22 April 2002 00:00 [Source: ICB Americas]WITH the chemical industry finding it increasingly harder to generate organic growth and high margins, biotechnology is becoming a key factor in bringing the industry out of the doldrums.
"The time is now for biotech to play a greater role in the chemical industry," said Larry E. Drumm, vice president of business development at Bio-Technical Resources, a division of Arkion Life Sciences LLC. Mr. Drumm spoke at a meeting of the Societe de Chimie Industrielle--American Section in New York last week. "With chemical companies under fire from competition from third world countries, they have to turn somewhere to jump-start profitability."
One key advantage of biotechnology is that it can offer low-cost raw materials--a key driver for the chemical industry. "Chemical companies see cheap raw materials to create new products and functionalities," says Mr. Drumm. While traditional raw material costs for the chemical industry have been rising over time, raw material costs for biotech have been declining.
For example, glucose as produced as a by-product from the corn wet milling process goes for around 6 cents per pound. In the future, it will be produced via cellulose degradation for about half that price.
Most recently, Cargill Dow LLC has teamed up with Codexis Inc., a unit of Maxygen Inc., to develop a novel synthesis for a key raw material for its NatureWorks PLA (polylactide) used to make plastics from biomass.
Since small companies in industries, such as biotechnology, take bigger risks and tend to be more innovative, and large companies are good at marketing, understanding customer needs and bringing products to market, the result has been a growth in partnerships and acquisitions of biotech companies. "The tools of innovation largely lie within these smaller companies," Mr. Drumm points out.
In the chemical industry, companies are clearly accelerating the role of biotech to fuel growth. Traditional companies such as Dow Chemical and DuPont have made a number of acquisitions in biotechnology as well as partnerships. In addition to Cargill Dow, Dow Chemical has formed an industrial enzymes JV with Diversa called Innovase LLC and acquired Cargill Hybrid Seeds and The Collaborative Group's biotechnology services division. European company DSM is transforming itself from a producer of petrochemicals and plastics to one focused on fine chemicals and biotech.
New frontiers in chemical/biotech collaboration are being forged by companies such as Dow Corning Corp. and Genencor International Inc., which in October 2001 formed a $35 million strategic alliance to develop silicon biotechnology to create unique materials.
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