8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): November 3, 2016

BIOAMBER INC.

(Exact name of registrant as specified in its charter)

Delaware	001-35905	98-0601045
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1250 Rene Levesque West, Suite 4310

Montreal, Quebec, Canada H3B 4W8

(Address of principal executive office)

Registrant's telephone number, including area code (514) 844-8000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.Results of Operations and Financial Condition

On November 3, 2016, BioAmber Inc. issued a press release announcing its preliminary financial results for the three months ended September 30, 2016.  The full text of this press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. On the same day, BioAmber Inc. held its previously announced earnings conference call discussing its financial results of its third quarter ended September 30, 2016. The transcript of that earnings conference call is furnished herewith as Exhibit 99.2.

Pursuant to General Instruction B.2. to Form 8-K, the information set forth in this Item 2.02, Exhibit 99.1 and Exhibit 99.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall any of them be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01.Financial Statements and Exhibits

(d)      Exhibits

Exhibit
Number	Description
99.1	Press Release dated November 3, 2016.
99.2	Transcript of the BioAmber Inc. Earnings Conference Call for the three months ended September 30, 2016.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 7, 2016	BIOAMBER INC.
	By:	/s/ Mario Saucier
		Mario Saucier
		Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press Release dated November 3, 2016.
99.2	Transcript of the BioAmber Inc. Earnings Conference Call for the quarter ended September 30, 2016.

EX-99.1

 

Exhibit 99.1

BioAmber Reports Third Quarter 2016 Financial and Operational Results

Montreal, Canada, November 3, 2016. BioAmber Inc. (NYSE: BIOA), a leader in renewable materials, today announced financial and operational results for the three months ending September 30, 2016.  

Highlights

• Q3 2016 Sales of bio-succinic acid were $3.7 million, an increase of 45% over the previous quarter

• The unit cost of bio-succinic acid continues to improve with Q3 2016 reporting a further 12% reduction vs Q2 2016

• The Sarnia plant operations continue to improve with fermentation yields, plant uptime and percentage of ‘on-spec’ products all increasing in Q3 vs Q2 2016

• Cash on hand was $15.9 million as of September 30^th, 2016, compared to cash on hand of $5.5 million as of June 30^th, 2016

• Jean-Francois Huc, BioAmber’s Chief Executive Officer stated: “We have continued to validate our production process at a commercial scale with our biotechnology, as measured by fermentation performance, achieving operating targets since inception. Our purification process has also improved every quarter since we started up Sarnia, while our plant uptime and percentage of on-spec product continue to meet target levels.” He added, “We will steadily increase our throughput towards full capacity and focus on further efficiency gains throughout our production process.”

Q3 2016 Financial Results

Revenues for the quarter ended September 30, 2016 were $3.7 million.  The 45% increase relative to the previous quarter was driven by an increase in the quantity of bio-succinic acid sold.

Cost of goods sold for the quarter ended September 30, 2016 was $5.0 million. The cost of goods per unit sold decreased by 12% in Q3 2016 relative to the previous quarter, as a result of the greater volume of succinic acid sold and improved operating performance, including higher yields, higher plant uptime and higher percentage of on-spec product in Q3 2016, relative to the previous quarter.

Research and development expenses for the quarter ended September 30, 2016 were $1.8 million, significantly lower than the $6.0 million incurred in the same period last year. The lower R&D expenses were the result of two factors.  First, certain non-recurring Sarnia commissioning and start-up costs incurred in Q3 2015 were recorded as research and development expenses. Second, the Company has streamlined its R&D efforts over the past year, given that Sarnia is operational.

Sales and marketing expenses for the quarter ended September 30, 2016 were $479,000, down from the $921,000 incurred in the same period last year. This was due to the expanded commercial role that Mitsui assumed in 2016, particularly in Asia, which allowed the Company to reduce the size of its global commercial team.  As a result, there has been a decrease in sales and marketing salaries, benefits and associated costs, including stock-based compensation and travel expenses.

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General and administrative expenses for the quarter ended September 30, 2016 were $1.8 million, down from $2.2 million for the same period last year. This was the result of the Company’s efforts to reduce headcount at the corporate level, which resulted in a decrease in salaries & benefits, recruitment costs and stock-based compensation expense.  These efforts were partially offset by an increase in Sarnia headcount as the facility transitioned from constructionto production.

