Biopesticides are en vogue in the world of agtech. Ever since Bayer acquired Agraquest for nearly half a billion dollars in 2012, start-ups have been raising significant money and jockeying for position as attractive partners and/or acquisition targets. The biopesticide market is still small – in the single-digit billions of dollars worldwide (see the Lux Research webinar “Planting Seeds for Future Success“) – but these products continue to take market share from the conventional pesticide market, which is worth more than $50 billion worldwide. While smaller companies like Marrone Bio Innovations and Stockton Agrimor have made headlines by developing promising biologicals, it’s really the world’s leading agrichemical companies that dominate the patent landscape for biopesticides (see figure below). Of the top 10 patent assignes in the biopesticide space, only five major companies and two smaller companies (Marrone and Qingdao Haolite) are represented. Notably absent from this group is Syngenta, a major player in the conventional agrichemical space.
The DowDuPont merger appears to be on track (client registration required) for a late completion after European regulators signed off on it recently. However, investors apparently aren’t satisfied with the company’s current plan to break into three entities after the merger. In fact, the companies have now announced that there will be a detailed review of the split-off after the merger is complete, which could result in delaying the final spin-outs. Continue reading
In March, the U.S. Renewable Fuel Standard (RFS) saw a record 617,908 gallons of cellulosic ethanol registered for Renewable Identification Numbers (RINs). This is the highest number of RINs generated in a single month since the RFS was established. However, before we begin announcing the ramp-up of commercial cellulosic ethanol production, a comparison to historical production numbers shows that things are still (slowly) proceeding at a business-as-usual pace.
DuPont is reportedly going to sell off some of its herbicides to assuage antitrust concerns, pending its upcoming merger with Dow AgroSciences. No specific herbicide portfolios or buyers are announced as of now, but details are likely will be released soon if Dow AgroSciences and DuPont hope to close the merger by the end of 2016.
We can expect that DuPont will divest one of its older herbicide portfolios, rather than letting go of one of its newer herbicide brands like its newly announced FeXapan brand. Other possible brands that DuPont may divest include its Breakfree and Cinch herbicides. These two brands of herbicides come in various formulations, some of which contain active ingredients atrazine, acetochlor, and S-metolachlor. Breakfree and Cinch target common grasses and broadleaf corn weeds, including foxtail and pigweed. The Breakfree and Cinch brands comprise eight out of 33 of DuPont’s current herbicide products approved for use in the U.S. targeting corn and soybean weeds. These products may be likely targets for divestiture because the safety of one active ingredient present in some formulations, atrazine, has recently been questioned by several regulatory agencies. In September of 2016, the U.S. Environmental Agency (EPA) released a draft ecological risk assessment recommending the ban of atrazine. Similarly, California listed atrazine as a reproductive toxin in July 2016. The changing regulatory attitudes surrounding atrazine may push DuPont toward divesting this specific technology, especially while the company is under pressure to trim its herbicide business. Continue reading
As the Bio-based Materials and Chemicals industry enters 2016, we looked back on 2015 to see the effects of sustained low oil prices and how the industry responded, and considered what lies on the horizon in the coming year as a result. Despite a full year of low oil prices dampening perception of the bio-based materials and chemicals (BBMC) industry, in reality the space was still quite active, with over 28 noteworthy commercialization announcements, more than $428 million in major fundraisers, four major facilities coming online, and more than 84,000 MT of new capacity announced. The product launches, admittedly front-loaded in the year, were largely driven by large corporations with 15 of the 28 products coming from these entities and ranging from chemical intermediates (e.g., BASF’s new bio-based polyol, #23 in the figure), to polymer resins (e.g., Evonik’s new VESTAMID® polymer, #25), to components for finished goods (e.g., Toray’s Ecodear laminate, #10).
Of course, low cost oil has added some harsh reality in the BBMC space, in addition to just the challenges of perception. This has been most heavily felt by the start-ups in the space. Cobalt, Vertichem and Optinol all met their demise, while delays in funding directly affected at least a few start-ups, such as Micromidas and Avantium, which are worrisome for the scale-up plans of both companies. Three of the four production facilities that came online this year were start-up-driven projects as they have little choice but to soldier on, but the underlying fundamentals aren’t strong in all cases. For example, the 50,000 MT of isobutene capacity announced by Cristal Union and Global Bioenergies is a gamble. Global Bioenergies previously claimed it could compete with $85/bbl for chemical applications (e.g. synthetic rubber and PMMA) without any green premium, a far cry from today’s oil prices that have oscillated around $30/bbl in recent days.
