Lux recently presented at the BIO World Congress on Industrial Biotechnology. Although the event’s topics ranged from renewable chemicals and materials to biofuels to synthetic biology, three key themes emerged: Continue reading
Early March gave us two announcements pertaining to bio-based additives in car tires: American Process (API) announced a joint development agreement (JDA) with Birla Carbon to combine nanocellulose and carbon black in tires; and Amyris announced that Sumitomo Rubber has adopted the liquid farnesene rubber (LFR) developed with Kuraray for Dunlop-branded Winter Maxx 02 tires. Because downstream application development is one of the biggest challenges for new bio-based materials (see the report “Navigating the Web of Bio-based Performance Materials” [client registration required]), we chose to evaluate how well the materials fit the announced applications: Continue reading
2016 marked a shift in the bio-based materials and chemicals (BBMC) industry. Because of sustained low oil prices, changing consumer demand, and emerging regulatory drivers, we saw synthetic biology advance with machine learning and robotics, performance emerge as the main driver in enabling sustainability, and bio-based become the new foundation of personal care and cosmetics. In particular, bio-based polymers have stood out as a key opportunity for performance to drive sustainability in applications such as packaging. 2016 ended with a handful of announcements related to bio-based polymers. Lux highlights three of the most noteworthy announcements as the industry continues to pivot in 2017: Continue reading
As the alternative fuels industry diversifies and scales up, financing is always the key to technology commercialization. While several sources of financing drive the whole industry forward, we investigate the trends of corporate financing from oil majors, based on a non-exhaustive database of over 1,000 deals and partnership engagements from 2000 through September 2014. With the focus on financial engagement, we only look into the private placement, equity stake, joint venture (JV), mergers and acquisitions (M&A), other than general partnerships. For example, we counted BP’s bioethanol JV plant with British Sugar, but we didn’t include BP’s research work with the Energy Biosciences Institute. We then drew a graph based on the investment counts (rather than invested companies) of the seven most activate oil majors in our database, namely, Shell, BP, Total, Valero, Chevron, Petrobras and Reliance. Particularly, repeated investment activities on the same company would be counted as multiple. We further sorted the investment by six core technology families – algae, biomass to sugar, catalysis, crop development, fermentation (and enzyme development), and pyrolysis/gasification.
From our analysis of their activities in the alternative fuels industry, we find that:
- BP leads the investment frequency in a variety of technology families. Particularly, it has a strong focus on the crop development by transgenics and breeding, with repeated investments made to Chromatin (client registration required) and Mendel Biotechnology (client registration required). It also continues investing on biomass to sugar technology including to handle cellulosic biomass, such as REAC Fuel (client registration required).
- Shell is not a fan of crop development, but has a wide coverage on other technologies. For example, it invested on multiple rounds and formed a JV with Iogen (client registration required), but terminated the JV in 2012. Then the oil giant formed partnerships and JVs with Codexis (client registration required), Cosan, and Novozymes to continue its interests in cellulosic ethanol. Shell shifted its shares in Codexis to Raizen, its ethanol JV with Cosan and “formed the largest sugar and ethanol company in the world”. It also partnered with Virent (client registration required) on the biomass catalytic conversion to produce renewable gasoline, and Cellana (HR BioPetroleum) on algae biofuel. Moreover, Shell Foundation also funded Husk Power System (client registration required) on gasification development.
- Total and Chevron are the most active corporate investors in the fermentation domain. Total did the private placement on the IPO of Gevo (client registration required) and formed a JV with Amyris (client registration required) with both focusing on corn and sugar cane feedstocks. Gevo is focusing on isobutanol fermentation and Amyris is doing the bioconversion to produce isoprenoids. On the other hand, Chevron invested in Codexis (client registration required) and LS9 (client registration required) with its concentration on the genetic engineering, while LS9 was acquired by Renewable Energy Group in early 2014 (client registration required). All invested companies by these two giants are diversifying their revenue streams with drop-in fuels, specialty chemicals, and/or drugs in downstream markets.