Depreciation of property and equipment and amortization of intangible asset expense were $1.2 million for the quarter ended September 30, 2016, up significantly from $123,000 for the same period last year. This increase was due to the depreciation of Sarnia facility assets following the beginning of production in Q4 2015.

For the quarter ended September 30, 2016, the Company incurred a net financial charge of $3.2 million, compared to a financial gain of $1.6 million for the same period last year. This $4.7 million variation was mainly due to a non-cash mark-to-market adjustment change of $3.4 million on the warrants that were issued at the time of the initial public offering (IPO Warrants), as well as an adjustment on warrants issued in June 2009 and April 2011 (Legacy Warrants). It was also due to an increase in the end of term charge of $602,000 and to interest and other charges of $600,000 in connection with the repayment of the outstanding Tennenbaum loan in September 2016.

The Company recorded a net loss attributable to BioAmber Inc. shareholders of $6.2 million, or a loss of $0.21 per share for the quarter ended September 30, 2016, compared to a net loss of $7.0 million, or a loss of $0.27 per share for the same period last year.

The Adjusted Net Loss Attributable to BioAmber Inc. Shareholders for the quarter ended September 30, 2016 was $7.4 million, or a loss of $0.26 per share, compared to an Adjusted Net Loss Attributable to BioAmber Inc. Shareholders of $9.4 million, or a loss of $0.36 per share for the same period last year.  Adjusted Net Loss Attributable to BioAmber Inc. Shareholders is a non-GAAP financial metric that excludes the impact of the change in fair value of the IPO and Legacy Warrants and the grant income from Sustainable Development Technology Canada (SDTC).

Please refer to Annex A: “Non-GAAP Financial Information—Adjusted Net Loss Attributable to BioAmber Inc. Shareholders” for more information regarding this non-GAAP financial metric.

Webcast and Conference Call Information

BioAmber will discuss these results on a live audio webcast, which will be available on the Internet to investors, members of the news media and the general public at 4:30 p.m. Eastern Time on November 3, 2016. To access the webcast of the conference call, go to the company’s website, www.bio-amber.com.   Audio of the teleconference is also available by dialing:

North American callers:  +1 (888) 390-0546     International callers: (416) 764-8688

Teleconference replays will be available through November 10, 2016: Domestic: 1-888-390-0541

International: 416-764-8677   Passcode: 534811#   A replay of the webcast will also be available approximately two hours after the conclusion of the live webcast on BioAmber’s website, for a period of 30 days.

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About BioAmber

BioAmber (NYSE: BIOA) is a renewable materials company. Its innovative technology platform combines biotechnology and catalysis to convert renewable feedstock into building block materials that are used in a wide variety of everyday products including plastics, paints, textiles, food additives and personal care products.  For more information visit www.bio-amber.com

Forward-Looking Statements

This press release contains forward-looking statements, including statements related to the beginning of our commercial operations and the ramping-up of our sales for our Sarnia Bio-SA facility.   All statements other than statements of historical fact contained in this press release are forward-looking statements.  These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “seek,” “will,” “may” or similar expressions.  Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond BioAmber’s control.  BioAmber’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors.  

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the events and circumstances reflected in the forward-looking statements will be achieved or occur and the timing of events and circumstances and actual results could differ materially from those projected in the forward-looking statements. Accordingly, you should not place undue reliance on these forward-looking statements.  All such statements speak only as of the date made, and the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  For additional disclosure regarding these and other risks faced by BioAmber, see disclosures contained in BioAmber's public filings with the SEC including, the "Risk Factors" section of BioAmber's most recent Annual Report on Form 10-K and the recent quarterly reports on Form 10-Q.

BioAmber Investor Contact

Roy McDowall

Sr. VP Communication & Strategy

514-844-8000 Ext. 270

roy.mcdowall@bio-amber.com

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BioAmber Inc.

