Green chems lead at BIO event – DAY 1

Last year the talk centered on biofuel challenges at BIO’s World Congress Industrial Biotechnology and Bioprocessing conference but this year a lot of the buzz (at least in my perspective) was centered on renewable-based chemicals and synthetic biology.

DAY 1:

First interesting updates I gathered was about bio-based propylene glycol and a little bit of isosorbide from agribusiness major Archer Daniels Midland (ADM). The company announced that it will start on the fourth quarter of this year its first 100,000 tonne/year glycerine-based propylene glycol facility in Decatur, Illinois, where a 140,000 mt/year refined glycerine facility is already in production since March this year.

ADM said the PG facility also has the ability to use corn-based sorbitol as feedstock. The company is also about to produce 50,000 tonne/year PHA (polyhydroxyalkanoate) bioplastic with its partner Metabolix in Clinton, Iowa, in the fourth quarter. Other renewable chemicals the company are looking into are glycerine-based epichlorohydrin and acrylic acid as well as sorbitol-based isosorbide.

“We see a big opportunity in the chemical space,” said Todd Werpy, vice president of ADM’s advanced biofuels and chemicals business.” If you look at global consumption of oil, only 3.5%-4% is being used by the chemical industry but the value proposition is about $375bn. Oil and transportation made up 70% of petroleum consumption and create a value proposition of $385bn.”

Werpy said they are looking to develop both in the bioadvantaged molecules space such as soy adhesives, isosorbide, soy polyols where the technology don’t have a market space as of yet but; and direct replacement space such as propylene glycol, where the biobased chemicals have to compete with petroleum-based materials.

ADM noted that it already has pilot plant working for bio-based isosorbide and looking for partnership for new applications.

Before attending the lunch plenary session (no rest even during lunch!), I was able to get information about updates on the algae industry as a potential feedstock for biofuels and biochemicals. I will write a separate post for that so stay tune!

During lunch, meanwhile, a consultant from McKinsey & Company reported a not-so-cheerful update about the industrial biotechnology sector mostly due to the current economic recession.

“We’re seeing a significant slowdown of venture capital investment activity. There are still money being spent but not near the levels that they were awhile ago,” said McKinsey principal Bill Caesar. He noted patent activities slowing down as well.

“While the industry itself maybe at this point feel resilient, there’s reason to believe that funding issues are going to be significantly impacted over the next couple of years,” he added.

In a panel session composed of renewable chemical companies Elevance, Genomatica and Myriant, industrial biotech firm Codexis, and bioplastic company NatureWorks, all agreed that the current economic recession has an impact on access to capital although most companies note that their operations have not been significantly impacted as of yet.

Elevance‘s CEO K’Lynne Johnsonnoted that despite the current economic situation, there are stillemerging viable opportunities such as government efforts in increasingstimulus funds for renewables as well as the increasing urgency inreplacing petroleum-based materials. Johnson also noted the importanceof partnership especially with big companies in oil, chem and ag whohave more cash in hand.

“Right now they have a lot more money than us, they have infrastructure and understand the market more,” she added.

GenomaticaCEO Christophe Schilling noted the current financial condition as atime for opportunity and survival of the fittest. While governmentsubsidies and incentives help, he cautioned the need for businessmodels that do not incorporate government intervention, subsidies, etc.

“Government help is a way to bemore opportunistic in these kinds of businesses but bear in mind thatlong term plans can’t be built around government policies,” saidSchilling.

MyriantCEO Stephen Gatto noted the need for similar platforms as traditionalchems to be successful. Development of drop-in renewable-basedintermediate chemicals for building blocks could create instant marketrevenues and minimize risks, he said, as opposed to trying to find newmolecules and finding a market for it.

“We have to get products outthere that are cost-effective and can’t be in subsidy,” said Gatto. “Atleast they have to be able to compete where price of oil is around$40-$50/bbl.”

He also noted the need for continued andsubstantial government role in terms of creating and cementinginvestments through pilot plant programs.

NatureWorks CEO Marc Verbruggen agreed and said that government policies allow emerging industrial biotech companies to take the first step in reaching economy of scale and be cost-competitive.

Codexis CEO Alan Shawpredicted the incoming consolidation period within the industrialbiotech sector parallel to what happened in pharmaceutical and biotechmarkets.

“What the industry isseeing now is lots of consolidation called by lack of financing,” saidShaw. “The technology that the industry have should survive but itmight just not survive within someone else’s company.”

Despitea slightly grim financial outlook predicted for the sector, optimismlingers for each companies that the green blogger interviewed (Q&Acoming soon). According to McKinsey’s Bill Caesar, he expects theeconomics of biobased industries to improve as petroleum prices recover.

“It may take a couple of yearsbut the long term expectations is that we’re going to see expensive oilagain, which is good for this industry. Meanwhile the challenge is howto manage ourselves through this period,” he added.

For ICIS subscribers, you can check out some of my coverage of the event:

Industrial biotech sector facing slowdown challenges

Huge bio-succinic acid plants to be built in 2011 – producers

Genencor to use BioIsoprene to make fuel

Bio-based auto-part suppliers respond to higher demand

Genencor eyes sustainability profit from textile processing market

Algae could be better for chemicals than fuel – Dow Chemical

ADM to start 2 US biobased chemical facilities in late 2009

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