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How next-gen biofuels are faring on the stock market

Katie Fehrenbacher — Sat, 17 Sep 2011 22:18:27 +0000

Both next-gen biofuel and biochemical companies Genomatica and Mascoma have filed notices in recent weeks indicating that they plan to go public some time soon. But how are the other biofuel companies that have gone public in recent months now faring on the stock market? Well, overall the companies are generally down over the past three months, including Amyris, Gevo, Codexis, and Solazyme. The only outlier seems to be Kior, which was down til September, and then jumped up over the past few weeks, most recently getting a boost from a “buy” rating from Deutsche Bank.

Codexis vs Gevo

Solazyme vs Amyris

Kior

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Oil Giant BP Backs Biofuel Startup Verdezyne

Jeff St. John — Mon, 09 May 2011 11:30:18 +0000

Verdezyne, an engineer of yeast that eats plant sugars and excretes biofuel and biochemicals, has just landed an undisclosed investment from British oil giant BP and Dutch biochemicals company DSM. Mark the news down as another biotech-based startup teaming up with the industry incumbents to scale up their green fuels and bio-chemicals.

The undisclosed round will fund the Carlsbad, Calif.-based startup’s operations through the next two years, as well as help it build two pilot plants to churn out both ethanol and adipic acid, a precursor to nylon and other polymers, CEO William Radany said last week. Previous investors Monitor Ventures and OVP Venture Partners also took part in the new round.

As for projects and partnerships with BP and DSM, Radany wouldn’t get into too many specifics, but said Verdezyne was looking at “additional relationships” that could fit into both companies’ broader green fuels and chemicals efforts. “The companies’ technologies seem to be very complimentary,” he said.

A lot of biofuel and biochemical startups are inking partnerships with oil, chemical and consumer products giants, which have deep pockets and a broad distribution channel that can help bring these still expensive and hard-to-make products to market. Amyris has a deal with Procter & Gamble to produce chemicals for consumer products and is working with Brazil-based sugarcane ethanol and electricity company Paraiso Bioenergia. Codexis is working with Shell and Brazilian ethanol giant Cosan on a $12 billion sugarcane-to-biofuel project.

Other such partnerships include Exxon’s $600 million partnership with Craig Venter’s Synthetic Genomics to genetically engineer algae for biofuel, as well as agricultural products giant Cargill’s partnership with Gevo , the Khosla Ventures-backed cellulosic ethanol company that went public in February.

Verdezyne was founded in 2005 as CODA Genomics, a University of California at Irvine spinout that used computational technology to design genes for the research world. Three years ago, the company hired Radany and shifted to the idea of making their own biofuel and biochemicals. The company has raised at least $15 million in a round it began in 2009, and raised a second undisclosed round in November.

Verdezyne has been able to design yeasts that eat both sugars such as glucose and ribose Radany said. Verdezyne has a deal with big yeast maker Lallemand to put Verdezyne’s ethanol-making yeasts into use in a pilot project expected to start later this year. This year will also see the start of another pilot project using yeasts that make adipic acid, which he said the company can do at costs lower than traditional methods using petroleum as a feedstock.

Verdezyne will still need help with breaking down cellulosic (and hemi-cellulosic) materials into the sugars it needs to eat to tackle converting grass, straw, sugar cane stalks and other such tough plant material into chemicals. Interestingly, one of BP’s other big moves into biofuels came in January with its $98 million purchase of Verenium, a startup that makes enzymes that break down cellulosic biomass into sugars — a technology that could be quite complimentary to what Verdezyne can do with sugar feedstocks.

Verdezyne isn’t the only startup with deep expertise in genetic engineering research to seek biofuel and biochemical markets. Genomatica, another startup that started out as a genetic engineering software and technology provider, just landed $45 million to develop microorganisms to convert sugar into chemicals like BDO, and is also working on bugs to turn syngas into chemicals.

Image courtesy of jurvetson via Creative Commons license.

