The Road Not Taken and Genomatica’s Renewable Chemicals Strategy

11/21/12Follow @bvbigelow

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minority investment in converting a lysine fermentation plant near Venice into a commercial-scale, sustainable butanediol production plant.

Still, Schilling says, “Since we don’t own and operate facilities, we don’t have these large expectations for [capital expenditures] and so the company requires less capital.” CFO Keane adds that as an industry partner, Genomatica’s disruptive technology poses less of a threat, “Because we’re in partnership with the chemical industry, we’re not looking to disrupt. We’re working to transform.”

A few months ago, Genomatica came to its own fork in the road—and decided to forgo its long-planned IPO and instead raise $41.5 million in a new venture round led by Versalis, with existing investors TPG Biotech, Mohr Davidow Ventures, VantagePoint Capital Partners, Draper Fisher Jurvetson, Alloy Ventures, and Waste Management joining in.

Without directly addressing the decision to remain private, Schilling acknowledges that Genomatica has been sensitive to market uncertainties and investor skepticism. Of six public industrial biotech companies (Amyris, Gevo, Codexis, Solazyme, KiOR, and Metabolix), Schilling notes that four have had major execution issues.

“We’re very mindful of that,” he says. “There’s a ‘Show me’ mentality. You’ve got to prove that the technology works at commercial scale.”

As a result, Genomatica is now focusing its resources on process improvements. The additional capital has enabled the company to focus on genetically improving the ability of Genomatica’s microbes to break down cellulosic plants like miscanthus, sawgrass, sweet sorghum, and energy cane, which can be grown at low cost. Extracting what Schilling calls C5 and C6 sugars from such plants can also produce impurities that are toxic, which poses another challenge the company plans to address.

“With biomass as feedstock, the hope is to reduce the cost of production maybe by 50 percent,” Schilling says. Genomatica’s existing technology for producing BDO compares favorably against the petrochemical industry’s current production costs, Schilling says, but the hope is to get even more efficient. “If we can develop our next-generation approach to BDO, we can dramatically lower costs—which would disrupt the market.”

And then there is Genomatica’s pipeline of other products.

“Our intellectual property portfolio covers over 20 basic and intermediate chemicals,” Schilling says. “So we have a lot of opportunities to go after besides BDO and butadiene. The company has a lot of depth in the strategy that we’ve laid out.”

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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