Solazyme Bets on Cosmetics Now, But Still Sees Biofuel Future

8/15/13Follow @wroush

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we can use lots of different kinds of sugars, including cellulosic sugars like prairie grasses and grass clippings from golf courses. We are not building our first plants based on those sources of biomass—you want your first plants to run well so you are not going to take one of the harder sources of biomass to start. The cost of using Brazilian sugarcane is higher than the cost of collecting forest residue or paper mill waste. But I believe our technology will ultimately be commercialized on many different feedstocks.

We’ve already demonstrated at least a dozen that work. That doesn’t mean the logistics to collect all those feedstocks are in place. But I believe strongly that our technology will ultimately be running on many different feedstock sources and will be extremely competitive on price.

X: Let’s suppose that your cosmetics and nutritional supplements businesses become very lucrative. Would it still be worth the investment to go into the fuel business? Would you be unhappy if that never happened?

JW: The markets that we can go into are very large and profitable without getting into fuel. But we started the company because we wanted to use biotechnology in a way that would positively influence the planet. There are some very good solutions like electric cars, but I think liquid fuels are going to be around for a very long time, especially in certain applications like aviation and heavy marine. It’s going to be very important to have renewable, sustainable alternatives for liquid fuel.

So, my answer is, we could build a very big company without being in fuel, but we have no intention of doing that. Fuel is very important to us; it was the reason we started the company, and it will be a critical focus for us, because it provides an amazing market opportunity.

X: Given that this is still your ambition, do you feel what you’re learning now about making cosmetics and nutritional supplements will really help when it comes time to start making fuel?

In small fermentation units in its South San Francisco lab, Solazyme is continuously testing the oil output of new strains of microalgae.

In small fermentation units in its South San Francisco lab, Solazyme is continuously testing the oil output of new strains of microalgae.

JW: Absolutely, yes. It has allowed us to come down the cost curve and commercialize at the same time. It has also instilled commercial discipline into a company that started out as an R&D organization. It’s really hard to turn an R&D organization into a commercial enterprise—we needed to build out quality assurance and quality control and customer relationships and the discipline of selling products at a positive margin. Those were all things that didn’t exist inside the company and are very synergistic in allowing us to get to fuel. Going one step further, the ability to transform the oils—to get to a better frying oil, for instance—helps us to focus on the better part of the oil barrel.

X: What are the main indicators you look at to figure out whether this is all working?

JW: Our most important KPI [key performance indicator] is product sales. We have had a very substantial upward tick in product revenue over the past couple of years, a lot of it owing to our cosmetics brand launch. Production capacity coming online is another indicator. Peoria is running, a Phase 1 facility is running in northern France, and a Phase 2 is going to begin commissioning this month. Then you have the facility in Clinton, Iowa, that should be running in early 2014, and in Brazil in late 2013. Over 125,00 metric tons of production capacity should be coming online between now and early 2014, and that is a very big deal.

The ability to put together financing and partnership to get all that capital to build capacity was one of the things that people thought we were going to have a very hard time doing. I’m not going to say it’s been easy, but I’m satisfied with where we are.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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  • friend

    Your opening premise is incorrect. Since its ipo, solazyme has always publicly declared itself a renewable oil producer.

    • GWT

      The opening statement is correct.

      I visited Solazyme in 2008 and 2009.

      Solazyme started on the premise of producing cheap algal lipids for biofuels via phototrophic cultivation in large-scale solar bioreactors.

      However, yields were very low/inconsistent and lipid composition was highly variable, and the economics were dire.

      It was then decided to turn to heterotrophic cultivation using sugar-based feeds, with artificial lighting. With this approach, lipid yields were greatly increased. However, feedstock costs and capital/operating were now prohibitive for biofuels – hence the search for higher-margin products – lipids, polysaccharides, carotenoids, etc for nutraceuticals, cosmetics, etc.

      It remains to be seen whether heterotrophic cultivation can ever deliver an economic algal biofuel, that can compete with fermentation-derived alcohols, let alone petroleum-based fuels.

  • ellen Mongkey

    Great article, very impressive and interesting.

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