Consolidated Statement of Operations

(unaudited, in thousands)

	Three Months ended September, 30
	2016	2015
Product sales	$                3,661	$                 352
Cost of goods sold excluding depreciation and amortization	5,035	367
Operating expenses
General and administrative	1,767	2,220
Research and development, net	1,773	5,999
Sales and marketing	479	921
Depreciation of property and equipment and            amortization of intangible assets	1,208	124
Foreign exchange (gain) loss	(29)	610
Operating expenses	5,198	9,874
Operating loss	(6,572)	(9,889)
Amortization of debt discounts	1,038	123
Financial charges (income), net	3,190	(1,552)
Grant income	(4,047)	—
Other expense (income), net	(34)	(1)
Loss before income taxes	(6,719)	(8,459)
Income taxes	—	(28)
Net loss	(6,719)	(8,431)
Net loss attributable to:
BioAmber Inc. shareholders	(6,158)	(7,051)
Non-controlling interest	(561)	(1,380)
	(6,719)	(8,431)
Basic net loss per share attributable to BioAmber Inc. shareholders	(0.21)	(0.27)
Weighted-average of common shares outstanding -  basic	28,811	25,858

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BioAmber Inc.
Consolidated Balance Sheet Information
(unaudited, in thousands)
	As of         September 30, 2016	As of         December 31, 2015
Assets	$	$
Current assets:
Cash and cash equivalents	15,940	6,974
Accounts receivable	3,973	979
Inventories	2,545	1,749
Prepaid expenses and other current assets	956	1,142
Total current assets	23,414	10,844
Property and equipment, net	125,821	122,543
Investment in cost and equity method investment	447	447
Intangible assets including goodwill	6,809	6,977
Restricted cash	573	541
Deferred financing costs	546	435
Total assets	157,610	141,787
Liabilities
Current Liabilities:
Accounts payable and accrued liabilities	5,479	15,834
Income taxes payable	118	112
Deferred grants	—	3,438
Short-term portion of long term debt	23,750	10,297
Total current liabilities	29,347	29,681
Long-term debt	30,715	28,492
Warrants financial liability	4,231	12,232
Other long term liabilities	262	443
Total liabilities	64,555	70,848
Redeemable non-controlling interest	40,366	24,584
Shareholders’ Equity	52,689	46,355
Total Liabilities and Shareholders’ Equity	157,610	141,787

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BioAmber Inc.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
	Nine months ended September 30,
	2016	2015
	$	$
Operating Activities
Net loss	(16,322)	(32,319)
Adjustments to reconcile net loss to cash:
Stock-based compensation	2,686	3,855
Depreciation and amortization	3,600	288
Write-off intangible assets	—	1,141
Loss on disposals of property and equipment	133	—
Amortization of debt discounts	2,479	281
Other long-term liabilities	(17)	34
Financial charges (income), net	(8,103)	1,041
Grant income	(4,047)	—
Changes in operating assets and liabilities	(13,510)	3,188
Net cash used in operating activities	(33,101)	(22,491)
Investing activities
Acquisition of property and equipment and intangible asset, net of disposals	(540)	(62,465)
Investment in equity method and cost investments	—	(413)
Net cash used in investing activities	(540)	(62,878)
Financing activities
Deferred financing costs	(1,369)	(882)
Issuance of short-term and long-term debt	26,929	21,967
Repayment of long-term debt	(14,081)	(585)
Government grants	1,108	7,947
Net proceeds from issuance of common shares	29,644	42,011
Net cash provided by financing activities	42,231	70,458
Foreign exchange impact on cash	376	(1,926)
Decrease in cash and cash equivalents	8,966	(16,837)
Cash and cash equivalents, beginning of period	6,974	51,043
Cash and cash equivalents, end of period	15,940	34,206

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ANNEX A:Non-GAAP Financial Information

