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Whitespace Opportunities in Biobased Chemicals
July 2015
BIO World Congress on Industrial Biotechnology
Prepared for:
Contents
Section
1 A Brief Introduction to Nexant
2 The Move to Specialty Chemicals
3 Addressing Opportunities in the “Whitespace”
4 Case Studies from Nexant’s Upcoming Report
July 2015BIO World Congress on Industrial Biotechnology
A Brief Introduction to Nexant
July 2015BIO World Congress on Industrial Biotechnology
Nexant provides expertise across the energy and chemicals value chain, in traditional and renewable sectors
July 2015BIO World Congress on Industrial Biotechnology
Energy Chemicals and Clean-tech
Electric Power
Grid Management
Software
Energy Efficiency
Demand Side Management
Gas Market Analysis and Forecasts
Gas Monetization
Gas Regulation
LNG & Gas Pipeline Projects
Petroleum Refining
Product Market Forecasts
Coal to Liquids
Gas to Liquids
POWER GAS CHEMICALSDOWNSTREAM OIL GREEN CHEMICALS RENEWABLE ENERGY
Syngas
Biopolymers
Olefins
Alcohols
Aromatics
Sourced from Biomass, Algae, Wastes, and
Biomass
Gasification
Solar (Thermal & PV)
Wind Power
Clean Coal
Capture and Sequestration
Fuel Cells &
C1 Chemicals & Fertilizers
Olefins
Aromatics
Polymers
Inorganics
SpecialtyChemicals
Advanced Materials
Nexant has completed over 3,000 client assignments in over 100 countries, and has over 600 employees
NexantThinking™ reports and subscription programs provide comprehensive analysis and planning tools
July 2015BIO World Congress on Industrial Biotechnology
See www.nexantthinking.com for more information
Nexant’s Biorenewable Insights offerings provide regular coverage of the sector
Reports are written on a 3-year rotating basis, with updates every quarter
July 2015BIO World Congress on Industrial Biotechnology
C1-C2 C3C4, Aromatics &
Other
Fuels and Refining
IntermediatesBio-Feedstocks
Biomass Gasification Propylene BDO Jet Fuel Cellulosic Feedstocks
Ethylene Acrylic Acid Butadiene Naphtha Cellulosic Sugars
Methanol/DME n-Butanol Isobutylene Ethanol Starchy Feedstocks
Alpha Olefins and
LAOsIsobutanol Succinic Acid Biodiesel
Natural Oil
Feedstocks
Lactic Acid/PLA Polypropylene Adipic Acid Isooctene/Isooctane Biomass Pretreatment
Biogas and LFG PDO and PTTIsoprene and
Isoprenoids
Gasoline and
ReformateMSW
Hydrogen Propylene Glycol BTX and PX Bio-Lubes Algae Technologies
Syngas Fermentation Epichlorohydrin PEF to Replace PET Bio-Crudes Lignin
Ammonia SAPs Caprolactam Pyrolysis OilSources for Natural
Rubbers
See www.nexantthinking.com for more information
The Move to Specialty Chemicals
July 2015BIO World Congress on Industrial Biotechnology
Bio-Based Product Relative Value Technology Status
Ethanol Low Established; Cellulosic Ethanol
Emerging
L-Lactic Acid Low Established
1,4-BDO Medium Early-Stage Commercial
Succinic Acid Medium Early-Stage Commercial
Adipic Acid High In Development
Para-Xylene High In Development
The industrial biotechnology field is moving towards higher value molecules
July 2015BIO World Congress on Industrial Biotechnology
Higher value molecules are attractive on a margin over feedstock basis –currently
primarily first-generation feedstocks for reasons of technical risk and immaturity of
cellulosic sugars technology
Avoids market development efforts for commodity functional replacements like FDCA,
PHAs or PLA
Higher-value products are consumer facing and more likely to have a bio-based
premium, such as with para-Xylene
The strategic focus on high value drop-in molecules is driven by many different factors
July 2015BIO World Congress on Industrial Biotechnology
Moving into higher value chemicals, however, also means looking at smaller markets
July 2015BIO World Congress on Industrial Biotechnology
Interferon, diamonds, monoclonal antibodies
Soil, sand
The most valuable and potentially exciting opportunities most resemble specialty chemicals
July 2015BIO World Congress on Industrial Biotechnology
As a company moves into these smaller markets, several characteristics become
apparent:
Markets are less transparent
Number of possible product targets proliferates
Significant barriers to entry may exist
Product value may depend on macroscopic properties rather than molecular
composition
Branding, biodegradability, traceability and bio-based product premiums are more likely
to be significant than in commodity chemicals
Many players have started in commodities and then moved into higher-value markets
July 2015BIO World Congress on Industrial Biotechnology
Addressing Opportunities in the “Whitespace”
July 2015BIO World Congress on Industrial Biotechnology
Nexant has observed the major trend of biotechnology companies moving into the
specialty sector and is looking in depth at potential targets that have not been
announced by any major player.
