3Q17 on CJ\u2019s joint venture and Plant 2 funding\/location\u201d
\nThe 2 Deliverables<\/p>\n
To deliver on the potential that BioAmber\u2019s technology and team have established, the company has to execute two major steps:<\/p>\n
1. Ramp of Sarnia production \u2013 something like $15M per quarter is the target here, and we see the problems of depending on major partners when, for example, \u201cPTT\u2019s delays in ramping their new facility\u201d cause sales to hit $2.6M for Q1.<\/p>\n
2. Bring in a new CFO and CEO, pronto. It\u2019s very hard to see the company drifting along without translating the CJ joint venture into a plant, or striking the financing and offtake agreements for its proposed 200,000 MT Plant 2 facility in the U.S. or Canada, or striking some additional deals of the CJ type. The company\u2019s speed in settling the top management will be key.<\/p>\n
In his note to investors, Osborne noted that it was a \u201ctough 1Q17 result\u201d but described the outlook for the remainder of the year as \u201cmore upbeat\u201d. The next 90 days will be crucial as the company lands a new CEO capable of diving in fast to achieve all those milestones now on the table \u2014 while retaining the confidence of Mitsui and turning more than 200 prospects who have taken product samples into the solid, global customer base that a biosuccinic technology of this power and promise merits and that the investors will require.<\/p>\n
It may well be that Mitsui nominates its own candidate \u2014 someone who already has that experience to ensure that Mitsui\u2019s global marketing assets are as fully utilized as possible \u2014 while ensuring that Mitsui\u2019s investment expectations also are realized.
\nThe next 180 Big Days<\/p>\n
We\u2019ll be looking east, then, over the next 180 days \u2014 for more clarity on the management team and the status of the China JV with CJ and on how much further Mitsui might expand its role in order to cash in on the promise Mitsui has always seen in the technology and the BioAmber team.<\/p>\n
The stock has taken a lusty beating in the past 90 days \u2014 at $5.92 in late January, it has fallen to $2.34 as the company suffered through the shock management changes and the delays from customers that limited shipments. Cowen sees limited upside for now, with a price target of $2.50.<\/p>\n
Biosuccinic is at a tipping point, and 2017 appears to be the year we discover if the clear customer interest and the success in bringing the technology to scale can be translated into a clear win for investors.<\/p>\n","protected":false},"excerpt":{"rendered":"
If you remember the 1981 film Excalibur, there were numerous uses of what was described as the Charm of Making: An\u00e1l nathrach, orth\u2019 bh\u00e1is\u2019s bethad, do ch\u00e9l d\u00e9nmha Which roughly translates into Modern Bioeconomyese as, \u201cO Lord, give me the power to make lots of succinic acid.\u201d If you\u2019re not chasing biosuccinic or at least […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","nova_meta_subtitle":"","footnotes":""},"categories":[5572],"tags":[13390],"supplier":[75,1180,5384,4110,12205,2777,12893,1222,6411],"class_list":["post-42858","post","type-post","status-publish","format-standard","hentry","category-bio-based","tag-biosuccinic","supplier-basf-se","supplier-bioamber-inc","supplier-corbion","supplier-cowen-company","supplier-dsm","supplier-mitsui-co-ltd","supplier-ptt-mcc-biochem","supplier-roquette","supplier-vinmar"],"_links":{"self":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/posts\/42858","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/comments?post=42858"}],"version-history":[{"count":0,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/posts\/42858\/revisions"}],"wp:attachment":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/media?parent=42858"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/categories?post=42858"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/tags?post=42858"},{"taxonomy":"supplier","embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/supplier?post=42858"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}