Adjusted Net Loss Attributable to BioAmber Inc. Shareholders

BioAmber presents Adjusted Net Loss Attributable to BioAmber Inc. Shareholders as a supplemental measure of BioAmber’s performance.  Adjusted Net Loss Attributable to BioAmber Inc. Shareholders is a non-GAAP financial metric that excludes, for the quarter ended September 30, 2016, the impact of the change in fair value of the IPO warrants and the Legacy Warrants and the STDC grant income. Adjusted Net Loss Attributable to BioAmber Inc. Shareholders is a non-GAAP financial metric that excludes, for the quarter ended September 30, 2015, the impact of the change in fair value of the IPO warrants and the Legacy Warrants. The above items are excluded from BioAmber’s Adjusted Net Loss Attributable to BioAmber Inc. Shareholders because these items are non-cash in nature, or because the amount and timing of these items are either unpredictable or not driven by current operating results and renders comparisons with prior periods and competitors less meaningful.  BioAmber believes Adjusted Net Loss Attributable to BioAmber Inc. Shareholders is a useful measure for analysts and investors to evaluate BioAmber’s future ongoing performance as this measure allows for a more meaningful comparison of BioAmber’s projected cash earnings and performance with its historical results from prior periods and to the results of its competitors.  Adjusted Net Loss Attributable to BioAmber Inc. Shareholders corresponds more closely to the cash operating income generated from BioAmber’s business and allows investors to gain an understanding of the factors and trends affecting the ongoing cash earnings capabilities of BioAmber’s business.

Adjusted Net Loss Attributable to BioAmber Inc. Shareholders has certain limitations in that it does not take into account the impact of certain expenses to BioAmber’s consolidated statements of operations.  In evaluating Adjusted Net Loss Attributable to BioAmber Inc. Shareholders, you should be aware that in the future BioAmber may incur expenses similar to the adjustments in this presentation. BioAmber’s presentation of Adjusted Net Loss Attributable to BioAmber Inc. Shareholders should not be construed as an inference that BioAmber’s future results will be unaffected by unusual or non-recurring items. Adjusted Net Loss Attributable to BioAmber Inc. Shareholders is not a measurement of BioAmber’s financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP.

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BioAmber Inc.
Non-GAAP Financial Information
(unaudited, in thousands, except for share data)
	Three Months ended September, 30
	2016	2015
	$	$
Net loss attributable to BioAmber Inc.  Shareholders	(6,158)	(7,048)
Adjustment:
Warrants revaluation expense (income)	1,108	(2,305)
Grant income	(2,396)	—
Adjusted net loss attributable to BioAmber Inc. shareholders	(7,446)	(9,353)
Adjusted net loss per share attributable to
BioAmber Inc. shareholders - basic	(0.26)	(0.36)
Weighted-average of common shares
outstanding- basic	28,811	25,858

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EX-99.2

Exhibit 99.2

FINAL TRANSCRIPT

BioAmber Inc.

Third Quarter 2016 Results Conference Call

Event Date/Time: November 3, 2016 — 4:30 p.m. E.T.

Length: 24 minutes

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FINAL TRANSCRIPT

November 3, 2016 — 4:30 p.m. E.T.
BioAmber Inc. Third Quarter 2016 Results Conference Call

 

Corporate participants

Roy McDowall
BioAmber Inc. — Senior Vice President, Communication & Strategy

Jean-François Huc
BioAmber Inc. — President and Chief Executive Officer

Mario Saucier
BioAmber Canada Inc. — Chief Financial Officer

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to BioAmber Inc.’s third quarter 2016 results conference call. My name is Sylvie, and I will be your coordinator for today. At this time, note that all lines are in a listen-only mode.

Later we will conduct a question-and-answer session.

As a reminder, know that this conference is being recorded for replay purposes.

I now would like to turn the conference over to your host for today, Mr. Roy McDowall. Please go ahead, sir.

Roy McDowall — Senior Vice President, Communication & Strategy, BioAmber Inc.

Thank you, Sylvie. Good afternoon, everyone, and welcome to BioAmber's third quarter 2016 earnings conference call. My name is Roy McDowall, and I recently joined BioAmber as the Senior Vice President of Communication and Strategy. My responsibilities include Investor Relations,

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FINAL TRANSCRIPT

November 3, 2016 — 4:30 p.m. E.T.
BioAmber Inc. Third Quarter 2016 Results Conference Call

 

Market Relations, and including me, in this call are JF Huc, BioAmber’s Chief Executive Officer; Mario Saucier, our Chief Financial Officer; and Mike Hartmann, our Executive Vice President.

I would like to remind everyone that this conference call contains estimates and forward-looking statements that represent the Company’s view as of today. BioAmber disclaims any obligation to update or revise these statements to reflect future events or circumstances. You should not place undue reliance on these forward-looking statements, because they involve known and unknown risks, uncertainties, and other factors that are, in some cases, beyond our control.