This ongoing research is part of Nexant’s upcoming Special Report, Whitespace
Opportunities in Biobased Chemicals
Nexant’s research has included leveraging industry contacts and primary research
among formulators, buyers and producers in various sectors
Nexant is covering a variety of application areas, including:
– Cosmetics
– Flavors and Fragrances
– Agricultural Chemicals (including specialty pesticides, micronutrients, and livestock
feed additives)
– Lubricants, Surfactants, and Fuel Additives
– Nutraceuticals
Nexant is looking beyond what current players are pursing
What are the biotechnology products of the future?
How does one decide which products to pursue?
July 2015BIO World Congress on Industrial Biotechnology
Discovery of new opportunities is as much a matter of art as it of skill
Some companies are working to leverage their engineering and technical competences
with single platform organisms to produce specialty chemicals
Some companies consider their metabolic libraries to be their core technology and select
the appropriate organism for production
Some companies are solely interested in very high-value components (>$5/lb) while
others will consider those as low as $2/lb
Capturing significant market share is as important as price
Size may be a disadvantage in terms of addressable opportunities – smaller companies
can be more nimble in terms of being able to switch from different products and be more
willing to devote the effort to addressing smaller opportunities
Nexant primary research indicates companies are pursuing specialties via diverse strategies
There is no one formula that works
July 2015BIO World Congress on Industrial Biotechnology
Case Studies from Nexant’sUpcoming Report
July 2015BIO World Congress on Industrial Biotechnology
L-(+)-Tartaric Acid must be enantiomerically pure (i.e., no
racemate) and sourced from non-fossil feedstocks due to
its use in food
L-(+)-Tartaric Acid has a remarkably inelastic demand
Must be sold as a pure component
Current production depends on potassium tartrate crystals
extracted from wine residues
Highly cyclical market due to weather affecting grapes
Flavors and Fragrances: L-(+)-Tartaric Acid
L-(+)-Tartaric Acid is a natural product with large applications as an acidulant,
stabilizer, baking soda activator and flavor enhancer
July 2015BIO World Congress on Industrial Biotechnology
Global Addressable
Market
$300-$500 million with
potential for additional
growth at lower prices
Approximate World
Market Price
$2/lb, with high levels
of volatility to up to $4-
$5/lb
Flavors and Fragrances: L-(+)-Tartaric Acid
This molecule occupies the lower end of the spectrum in terms of price but has
high potential revenues
July 2015BIO World Congress on Industrial Biotechnology
Traditional production is high cost and
requires acids and bases for processing
Petrochemical competitors produce racemic
and off-spec product suitable only for
industrial uses
Biotechnology can potentially offer lower
cost, greater supply reliability and lower
impact while retaining advantages of
traditional production
Biotechnology is ideally suited towards
producing enantiomerically pure product
Potential responses from current market
incumbents are limited due to high fixed
costs
Low price and relatively small addressable
market
Lower value product than ascorbic acid
Production cost play – competitiveness
depends on achieving higher titer in output
No efforts currently underway
Pathway to L-(+)-tartaric acid is based on
cleavage of L-ascorbic acid, but has not
been fully characterized in literature – this
is truly a whitespace opportunity
Potential synergies between production of
L-(+)-tartaric acid and production of L-
ascorbic acid for nutritional
supplementation
– Process technology
– Platform organisms (e.g., A. niger)
Flavors and Fragrances: L-(+)-Tartaric Acid
Biotechnology may be able to offer a
functional, identical replacement
Current developments in biotechnology
suggest that the pathway is not yet
characterized
July 2015BIO World Congress on Industrial Biotechnology
Beeswax products are composed of a mixture of various esters of long-chain fatty acids
and alcohols in the C24-C35 range (alcohol) and C15-C18 range (acid)
Beeswax is gaining popularity as a natural ingredient for cosmetics
Although there is an element of marketing in the source of beeswax, the primary criteria
