White biotechnology starting to fulfill its potential

Everything will be all white

24 June 2009 00:00  [Source: ICB]

Listen to an interview with Volkert Claasen

Fossil fuels are costly and finite. White biotechnology could be the ideal solution

WHITE BIOTECHNOLOGY has been touted as the next big thing for years but has never quite lived up to its billing as an alternative to key chemical processes.

Finally, thanks to increased consumer awareness and demand for all things green, coupled with advances in technology and political support, its potential is now starting to be realized.

White - or industrial - biotechnology is the use of living cells or enzymes to create products that would typically require petroleum-based feedstocks. White biotech can therefore reduce pollution and waste, while minimizing energy and raw material use.

Applications are varied, ranging from biofuels and chemicals to pharmaceuticals and food nutrients.

"I think that the technology is finally there. That is probably the most pivotal thing but on top of that, the political environment is very favorable in the US and Europe but even in China right now," says Volkert Claassen, head of white biotechnology at Dutch life sciences and materials sciences company DSM.

"You also see that consumers are much more interested in this whole opportunity; there is a lot of awareness that biodegradable products are important," he adds.

Nevertheless, the sector still faces plenty of challenges. The economic situation is not helping, making it tough to access sufficient capital. White biotech does not come cheap, requiring companies to commit to a considerable outlay, he says.

"You've got to put a lot of money in before you have a proof of concept," says Claassen. "If you look at DSM's portfolio, our general research and development is a lot less risky than this category. The challenge we face is how to find the right risk/reward profile, otherwise I don't think we could justify it. The chances that this program will succeed are a lot lower than our typical programs."

Although its development is clearly more problematic for companies in the current financial climate, it is important not to lose sight of the fundamental issues that will remain after the crisis, he says.

"Ultimately, we believe that the problems we're addressing are not going to go away. We don't know when the economy will recover but it is a fact that there are more and more people in China and India who want to drive cars or like to eat meat, for example - there is an emerging middle class that will have requirements not too different from what we have in the West. In the end, demand for all kinds of raw materials is going to grow.

"We believe fundamentally that this is the right direction to take. What won't be good is if after this economic crisis we are still as dependent on oil; we really need to try to change the rules right now. This is the opportunity. We want to come out of this crisis much stronger than we went in."

Global consultancy McKinsey & Co. forecasts that white biotech chemical sales will grow from €100bn ($143bn) in 2007, to more than €150bn by 2012. Around 5% of chemicals are bio-based, and this is expected to double over that same period, says Claassen.

Nevertheless, the sector has far greater potential, he adds. Some 75% of all chemicals handled by the Port of Rotterdam harbor, for example, could eventually be bio-based. "Will that happen in its totality? Probably not but it clearly shows that we can go much further than 10%," he says.

However, Europe will almost certainly have to do better if it is to continue its growth and remain at the forefront of the sector.

In March, DSM's CEO Feike Sijbesma warned that Europe's lack of investment in renewable chemical and biofuels technologies was putting it in danger of lagging behind countries such as the US.

"When it comes to investments in bio-based hardware and production, I don't think it's going too well in Europe," says Claassen.

"The vast majority is related to bioethanol, and that's really a US business. US companies remain far ahead, but when you look at the enzyme industry, the most important companies are all European. I do think that the knowledge base in Europe is certainly quite strong, but the real issue is where this will all be applied commercially."

Perhaps the main reason for this, he says, is that the policies of the EU are not always as clear and focused as they are elsewhere. The development of white biotech in the EU is extremely complex because there are so many parties involved - all the member states, different frameworks and working practices.

"Given the very high risk profile of all these endeavors, it's not easy," he says. "The EU could maybe benefit from being more transparent and there being a more equal playing field. Maybe they could take what is happening in the US as a model?"

For now, DSM - along with its French partner, Roquette - remains focused on the development of a demonstration plant that would produce succinic acid derived from starch.

Claassen says that the facility in Lestrem, France, is scheduled to come on stream later this year with the first material emerging in the first quarter 2010.

Initially, the plant's annual output will amount to only a few hundred tonnes, although this could soon be ramped up to "more significant" volumes. Claassen suggests that decisions would be made in the second half of 2010.

"Realistically we need at least minimum of one year to seek responses from market," he said. "At some point you need to bite the bullet, and say okay, we have some positive responses from the market and you need to scale this up. That's another challenge in the current economical times."

Succinic acid has numerous applications in the pharmaceuticals, detergents, food and automotive sectors. It is also as an intermediate for the production of some high-performance polymers.

In early June, DSM also revealed that it had acquired German biogas firm Biopract for an undisclosed sum.

The company said the acquisition of privately held Biopract would serve as an entry point for DSM into the biogas market, which is showing 15-20% growth each year.

Biogas is produced by anaerobic fermentation of biodegradable materials such as biomass, manure or sewage, green waste and energy crops. It can be used to generate electricity and as a low-cost fuel for heating.

"The big impact of biotech is still to come. We're now seeing a lot of people investing but it will take some time to really create a significant business out of this," says Claassen.

"We have always said that we're in this for the long haul and we're trying not to be distracted by what are obviously difficult times. If you look at DSM, 80% of our revenue is somehow based on oil and a big part is going towards automotive and construction. It is no secret that this part of the business is not going too well. Nevertheless we have taken this strategic position and white biotech is really what links our life sciences businesses and materials business together."

By: Andy Brice
+44 20 8652 3214

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