Solazyme goes public, aims to commercialize renewable oils, bioproducts

Solazyme, a renewable oil and bioproducts company, launched an initial public offering of 10.97 million shares priced at $18. The company plans to use the money to commercialize renewable products for fuels and chemicals, nutrition and skin and personal care.

In early trading, Solazyme was trading north of $21 under the ticker SZYM. Solazyme, based in South San Francisco, has some big-name investment bankers in Morgan Stanley and Goldman Sachs backing it.

What's unclear is whether Solazyme can commercialize its bioproducts, which are based on transforming plant sugars into high value oil products.

Among the key points from Solazyme's regulatory filings:

  • Since 2007, Solazyme's production costs have fallen.
  • Renewable oil manufacturing capacity is being scaled up. Solazyme's oils are used as drop-in replacements for marine, motor vehicle and jet fuels. Oils are sold to refiners and chemical companies.
  • The company's nutrition business revolves around microalgae-based food ingredient. These would be sold to consumer packaged goods companies.
  • Microalgae products will also be used for skin and personal care products. Alguronic Acid is Solazyme's first major ingredient that is for anti-aging skin creams.
  • Solazyme's wares are sold as supplements at Whole Foods, GNC and QVC among others. The company has development deals with Dow Chemical, Chevron, Quantas Airways and others. Quantas has agreed to buy 200 to 400 million liters of the company's jet fuel.
  • The company's financials highlight how Solazyme is still being developed as it tackles promising markets. For 2010, Solazyme lost $16.2 million on revenue of $37.97 million. For the three months ended March 31, Solazyme lost $7.3 million on revenue of $7.74 million.
  • According to Solazyme one big risk to the company is the ability to acquire fermentable feedstock in bulk. Solazyme also said it is busy closing a purchase on a manufacturing facility. To date, the company uses third parties for manufacturing.

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