- Velero has a strong focus on the drop-in fuel production either by bioconversion or catalysis. Valero owns 10 facilities in the U.S. with over 1,000 MGY corn ethanol capacity. However, it is also interested in cellulosic ethanol with its funding of Qteros, Mascoma Corporation (client registration required), and Enerkem (client registration required). Additionally, the focus on waste feedstock can be reflected by its investments in the ill-fated Terrabon (client registration required), which was focused on wet waste-to-gasoline.
- Investments of oil majors in developing countries are more constrained by local resources and policy drivers. For example, Reliance is investing the algae technology developers such as Algae.Tec (client registration required), Aurora Algae (client registration required), and Algenol Biofuels. Petrobras is concerned with fuel production from sugar cane or bagasse, such as BTG-BTL (client registration required) and BIOecon, which combine the feedstock advantage and local policy driver. Other oil majors not listed in the graph, such as Chinese oil majors, Sinopec and PetroChina (CNPC), are shifting their focuses from food ethanol to cellulosic ethanol and coal-to-ethanol, which is responding to the call of the Chinese government to discourage the food ethanol industry (see the report “Fueling China’s Vehicle Market with Advanced and Coal-based Ethanol” — client registration required.)
- Less active oil majors in this space include ExxonMobil and ConocoPhillips. They only made sporadic investments – such as Synthetic Genomics (client registration required) by ExxonMobil and ADM by ConocoPhilips. Additionally, ExxonMobil mobile recently teamed up with Iowa State University to research pyrolysis.
Investment and growth in bio-based material and chemical capacity continues to increase globally. Aggregating 229 sites from 217 companies that are planned, operating, or have been shuttered between 2005 and 2017 paints an interesting picture, whether considered by feedstock, product category or the geography where scale-up is strongest. Categorizing the products – 133 chemicals and classes like succinic acid and polyols – into seven main product categories (e.g., intermediate chemicals, polymers, and specialty chemicals) and 22 subcategories shines the light on the highest potential areas for producers and potential adopters:
Bio-based intermediate chemicals (e.g, adipic acid and lactic acid) is the biggest singular growth driver in the coming years, growing from 2.0 million metric tons (MT) to 4.9 million MT in 2017, while growth in first-generation facilities stalls. Adding further volume to the overall bio-based space, today’s 1.1 million MT bio-derived polymer capacity will grow at an 18% CAGR through 2017 as companies like Avantium build new sites, and production of bio-oil and its derivatives is set to grow from 1.0 million MT today to 1.8 million MT in 2017. Finally, specialty chemicals (e.g., farnesene) are set to boom at a 46% CAGR on a relatively low existing base between now and 2017. In contrast, the nascent bio-based advanced material space, comprised of products like bee silk, continues to have a negligible capacity through 2017.
As the bio-based industry matured, the pendulum moved from fuels to chemicals and companies like Solazyme, Elevance, and Amyris pushed back plans for entering the fuel market and instead focused on available chemical markets. Now that these companies are reaching commercial production volumes and are looking to set up strong downstream offtake markets, strategies are shifting even further away from fuels. As companies look to generate revenue, expect to see continued movement into existing and high-value specialty markets. A key to this on-going growth will be a continuation of the partnering behaviors already exemplified by key players in the industry. Years of collaboration and partnership have resulted in the first wave of bio-producers reaching scale and putting products on the markets. Larger patterns and trends continue to evolve, and a variety of partnership models – some focusing on strong upstream relationships and other focusing on downstream offtake – are showing success. LanzaTech, Agilyx, and Renmatix are key companies with an upstream, feedstock focus, while Genomatica, Solazyme, Gevo, Elevance, and Segetis are working on downstream business development.
Assembling the partnerships for feedstock, process and product in the right geographies will define the long term winners in this space. The masses rushing towards natural gas feedstocks are only enhancing the opportunities for thought leaders and strategic thinkers in higher carbon bio-based materials and chemicals who can position to win now as well as long after the natural gas frenzy is over.
Source: Lux Research report “Cultivating Capacity for Bio-based Materials and Chemicals through 2017” — client registration required.
As the alternative fuels industry rapidly approaches maturity, reports of IPOs and commercialization have blended with headlines about spectacular failures and cheap acquisitions. The remaining players navigate a landscape of prospective partners, funding, and scale as well as serious uncertainty (read: opportunity).
