Tag Archives: Novozymes

DuPont Acquires Dyadic’s C1 Enzyme Technology for $75 Million

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.

Dow AgroSciences and Valent BioSciences Each up the Ante on Biological Crop Protection, but Whose Bet Will Pay Off More Quickly?

In separate press releases, both Dow AgroSciences and Valent BioSciences made announcements demonstrating new commitments to biological crop protection. Dow AgroSciences announced a partnership with Radiant Genomics, a metagenomics company. Sumitomo Chemical’s subsidiary Valent BioSciences announced a partnership with Evolva, a company with expertise in developing engineered yeast strains. Both collaborations will aim to develop and discover novel biological actives for crop protection, with Dow AgroSciences focusing on discovery and scale production of natural products and Valent BioSciences working on scale production of actives using engineered yeast. These partnerships are reminiscent of the December 2013 announcement by Monsanto and Novozymes (client registration required) of the BioAg Alliance, also targeting biological crop protection products.

Dow AgroSciences has demonstrated past success with its spinosad-based insecticide product lines like Entrust and Conserve. Spinosad is a natural product insecticide, isolated from a naturally occurring bacterial strain called Saccharopolyspora spinosa. The company has demonstrable expertise in scaling up production once a valuable biological active ingredient is identified – which is what makes the partnership with Radiant Genomics (client registration required) highly valuable. Radiant has expertise in identifying such promising candidates, using metagenomics to identify the genes required to synthesize candidate compounds. This partnership will bring together discovery and scalability, and should yield rapid progress.

Valent BioSciences has also demonstrated success with scale production of biological actives for crop protection. The company owns the largest purpose-built biorational facility in the world, which it just opened in mid-2014. To date, its catalog of agricultural products has been focused on microbials and plant growth regulators, rather than insecticides or fungicides. While Evolva has demonstrated expertise in producing specialty chemicals like resveratrol and vanillin, it is a new entrant to the agriculture industry. Evolva will need to successfully navigate a steep learning curve to apply its expertise to this new sector. While the two companies will work together on manufacturing, Valent BioSciences will likely use parent Sumitomo Chemical Company’s global distribution network to aid in commercialization.

While both partnerships have promise, Dow AgroSciences’ work with Radiant Genomics is definitely poised for quicker success as it brings together teams with existing expertise in this industry. Valent BioSciences and Evolva also appear positioned to work well together, but will need to navigate the transition of Evolva’s expertise from food and fragrance ingredients to crop protection ingredients. Regardless of speed, both bets are likely to pay off in new biological crop protection products. For others considering getting into the space, these announcements make clear that the time is now to find a partner and enter the fray. Clients should look to emulate these representative partnerships – earnestly identify your own expertise, and then look for a partner that fills your gaps and/or extends your reach for the best, most rapid success.

What Are the Major Alternative Fuels Interests of Oil Majors?

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.

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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.

Coal is the Big Winner in 2017 as China Scales Alternate Paths to Ethanol Output

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China’s increasing transportation fuel demand and shortage in oil supply is creating opportunities for ethanol in China, with overall output in China growing at a CAGR of 27% from 2008 to 2012. Despite this remarkable growth, ethanol production is falling behind the ambitious E10 mandate put in place by the Chinese government.

Ethanol is currently dominated by conventional sugar fermentation technology but faces rising feedstock cost and dwindling subsidies due to agricultural pressure. In addition, nationwide air pollution issues are also stimulating China’s novel fuels market, including ethanol. Given a growth rate that isn’t being met and supply challenges associated with current processes, advanced ethanol technologies, represented by cellulosic materials and coal as feedstocks, are emerging in China. In earlier years, facilities adopting the advanced technology have been limited to demonstration sites, and output was virtually non-existent compared to conventional ethanol production. In 2012, several commercialized plants were approved by the Chinese government, but ethanol production from alternate feed stocks is expected to quickly increase in the next few years. Specifically, our models predict ethanol production from coal is expected to reach 720 million gallons per year (MGY) in 2017, 227 MGY from cellulosic materials, and 40.0 MGY from waste gas.

Large Chinese SOEs, such as COFCO and the “three big oils,” will continue their dominance in the fuel ethanol market for the next few years. However, more and more private-sector players, such as Shengquan, Laihe Rockley, and SOPO, among others, are entering the advanced ethanol field, particularly the cellulosic ethanol market. China’s growing fuel ethanol market is also whetting the appetite of multinational companies and international technology providers. In particular, Celanese, LanzaTech, Novozymes, Sojitz, and Hitachi Zosen, among others, are entering China’s ethanol market by partnering with Chinese SOEs to initialize and commercialize advanced ethanol facilities toward fuel application.

