Tag Archives: Solazyme

Growth Beyond First-Generation Bio-based Products Drives the Industry Towards a 13.2 Million MT Capacity in 2017

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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 VCs Retreat Four New, Nimble Innovation Funding Structures Step In

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Venture capital is seemingly synonymous with innovation. Venture-backed software companies like Google, Facebook, and Twitter have launched products that billions of consumers use on a daily basis, and their funders have reaped huge dividends.  VC has also catalyzed successful biotech and cleantech companies like Genentech and Solazyme. Thousands of important, successful companies would not exist if it had not been for venture investors providing funding and business acumen to entrepreneurs and inventors.

And that’s why it’s so worrisome that traditional Venture Capitalists are in increasingly obvious retreat. Over the past five years:

  • VCs are doing less: dollars and deal count are down. According to the National Venture Capital Association (NVCA), venture funds peaked in 2011 with $29.7 billion going into 3986 deals. In 2012 they fell to $27 billion, in 3796 deals; and while 2013 is not wrapped, it looks to be a down year again. And VCs are raising less money to invest; through September this year they had brought in $11.6 billion, a plunge from $16.2 billion in the first nine months of 2012. In fact, for 11 of the past 13 years, VCs invested more money than they raised. All these declining numbers point to a long-term shrinkage of VC – meaning less money and mentorship for innovation.
  • VCs are struggling to create value, especially outside software and drugs. Medical biotech and software have long been the dominant categories of VC investment (taking about 15% and 60% respectively). But with global warming fears and oil prices soaring from 2005-2008, many investors briefly branched out into “cleantech.” For example, VC Khosla just put another $50 million into its biofuels maker KiOR (client registration required), which has been on a downward spiral of missed production milestones, producing just 80,000 gallons to date this year (it claimed it would produce more than 3 million gallons by the end of 2013). VCs’ other forays (client registration required) into areas like nanomaterials have fared similarly. Sadly, the only return on many of those investments was to make VCs realize that they don’t understand the science, engineering, and economic constraints on the technology, and even if they did, commercializing it takes too long for VCs to wait.

Fortunately, several alternatives to traditional venture capital are arising to take up the slack. Where will they complement VC, and where will they replace it?

  • Corporate VC invests $5 billion: Corporate VCs like Intel Capital, BASF Ventures, and Monsanto Growth Ventures are large corporations’ way of staying abreast of, and investing in, promising new technologies they find. Last year they invested about $3-5 billion – less than a fourth of conventional VC, but CVCs put it towards areas like industrial and agricultural technology that traditional VCs don’t know how to commercialize.
  • Conscious Capital (aka “impact investment”) grows to $9 billion: As legendary investor Warren Buffett recently argued in a New York Times op/ed article, charity has the potential to better achieve its goals if it adopts more business-minded principles. JP Morgan recently estimated that impact investment will grow by 12.5% this year to $9 billion. And many super-successful entrepreneurs like Jeff Bezos (Amazon), Elon Musk and Peter Thiel (PayPal), and Richard Branson set aside money for pursuing technically audacious goals (client registration required). VCs can’t make such long-term, high-risk bets with their partners’ money, but firms like Bezos Expeditions, Breakout Labs, and the Skoll Foundation can. They are investing in companies like Modern Meadow (client registration required) (which grows meat from cells, lowering the need for both natural resources and animal suffering) and D-Wave (client registration required), the world’s only quantum computer manufacturer.
  • Competitions bring in $2 billion, but have outsized impact: Like business-minded conscience capital, innovation competitions are based on the premise that competing for investment makes the recipients stronger. While high-profile programs like the X Prize and NASA Centennial Challenges are the best-known, the Institute for Competition Sciences, which documents data and best practices in the area, estimates that 30,000 competitions take place worldwide annually. While they are a smaller slice of the overall dollar pie and seldom can fund an innovation entirely, they amplify the value of all other investments into the organization.
  • Crowdfunding bringing $5 billion: Sites like Kickstarter and Indiegogo help small entrepreneurs and inventors to get seed money from thousands of individuals, usually in exchange for the product or merchandise like stickers and t-shirts. Then there are “pure science” crowdfunding sites like Microryza, FundaGeek, and Petridish.org which seek to support experiments and research that may or may not have a tangible return to the donor. Crowdfunding brought innovators some $1.5 billion in 2011, $3 billion in 2012, and will hit $5 billion this year. As with other sources, Crowdfunding’s biggest benefit is not the money – the fundraising campaign brings publicity, customer input, and community-building all at once.

Venture capital is slowly shrinking, while the four new forms of funding – Corporate VC, Competitions, Conscious Capital, and Crowdfunding – are set to pass $20 billion in aggregate, and are growing, fast. In fact, it seems inevitable that they will surpass VC in the coming year or soon thereafter. It’s important to keep in mind that these new forms of funding can both complement traditional venture investment, as well as compete with it by offering better terms inventors and entrepreneurs. Whether they are competing or collaborating, innovation can only benefit from these novel approaches.

