Solazyme and Mitsui ink a $20M, multi-year pact to develop tailored algal oils

| February 7, 2013

SolazymeNew suite of sustainable, highly functional oils brings significant breakthroughs to the oleochemicals and functional fluids industries

In California, Solazyme and Mitsui announced that they have entered into a $20 million multi-year agreement to jointly develop a suite of triglyceride oils for use primarily in the oleochemical industry. The agreement includes further development of Solazyme’s breakthrough high myristic algal oil, a valuable raw material in the oleochemical industry, as well as additional oils that Solazyme is developing for the oleochemical and industrial sectors.

“Mitsui looks forward to strengthening its position in the oleochemicals industry through the successful development and commercialization of these novel products as a potential source of new sustainable materials to oleochemical companies including Mitsui’s subsidiary, Palm-Oleo Sdn.Bhd.”

Product development is expected to span a multi-year period, with periodic product introductions throughout the term of the joint development alliance. End use applications may include renewable, high-performance polymer additives for plastic applications, aviation lubricants, and toiletry and household products.

Answers to your questions

We had, we’re sure, the same four questions you had when the news came out. How long is the timeline? Is this an equity investment or, more simply, Mitsui funding some product development? Where is the work going to take place – SF or in Brazil, where Mitsui is highly active?

Finally, er, what exactly is myristic algal oil?

Timelines. Solazyme is expecting to start seeing products in late-2014 or early-2015. Beyond that, the company is not disclosing the specific span of the deal beyond multiple years.  Product development is expected to span multiple years, with periodic product introductions throughout the term of the joint development alliance.

The nature of the spend. No specific word from the high priests of South San Francisco — and since we are absent an SEC disclosure of an equity sale, assume this is funding of a development agreement, not an equity injection. Besides, Solazyme is sitting on (relatively speaking, in this young industry) a mountain of cash – why dilute?

The geography. The R&D development will take place in South San Francisco.  As for production, Solazyme has a global network of partnerships and manufacturing sites and could easily produce this oil out of North America and Brazil in the short term, and in Asia, Europe and other geographies as we expand beyond our initial two manufacturing facilities.

Myristic acid. Myristic acid (a fatty acid with 14 carbons and no double bonds) is a valuable specialty chemical ingredient, particularly in personal care markets.  Coconut oil and palm

kernel oil are the dominant sources of myristic acid today, however they each contain relatively minor concentrations of myristic acid.  As a result, there is limited availability of the pure cut myristic acid, even as demand continues to grow.

Reaction from Solazyme and Mitsui

“Mitsui’s extensive knowledge of the end use markets for the jointly-developed triglyceride products, including both the oleochemical industry and applications further downstream, makes Mitsui an ideal fit for Solazyme,” said Jonathan Wolfson, CEO, Solazyme. “We look forward to rapid progress on our research and development efforts, and to commercialize these novel products thereafter.”

“Collaborating with Solazyme allows us to develop highly attractive products to penetrate the traditional oleochemicals industry, and expand beyond the supply limitations caused by both regional oil production and constraints in conventional oil profiles. Solazyme’s flexible manufacturing process and oil tailoring capabilities helps to support long-term competitiveness, independent of price swings inherent to this industry, while allowing us to produce tailored oils that are in demand in the marketplace,” said Mr. Daiji Kojima, General Manager of Specialty chemicals Division, Mitsui.

“Mitsui looks forward to strengthening its position in the oleochemicals industry through the successful development and commercialization of these novel products as a potential source of new sustainable materials to oleochemical companies including Mitsui’s subsidiary, Palm-Oleo Sdn.Bhd.”

Mitsui, of late

Last month, Dow and Mitsui have postponed plans for the ethanol-based plastics production facility they announced in 2007. The $1.5 billion project was meant to break ground in Santa Vitoria, Minas Gerais state this year and with the ethanol plant online before year’s end before bringing on an ethanol-to-ethylene and biopolymers plant. The ethanol part of the project is still on time but the plastics part is on hold.

Also last month, Mitsui Chemicals signed a licensing agreement for their acrylamide (AAM) manufacturing technology, the raw material for poly-acrylamide which is used in wastewater treatment and shale gas mining recovery processes, with Kemira OYJ of Finland.

Last November, BioAmber and Mitsui partnered to build and operate the previously announced manufacturing facility in Sarnia, Ontario, Canada. The initial phase of the facility is expected to have production capacity of 17,000 metric tons of biosuccinic acid and commence commercial production in 2013. The partners intend to subsequently expand capacity and produce 35,000 metric tons of succinic acid and 23,000 metric tons of 1,4 butanediol (BDO) on the site.

The bottom line

A coup for Solazyme and Mitsui, both. For Mitsui, access to potentially transformative opportunities via what Digest readers have consistently rated as the hottest technology around. For Solazyme, a tie-up with an internationally-renowned giant and, like Bunge, heavily invested in Brazil, that oasis of pure cane sugar or — dare we say — the meal that choosy algae moms choose.

But also, keep a close eye on Mitsui’s moves to diversify away from palm oil — without losing the markets that palm oil serves.

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