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Bioamber Inc (OTCMKTS:BIOA) Remains in Hot Pursuit of a Turnaround Strategy

Bioamber Inc (OTCMKTS:BIOA) Remains in Hot Pursuit of a Turnaround Strategy
Written by
Jim Bloom
Published on
April 3, 2018
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Bioamber Inc (OTCMKTS:BIOA) has not been the top pick for investors in recent times. In the last few months, its share price has tumbled from $2.11 to $0.05. However its management has remained steady in its plans to turn around the firm’s fortunes and if recent announcements are anything to go by, this may just be the time. Recent announcements of multiple profitable partnerships, an increasing client base which has translated to increased sales and a very active management have brought the firm back into the spotlight. In the piece, we provide you with some of the high points of its recent earnings call and its financial outlook.Take a look at its share price movement over the last year. BIOA Daily ChartCompany ProfileBioAmber, Inc. was established in October 2008 and its head office is situated in Montreal, Canada. The firm is an industrial biotechnology company, which specializes in the production of sustainable chemicals. Its innovative technology platform which integrates chemical catalysis and industrial biotechnology in order to transform renewable feedstock into chemicals for everyday use which includes resins, personal care products, food additives, paints, and plastics. Some of its other merchandise includes butanediol, bio-based disodium succinate, and bio-based succinic acid. For more information on the company, visit our previous post here.Recent DevelopmentsIn the very recent fourth-quarter earnings call, the company discussed its previously announced merchandise launch with an Aqua Concept, an innovative company based in Europe. Aqua Concept is releasing a new coolant which is based on BioAmber’s own succinic acid. Besides the provision of a much more sustainable footprint, this new merchandise delivers a number of improved performance features in comparison to other products within the market. Bioamber intends to forward to grow this new effective merchandise in partnership with Aqua Concept. Interestingly, Aqua Concepts happens to be just one of the many clients who is launching new products associated with Bioamber’s bio-succinic acid which it had been working with not just in the last few months, but a number of years and the plans to boost the demand for its other products in the future.Considering its long-term growth strategy, the firm has made major progress in entering into the animal feed sales in PET markets. These markets have a target market size estimated to be about 0.4 million and 0.7 million tons of bio-succinic acid respectively, both of which are many times above the firm’s present production capacity. Regarding animal feed, a recent independent research revealed that the addition of succinic acid to animal feed with delivers significant benefits for both gut health and growth performance for nursery pigs. This result corroborates with preceding studies by BioAmber which demonstrate the minimum inhibitory concentration, of succinic acid relating to multiple pathogenic microorganisms, is much reduced compared to the content level for other organic acids in the market which suggests that bio-succinic can be said to be more economical and effectiveHowever, for PET, the firm’s plans to replace isophthalic acid which is currently used in roughly 3 weight percent in the production of PET bottles. Bio-succinic acid is demonstrating the ability to decrease the cost along with the greenhouse gas effect of PET bottle production. Biopharma is scaling up this innovation through collaborations with its developmental partners located in China and Europe, where the firm has had three recently fruitful scale-up trials of manufacturing PET packaging resin. This will enable the company to advance with both PET and animal feed by 2019 to the level of major industry players.Financial PerformanceAt the end of 4Q2017, the firm recorded revenues for the quarter of $5.4 million, an increase of over 750% from the revenues of Q32017. Total sales for the year was recorded as $14.9 million, 81% higher than revenues in 2016. The huge sales growth demonstrates the solid increase of its customer base and the importance of its products as a chemical building block.Meanwhile, gross margins improved year on year with gross loss dropping from 231% to 20%. Encouragingly, it is anticipated that firm will continue to expand its customer base at least for the near future hence increasing both demand and sales revenues in the coming years. It was reported that that the firm managed to grow its customers by five in 4Q2017 and eight in 1Q2018.Research and Development costs for the year fell by 43% from $2.1million to $1.2 million in 2017 due to reduced expenses required to support R&D work on the firm’s Sarnia facility while spending on new applications and patents has also dropped. In line with R&D costs, sales, general and administrative expenses fell by $0.4 million to $0.3 million. This decrease has been attributed to the reduction in staff due to a restructuring of the commercial function.The statement of financial position reveals that the firm is very highly geared. On its books, its total debt is worth an estimated $75.3 million while having total assets worth $161.3 million, leading to debt to equity ratio of 1.8. It also has a liquidity ratio of 0.69, which may be considered acceptable for its industry.ConclusionBIOA may have found the solution to the drop in its share price. With its new partnerships, increase in sales and positive future strategies it won’t be long before buyers come knocking.Disclosure: We have no position in BIOA and have not been compensated for this article.

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