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Amyris Goes Industrial Scale with Bio-Chemical

Jeff St. John — Fri, 29 Apr 2011 12:00:43 +0000

Genetic engineering company Amyris has opened its first industrial scale facility to turn sugarcane syrup into Biofene, a form of the industrial chemical farnesene, which is a fragrant hydrocarbon that’s used to make cosmetics, lubricants and other materials. It’s an important step for the publicly traded next-generation biofuel company, though the company is still a ways from reaching the commercial-scale biofuel production that it hopes to reach next year.

The Emeryville, Calif.-based Amyris got its start engineering bugs to turn sugar into anti-malarial drugs, and still earns revenues on that line of business. But it raised more than $244 million from a long list of investors, including Khosla Ventures and Kleiner Perkins, and went public on the Nasdaq in September, on the hopes of turning sugar into a diesel substitute.

In the meanwhile, however, Amyris makes a good chunk of its revenues by selling other company’s ethanol. While it will be adding revenues from cosmetics and lubricants this year, it doesn’t expect large volumes of biofuels until it opens a biofuel plant with Brazilian sugarcane producer Grupo São Martinho, in the second quarter of 2012, although it may produce smaller quantities of diesel this year, CEO John Melo said in an email.

Biofuel is a tough business for a startup to tackle, and the more promising technologies in the field have quickly formed partnerships with big oil companies to attain the needed scale. Chevron has invested in LS9 and Codexis; and Exxon is in a $600 million partnership with Craig Venter’s Synthetic Genomics to genetically engineer algae for biofuel. Other biofuel startups are inking deals with agriculture giants: Gevo, the Khosla Ventures-backed cellulosic ethanol company that went public this spring, has a partnership with Cargill.

At the same time, many are adjusting their plans to produce lower-volume but higher-value biochemicals to replace a host of industrial chemicals also produced from petroleum. Aurora Biofuels changed its name to Aurora Algae last year to reflect a shift to non-fuel markets. Algae maker Solazyme has long said cosmetics and foods were its first markets before tackling algae fuel, and has an investment from consumer products giant Unilever. Amyris, for its part, has a deal with Procter and Gamble to produce chemicals to fit into its consumer products lines.

Amyris’s new farnesene plant feeds sugar cane syrup into three dedicated 200,000 liter fermenters at a facility owned by Biomin do Brasil Nutriҫão Anima. Farnesene now goes for about $1,000 a gallon, which makes it a lot more profitable than a gallon of fuel substitute, though for a much smaller market.

Amyris hasn’t specified customers for its new production, but says the farnesene can be turned into diesel to help Brazil meet environmental mandates, as well as turned into moisturizing agents for cosmetics and as base oils for lubricants. Amyris is finishing the chemical under an agreement with Glycotech.

Amyris is also working with Brazil-based sugarcane ethanol and electricity company Paraiso Bioenergia, as well as Tate & Lyle Ingredients Americas in the U.S. In the meantime, giants are treading the same ground — Dutch oil gian Shell and Brazilian ethanol/sugarcane giant Cosan plan a $12 billion joint venture to produce biofuel from sugarcane sugars and cellulose.

Image courtesy of Sweeter Alternative via Creative Commons license.

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Codexis CEO: Note to U.S. Govt., Don’t Act Like a VC

Katie Fehrenbacher — Mon, 07 Mar 2011 04:47:44 +0000

The CEO of biocatalyst company Codexis — Alan Shaw — has a message for the U.S. government, and more specifically, the Department of Energy: Don’t act like a venture capitalist. In Shaw’s view, the government has rushed into supporting some early stage renewable energy companies “that clearly haven’t made it,” he told me in an interview at the ARPA-E Summit in Washington DC last week, adding, “I’m not so sure that’s a good use of taxpayers’ money.”

While Shaw didn’t name any specific companies, there’s a decent-sized list that could fit that government-backed, lack of success, bill. For example, biofuels company Range Fuels reportedly is shutting down its plant in Georgia after making just one batch of ethanol, and after having received a DOE grant and a USDA loan guarantee.

Shaw thinks the best endorsement of whether an early stage green technology is real or not is if a real company has endorsed that technology. ” If I was running DOE, I would wait until I could see some significant interaction with industry,” before he supported a company, said Shaw.

