Tag Archives: Solazyme

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

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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.

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

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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.”

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Investors pump $930 million into alternative fuel technologies

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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.

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Materials suppliers follow consumer brand owners into synthetic biology

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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.

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

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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.

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Solazyme files for IPO

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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.

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

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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.”

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Tate & Lyle and Roquette take synthetic biology further into food, personal care, and agriculture

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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.

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EPA’s 2011 blending mandates signal a wake-up call for cellulosic biofuels

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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.

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