Please refer to today's earnings release and BioAmber's filings with the SEC for information concerning factors that could cause actual results to differ materially from those expressed or implied by such statements.

In our earnings press release, which we issued at 4:05 p.m. today, you will find reconciliation to the most comparable GAAP financial measures for any non-GAAP financial measures discussed on this call. Our earnings release is available on the Investor Relations page of our corporate website at www. bio-amber.com.

An audio replay of this call will be available on our website starting two hours after the end of this conference call.

I’ll now turn it over to Jean-François Huc.

Jean-François Huc — President and Chief Executive Officer, BioAmber Inc.

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FINAL TRANSCRIPT

November 3, 2016 — 4:30 p.m. E.T.
BioAmber Inc. Third Quarter 2016 Results Conference Call

 

Thanks, Roy, and good afternoon, everyone. We're thrilled to have Roy join our management team. He brings over 20 years of experience in capital markets, including banking, research and sales, and most recently with Macquarie Capital Canada.

Roy brings extensive experience and a deep understanding to capital markets and has a rich network of contacts in both the US and Canada. Roy's arrival will enable Mike Hartmann, one of our founders, to focus on the financing of our next plant and to lead other corporate initiatives and will free up more of my time to spend with shareholders and potential investors.

I'll give you a quick update on the business, and then Mario will touch on the financial highlights. The takeaway message for our shareholders on this call is that BioAmber's Q3 operational accomplishments reconfirm the viability and economics of our disruptive bio-succinic acid fermentation process. This continued success provides a solid foundation for the future global expansion of our proprietary technology, and we would like to thank our shareholders for their continued support.

At the plant level, Q3 2016 was solid. The biotechnology is the core of our success and has continued to prove itself to be highly efficient as we ramp up production. After one year of Sarnia plant operation, our proprietary fermentation process has consistently met our internal targets for yield, productivity, and output. We have also further increased our overall plant uptime. As a result of these operational achievements, we've driven our Q3 unit cost 12 percent lower versus Q2, demonstrating continued operational improvement.

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FINAL TRANSCRIPT

November 3, 2016 — 4:30 p.m. E.T.
BioAmber Inc. Third Quarter 2016 Results Conference Call

 

In line with these operational achievements, Q3 sales of bio-succinic acid were 3.7 million, a 45 percent increase over our Q2 sales. In addition to increased sales, we witnessed a growing number of companies qualifying our products. To date, over 180 companies have qualified our bio-succinic acid with 40 of these companies actively purchasing it from BioAmber. The continued conversion from qualified to purchasing is being dynamically managed to match our production ramp.

Although our proprietary, ecofriendly biotechnology is new and disruptive, the actual underlying production process is relatively simple and is used in many industries. The simplicity has enabled us to continue our ramp-up, and although we expect to encounter some inevitable minor production issues as we increase our plant throughput to full capacity, we are confident we will continue our steady progression.

As our first commercial-scale facility in Sarnia has both provided proof of concept and demonstrated attractive variable costs, we are increasingly focusing our attention on securing the location and financing for our second larger facility that will drive future growth.

In September, we announced an important milestone with US Department of Energy with respect to a proposed $360 million low-interest loan guarantee. BioAmber is in the advanced stages of securing this facility through the DOE’s Title XVII Loan Guarantee Program. This is a four-phase program for which we are in Phase III, conditional commitment, to negotiate the terms and conditions of said loan guarantee.

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FINAL TRANSCRIPT

November 3, 2016 — 4:30 p.m. E.T.
BioAmber Inc. Third Quarter 2016 Results Conference Call

 

This process with the DOE has been underway for over a year. In anticipation of a successful outcome, BioAmber has secured a potential site in the US for our proposed facility.

Paralleling our progression with the US Department of Energy, BioAmber has also been engaged in discussions with the Canadian government, also for over a year. A working group made up of various ministries, Crown corporations, and different levels of government has been established to provide BioAmber with a more efficient, single point of contact. Discussions are encouraging and similar in nature to the scope of the discussions with the US Department of Energy. As we did in the US, BioAmber has secured an option on a site in Canada for the second facility.