Going into 2016, large companies’ ability to weather the storm creates opportunity, subject to their executives having a requisite level of strategic vision. Continue reading
For decades, oil and gas’ position as the dominant energy source seemed impregnable. A quick glance at the reserve-to-production ratio shows that the rate of consumption has historically kept pace with new finds (client registration required). According to BP, there are 1.7 trillion barrels of proved oil reserves and 187 trillion m3 of proved gas reserves remaining. The total volume of unproven and undiscovered reserves is likely an order of magnitudes higher. With the enormous amount of oil and gas still available, dwindling supplies is not the most immediate issue. The largest and most credible threat to the oil and gas industry’s dominant position in the energy space is substitutes to its products.
Earlier this week Dyadic announced DuPont will acquire its C1 industrial enzyme technology platform for $75 million. While the deal transfers nearly all of Dyadic’s industrial enzyme technology assets to DuPont, the announcement also disclosed that Dyadic will continue to have co-exclusive rights to the C1 technology specifically for pharmaceutical applications. For pharmaceutical applications, DuPont will make royalty payments to Dyadic upon commercialization. Dyadic’s C1 technology is currently licensed to companies such as Abengoa for cellulosic ethanol production and BASF for the animal feed, food, and textile industry. In the pharmaceutical industry, Dyadic licenses its technology to Sanofi-Pasteur for production of vaccines, antibodies, and therapeutic proteins (client registration required).
DuPont is no stranger to bolstering its enzyme technology portfolio through acquisitions, acquiring Danisco in 2011 for a total of $6.3 billion. However, DuPont isn’t alone, as many of the larger companies in the space made similar transactions in the enzyme industry over the last few years. At the start of 2013, Novozymes acquired Iogen Bio-Products, Iogen’s industrial enzyme division that produced enzymes for a range of industries including grain, animal feed, and pulp and paper (client registration required). The transaction totaled $80 million and did not include Iogen’s assets in cellulase enzymes. Later that year, BASF acquired Verenium for approximately $62 million. By this time, BP had already acquired Verenium’s cellulase enzyme portfolio in June 2010 for $98.3 million (client registration required). While all the transactions, except for the Danisco acquisition, are relatively equal in size to the Dyadic acquisition, the economic environment in which they occurred were drastically different.
In January 2013, oil prices were approximately $95 per barrel WTI Crude when Novozymes decided to purchase Iogen without its cellulase enzyme technology. Later that year in October, oil prices were just under $104 per barrel WTI Crude when BASF acquired Verenium. Notably, the Dyadic acquisition stands out, as oil prices have plummeted to approximately $45 per barrel WTI Crude this month. Yet the transaction price is in the same range as the previous examples even though DuPont acquired something more – the cellulase enzyme technology that is licensed to DuPont’s competitor, Abengoa. In May 2012, Abengoa expanded its rights under the non-exclusive license agreement the parties entered into in February 2009. The first iteration of the license agreement gave Abengoa the right to use Dyadic’s C1 platform technology to develop, manufacture and sell enzymes for use in second generation biorefining processes to convert biomass into sugars for the production of fuels, chemicals and/or power in certain territories. This iteration of the license agreement expands the license to worldwide rights and gives Abengoa the ability to produce, use, and sell C1 enzymes in first as well as second generation biofuels and other bio-based processes.
But the reason for the relatively low transaction bill doesn’t necessarily reflect the value of the C1 platform. It’s list of current licensees ranging from small start-ups (client registration required) to large corporations and across various industries made it a prime target and will likely strengthen DuPont’s own enzyme platform. The link to Abengoa’s enzymatic technology is an added bonus as it may mean some leverage over a direct competitor. What it does show is that the current economic climate of low oil prices is ripe for opportunity for those with the capital and long term vision to supplement their current biotechnology portfolios.
Droughts have plagued North America cutting corn output to a 16-year low, while monsoon rainfall has been 12% lighter in areas of India and even more in other regions. But in Brazil, even though excessive rains pushed harvesting back, the 2012 yield still rose to 571 million metric tons. Estimates peg next year’s crops as being bigger than ever, due to the same unusually rainy conditions. The harvest season ending in 2010 saw yields of 541 million, and in 2011 yields grew slightly, to 557 million metric tons. But next year’s yield is being forecast to be even larger – 5.4% larger – at 602 million metric tons.
Also in Brazil, Coca-Cola contracted JBF Industries to produce ethylene glycol in Araraquara, Sao Paulo, for partially bio-based PlantBottle PET. JBF will build a new plant starting at the end of 2012 and will produce 500,000 metric tons/year; it will take two years to complete.