It’s no surprise Shaw thinks as much; Codexis has been working with oil giant Shell for years. As this article reports, Shell has invested $350 to $400 million in Codexis, and Shell is essentially outsourcing its biofuels R&D to Codexis. Shaw says:

It’s not for a VC to tell Royal Dutch Shell, ‘you should buy this fuel molecule.’ What the hell does a VC know about fuel molecules?

The difference between the VC approach and what Shaw says Codexis has done, is pretty simple. Codexis has taken strategic investors (Shell), and used what Shaw calls “big brother,” to grow the company. VCs, in comparison, largely opt to “go it alone,” explained Shaw, and can easily get burned in the process.

To be sure, Codexis won’t be commercializing its technology for another 4 to 5 years. The company, which had its IPO almost a year ago, is focusing on both providing its enzymes for cellulosic biomass production (breaking down biomass into sugar, that a company can then make into ethanol), and also bio-based chemicals, like more sustainable chemicals for products like shampoo. Shaw says that by the end of the year, Codexis will announce a major partner for its bio-based chemicals production.

Codexis’ stock is down a bit from its IPO debut of a year ago. The company set final pricing for its IPO on the low end, at just $13 per share for a total of $78 million, and is trading at close to $11 most recently. Shaw says that’s because he’s not actively pumping up the stock.

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Gevo Lowers IPO Target to $100M

Jeff St. John — Wed, 19 Jan 2011 22:25:41 +0000

Biofuel startup Gevo has reduced its target price for its planned IPO, releasing terms Wednesday that set a target price of $13 to $15 a share, according to VentureWire and other news reports. That would raise about $100 million, or $89 million after fees — not as high as the $150 million it first targeted in August, but in line with what an analyst told us to expect from the company back when it first filed its IPO papers.

There was good reason to expect a lower valuation from the Englewood, Colo.-based startup, Lux research analyst Samhitha Udupa told us in August. The company generated $660,000 and lost $19.89 million in 2009, and had accumulated a deficit of $50.3 million as of March 31, 2010. Still, Lux has put Gevo among its top-ranked biofuel startups for the past two years, giving it high marks for its innovative retrofit model toward cheaper production costs.

Gevo, which has backing from Khosla Ventures and Virgin Green Fund, wants to retrofit old corn ethanol plants to turn cellulosic feedstocks like agriculture waste into isobutanol, a fuel additive and precursor to plastics and other products. The startup is retrofitting an ethanol plant in Luverne, Minn. to produce about 18 million gallons of isobutanol per year, and says its retrofit model could allow it to scale up to 50 million gallons-per-year for about $24 million, or 100 million gallons for $40 million to $45 million.

Empty ethanol plants aren’t necessarily hard to come by — oil refining giant Valero bought up seven plants from bankrupt corn-to-ethanol maker VeraSun in 2009. If Gevo meets its new IPO targets, it could command a market value of $349 million, according to Renaissance Capital. The company booked $2 million in sales for the fiscal year ending in September 2010 and has said it has letters of intent from customers including chemical company Lanxess, French oil giant Total’s subsidiary Total Petrochemicals USA, plastic maker Toray Industries, airline company United Air Lines and oil industry technology developer CDtech.

One big question is whether Gevo will tackle the biofuel market right away, or focus on providing isobutanol for the plastics and chemicals industries. The company got EPA clearance to sell its isobutanol as a fuel additive in November, but it is also looking to supply makers of plastics, fibers, rubber and other polymers.

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Biofuels, Bioplastics Startups Getting Sparse, Lux Says

Jeff St. John — Wed, 19 Jan 2011 20:33:32 +0000

The grab bag of biofuel and bioplastics startups available for partnership or acquisition by corporate giants is running dry. That’s the gist of Lux Research’s latest report on the sector, which sees Big Oil and consumer products conglomerates quickly winnowing the field of the best technologies for turning non-food feedstocks into useful hydrocarbons.

Report author Andrew Soare interviewed more than 300 executives for the report, and finds that startups in the field have started to distinguish themselves as winners or losers in terms of larger rounds of investment and corporate partnerships. At the same time, startups are changing their game plans to better fit the difficult market, shifting focus to specialty chemicals and postponing plans for mass-producing biofuels that will have to compete against oil on price.