Now before I conclude, I would like to take a moment to circle back and tie in my previous comments regarding our progression path, proof-of-concept, and our solid demonstration in Q3 of robust variable costs and improving operational efficiencies.

These accomplishments are one of the key reasons we've been able to make good progress with the Canadian and US government programs. Both governments have conducted due diligence and recognize the benefits of BioAmber’s proven disruptive biotechnology.

We offer a meaningful reduction in greenhouse gases, we create skilled manufacturing jobs, and we leverage local agriculture to produce value-added products with an economically competitive process.

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FINAL TRANSCRIPT

November 3, 2016 — 4:30 p.m. E.T.
BioAmber Inc. Third Quarter 2016 Results Conference Call

 

In addition to the expressed interest from governments, we are also engaged with several global players within our industry and from the investment community to help fund the balance of the proposed second facility.

The last point I would like to make concerns our more macro or blue sky trend. I'm referring to carbon pricing. On the heels of the Paris Accord, we’ve seen Canada adopt a pricing mechanism of $10 per tonne of CO2 gas starting in next year and increasing to $50 a tonne by early next decade.

Ontario, where our first plant is located, is putting in place a cap-and-trade system. While it is too soon to know how these initiatives will actually be implemented, we're working to confirm BioAmber’s eligibility so that we can benefit from these carbon pricing programs.

Irrespective of the system that gets rolled out in Canada, the US, and elsewhere, it's becoming increasingly clear that processes that pollute will cost more to operate in the future, which will improve the economic environment for clean technologies such as BioAmber's.

This concludes the operational update, and I will now turn the call over to Mario Saucier, our CFO, to discuss our financial results.

Mario Saucier — Chief Financial Officer, BioAmber Canada Inc.

Thank you, JF. Revenues for the quarter ended September 30, 2016 were 3.7 million. The 45 percent increase compared to the previous quarter was driven by an increase in the quality of bio-succinic acid sold. Cost of goods sold for the quarter ended September 30, 2016, was 5 million.

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FINAL TRANSCRIPT

November 3, 2016 — 4:30 p.m. E.T.
BioAmber Inc. Third Quarter 2016 Results Conference Call

 

The cost of goods per unit sold decreased in Q3 2016 compared to the previous quarter as the result of an improvement in operations, including higher yields, higher plant uptime, and a higher percentage of on-spec products in Q3 2016 compared to the previous quarter.

Research and development expenses for the quarter ended September 30, 2016 were 1.8 million, significantly lower than the 6 million incurred in the same period last year. The lower R&D expenses were the results of two factors. First, certain nonrecurring Sarnia commissioning and start-up costs incurred in Q3 2015 were recorded as R&D expenses. Second, the Company has streamlined its R&D effort over the past year, given that Sarnia is now operational.

Sales and marketing expenses for the quarter ended September 30, 2016, were 479,000, down from 921,000 incurred in the same period last year. This was due to the expanded commercial role that Mitsui assumed in 2016, namely in Asia, which allowed the Company to reduce the size of its global commercial team. As a result, there has been a decrease in sales and marketing salaries, benefits, and associated costs, including stock-based compensation and travel expenses.

General and administrative expenses for the quarter ended September 30, 2016 were 1.8 million, down from 2.2 million for the same period last year. This was the result of the Company's effort to reduce headcount at the corporate level, which resulted in a decrease in salaries and benefits, recruitment costs, and stock-based compensation expense. These efforts were partially offset by an increase in Sarnia headcount as the facility transitioned from construction to production.

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FINAL TRANSCRIPT

November 3, 2016 — 4:30 p.m. E.T.
BioAmber Inc. Third Quarter 2016 Results Conference Call

 

Depreciation of property and equipment and amortization of intangible asset expense were 1.2 million for the quarter ended September 30, 2016, up significantly from 123,000 for the same period last year. This increase was due to the depreciation of Sarnia facility assets following the beginning of production in Q4 2015.

For the quarter ended September 30, 2016, the Company incurred a net financial charge of 3.2 million compared to a financial gain of 1.6 million for the same period last year. This 4.7 million variation was mainly due to a noncash mark-to-market adjustment charge of 3.4 million under warrants that were issued at the time of the initial public offering, the IPO warrants, as well as an adjustment on the warrants issued in June 2009 and April 2011, the legacy warrants. It was also due to an increase in the end-of-term charge of 602,000 and to interest and other charge of 600,000 in connection with the repayment of the outstanding Tennenbaum loan in September 2016.

