Genomatica and Tate & Lyle Form Strategic Partnership as CEO Explains “Feedstock Strategy”

3/15/11Follow @bvbigelow

The past couple of months have been busy for San Diego’s Genomatica, which is announcing a strategic partnership today with Tate & Lyle (LSE: TATE), a London-based food and industrial products manufacturer with extensive U.S. operations.

Just two weeks ago, Genomatica revealed it had raised $45 million in venture capital, bringing the company’s total financing to $84 million since inception. One of the key points of the recent round is that Genomatica brought in a couple of strategic investors: Bright Capital is the venture arm of RU-COM group, a diversified Russian business group with investments in industrial engineering and construction management in agriculture and other industries; and Waste Management (NYSE: WM), a leading provider of garbage management services in North America. The round also included a new venture investor, VantagePoint Venture Partners of San Bruno, CA, and existing investors Alloy Ventures, Draper Fisher Jurvetson, Mohr Davidow Ventures, and TPG Biotech.

In early February, Genomatica also disclosed a strategic partnership with Waste Management to develop ways of making basic and intermediate industrial chemicals from syngas produced from municipal solid waste.

Now, with the Tate & Lyle strategic partnership, the full scope of Genomatica’s strategy is coming into view. Genomatica CEO Christophe Schilling, said in a recent interview that Tate & Lyle has extensive experience in building and operating “corn wet mills” that are used to make high fructose corn syrup and related industrial starches.

“They have a proven track record in scaling up fermentation processes,” Schilling said. “They also have some direct experience with chemicals that are related to BDO, using a facility in Decatur, IL.”

BDO, the industry shorthand for 1,4-butanediol, is an intermediate industrial chemical used to make spandex, automotive plastics, running shoes, and other products. Major chemical companies use petroleum-based feedstocks to make BDO. But Genomatica showed last year it can make “Bio-BDO,” using genetically engineered microbes and dextrose (from corn syrup) and sucrose (from sugar cane) in 3,000-liter fermentation tanks.

So the strategic partnership with Tate & Lyle represents the part everyone was waiting for, as Genomatica scales up its technology to make BDO in 13,000-liter batches at a Tate & Lyle facility in Decatur, IL. “We’ll have a fully integrated demonstration plant there by the end of the third quarter,” Schilling said. More importantly, he added, is that the fermenters will be fully integrated with Tate & Lyle’s corn wet mill operation at the same facility, providing easy access to a renewable source of sugar feedstock at a relatively low cost.

Christophe Schilling

Genomatica plans to ship large-volume samples of Bio-BDO made in Decatur to companies that usually get their BDO feedstock from petrochemical companies. “The key is to make BDO, and giving it to our customers and letting them use it to make products,” Schilling said. The recent $45 million infusion “is everything we need to do that, and more,” he added. A successful demonstration of producing large-volume quantities also validates the basic engineering as Genomatica then moves to construction of its first commercial-scale bio-BDO plant.

Tate & Lyle “are not looking to become producers of chemicals,” Schilling said. “They’re looking to leverage their expertise and feedstock materials, which are used to make gluten, animal feed, and ethanol, among other things. Creating new markets for its high-fructose corn syrup also comes at an ideal time, as nutritionists and health experts increasingly raise concerns about the prevalence of corn syrup in American diets, which many believe is a prime reason the nation suffers from an epidemic of obesity and diabetes.

“ADM, Cargill, and Tate & Lyle are the big corn mills, and for them, the key to a successful operation is keeping the ‘grind rate’ high, and so they’re looking for alternate markets” Schilling says. “We represent a great opportunity to put that sugar to use.”

From there, Schilling says the next step for Genomatica is to explore the use of lower-cost sugars from biomass sorghum, energy cane, switchgrass, and related cellulosic biomass. “I’m optimistic that we’ll be announcing some pretty significant partnerships in that area as well,” Schilling said.

Beyond cellulosic biomass, though, Schilling said Genomatica is undertaking research and development to develop syngas (a mixture of carbon monoxide and hydrogen) that represents the potentially lowest-cost feedstock for making intermediate industrial chemicals. In this respect, Schilling said, “Waste Management is an ideal partner for us. The have a fascinating strategy that’s really forward-looking in terms of using their waste streams at landfills.”

Waste Management already captures enormous quantities of methane gas that’s produced by decomposing organic matter, and has been developing plans to produce syngas by burning municipal solid waste to extremely high temperatures.

Schilling said Syngas is traditionally used to make methanol, one of the top seven most commonly used basic industrial chemicals. Syngas also can be converted into diesel fuel, using “Fischer-Tropsch chemistry.”

“Where we come in is to take syngas and develop ways to make higher-value chemicals, which represent the highest value per ton,” Schilling said. In short, he said Genomatica’s “feedstock strategy” is to make industrial chemicals from sugars today, from biomass tomorrow, and from syngas in the future. Using Genomatica’s expertise in computational modeling, Schilling said, “We can identify the best ways to use syngas as a raw material. It really opens the door to a whole range of other opportunities—and using biology to make target chemicals offers certain advantages over chemistry.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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