The Digest has a one-on-one with Genomatica CEO Christophe Schilling to explore the deal in-depth.
In Germany, BASF announced that it plans to begin production of 1,4-butanediol based on renewable feedstock (renewable BDO) using Genomatica’s patented process. The one-step fermentation process is based on sugars as a renewable feedstock.
Timing, feedstock, location, size, cost?
“The BDO plant is subject to market performance,” notes BASF spokesman Klaus-Peter Rieser. ” BASF will in due course announce its decision on the location, capital expenditure and start of construction for the plant. Currently we anticipate a plant capacity of 50,000 tons per year.”
The license agreement allows BASF to build a world-scale production facility that will use the Genomatica process to manufacture BDO based on renewable feedstock.
The BDO Market
In addition to being the leading chemical company, BASF is the largest global producer of BDO.
BDO and its derivatives are widely used for producing plastics, solvents, electronic chemicals and elastic fibers. The starting materials for the production of conventional BDO are natural gas, butane, butadiene and propylene. BASF currently produces BDO and BDO-equivalents at its sites in Ludwigshafen, Germany; Geismar, Louisiana; Chiba, Japan; Kuantan, Malaysia; and Caojing, China, and has an annual capacity of 535,000 metric tons. BASF has recently announced the intention of building a BDO complex in China with a capacity of 100,000 annual metric tons.
Under the terms of the agreement, Genomatica will continue to advance its patented renewable BDO production process technology based on sugars while BASF will produce renewable BDO, which will be available in the second half of 2013 for sampling and trials.
“We chose the Genomatica process because we consider it to be exceptionally advanced and reliable,” said Sanjeev Gandhi, President of BASF Intermediates division, and added: “In line with our ‘We create chemistry’ strategy, we aim to offer renewable BDO and create additional value for our customers, in the plastics, textile and automotive industries.”
One on One with Genomatica CEO Christophe Schilling
BD: Big announcement with BASF. One of several in recent weeks, for example the announcement from Toray that they have made renewable PBT using your BDO as a feedstock. What does the BASF news mean for Genomatica in terms of validation?
CS: When the #1 chemical company and the #1 producer steps up and says that we intend to produce a commercial scale plant, it doesn’t get much more significant than that. In terms of the technology and commercial viability, it’s real recognition, and another great example of momentum for Genomatica.
The impact of demonstration at scale
BD: How important was the demonstration last year – where you produced five million pounds of BDO in a several week campaign – to accelerating the commercial agreements?
CS: Nobody came to us and said “if you can validate the technology at such-and-such a scale, and produce such-and-such quantity, we’ll go with you”, but clearly we knew that the demonstration would be tremendously helpful. Companies like BASF have capabilities around fermentation, but many others don’t, and we have to work to get them comfortable.
Drop-ins vs novel
BD: In renewable BDO, you’re producing a drop-in chemical, as opposed to a novel chemical that has an adoption curve in terms of new applications. How critical are drop-ins to maintaining your pace of commercialization?
CS: We tend to use the term “exact same” instead of drop in, because drop-in can mean different things to different people. Some people said, for example, that ethanol is a drop-in because it can be dropped in to existing infrastructure up to a certain blend. And there’s a line of thinking that succinic is a drop-in, for example, where it can replace adipic.
“Exact same” is critical, we think. That’s been very clearly demonstrated with BDO, where we have tried to show that our BDO could be used in the same exact way — for example, to make all the major derivatives that BDO is used for. So, PBT made with our BDO is an exact equivalent, as we saw with the Toray announcement recently, and that’s critical when you are talking about potential market size.
BDO is a $4B market today, and we can tell our partners, with back-up support, that our BDO can address that market. Not “hope” or “one day” or “could” replace. That’s different than the case with, to use an example, succinic acid. It’s tougher where a customer may find themselves having to move forward based on belief, or based on big market growth.
In the case of our first two molecules [BDO and butadiene], the markets are large, the specs are clear, and if you hit them, people will use your molecule and build plants if the costs are right. You don’t have to do the long slog of building the case for new applications.
BD: Right now you have discussed your work in butadiene and BDO in terms of commercialization. What about other molecules in the future?
CS: We are open up to the possibilities to do more, but before we start on product 3, 4, or 5, what we hope that we have demonstrated is, in terms of developing process technology, “you’ve seen what we did with BDO.” When we go forward with another product, partners can have confidence that we know what we are doing.
The BDO story has a steady drumbeat of progress proving the commercial viability, and we expect to have many announcements in the future. With butadiene or BDO, we now have more understanding of what we do, how we scale, how we carry out the work.
BD: Does the BioAmber IPO last week tempt you to reconsider tapping the public markets and an IPO – do you see opportunities for cheap capital there?
CS: I don’t think that BioAmber speaks to cheap capital, to me it speaks to the exact opposite. Particularly in biotech, the market is still in a holding phase. We need to do a better job of showing real credible results, and we really hope we can see more and more results, and a strong set of companies with credibility?
As we think about raising capital, we’re are pretty comfortable where we are, and we think that announcements, for example, like the Versalis JV where we have $20M coming in as non-dilutive capital, that’s the kind we’re looking to bring in, although we keep our eye on the capital markets.
Seeking, keeping talent
BD: We usually talk about these commercial agreements in terms of the impact on the bottom line, for investors, or for the industry, But what about people? How does these announcements impact your ability to source and keep talent?
CS: A lot of people in the industry love the space. We wake up, eat, breathe and sleep the story. But a lot of talent we will ultimately need to bring in don;t operate with that kind of enthusiasm for the space. For example, someone used to licensing petrochemical technology, and doing it for a long time. For them, we’ve got to demonstrate that the technology is going to work. So, these milestones go a long way to help bring those that are new to the field — intrigued, perhaps, but saying “provide me comfort”. When the #1 company steps up and says they’ll be producing, it’s a big statement.
(Note to readers: an earlier version of this story, appearing in the Biofuels Digest newsletter summary, made a garbled reference to an IPO which astute readers will recognize as copy left over from discussion of Friday’s BioAmber IPO, starring this incoherent gem: “the pricing of its initial public offering the underwriters an option for 30 days.” The description is an editing error and not related to Genomatica’s capital raising plans. The Digest regrets the error.)
More background on the story from the Digest
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