The Company recorded a net loss attributable to BioAmber Inc. shareholders of 6.2 million or a loss of $0.21 per share for the quarter ended September 30, 2016, compared to a net loss of 7 million or a loss of $0.27 per share for the same period last year.

The adjusted net loss attributable to BioAmber Inc.’s shareholders for the quarter ended September 30, 2016, was 7.4 million or a loss of $0.26 per share compared to an adjusted net attributable loss to BioAmber Inc.’s shareholders of 9.4 million or a loss of $0.36 per share for the same period last year.

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FINAL TRANSCRIPT

November 3, 2016 — 4:30 p.m. E.T.
BioAmber Inc. Third Quarter 2016 Results Conference Call

 

Adjusted net loss attributable to BioAmber Inc.’s shareholders is a non-GAAP financial metric that excludes the impact of the change in the fair value of the IPO and legacy warrants, as well as the grant income from Sustainable Development Technology Canada, SDTC.

Finally, we closed the quarter with a cash balance of 15.9 million thanks for a 19.2 million loan secured from Bridging Finance, which we partially used to pay down our outstanding balance on the Tennenbaum loan netting 11 million in cash.

During the quarter, our Sarnia joint venture also closed a $7.6 million loan from BDC.

I will now turn the call to the Operator so we can field questions.

Q&A

Operator

Thank you. Ladies and gentlemen, if you do have any questions, please press *, followed by 1 on your touch-tone phone. Note that your questions will be taken in the order received. And if you should decide to withdraw your request, please press *, followed by 2. And note that if you are using a speakerphone, you will need to lift the handset before pressing any keys.

And your first question will be from Sameer Joshi at Rodman & Renshaw. Please go ahead.

Sameer Joshi — Rodman & Renshaw

Hey, guys. JF, Mario, how are you?

Jean-François Huc

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November 3, 2016 — 4:30 p.m. E.T.
BioAmber Inc. Third Quarter 2016 Results Conference Call

 

Good. How are you Sameer?

Sameer Joshi

Good. So first question relates to the capacity utilization. I’m assuming the capacity is being utilized at around 25 percent given the bio-succinic acid price of around $2,000 per metric ton. Is that assumption correct?

Jean-François Huc

We’re actually running, Sameer, at about 40 percent today. Keep in mind that we did have a shutdown in August, and we’re running higher now than we were early in the quarter, and we’ve also accumulated some inventory.

Sameer Joshi

Okay. But in terms of the bio-succinic acid sale price, is $2,000 per tonne fair?

Jean-François Huc

We have not seen a material change in our average selling price in 2016 year to date. And so we’re not giving any change relative to past guidance.

Sameer Joshi

Okay. In terms of customer demand, are you seeing any mismatch between your capacity that you can produce compared to the actual customer demand that exists?

Jean-François Huc

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BioAmber Inc. Third Quarter 2016 Results Conference Call

 

Well, I think the selling cycle is longer than what we had originally expected. We sell to B2B customers, and our customers need to qualify their products with their customers.

So and there are some projects, some bio-based projects, that have been slowed by the low oil price environment, but the trends are very clear. A lot of companies have qualified us, and we’re seeing a steady conversion of these companies into purchasing customers.

So it’s taken a little longer, but we are seeing good quarter-over-quarter sales growth, and we’re trying, on the production side, to match production with sales ramp.

Sameer Joshi

Okay. And in terms of Mitsui’s partnership, I can see that you reduced your costs, but are you seeing any increased sales demand from that avenue?

Jean-François Huc

Well, Mitsui plays an important role in commercialization alongside BioAmber. We, for all intents and purposes, have an integrated commercial team. Mitsui is focused more on Asia but also provides some support in Europe and North America. So as an integrated team it’s kind of difficult to say we’re seeing more or less.

Mitsui is very involved in getting customers qualified and then converting those companies into purchasing customers with the caveat that they are more focused on Asia than North America or Europe.