So who’s on top? As with its report last year on the biofuel sector, Lux pulls together data on revenue per employee, patents, performance metrics, production capacity and the like to place contenders in terms of maturity and potential. Winners in both categories included net-generation biofuel stock market bellwether Amyris, cellulosic waste-to-isobutanol startup Gevo, algae-to-fuel startup Solazyme, long-time cellulosic ethanol developers Mascoma and Poet, and two startups making succinic acid and butanol — U.S.-Canadian firm BioAmber (formerly DNP Green Technology) and China’s Cathay Biotechnologies.

As for low-ranking companies, Lux didn’t pull punches, putting some dozen little-known names in its immature, unpromising quadrant, indicating the judgment that they’re “highly risky as investment, licensing, partnership, or merger and acquisition target(s).” Those included two “caution” warnings for U.K.-based ethanol producer TMO Renewables and French biocatalyst developer Proteus.

Many of the top-ranking startups have deep partnerships with established players in the field. Cellulosic ethanol maker Mascoma just got $50 million from oil refining giant Valero to build a plant in Michigan, along with an agreement to buy the fuel from it. Amyris has backing from French oil giant Total and P&G, Gevo has letters of intent from Total subsidiary Total Petrochemicals and United Air Lines, and Solazyme has investment from Chevron and a partnership with European food and consumer products giant Unilever.

They’re not alone, of course. Craig Venter’s Synthetic Genomics got $300 million from ExxonMobil for algae biofuel research, LS9 has backing from Chevron and products giant Procter & Gamble, and Codexis has pharmaceutical partnerships and a piece of Shell’s massive Brazilian biofuel partnership.

The Lux report breaks down startups according to technologies: fermentation, gasification, synthetic biology, chemical processes, crop enhancement, and algae processes. Some headline-level conclusions include:

Fermentation’s digestion is improving. Companies like TetraVitae and Genomatica are engineering organisms that can eat more and more feedstocks and pump out more and more valuable chemicals, like succinic acid and butanol. Companies emerging from the biotechnology sector like Amyris and Verdezyne are also producing interesting new chemicals.
Gasification is good for waste. It looks like heat beats bugs for converting trash into useful hydrocarbons. Even though that uses a lot more energy, it could be worth its while if startups can squeeze efficiencies out of the process. And remember that trash doesn’t cost anything — in fact, processors can usually get paid by the ton for taking it off the hands of government and private trash management authorities.
Algae hasn’t proven anything yet. Lux says that only a handful of algae-based biofuel startups will survive — the report singles out Solazyme and Algenol — amidst a host of competitors that haven’t solved the key problems of harvesting and processing algae in a cost-effective manner.

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Image courtesy of Argonne National Laboratory via Creative Commons license.

Green IT 2011: China Marches Towards Greentech Dominance

Jeff St. John — Sat, 18 Dec 2010 01:00:06 +0000

The world’s greentech industry is likely meeting the end of 2010 with a mix of relief and trepidation. Clouds are on the horizon for global investment in renewable energy, and VCs fret about realizing returns on their existing investments. Meanwhile, China boasts the world’s largest population and a booming economy, and could go from the world’s leading greentech manufacturer to the world’s leading greentech consumer.

Joule Patents Secret Sauce for Diesel-Excreting Organisms

Jeff St. John — Tue, 14 Sep 2010 20:10:44 +0000

Joule Unlimited promises it can genetically engineer an organism that eats CO2 and produces a drop-in diesel fuel. On Tuesday the company announced that it has landed a patent on its “recombinant biosynthesis” technology, putting it on track to commercialize a feedstock-free process it says can churn out “diesel-range hydrocarbons” for $30 a barrel.

U.S. Patent #7,794,969, AKA “Methods and Compositions for the Recombinant Biosynthesis of n-Alkanes,” covers the Cambridge, Mass.-based startup’s process to engineer “photosynthetic microorganisms for the direct synthesis of diesel molecules.” While other biofuel startups are using genetically engineered organisms to convert sugar into drop-in fuels (see Amyris and Solazyme for examples), Joule says its organisms need only sunlight, water and carbon dioxide — a fact that’s key to its low-cost claims.