Alternative Fuels: Rating Bioprocessing Companies on the Lux Innovative Grid

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.

Unilever and Solazyme double down as “green” consumer spending wilts

California-based biotechnology firm Solazyme recently extended its commercial agreement with consumer care giant, Unilever. The two companies have been working together since 2009 to leverage Solazyme’s tailored algal oils* for use in Unilever’s soap and personal care products.*

Upon completion of the development agreement, the two parties will enter a multi-year supply agreement that calls for Solazyme to supply Unilever with commercial quantities of renewable oil. That will help Unilever further lay the groundwork for its Sustainable Living Plan, under which it aims to derive 100% of its agricultural raw materials from sustainable sources by 2020. The extension of the partnership between Solazyme and Unilever underscores* the convergence* of synthetic biology and the personal care industry.

Although some personal care manufacturers have successfully charged a premium for their products, most green product manufacturers have not fared as well. During the recession, green products have experienced a higher drop in sales compared to conventional products, suggesting that although consumers want to appease their eco-conscience, they aren’t willing to sacrifice performance or price. Despite the growing number of green formulations, they still represent a small percentage of the overall market. Most manufacturers are focusing instead on bio-based packaging to position themselves as environmentally conscious, even going as far as to absorb the premium themselves. The trend is also* evident* in the food and beverage industry, and more recently the telecommunications industry.* As the recession tightens consumer spending, bio-based products must offer increased performance to incentivize consumers to make the switch.

* Client registration required.

The boom in bio-based materials and chemicals is really a boom in synthetic biology

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.”

Investors pump $930 million into alternative fuel technologies

Graphic of the WeekIn 2010, investors gave $930 million to alternative fuels start-ups, a four-year low. However, investment climbed dramatically to an all-time high of $698 million for companies with flexible technologies that can use a variety of feedstocks or generate diverse end products. Flexibility increases a technology’s addressable market, provides secondary revenue streams, and unshackles technologies from price volatility.

Specifically, synthetic biology start-ups – which develop novel organisms ranging from Escherichia coli (E. coli) to yeast – have attracted the most funding since 2004: $1.84 billion or 28.4% of the total. Investment dipped just 16.7% from $436.5 million in 2007 to $358.3 million in 2009, and investments actually peaked last year at $447.0 million, representing 25% growth over 2009. Driving this growth were companies with novel and flexible technologies to make both fuels and chemicals, such as Solazyme ($60 million Series D), LanzaTech ($18 million Series B), and LS9 ($30 million Series D). Since those 2010 transactions, Solazyme and several other venture-backed companies in the space have launched successful IPOs (Client registration required).

But investors shouldn’t ignore other flexible technologies. Investment in thermochemical processes (pyrolysis, gasification, torrefaction) did not trail far behind synbio. Technologies in this category account for 43.3% of the funding thus far in 2011. Representative companies include Virent and Elevance, whose catalytic processes produce a range of fuels, rubbers, oils, and plastics. Technologies capable of using agricultural, solid, or gaseous waste, such as LanzaTech, GlycosBio, and Ignite Energy, present further opportunities for investors.

Materials suppliers follow consumer brand owners into synthetic biology

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.

Lastly, we noted that Roquette’s partnership with Solazyme* has deepened into a JV, as successful partnerships often do (see the report: “Green Materials’ Social Networks”)*.

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.

Billion-dollar bio-based chemicals IPO window is open, as Solazyme IPOs and Myriant files

Solazyme’s much-anticipated initial public offering (IPO) finally happened last Friday, selling about 11 million shares at $18 – raising $198 million in total, twice what it expected when it filed (see the March 29, 2011 LRMCJ – client registration required). Today the stock is trading up 20% at about $22, for a valuation of $1.3 billion.

While that dwarfs Gevo (trading at 30% above its IPO price, valuation at $475 million), it’s comparable to Amyris (trading at twice its IPO price, valuation at $1.3 billion). All of this bodes well for the next bio-based chemicals IPO, Myriant, which which announced its filing last week and is looking to raise $125 million. Myriant recently took in $60 million from PTT Chemicals and started constructing a plant in Louisiana, due to open in 2013 (see the  January 13, 2011 LRMCJ and the January 27, 2011 LRMCJ – client registration required). Among the notable data in the filing is a memorandum with China National BlueStar Group for a “jointly-owned, 220-million-pound biosuccinic acid plant in Nanjing, China, and an agreement for the exclusive supply of biosuccinic acid to BlueStar.”