Sameer Joshi

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November 3, 2016 — 4:30 p.m. E.T.
BioAmber Inc. Third Quarter 2016 Results Conference Call

 

Okay. Going back to the top line or capacity utilization, are you giving any guidance, because last quarter I think you had said that there would be a 50 percent quarter-over-quarter increase. Should we assume that going forward? Similar improvements?

Jean-François Huc

So I think we’re ramping up, and there’s going to be some bumpiness in the ramp-up I think. We’re not giving any new guidance for Q4 2016, and I think it’s a little early to give guidance for 2017. But we are confident of the trend that we’ve seen to date, and I think we’ll feel more comfortable early in the new year giving more precise guidance on the ramp in—more granularity around the ramp in 2017. But the trend is clear, and we expect this trend to continue.

Sameer Joshi

And one last one from me. As regards to the Title XVII progress, how long do you estimate the phase III and IV to take? And as a corollary, can you elaborate a little bit more on the Canadian efforts to extract some incentives from there?

Jean-François Huc

Sure. So the time line is our goal is to complete the conditional commitment in Q1 2017, and definitive agreements would be signed in Q2 2017. And on the Canadian side, thanks to this working group that’s been created to manage our request for funding in Canada, we have a one-stop shop, and we’re confident that we can meet a similar time line in Canada. That is to say some kind of term

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BioAmber Inc. Third Quarter 2016 Results Conference Call

 

sheet equivalent to what we’d be getting from a phase III from the DOE, getting that in the first quarter, and being in a position to sign definitive agreements in the second quarter.

Sameer Joshi

Great. Thanks. I’ll take the rest of my questions off-line. Thanks a lot.

Jean-François Huc

Thank you, Sameer.

Operator

Thank you. Next question will be from Alex Stewart at Barclays. Please go ahead.

Alex Stewart — Barclays

Hi, team. Good afternoon, and good to hear from you all. Just one question. You have a liquidity event coming up in April where the IPO warrants will either be exercised or not. The trigger point is $5. Previously you said you were confident you would get to that level. What’s the contingency plan if your shares languish below that level and the warrants are not exercised? Do you have in place a method to repay the bridge financing loan you’ve taken out? And is the portion the corporate sense cost? Thanks.

Jean-François Huc

Thanks, Alex. And good evening. Thanks for staying up to be on the earnings call.

So with respect to the warrants, the two mechanisms that are built into those warrants, we have the ability to move the strike price down if we wanted to precipitate an exercise. And we have

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the ability to extend the life of those warrants as well. Those are two things that allow us to increase the probability.

And then as we alluded to during the opening remarks, we are engaged in a number of strategic discussions, and we may secure some cash opportunistically in the context of strategic deals that we would strike over the next couple of quarters.

So I think that we’re confident that we’ll be able to manage that, but we are working on a number of things that might give us alternatives in terms of liquidity events.

Alex Stewart — Barclays

Great. Thanks so much. And congratulations on all your hard work over the last 12 months.

Jean-François Huc

Thank you, Alex.

Operator

Thank you. Ladies and gentlemen, as a reminder, if you do have any questions, please press *, followed by 1. And the next question will be from Edward Walbridge at Ergon Institute. Please go ahead.

Edward Walbridge — Ergon Institute

Gentlemen, I’m confused about the warrants. There are May—I think it’s May 7th warrants, are those the ones that you’ve just been talking about, because the gentleman ... [audio gap]

Jean-François Huc

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Yes. These are the warrants that were issued at the time of the IPO. At the IPO, we sold units. After 30 days those units expired and each unit had one warrant and one share. The shares trade on the NYSE, as do the warrants.

You need two warrants to purchase a share at a predefined strike price, and that strike price today is $5 because there was a price adjustment mechanism that readjusted that price based on any down-rounds or subsequent equity offering.

So the offering that we did in January of this past year reset the strike price for those warrants to $5. So they expire normally on May 7th or May 9th, I believe, and you require two warrants with the $5 exercise price to purchase one share of BioAmber.

Operator

Thank you. At this time, Mr. McDowall, I’d like to turn the conference back over to you.

Roy McDowall

Thanks, Operator. Thanks, Sylvie. And I think that’s it for this evening. So we’d like to once again thank our shareholders for their continued support, and we’d like to wish everyone a good evening.

Operator

Thank you. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have yourselves a lovely evening.

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*****

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