Joule’s “helioculture” systems — glass containers of algae and water laid out in a manner similar to solar panels, with pipes to take the resulting biofuel to storage tanks — are meant to be modular and scalable, CEO Bill Sims told us last year. Unlike many other algae biofuel efforts that rely on harvesting and processing the algae to make fuel or other products, Joule’s microorganisms keep pumping out fuel in a continuous process. Craig Venter’s startup Synthetic Genomics is working on engineering algae to do someting similar, and has a $300 million research project underway with oil giant ExxonMobil.

Joule’s pilot project in Leander, Texas is now producing ethanol, rather than diesel, and can produce up to 10,000 gallons per acre per year, though Joule said it’s shooting for 15,000 gallons per acre. As for its diesel product, Joule plans to start pilot production by year’s end and open a commercial plant in 2012.

Joule raised a $30 million series B round in April, adding to the “substantially less than $50 million” CEO Bill Sims said the company had raised as of July 2009, when it came out of stealth. The company was founded in 2007 at the Flagship Venture Labs, an arm of Cambridge-based Flagship Ventures.

Joule’s claims have been greeted with some skepticism by biofuel industry analysts, no doubt making the new patent — along with another on “Hyperphotosynthetic Organisms” approved on August 31, and Joule’s numerous other patent filings — interesting nighttime reading for its biofuel competitors.

Joule’s claim of being able to produce 15,000 gallons of diesel per acre is particularly aggressive. Henrik Scheller, director of cell wall biosynthesis at Lawrence Berkeley National Laboratory’s Joint BioEnergy Institute, has said that algae growing in sunlight can reasonably produce about 4,385 gallons of fuel per acre per year, and that’s by harvesting and processing the algae itself. Joule declined our interview request on Tuesday — we’re curious to hear how the company addresses questions about its high-volume, low-cost claims.

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Cleantech Financing Trends: 2010 & Beyond

Aurora Drops Biofuels For Greener Algae Markets

Jeff St. John — Mon, 13 Sep 2010 07:00:40 +0000

Aurora Biofuels announced Monday that it has changed its name to Aurora Algae, in hopes of finding commercial markets today in turning algae into nutrients and protein products. It’s not exactly a vote of confidence for the short-term plans of algae-based biofuel startups to bring a cost-competitive replacement for fossil fuels to market.

The move — first reported via anonymous sources by Greentech Media last month —makes sense, given the startup’s strengths. Alameda, Calif.-based Aurora’s main technological advantage lies in the work they’ve done to selectively breed strains of algae. Those strains are higher in omega-3 fatty acids than most, and can also out-grow typical strains by a factor of two to one in pilot ponds in Florida and Mexico, CEO Gregg Bafalis tells me. Otherwise, the company is using technologies that have been around for decades: open raceway ponds, well-known algae harvesting crushing techniques, conversion into omega-3 EPA for pharmaceuticals and high-protein feed for fish farms and other purposes.

But while Aurora had first hoped to take its better-growing algae straight to biofuels, it’s decided that the technology for doing so is “really at least several years out,” Bafalis told me. Monday’s shift has been presaged by big changes in the company, with CFO Joe Geesmand and CEO and former Shell veteran Robert Walsh leaving in February, and the company raising $15 million and appointing new CFO Scott McDonald in March. Bafalis, a veteran of both the traditional energy industry and biofuel startup Green Earth Fuels, joined the company in June.

“I’m familiar with biofuels and living off of government subsidies,” he said. “When I joined this company I was concerned with building a business on fundamentals that could stand on their own.” The company hopes to have its first demo facility in Australia, which will use CO2 from natural gas and fertilizer plants to grow algae in eight 1-acre ponds, operating by year’s end, and plans to get to commercial scale by the first quarter of 2013, Bafalis said. While the company does hope to see biofuel made from its algae in the future, that’s off the table for current commercialization plans, Balfalis said.