We’ve noted the importance of startups’ “social network” of partnerships (see the report “Green Materials’ Social Networks”), and clients might rightly compare the soaring valuations of bio-based fuels and chemicals with the increasingly frenzied valuations of actual social networking companies of LinkedIn (post-IPO valuation of $7.3 billion), Skype (bought by Microsoft for $8.5 billion), and Facebook (valued at $50 billion in its last round of fundraising). There is undeniable hype driving both fields today, and investors should take a cautious stance based on the companies’ partnerships, plants, and future plans. While bio-based chemical and fuel companies have long-term contracts and hard assets that social networking sites don’t, the real long-term driver of their success will be the difference between their feedstock and manufacturing costs and oil prices; the former are declining predictably with scale and the latter looks to rise for some time to come.

Solazyme files for IPO

As we mentioned in an earlier post, Solazyme recently filed for an initial public offering (IPO) targeting $100 million. This wasn’t a surprise: Just as we had seen Amyris form multiple strong partnerships in the months leading up to its IPO (see the July 6, 2010 LRBJ*), Solazyme’s been revving up its own stable of new partnerships. It’s been forging partnerships in fuels and chemicals more intensely in recent months than it has throughout its lifetime. Since September, the company has inked deals with Bunge, Unilever, and Roquette (see the September 14, 2010 LRBJ* and the November 9, 2010 LRBJ*) on top of existing relationships with companies like Chevron, Honeywell, Abengoa, and Virgin (see the August 17, 2010 LRBJ*), and a joint development agreement with Dow announced last week.

Some highlights from the company’s S-1 include the company’s claims that it has already achieved “attractive margins when utilizing partner and contract manufacturing for the nutrition and skin and personal care markets,” and that it believes it can undercut fuels “when we commence production in larger-scale, built-for-purpose commercial manufacturing facilities utilizing sugarcane feedstock,” citing oils at a cost below $1,000 per metric ton, $3.44 per gallon, or $0.91 per liter.

Solazyme also notes that its Roquette JV will fund an approximately 50,000 metric-ton-per-year facility for nutrition products, which would be the first serious challenge to DSM-owned Martek (see the January 13, 2011 LRMCJ*). The company also mentioned a deal with Colombia’s national oil company (NOC), Ecopetrol, and a Brazilian letter of intent to form a JV that would add capacity of 400,000 metric tons of oil per year – nearly a thousandfold increase over the 455 metric tons the company produced in 2010.

But for all its strengths, Solazyme still lost $16 million last year on $39 million in revenue. By comparison, Amyris brought in $65 million in 2009, the year before its IPO.

While there are always reasons to be cautious when a loss-making company files for an IPO, one of the biggest challenges Solazyme will face is the public market’s mistaken association of its technology with older technologies like corn ethanol or dodgy algae developers. Solazyme is indeed an algae company. But it is wholly different from certain competitors, whose reliance on hype rather than commercially viable technologies poison the pond (pun intended) for legitimate players like Solazyme, Phycal, and Algenol (see the November 13, 2010 LRBJ*, the August 17, 2010 LRBJ*, and the March 10, 2009 LRBJ*). Gevo and Amyris represent better comparisons for Solazyme, and both had relatively successful IPOs (see the October 12, 2010 LRBJ* and the February 10, 2011 LRMCJ*). 

* Client registration required.

Biofuels: Synthetic biology leads in investment dollars, but will it deliver?

Biofuels: Synthetic biology leads in investment dollars, but will it deliver?Although synthetic biology companies trail other biofuel firms in terms of commercialization and scale, their flashy claims of spinning custom-built microbes into complex chemicals and drop-in fuels have captured the attention and dollars of investors. Last year, we saw LS9 and Solazyme, among others, secure large funding rounds. Additionally, Amyris Biotechnologies successfully launched the market segment’s first IPO. Gevo followed suit with a February IPO, in which it raised $107 million. And, just last week, Solazyme filed its own plans for public launch, with aims to raise $100 million.

As our Lux Innovative Grid for synbio indicates, many competitors land in the Undistinguished and Long-shot quadrants – although plenty of potential contenders join Amyris, Gevo and Solazyme in the Dominant quadrant.

In addition to its spot in the Dominant quadrant here, relative newcomer BioAmber occupies a similar position in our Grid for the Fermentation segment of biofuels. While it’s focused on the production of succinic acid – a flavoring agent, plasticizer, and coating, among other things – the firm’s genetic modification technology also applies to the fermentation of adipic acid, which was the focus of a recently signed licensing agreement. Its position in the Dominant quadrant here stems from a high business execution score due, in part, to strong partnerships with Mitsui, Samsung Ventures, and Greenfield Ethanol.

Metabolix and LS9, both of which modify microbes to convert sugar to fuels and chemicals, round out the Dominant quadrant. Metabolix’s main efforts are through a joint venture with ADM to produce polyhydroxyalkanoate (PHA), which is at commercial scale today. Its PHA is used for agricultural mulch film, a polypropylene replacement in consumer products applications, and for packaging applications. LS9’s strong partner list and technology to produce alkanes in single-celled organisms (see the August 3, 2010 LRBJ – client registration required) positions the company among the leaders in the group.

Source: Lux Research report “Today’s Top Technologies in Bioplastics and Biofuels.”