Of course, the role of government research funding, such as national “983,” ”863,” MoST pillar projects, and other provincial and municipal level incentives, should not be ignored. Knowledge transfer from leading Chinese research groups to domestic ethanol producers will greatly accelerate the industrial commercialization of ethanol production. This cross-fertilization between academia and industry is growing in prevalence in China making partnerships with leading Chinese researchers in the country a quality route to connecting with industry and government stakeholders.

Ultimately, scale economics as well as product composition will determine the viability and market opportunity for advanced ethanol technologies. The inevitability of increasing technology commercialization assures that advanced ethanol technologies will be real game-changers in China. The question for producers, consumers and technology providers alike is how to get a piece of the action.

Source: Lux Research report “Fueling China’s Vehicle Market with Advanced and Coal-based Ethanol” — client registration required.

The BioAg Alliance: What This Week’s Monsanto/Novozymes Announcement Means For the Ag Sector

Last week, Monsanto and Novozymes announced the formation of a new research and development (R&D) cooperation, aimed at rapid discovery and commercialization of biological products for agriculture. Named the BioAg Alliance, this cooperative effort is designed to draw on the strengths of each company to shorten discovery timelines and, theoretically, decrease the cost of development for new biological products. This announcement seems a logical next step following comments by Monsanto’s Dave Russell at the World Agri-Tech Investment Summit earlier this year, where he highlighted biologicals as the “missing piece” in Monsanto’s goal of offering fully integrated crop care solutions. Under the terms of this agreement, Monsanto will pay Novozymes a lump sum of $300 million. The two companies will then share R&D costs, with each company responsible for the research steps with which they are familiar. For example, Novozymes will be responsible for fermentation, process optimization, and production, while Monsanto will handle field trials, registration-related activities, and product commercialization. While this agreement will not be in full force until clearing U.S. antitrust regulators, no impediment is anticipated at the regulatory level.

This BioAg Alliance will focus on developing new agricultural biological products. “Agricultural biologicals” is an umbrella term describing various biological, bio-sourced, and bio-derived products that can enhance crop cultivation. Relevant product categories include biopesticides (client registration required), microbial and fungal extracts, whole microbes, beneficial insects, plant extracts, and various fermentation products. These products can impart a wide range of traits and protections to crop plants, including insect resistance, disease resistance (client registration required), yield increase, enhanced yield stability, and heightened abiotic stress resistance. Specifically, Novozymes reports that this alliance will focus on “biocontrol, biofertility, and bioyield enhancers.”

Biologicals are a fast-growing sector. Monsanto estimates the area to be worth $2.3 billion dollars annually, and cites rapid recent growth as evidence of biological products’ growing importance for agriculture. Earlier this year we reported on a collection of high-profile acquisitions of biological product producers by major agribusinesses, totaling $2.5 billion (client registration required). Monsanto is not the only major agribusiness company seeking to capitalize on the growing biological market, but this is definitely a new approach compared to the M&A style of other efforts in this sector.

The Crop Protection Association estimates that bringing a new molecule to market costs $250 million and can take upwards of 9 years. Whether through outright acquisitions or via alliances like the BioAg Alliance, it is imperative that agribusinesses work to bring those costs down. This alliance has promise to chip away at those costs. Others on both sides of the field expertise-wise – agribusinesses and biological developers alike – should consider coming together in a similar manner to avoid losing out on a piece of this rapidly-growing, multi-billion dollar pie.

Industrial biotech’s holiday shopping spree: DSM nabs Martek and DuPont takes Danisco

Like U.S. consumers celebrating holidays and post-holiday sales, chemical giants have been in the mood to shop lately, and biotech is on their lists. Earlier this month, DuPont announced that it is buying Danisco for about $6 billion. DuPont is, of course, an iconic chemicals and materials company, while Danisco is an industrial biotech company, making chemical “parts” for products as diverse as biofuels, foods, and detergents.

This big news came close on the heels of DSM’s bid of $1.1B for Martek, an algae company (the biggest one, actually) that makes food ingredients and nutrition products, but dabbles in biofuels, as well (BP has a biofuels JDA and $10M investment with Martek). Also, just a few months earlier, DSM bought another nutrition/biofuels company, Microbia.

Why are these transactions important? Because they provide further evidence that traditional chemicals and materials companies are expanding beyond petroleum-based materials and industrial chemicals to get into biotechnology – but they’re not just using small investments in small start-ups to do so. There are two huge strategic drivers behind the trend (see the January 5, 2010 LRBJ – client registration required). First, there’s the erosion of the basic petrochemicals commodity business by new entrants from oil-producing nations, like SABIC; and, second, there’s the opportunity to leverage biotechnology to produce new chemicals and materials at the high-performance edge of the spectrum (see the September 15, 2009 LRBJ – client registration required). With the stakes now in the billions, expect more M&A activity targeting larger biospecialists like Novozymes as the agriculture, chemicals, and energy industries pursue the same opportunities in biomaterials and biofuels.