for use as a beeswax substitute is functional properties
Cosmetics: Beeswax (Functional Substitute)
Beeswax is a natural, waxy substance produced by domesticated bees
July 2015BIO World Congress on Industrial Biotechnology
Biotechnology can offer potential for lower
cost and consistently higher quality without
refining natural product
There may be potential marketing
advantages for environmental reasons
Biotechnology-based beeswax is a
potential vegan substitute for conventional
types
Cosmetics: Beeswax (Functional Substitute)
Beeswax is primarily used in cosmetics, with minor applications in food and as a
surface protectant
July 2015BIO World Congress on Industrial Biotechnology
Global Addressable
Market
$80-$90 million
Approximate World
Market Price
Depends on color and
desired application,
from $1.50-$5/lb
Biotechnology-based beeswax would be a
functional substitute rather than a perfect
substitute for existing beeswax
Greater control over the composition of
beeswax fatty acid and alcohol chain
lengths could lead to better tailoring of
products for use
Long-chain fatty alcohols are a major
prerequisite for production, and may have
independent uses
There are additional markets for vegetal
waxes (jojoba, carnuba) that can extend
the market, and potentially also petrolatum
substitutes
Efforts at developing synthetic beeswax
have been made by Croda, Elevance and
Koster Keunen but have not been able to
match all properties or compositions
Primary difficulty in synthetic beeswax
production has been the consistent
production of very long chain length fatty
alcohols
Cosmetics: Beeswax (Functional Substitute)
Biotechnology-based beeswax would be
a functional substitute rather than a
perfect substitute for existing beeswax
Some synthetic beeswax products have
been made but, typically for functional
markets, have not replicated all
properties
July 2015BIO World Congress on Industrial Biotechnology
Many of the opportunities for biotechnology entrants are already served by bio-based
products that are produced using traditional methods
At higher levels of value and smaller markets, functionality becomes more important than
the composition of a particular product, such that all new products become drop-in
replacements
Many opportunities are quite small and individually represent relatively minor revenue
sources
Especially for small companies, there is a significant opportunity cost associated with
pursuing a given opportunity – many larger opportunities may pass you by
Imperfect substitutes for many applications can still capture significant market share
As prices increase, production cost reduction becomes less and less essential
Partnership with formulators and distributors is essential for market entry
Nexant has found through its preliminary study that target markets share certain characteristics
July 2015BIO World Congress on Industrial Biotechnology
July 2015BIO World Congress on Industrial Biotechnology
Contact info:
Joshua Velson
Consultant
44 S. Broadway Fl. 4
White Plains, NY 10601
+1 914 609 0341
Nexant, Inc.
San Francisco
New York
Houston
Washington
London
Frankfurt
Bahrain
Singapore
Bangkok
Shanghai
Kuala Lumpur
44 South Broadway, 4th fl
White Plains, NY 10601
Telephone: +1 914 609 0300
Facsimile: +1 914 609 0399
www.nexant.com
“This presentation was prepared by Nexant Limited (“Nexant”). Except where specifically stated otherwise in the
presentation, the information contained herein was prepared on the basis of information that is publicly available
and has not been independently verified or otherwise examined to determine its accuracy, completeness or
financial feasibility. Neither NEXANT, nor any person acting on behalf of NEXANT assumes any liabilities with
respect to the use of or for damages resulting from the use of any information contained in this presentation.
NEXANT does not represent or warrant that any assumed conditions will come to pass.
This presentation is integral and must be read in its entirety.
The presentation is given on the understanding that the recipient will maintain the contents confidential except
for internal use. The presentation should not be reproduced, distributed or used without first obtaining prior
written consent by NEXANT. This presentation may not be relied upon by others.
This notice must accompany every copy of this presentation.”