BioAmber (NYSE:BIOA)

CAPS Rating: 2 out of 5

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Member Avatar TMFBlacknGold (94.61) Submitted: 2/8/2016 12:32:31 PM : Outperform Start Price: $3.42 BIOA Score: +12.49

There's no way BioAmber is worth $90 million. Sure, petroleum prices are in the toilet, and the company's flagship molecule -- biosuccinic acid -- is typically derived from petroleum, but the bioprocess being implemented is said to be competitive with petroleum prices of $30 per barrel. Of course, many other industrial biotech companies have made similarly bold claims about low production costs in the past. And it will take some time before BioAmber's first facility in Sarnia is firing on all cylinders and actually achieving targeted production costs. But $90 million?

I think BioAmber is being taken down by association. As in, "look at how inefficient and loss accumulating other industrial biotech platforms can be! Run!" But this company is Ninja Level at managing costs. Additionally, it has customers lined up to purchase the output of its facility (and even future, unbuilt facilities) -- that's something no other industrial biotech can claim.

There are some risks, as always. It's obvious that BioAmber will need to raise more money to expand production and build new facilities. There are also quite a few young industrial biotech companies looking to get into the biosuccinic acid market. But the company should be helped by partners and customers when seeking financing (although dilution will be obvious), and the market for the chemical is pretty large and growing rapidly.

Investors should be encouraged by the early and fast success at Sarnia so far. I think the rest of the market will catch on to what separates BioAmber from others in the space and adjust the market value accordingly. Or it could be purchased by a bigger chemical producer looking to green its portfolio. Either way, this is worth more than $90 million.

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