A thorough examination of the field reveals contenders, dark horses, and long-shots within several technology classes, including pretreatment, bioprocessing, and gasification. While many of these companies appear similar on paper, we applied the Lux Innovation Grid in a recent report to rate them in three dimensions – business execution, technical value, and maturity. Drawn from that report, this week’s graphic reveals likely winners and losers among Alternative Fuel bioprocessing companies which, as a group, offer strategic flexibility in feedstock and end-products.
The crowded Dominant Quadrant is due in part to the successful IPOs of Amyris, Gevo, and Solazyme, as well as the impending commercial scale of companies like LS9, Cobalt, and LanzaTech. Aemetis edges into the Dominant Quadrant thanks on the technological potential of its Z microbe, which simultaneously breaks down cellulosic biomass and converts the sugars into isoprene. ZeaChem also lands in the Dominant Quadrant due to high partnership and momentum scores, fueled by a recent funding round and joint development agreement with P&G.
Cellulosic ethanol producers Qteros and Mascoma both claim low cost production and robust organisms, but both fall into the High Potential Quadrant due to sagging business execution scores. Qteros’ Q microbe could lead to more efficient processing of biomass; but it recently laid off most of its staff, including its CEO. Touting similar technology, Mascoma filed for an IPO* in September, but could see its public launch hindered by capital intensity and slowing momentum.
Lastly, OPXBiotechnologies shows some interesting potential for developing microbes for acrylic acid (with partner Dow) and diesel as part of the ARPA-E funded Electrofuels project: https://portal.luxresearchinc.com/research/tidbit/8436*. But, on the fuels side, it falls into the Long-Shot Quadrant due to a competitive landscape score of 2, and a partnership score of 2, with an overall Lux Take of “wait and see.” Joule, on the other hand, we rate as a “caution” thanks to a barrier to growth score of 1, no commercial partners, and wholly unproven claims.
Source: Lux Research report “Refining Alternative Fuels Innovators into Winners and Losers.”
* Client registration required.
Venture capitalists (VCs) invested $3.1 billion in bio-based chemicals and materials developers since 2004. As many of those start-ups reach megaton scales and launch IPOs, Lux Research analysts sought to find which technologies venture investors favored. This week’s graphic comes from their just published report (client registration required), in which analysts tracked 177 venture transactions involving 79 companies operating in five technology categories – biocomposites, bioprocessing, thermochemical processes, crop modification, and algae. In short, they found:
Bioprocessing developers brewed up $1.89 billion in 96 deals. Bioprocessing developers – especially synthetic biology companies – landed more than half the total venture capital invested since 2004. Encompassing technologies like fermentation, phage display, natural breeding and synthetic biology, all bioprocessing platforms employ some sort of organism as a “factory” for creating products as diverse as sweeteners and catalyst supports. Intrinsically flexible, these platforms enable the likes of Amyris, Codexis, LS9, and Solazyme to produce multiple products from multiple feedstocks, thus ensuring a relatively low-cost route to high-value compounds and providing a hedge against feedstock and product price volatility.
Thermochemical technologies raked in $577.0 million in 31 deals. Thermochemical processing encompasses technologies like gasification (Enerkem), catalysis (Avantium, Inventure), and acid hydrolysis (HCL Cleantech, BlueFire) that sometimes convert biomass to an intermediate like sugars or syngas, and sometimes go all the way to an end product. (e.g. Virent’s paraxylene is used in Pepsi’s famed 100% bio-based PET bottle
Crop modification companies harvested $371.7 million in 28 deals. IPOs are less common fates for crop modification companies which, as you may have guessed, modify crops to be more amenable and economical for use in bio-based materials and chemicals. Instead, companies in this category, like Athenix and FuturaGene, usually end up being acquired by the likes of Syngenta, Monsanto, DowAgro, or Bayer CropScience.
