Cargill and Materia spin-off Elevance Renewable Sciences has filed paperwork to sell up to $100 million worth of stock in an initial public offering. Elevance, which has made a name for itself with its methods for building complex petrochemicals out of plant-based oils, plans to apply for listing on Nasdaq under the ERSI symbol.
Underwriters for the offering are Morgan Stanley, J.P. Morgan, Jefferies & Co., Piper Jaffray and Raymond James.
Elevance began producing its specialty and intermediate petrochemicals for a market the company estimates at $176 billion. According to Elevance's Form S-1 filed with the SEC, the firm produces “these chemicals using our proprietary, low-cost, capital-efficient production process based on Nobel Prize-winning innovations in metathesis catalysis.”
In more basic terms, Elevance has developed proprietary methods to break down complex plant-based oils into more simple building blocks that are recombined into high-value chemicals. These include ingredients for detergents, lubricants, personal care products, coatings and plastics, along with custom olefins and oleochemicals.
Elevance claims its techniques allow it to produce specialized compounds at lower cost and with less capital investment than more conventional, non-renewable processes.
Elevance is already producing chemicals at a commercial scale using tolling facilities. Those efforts will shift to facilities in Natchez, Mississippi and Gresik, Indonesia within the next two years. The Gresik plant is a split venture with Wilmar International, a giant global processor of palm, palm kernel and coconut oils, all of which are important feedstocks for Elevance's products. Elevance claims the Gresik plant, scheduled to begin operations in the second quarter of 2012, will be the largest biorefinery in the world.
The two facilities are key to Elevance's success. In the S-1, both facilities are expected to be built for far cheaper than facilities utilizing conventional processes. Elevance states that it expects construction to cost between $0.07 to $0.016 per pound of annual production capacity, as compared to $0.42 to $1.04 per pound for conventional plants. If those numbers hold up, Elevance may have an advantage as it expands operations.
Elevance faces the same risk as any manufacturing startup -- namely, the fact that it needs its plants to be built on time in order to quickly bring products to an accepting market. That latter point may prove troublesome: Until Elevance fully delves into the world chemical market, it is unclear how its products will compete or, more importantly, how they will resonate with buyers. Additionally, Elevance has inherent intellectual property risks regardless of whether or not its products gain traction.
- According to the filing, Elevance had revenues totaling $21.2 million in 2010.
- That year, net loss attributable to the company totaled $27.3 million.
- As of June 30, 2011, the company's total shareholders' deficit was $188.8 million.
- From its inception through June 2011, Elevance has raised $198.8 million through the sale of convertible preferred stock and convertible notes. As of June, the company has $73.2 million (unaudited) in cash and equivalents, along with $22.9 million in short term investments.
Elevance offers an interesting model for an already massive market. Coming hot on the heels of numerous other IPO filings, including Mascoma's, it's enough to wonder whether the time is ripe for the biotech industry -- or if investors simply have an unending appetite for biotech IPOs.