Biofuel Maker Sets IPO Price (CDXS, PALG, SNY)

A lot of companies are working on developing microbes to eat something ordinary and expel something extraordinary, like diesel fuel or methane or butanol. Laboratory scale projects have all proved the feasibility of these conversions. The problem is scaling up to volumes that can make a difference.  The latest company shooting for scale is Amyris Inc., which creates organisms in its labs that chomp on biomass and secrete hydrocarbons. Amyris has filed an amended Form S-1 with the SEC setting the price of its planned IPO at $18-$20/share. The company’s original Form S-1 was filed in April. No date is set for the offering. Amyris plans to offer 5.3 million shares of common stock, with an over-allotment option of 795,000 shares for the underwriters.

Codexis, Inc. (NASDAQ:CDXS), the most recent IPO in the biofuels market, went public at $13/share in May and now trades at around $8/share. But at least Codexis was able to raise some cash. The road to success is littered with shredded S-1s.

PetroAlgae Inc. (OTC:PALG) filed a S-1 in August for an IPO of an unspecified number of shares at an unspecified price. This one is probably going nowhere. PetroAlgae, its name notwithstanding, doesn’t make biofuels, but develops technology that speeds the natural growth rate of the micro-organisms that turn biomass into a feedstock that can be used to produce a renewable substitute for gasoline. The feedstock, which PetroAlgae calls biocrude, is a pyrolitic-based fuel that has high levels of oxygen which must be purged before the stuff can be refined into a gasoline substitute. The conversion rate of a barrel of biocrude to usable energy is very low, about 20%, compared to about 90% for a barrel of petroleum crude.

Amyris does much the same thing as both PetroAlgae and Codexis. The difference is that the Amyris microbes convert biomass directly to hydrocarbons, not the pyrolitic fuels of PetroAlgae or the ethanol of Codexis. Amyris received a $40 million grant from the Bill & Melinda Gates foundation to develop a synthetic anti-malarial drug, which it is providing royalty-free to Sanofi-Aventis (NYSE: SNY) for manufacture and distribution. The company has also raised $244 million in venture funding from a long list of firms.

Amyris reported sales of $64.6 million in 2009, but suffered a net loss of -$64.4 million. Ironically, Amyris bought and resold $61.7 million worth of ethanol to make its 2009 revenue. Not a dime came from the company’s own technology.

The biofuels space is crowded, with a lot of R&D and not much in the way of revenue. Some microbe-makers are turning to non-fuel products to stay afloat. Aurora, an algae startup formerly known as Aurora Biofuels, now concentrates on make omega-3 fatty acids for the dietary supplement market. Another algae firm, Solazyme, now sells algae to the food and cosmetics industry to make sales.

It’s not unthinkable that Amyris, whether it goes IPO or not, will have to spend more effort and money on non-fuel products. A gallon of some drug is worth far more than a gallon of biodiesel.

Paul Ausick