Algae developers saw $190.5 million in 13 deals. Notably, that figure only encompasses start-ups developing algae strains, cultivation systems, and processing equipment for creating industrial chemicals. Representative developers include Bio Architecture Lab, a macroalgae developer, and Israel’s Rosetta Green, which had raised $1.5 million in venture funds, but more recently brought in almost $6 million in an IPO on the Tel Aviv TASE. Excluded from this category are companies primarily developing fuels (which we cover in our Alternative Fuels Intelligence service), and companies like Solazyme and Green Pacific Biologicals that use algae for fermentation (and, thus, are categorized in bioprocessing, above).
Biocomposites developers brought in $108.9 million in a mere nine transactions. This category includes bioplastic blends, some starch plastics, and bio-based foams, from the likes of Cereplast, EcoSynthetix, Ecovative Design, and Entropy Resins. Because of the relatively simple nature of these technologies, VCs often don’t see them as investment opportunities – forcing companies like SoyWorks and Biop Biopolymer to find other sources of funding.
Source: Lux Research report “Seeding Investment in the Next Crop of Bio-Based Materials and Chemicals.”
Consumer goods material suppliers continue to turn to synthetic biology for advanced products and delivery systems. A few months ago at the Metabolic Design summit, Steve He, who is responsible for acquisition of sustainability technologies at Henkel, said the company is collaborating with Arizona State University to see whether CO2-fed algae could synthesize high-value, renewable oils, and surfactants.
Elsewhere, Evolva’s Pascal Longchamps described the company’s synthetic biology platform, and how it’s applied for partners like Roche (cancer drugs), BASF, and the U.S. Army (antimicrobials). The company creates yeast artificial chromosomes (eYACs) that combine genes from “trees, from coral, from the brain” – apparently not meant as casual examples – into one new organism. For example, Evolva has developed a pathway for producing Stevia (a sweetener found in certain plants) in yeast. The company was collaborating with Abunda*, which it acquired in April.
We also spoke with Marcus Wyss of DSM Nutritional Products, which aims to become the cosmetic industry’s leading supplier by building a product portfolio with designed metabolic processes. The company is a sponsor of the BioFAB consortium based at SynBERC, and it is also contemplating agricultural waste as a feedstock for bio-based chemicals and materials. Also, Wyss specifically said DSM’s recent acquisition of Martek will bring “significant improvement” to its algal biotechnology abilities.
These examples of how bio-based materials and chemicals suppliers are supporting brand owners only appear cutting-edge. In reality, brand owners are leading the suppliers. Procter and Gamble has been using genomics and proteomics technology since the 1990s, even publishing papers on the subject. In the last twelve months, it struck a supply deal with Amyris, invested in personal genomics company Navigenics *, and opened a collaboration with the Institute for Systems Biology to study skin conditions ranging from aging to cancer. Similarly, Unilever has been acting like a drug company* for several years*. It is now using controlled-release biopolymers to deliver encapsulated lipids,* and investing* in its partner Solazyme*.
We expect to see more companies use biotechnology to improve food and cosmetics by blazing new routes to known and new substances, applying delivery technologies to improve substance benefits, and using their products as delivery technologies in and of themselves. These strategies are part of the broader trend of convergence of food, cosmetics, chemicals, and medicine, driven aggressively by BASF* and DSM*. Clients should note that these technologies are maturing at an opportune moment for companies looking to enter pharmaceuticals, as the collapse of drug majors clears the way for new entrants from delivery,* consumer products, and even the electronics industries*.
* Client registration required.
Not one, not two, but three synthetic biology food-related announcements recently hit the wires in short order. First there was Abunda Nutrition’s debut, and the company’s plan to use synthetic biology to produce ingredients like vanillin and nutritional fats and oils (see the November 2, 2010 LRTJ*) of a contract manufacturing agreement between Tate & Lyle and Amyris to produce farnesene, a set of compounds that includes, among other things, the scent of apples. And topping it off was the report of a joint venture between Roquette and Solazyme to make “oil-, protein-, and fiber-based products aimed at delivering improved performance with a superior health profile compared to ingredients in the market today.” According to the announcement, Roquette will fund and build a jointly owned, commercial-scale manufacturing plant at one of its corn wet mills. The plant’s annual production capacity will be on the order of tens of thousands of tons.