But aside from the feedstock and materials developments, there’s money flowing, too, in Brazil. Brazilian national development bank, BNDES, and research-financing agency, Finep, have earmarked $988 million for bio-based chemicals and biofuels investment to be placed this year ($148 million), 2013 ($345 million), and 2014 ($493 million). They emphasize only “several projects” will be pursued. Dow Chemical, Braskem, and DuPont each passed the initial selection phase for their proposals to build projects collectively worth more than $1.5 billion. DSM has already been approved to receive funding for succinic acid from sugarcane. Previously, the two organizations contributed $493 million to research on cellulosic ethanol production, gasification, and other value-added derivatives of sugarcane.
For any that doubt, Brazil’s sugarcane continues to put it on the map of bio-based chemicals and biofuels production hotspots, although a recent conversation highlighted that, ironically, corn was less exposed to food price increases than sugarcane, since sugarcane prices track with sugar, a commodity more tightly linked to food price trends than corn, which is largely used for feed and ethanol. Brazilian government support for sugarcane production and downstream conversion activities is strong, and the Brazilian bio-chemical industry has a reputation for translating technology into commercial successes well. Whether it be to keep tabs on a formidable competitor or to understand the landscape in Brazil to explore forming a valuable partnership to secure feedstock or to access sugarcane-derived material, clients are advised to monitor Brazil’s sugarcane harvest and consider it when making decisions about feedstock supply. Though this year’s droughts are not expected to repeat next year, contingency plans for less likely – and even more unlikely events – are advised, as volatility in weather yields volatility in crop yields.
We learned recently that metal ink developer Five Star Technologies has closed its doors, and former CEO Tim Fahey was good enough to speak with us about the decision to shut down operations. The company had developed a unique cavitation process for dispersing fine particles (see the April 20, 2009 LREJ – client registration required). When we last profiled Five Star, it was taking aim at solar cell metallization applications, with silver pastes for screen printing and silver inks for inkjet printing that enabled finer lines and features. Tim said the company concluded it lacked the resources to compete with leaders like DuPont, Heraeus, and Ferro in the silver paste market. Namely, Five Star was able to develop a paste that had comparable performance; but, without a significant technical advantage, entering the market was too daunting a task in the face of larger competitors’ superior sales, distribution, and manufacturing resources.
At the end of 2009, investors funded it for an additional year so it could try to apply its technology to another market: It focused on silver inks for printing of interconnects around the outer edges of touch screens. While Tim said it made some commercial headway, scoring a few hundred thousand dollars in revenues, it ultimately landed in the same dead end: Marginal technical improvements weren’t enough to displace incumbents like Asahi Chemical Research Laboratory.
Tim said, “In the end, I don’t think cavitation creates an ‘oh wow’ advantage.” His implied point is well-taken: For start-ups, a step change in performance is really needed to effectively go after large incumbent firms. Five Star’s IP has reverted to its parent, Cavitech Holding Company, which is negotiating licensing deals with former customers and partners. Clients interested can contact us for an introduction.
Just a few weeks after DuPont announced a new product for its ionomer-based encapsulant line, we caught wind that Cytec is developing its encapsulant targeted at the thin-film market. The company plans to leverage its experience in UV-cured materials used in laminated glass applications, and ultimately offer a solution that can be cured in a matter of seconds. Incumbent materials like ethelene vinyl acetate (EVA) and polyvinyl butyral (PVB) take at least ten minutes to laminate.
In addition to faster cure times, both companies claim a key advantage of their products will be a lower moisture vapor transmission (MVT) rate, which helps protect the sensitive semiconductor layers. Having a low MVT rate is especially important for thin-film modules that replace glass with polymer backsheets and frontsheets, since it helps cope with the lower moisture barrier properties of those materials. However, successful solutions must be able to show a clear advantage over PVB for thin-film applications, primarily in raw materials cost. Since most module manufacturers already have autoclave furnaces, it is unclear how much they value improvements in cycle time.
A growing threat for such encapsulant technologies, however, is a practice by module manufacturers to sandwich products in glass and apply a powerful edge sealant, which provides the desired moisture-barrier. Abound Solar is already using such a “filler-free” encapsulation method; and Sharp, one of the world’s largest thin-film silicon module manufacturers, recently announced that it too will pursue frameless glass-glass modules protected by an edge sealant. First Solar, also using a glass-glass construction, uses EVA material for mechanical stability and an edge sealant to slow water and oxygen penetration.
Clients should watch closely over the coming years to see whether or not module manufacturers increasingly value the adhesion and strength of encapsulants over their moisture barrier properties. In our upcoming Solar Components State of the Market Report, we will tackle this topic among other challenges being faced by materials suppliers.