It’s a hard fact that no algae biofuel company can claim cost-competitive production to date. The key challenges lie in cost-effective ways to harvest the algae from water, and convert it into fats for conversion to fuel, without using more energy at higher cost than you’d yield from the final fuel product.

Other algae startups have targeted markets outside fuel to get started. Solazyme, which has technology for growing algae in the dark by feeding it sugar, has been working to adapt its algae oils for consumer products giant Unilever to replace palm oil, and last week said it had received an undisclosed investment from the consumer products giant. The insight isn’t limited to algae-based biofuels. Khosla Ventures-backed LS9 has a deal to produce industrial chemicals for Procter and Gamble, even as it has continued to claim breakthroughs in turning cellulosic materials into fuels.

These smaller markets could help biofuel companies in their challenge to compete with the fossil fuel industry on its own terms. Not only must biofuels compete with their fossil fuel equivalents, they also have to be able to scale production to the billions of gallons. Without that kind of scalability, most algae biofuel companies are just “playing” with their investors money, according to Craig Venter, whose Synthetic Genomics is in a $600 million algae biofuel research program with ExxonMobil.

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Cleantech Financing Trends: 2010 and Beyond

What Shell’s Brazilian Biofuel Megadeal Means for Codexis

Jeff St. John — Wed, 25 Aug 2010 22:00:07 +0000

Dutch oil giant Shell and Brazilian ethanol giant Cosan sealed the deal Wednesday on a $12 billion joint venture to turn sugarcane into pump-ready fuel. How will the massive partnership affect Codexis, Shell’s biocatalyst partner and recent entrant to the public markets?

Codexis CEO Alan Shaw spoke to us Wednesday, and while he couldn’t say just how the deal would impact the company’s short-term financial picture, he did say that Codexis would be working on converting 100 percent of the sugarcane plant — the one-third that’s sugar, and the rest of the cellulosic material that’s left over — into biodiesel through a direct fermentation process. Just what share of the overall venture’s production might come from Codexis technology in the coming years he couldn’t specify.

Still, Codexis is “already significantly engaged” in the Brazilian project (an MOU was signed in February), and expects to have its technology working there next year, Shaw said. While Shell has turned over its 16-pecent stake in the Redwood City, Calif.-based company to the yet-to-be-named venture, it and other investors (Chevron, Pfizer, General Electric) are holding onto their Codexis stock, he added.

“This joint venture is very much about Shell’s future,” Shaw said. Indeed, Shell says it will invest $2 billion in the project, and will retain rights to buy back Cosan’s half in ten years. The new joint venture is expected to add some 2 billion liters (528 million gallons) of annual production capacity to Cosan’s already existing 18 billion liters (4.75 billion gallons) per year in ethanol sales, and Shell and Cosan together have 4,500 gas stations to sell the fuel.

Shell has had a 3-year partnership with Codexis, and accounted for 76 percent of its revenues in 2009. Codexis was one of the first biofuel startups to link its fortunes so publicly to Big Oil, but it has since been followed by others. IPO candidate Amyris has a partnership with French oil giant Total; Chevron has invested in LS9 and Solazyme as well as in Codexis; and Exxon is in a $600 million partnership with Craig Venter’s Synthetic Genomics to genetically engineer algae for biofuel. Other biofuel startups are inking deals with agriculture giants: Gevo, the Khosla Ventures-backed cellulosic ethanol company that filed for an IPO this month, has a partnership with Cargill.

Shaw said he believes Codexis is ahead of its competitors in getting its technology into the massive refining, transport and distribution networks needed to bring biofuels to market at a scale that matters. “This joint venture is real, it’s happening today, one of the world’s largest oil companies has put its weight behind it,” he said.

Shell also turned over its stake in Canadian biofuel company Iogen Energy, which will also be part of the new joint venture. Codexis is working with that company to turn wheat straw into ethanol, in what Shaw dubbed a “North American solution” to match Brazil’s interest in cellulosic sugarcane waste for fuel.

Beyond its partnerships with Pfizer and other pharmaceutical companies, other projects underway for Codexis include carbon capture, and Shaw said the company expected to announce a “big brother partner” in that field some time this year.

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Report: Cleantech Financing Trends: 2010 and Beyond