IPO market re-opens, sort of, as Calyxt raises $56M in NASDAQ offering

July 20, 2017 |

In Minnesota, Calyxt, the gene editing agriculture company, raised $56M and priced its NASDAQ initial public offering of 7 million shares at $8.00.

The number of shares in the offering was sweetened to 7 million this week, from the original estimate of 6.06 million — and the price was substantially lower than the expected $15.00-$18.00 range, with final proceeds some $50M less than the high end of the projected range disclosed last week by the company.

However, markets were enthusiastic in initial trading, pushing the company’s shares as high as $11.42 in intra-day trading before closing at $11.25, up 40% over the IPO price. In after hours Trading on Thursday night, the stock rose another 40 cents to $11.65.

In addition, Calyxt granted the underwriters for the Offering an option to purchase up to 1,050,000 additional shares of Calyxt’s common stock at the initial public offering price less the underwriting discount — raising a potential $8 milli9on more for the company. The offering will close on 25th July and shares are expected to begin trading under the ticker symbol “CLXT” as of this morning.

Parent company Cellectis purchased 2.5 million shares in the IPO, and will continue to own 83.1% of Calyxt’s outstanding shares (or 79.9% if the underwriters exercise their additional shares options.

Citigroup, Jefferies and Wells Fargo Securities are acting as joint book-running managers — BMO Capital Markets and Ladenburg Thalmann are acting as co-managers.

The Calyxt Backstory

The company’s secret sauce? It’s ability to asses a trait in less than two years and commercialize it in as short as six years with a significantly reduced development cost. At its heart, it’s a company about transformation in basic food feedstocks. But where the technological imperative for years has been about, to use an example, more corn and cheaper corn — with the resulting focus on rate and yield — Calyxt is overtly focused on performance. On better food. Dialed in at the gene level, through gene editing.

Calyxt files for $109M IPO: The Digest’s 5-Minute Version

Calyxt files for $109M IPO: The Digest’s 5-Minute Version

Frontiers of gene-editing, and why Calyxt is one to watch

Frontiers of gene-editing, and why Calyxt is one to watch

Lessons learned

1. Demand is light for early-stage companies with emerging revenue streams even if the technology is outstanding. By this time, we doubt if anyone is not observant of the potential value in gene-editing, and especially for the potential in agriculture. However, companies are still in the process of building their science machines and in early engagement with customers. Business models are as yet unproven and the specifics of how fast and how profitably, for how many, the value-adds can be built — that remains to be seen and the risks associated with slow build-out are reflected in the share demand and price.

2. Discounting $20 million in shares sold to the parent, Cellectis, the company sold 4.5 million shares to outside investors at $8.00 per share — that’s a $36 million external offering, far less than we have seen in private rounds raised by gene editing companies such as Caribou Biosystems.

3. Valuation remains pretty good. Overall, the public paid that $36 million for one-sixth of the company, giving a valuation of $216 million. That dwarfs the valuation of companies like TerraVia ($24M) and Amyris ($82M) that also came early to the public markets. It’s not far behind the valuation of Codexis ($260M) which is also developing advanced organisms (although primarily for the pharma market, and not through gene editing but rather gene evolution).

4. What’s next for Calyxt? Think soy. The company’s fortunes will rise and fall to some extent on turning elegant technology into actual crops that make a difference — high oleic soybeans, low saturated fat canola, herbicide tolerant and high fiber wheat. With wheat growth open to question given concerns ranging from carbs to gluten, we see soybeans as something that could really ignite interest. (While at the same time, noting that Calyxt also has a low gluten wheat in development).

5. What about soybean oil anyway?

As Calyxt points out:

Soybean oil has historically been partial hydrogenated to enhance its oxidative stability in order to increase shelf life and improve frying characteristics. This process, however, creates unsaturated trans fats, which have been demonstrated to raise low density lipoprotein, or LDL, cholesterol levels and contribute to cardiovascular diseases. The discovery that dietary trans fats increase the risk of several health issues led to a FDA ruling in 2003 to require mandatory labeling of trans fat in 2006, with a full ban in 2018. Since FDA’s 2003 ruling, commodity soybean oil has been quickly losing market share to other vegetable oils such as canola and sunflower oil. Calyxt has developed a new soybean variety that produces oil with a fatty acid profile that contains 80% oleic acid, and 20% less saturated fatty acids compared to commodity soybean oil and zero trans fats.

The high level of oleic acid in reported in its soybean oil enhances oxidative stability more than fivefold when compared to commodity soybean oil and also offers a threefold increase in fry-life, says Calyxt. If so, this could eliminates the need for partial hydrogenation. 

Where is the company in soybean oil development? Phase III development has been completed, and Calyxt anticipates beginning commercial sales in 2018. The uniqueness of Calyxt’s business model allows it to generate revenues from three sources – seed, soybean meal and high oleic soybean oil. That’s all great — but for sure, 2018 will be the “will they or won’t they year for Calyxt” as a publicly traded stock.

The Bottom Line

Early-stage IPOs are not for the faint of heart. Cellectis pouring $20M into the company in this IPO shows that parent companies and early-stage investors don’t have easy exits. Management is right now, you can be assured, measuring the benefits of $36M gained and more liquidity for early-stage investors and staff — against the headaches, limitations, short attention span and complete lack of patience of public markets.

So, we see it as a case of “Go Calyxt! But be sure to run fast.”

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