Levine to succeed Warner as CEO of Sapphire Energy: new commercial era begins

July 28, 2014 |

sapphire-BarrelsFormer Verenium CEO and Goldman exec ushers in new commercial era at Sapphire, as CJ Warner relinquishes CEO title, remaining as Chairman.

In California, the Digest learned that James “Jamie” Levine has been appointed CEO of Sapphire Energym succeeding Cynthia J. “CJ” Warner, who will remain the company’s chairman.

Levine, a former Goldman exec, took the reins at Verenium in 2009 after Carlos Riva’s departure, and immediately cemented a reputation there as a dealmaker.

Under his leadership, Verenium sold its Vercipia interests to BP for $98M, the sale of its oilseed processing enzymes business, including Purifine to DSM for $35M — and finally, the sale of the the rest of the company to BASF last year for $51 million. The stock never recovered anywhere near the value it had in the days of the initial enthusiasm over the merger of Celunol and Diversa that created Verenium in the first place — but the company did well in its last three years, considering BP Biofuels’ decision to hold off on building the commercial-scale cellulosic ethanol plant for which Vercipia was created.

Looking at the announcement

The official announcement is, as structured, a little puzzling.

It reads: “Sapphire Energy, Inc., a global leader of algae cultivation technologies, today announced the appointment of biotechnology veteran James Levine as president, CEO and member of the board of directors. Levine replaces Cynthia ‘CJ’ Warner, who is stepping down from her post effective immediately. She will remain chairman of the company’s board of directors.

“The impact of CJ’s leadership on Sapphire Energy’s mission to deliver commercial scale algae-based fuels has been tremendous, from overseeing the build out and commencement of operations at the world’s first algae-to-energy facility in New Mexico to securing key partnerships with some of the world’s top oil and gas refiners,” said Robert Shapiro, a member of Sapphire Energy’s Board of Directors.  “We’re very grateful for all that she’s done, and look forward to her continued work with the company as board chairman.”

Everyone I know who read the release here in Digestville inferred that Warner had been let go. “Stepping down immediately”, and structuring comments from board members Bob Shapiro and Bob Nelsen, but including nothing from the company’s chairman, welcoming a successor — well that tipped the scales for the Digesterati.

Adding some fuel to that fire: rumors had been swirling for months regarding Sapphire’s direction, and the usual sniping about companies with big burn-rates of the “how long can they go on?” variety. A major layoff that the company chose not to put some structure around, and a general absence of news from what has been, in many ways, the signature algae-based biofuels company — well, those made for rumors, too.  In particular — given Sapphire’s burn-rate as a company that has built an entire synthetic biology platform for algae, almost from scratch — we hadn’t heard any financing events since April 2012, when the company raised $144 million in its Series C.

But don’t believe it.

The transition from Jason Pyle’s tenure as CEO to CJ Warner’s term in office had been in the works for six months before it was officially dropped on the industry like a bombshell. This  too. Digest sources say that this move has been underway fro some time — and that Warner is heading back full-time into the petroleum industry with what has been described as a key and exciting role that we’ll hear more about down the line.

The company’s level of financial secrecy and the evolution of its leadership has always been quirky.

As some readers may recall, at one stage Jason Pyle was CEO and president; then Jason was CEO and CJ was president. Then Jason was CEO and CJ was president and chairman. Then CJ was chairman and CEO, and Jim Lambright came in as CFO and president, international (when the company didn’t have any international operations at the time). Now, CJ relinquishes the CEO title but remains chairman. Sapphire doesn’t play much “follow the leader” and the way the titles are handed around

What is clear is this: the investors are getting antsy about something in changing from a consummate builder of scaled-technology in CJ Warner  to a consummate dealmaker in Jamie Levine. Just as they shifted when moving from Jason Pyle, the consummate builder of synthetic biology platform, to Warner back in 2012. That something is ensuring that there is deal flow that matches the technology flow, and the gallon flow — deal flow that brings dollars and markets.

New directions? Jamie Levine speaks with the Digest

Right away, Levine found positive differentiation in comparing his arrival at Verenium with arrival at Sapphire.

“I’m coming in with a supportive investor group, instead of long short hedge funds owning more than $100 million of the company’s debt and equity instruments. There’s been a thoughtful process on how to capitalize this company.”

“What the two company share is that they both have an incredible technology and platform and the question is: how do we get the most value for the company, the employees, the potential partners. I’m an MBA, not a tech guy, and I’m not going to find new places to build technology and new areas to take this platform. What’s the value here today, is the question.”

“The Sinopec partnership is an example of what has to come. You can’t do great things alone, you have to work with others well, and find the right kinds of partnership. It’s about getting the right motivations for a partnership, which starts with recognizing that Sapphire has a lot of solutions to very big problems, and we have to find those partners for who we can solve that problem.

So, who has a problem for which green crude is the solution? China is one geography of several where that could prove to be the case. It’s not just picking an illustrious name, but finding partners who really are invested.”

How do you do that?

“It’s not a cookie cutter approach. If you compare how Verenium worked with DuPont vs Novus – it was very different. But it’s all about structuring incentives that last, that align the companies for the long-term, and survive changes.”

Financial incentives?

“The success of the partnership is important to the partner, but the success has to be important to our partner as a person, important to their career. People like Sue Ellerbusch at BP, in the case of Verenium, were invested persoanlly in seeing our partnership become a success.

“Then you have to get down to the details, how are we going to set up operating committee, and a steering committee. What’s the purpose of each, how does everyone work together functionally.”

What kind of changes can we expect to see? New deals, new markets? One, many?

“You can’t be in hands of shell if you’re Codexis, so sometimes the answer is to have multiple opportunities and partners. That could be green crude in different geographies, could be other products. First day, there are no changes being announced, but as a new CEO you can bet I am looking to understand where this business can go.”

Multiple products and markets — have you ruled anything in or out?

“Nothing’s ruled in or out. Big Oil can be an excellent partner, so it could be traditional companies, but we also have to look outside. Right now, a concern I have is that Big Oil doesn’t see a compelling problem right now, so I’m not betting on it. But green crude is a route.

“What I see in sapphire is several core capability sets that I believe have strong value, and that algae as a platform has tremendous productivity and inputs if you can get it right. I think that algae can work, i can do something. But let’s see what it can do — and let’s get to turning that into attractive opportunities.

New capital, new investors

“Certainly we have support on the board, and its nice to have strong backers led by CJ. We’re not ruling out sources of capital and being invested in our success with partners means that equity is an effective vehicle for that.

But I’m not making the financial outcome the goal, I want to make the business outcome the goal.

Next steps?

“A lot of planes, a lot of discussions, with companies you knwo, and with companies we haven’t yet talked about. But there’s a lot of internal work to do, people need to know me, know what I see and I need to know them, and this platform.”

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