By Pavel Molchanov, Senior Vice President, Raymond James
This week, we attended the Advanced Bioeconomy Leadership Conference, a major annual gathering of firms in the bioindustrial space. As we noted in our conference recap from March 2015, the industry’s focus had been pivoting away from transportation fuels well before the oil meltdown began in mid-2014. In this sense, the oil price landscape – which, needless to say, is even worse now than a year ago – is not as impactful as it might seem at first glance. The changed oil price environment is, however, accelerating the shift to chemicals and other high-value materials, a shift that had been visible as early as 2012. This report has our latest thoughts.
Five years ago, there was a spurt of IPOs in the bioindustrial space. In the space of about a year, from mid-2010 through mid-2011, five companies went public, each highlighting fuels as the top driver, or at least a major one, of their medium-term business mix. The fact that none of these IPOs have made investors money is hardly a secret, but what we want to highlight is the evolution of each company’s business focus. Codexis originally had a cellulosic biofuel R&D partnership with Shell. In the years after Shell pulled the plug on that in 2012, Codexis reverted back to its legacy business of supplying biocatalysts to the pharma industry.
Amyris began with a multi-faceted business model, encompassing both fuels and specialty products. After running into scale-up issues starting in 2012, Amyris has deemphasized fuels (though it still has a renewable diesel JV with Total and some biojet sales to airlines), while entering new verticals such as nutrition and cleaning products. Similarly, Solazyme laid out both fuel and non- fuel opportunities from day one, but its fuel initiatives as a public company have been limited to small-scale sales
to the military and UPS. Facing its own scale-up issues, Solazyme has increasingly focused on its skincare product line and other high- value markets. Finally, Gevo and KiOR are the counterexamples, having stayed consistent with their original focus on fuels. As a practical matter, KiOR (bankruptcy in 2014) had a catalytic platform that simply didn’t lend itself to specialty applications. Gevo, meanwhile, has been running its one isobutanol plant primarily as a corn ethanol plant to improve utilization after running into contamination and production cost troubles.