| GOODWIN PROCTER | Robert E. Puopolo 617.570.1393 rpuopolo@ goodwinprocter.com | Goodwin Procter LLP Counsellors at Law Exchange Place Boston, MA 02109 T: 617.570.1000 F: 617.523.1231 |
September 21, 2006
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549-7010
Attention: Pamela A. Long
Dear Ladies and Gentleman:
This letter is being furnished on behalf of Metabolix, Inc. (the "Company") in response to comments in the letter dated September 13, 2006 (the "Letter") from Pamela A. Long of the Staff (the "Staff") of the Securities and Exchange Commission (the "Commission") to James J. Barber, Chief Executive Officer of the Company, with respect to the Company's Amendment No. 1 to the Registration Statement on Form S-1 (the "Registration Statement") that was filed with the Commission on August 31, 2006. Amendment No. 2 to the Registration Statement ("Amendment No. 2"), including the prospectus contained herein, is being filed on behalf of the Company with the Commission on September 21, 2006.
The responses and supplementary information set forth below have been organized in the same manner in which the Commission's comments were organized and all page references in the Company's response are to Amendment No. 2 as marked. Copies of this letter and its attachments are being sent under separate cover to Brigitte Lippmann of the Commission. The Company respectfully requests that the Staff return to us all material supplementally provided by the Company once the Staff has completed its review.
Metabolix. Inc., page 1
RESPONSE: The Company advises the Staff that page 1 of the prospectus has been revised in response to the Staff's comment.
RESPONSE: The Company advises the Staff that page 1 of the prospectus has been revised in response to the Staff's comment.
RESPONSE: The Company advises the Staff that pages 1, 33 and 48 of the prospectus has been revised to remove the word "leading".
Risks Associated with Our Business, page 3
RESPONSE: The Company advises the Staff that page 3 of the prospectus has been revised in response to the Staff's comment.
RESPONSE: The Company advises the Staff that page 4 of the prospectus has been revised in response to the Staff's comment.
RESPONSE: The Company advises the Staff that pages 3 and 11 of the prospectus has been revised in response to the Staff's comment.
RESPONSE: The Company advises the Staff that page 4 of the prospectus has been revised in response to the Staff's comment.
Special Note Regarding Forward-Looking Statements, page 26
RESPONSE: The Company advises the Staff that page 102 of the prospectus has been revised in response to the Staff's comment.
Use of Proceeds, page 27
RESPONSE: The Company advises the Staff that page 27 of the prospectus has been revised in response to the Staff's comment.
Business, page 48
the contract period, payment terms and amounts, obligations of the parties, events and circumstances that trigger milestone payments, and termination provisions.
RESPONSE: The Company advises the Staff that pages 56 through 58 of the prospectus has been revised in response to the Staff's comment.
Financial Statements
Consolidated Statements of Cash Flows. page F-6.
RESPONSE: As of June 30, 2006, Other Assets were primarily comprised of $882,473 of costs incurred in connection with the anticipated public offering of our common stock and $25,000 in long term deposits. Such costs have been capitalized on our balance sheet and included in cash flows from operations during the six months ended June 30, 2006. We reviewed Statement of Financial Accounting Standards (SFAS) No. 95, "Statement of Cash Flows" with particular focus on paragraphs 18-20 which provide the guidance of what constitutes cash flows from financing activities. We did not note any specific guidance with respect to the classification of costs incurred in anticipation of an offering of common stock. Given this lack of specific guidance, we believe that the most appropriate classification of such cash outflow is as an operating activity.
In addition, to increase the transparency within the financial statements, we have disclosed in footnote 2 to the financial statements, the amount of offering costs included within other assets as of June 30, 2006 and the related effect on operating cash flows for the six month period then ended.
Note 11—Stock Compensation Plans, page F-33
RESPONSE: The Company advises the Staff that we have provided, under separate cover dated September 14, 2006, the independent valuation reports prepared as of December 31, 2005, June 9, 2006 and July 28, 2006.
RESPONSE:
The basis for significant assumptions in computing the value attributed to each of the stock option issuance is as follows:
Volatility:
The Company used four comparable companies (Diversa Corporation, Senomyx, Inc., Martek Biosciences Corporation and Symyx Technologies, Inc.) to evaluate stock volatilities. While none of them are direct competitors of the Company, they are all engaged in developing advanced biotechnology for industrial or consumer product type applications excluding pharmaceuticals. Diversa Corporation is engineering novel enzymes for various products and processes. Senomyx, Inc. is developing proprietary flavor ingredients using biotechnology. Martek Biosciences Corp. produces a patented bioproduct from algae to be used as an additive for baby formula. Symyx Technologies, Inc. uses combinatorial chemistry to develop novel catalysts for industrial processing applications. These companies are generally small to mid-capitalization companies that derive considerable funding from partnering their technology. Investors who understand and buy the stocks of these companies are ones who, in our view, would be interested in the Company as a prospective investment.
| Company Name | Assumed Volatility | 5 year computed volatility * | Expected Term used by the respective company | |||
|---|---|---|---|---|---|---|
| Diversa Corporation | 61 | % | 63 | % | 5 years | |
| Senomyx, Inc. | 60 | % | 54 | % | 6.08 years | |
| Martek Biosciences Corp. | 61 | % | 61 | % | 5 years | |
| Symyx Technologies, Inc. | 52.5 | % | 61 | % | 5 years |
The Company based the assumed volatility rate on a review of historical volatilities for a 5 year term for the above companies, except that in the case of Senomyx, the Company used the historical available prices since Senomyx's IPO on June 22, 2004. The Company also reviewed the computed volatilities for these companies over 6 year periods and the range was 62% to 71%. The Company then adjusted the volatility to 75% to anticipate increased expected volatility associated with being a newly public company.
Expected Term:
The Company used an assumed expected term of 6.0625 years based on the Simplified Method as allowed by SAB 107 for "plain vanilla" options. The Company issued options to employees during 2006 with quarterly vesting over 4 years from the start of employment. The Company also issued options to one director that were fully vested upon issuance. The contractual term for all options issued during 2006 was 10 years from the date of grant.
Discounts due to lack of marketability:
The Company did not use any assumed discounts due to the lack of marketability in the calculation of the fair value of each option. In determining the fair value of our common stock, we assumed a 10% discount due to the lack of marketability. Please see our valuation reports provided in response to question 12 for more information.
The Company used the same assumed volatility and expected term for all the stock option issuances during 2006. The effect of not utilizing a shorter term in the valuation of the one grant with non-standard vesting provisions was immaterial.
Fair value of stock options issued to employees is as follows:
| Date | Fair Value | ||
|---|---|---|---|
| 01/05/06 | $ | 1.08 | |
| 01/19/06 | $ | 1.08 | |
| 02/01/06 | $ | 1.09 | |
| 04/13/06 | $ | 1.91 | |
| 04/24/06 | $ | 1.91 | |
| 06/13/06 | $ | 2.91 | |
| 06/20/06 | $ | 3.44 | |
| 08/03/06 | $ | 5.01 | |
If you require any additional information, please telephone either John M. Mutkoski at (617) 570-1073 or the undersigned at (617) 570-1393.
| Sincerely, | ||||
/s/ ROBERT E. PUOPOLO Robert E. Puopolo |