We’ve discussed the entrance of synthetic biology into food before, and these announcements naturally bolster that trend (see the June 29, 2010 LRBJ*). Likewise, we have mentioned the convergence of agriculture, energy, and chemicals in previous posts (see the September 15, 2009 LRBJ*). Adding public announcements to discussions we’ve had with companies in the space, we see an increasing flight in industrial biotech from fuels to other products. It remains to be seen whether those “other products” will be synthetic biology technologies such as these, or algae companies looking to secure revenues while they are at small scale. Either way, synthetic biology is no longer an activity that companies in food, personal care, or agriculture can watch from the sidelines. Like their peers in energy and chemicals already have done, clients in these industries should examine the likes of Amyris, Solazyme, LS9, and Blue Marble as strategic partners for future products.
* Client registration required.
Earlier this week, the U.S. Environmental Protection Agency (EPA) announced its proposed RFS2 renewable fuel blending mandates for 2011, a surprisingly pragmatic piece of regulatory action. The RFS2 is an expanded version of the Renewable Fuel Standard (RFS1) program modified by the Energy Independence and Security Act (EISA) of 2007, and it requires the EPA to set renewable fuel standards each November for the following year.
While there is generally good news for biodiesel, the RFS2 is a veritable reality check for cellulosic biofuels cheerleaders.
Here are the blending mandates the recent regulatory action proposes: for cellulosic biofuel (0.015%), biomass-based diesel (0.68%), advanced biofuel (0.77%), and total renewable fuels (7.95%). All proposed mandates apply to any gasoline and diesel produced or imported in year 2011. In setting these targets, the EPA reaffirmed the scheduled advanced biofuels mandate of 1.35 billion gallons, as well as the 800-million-gallon blending mandate for biodiesel.
However, for the second year in a row, it had to dramatically slash the cellulosic biofuel mandate from RFS1 targets, this time from 250 million gallons to a 6-million-gallon to 25-million-gallon range. As a result, and because the EPA didn’t slash the overall mandate, blenders will now have to look elsewhere for 124 million to 144 million gallons of qualifying advanced biofuels to make up the portion of the advanced biofuels mandate not met by the cellulosic biofuel or biodiesel targets. Options include importing sugarcane ethanol, finding additional biofuel production, or buying appropriate Renewable Identification Number (RINs) credits to make up the difference. Clients should monitor companies like Dynamic Fuels (a joint-venture of Tyson Foods and Syntroleum Corporation), LS9, and INEOS to see if they can step up to the plate and provide this additional capacity.
The reception to this regulatory action has been mixed. While organizations like the Renewable Fuels Association (RFA) took offense with the downward correction of the cellulosic biofuel mandate, seeing in it the potential to further hamper investment, others thought the EPA was optimistic to anticipate 25 million gallons of cellulosic biofuel supply. However, everyone agrees that the EPA didn’t really have a choice but to stay true to market realities.
In determining the applicable standards, it is required by law to conduct an in-depth evaluation of how much qualifying biofuel can be made available in the following year. If the projected available volume is less than the required volume specified in the statute, it must lower the required volume to match the projected amount. In short, the EPA must match its mandates to available production capacity.
Cellulosic biofuels were done in by the sluggish pace of commercialization of developers like Range Fuels, Gevo, Iogen, Enerkem, and others who have all frequently missed milestones for maturity and commercial penetration. If the latest projections are to be believed, this capacity picture is unlikely to alter significantly for the next three years to four years, in which time competing technologies could blaze critical inroads into the market and make the outlook for cellulosic biofuels even more bleak. This news should come as a definite cause for concern for investors in and champions of cellulosic biofuels, whose only respite might be new loan guarantee programs from the U.S. Departments of Energy and Agriculture that are specifically engineered for cellulosic biofuels.
Meanwhile, as cellulosic biofuels grapple with this sobering reality, there are positives in the overall story for advanced biofuels in general. The EPA believes the overall mandate of 1.35 billion gallons of advanced biofuels in 2011 is enforceable, and we certainly agree. What is bad news for cellulosic biofuels might be good news for developers of other types of technology options like biodiesel or renewable diesel. Clients active in this domain should engage companies like Amyris, Solazyme, or Benefuel.