Verdezyne, Ave Atque Vale : Biofuels Digest


From Southern California the report has arrived that Verdezyne is winding down as a company, and today is the last day of operations. The low oil price environment has claimed another victim among the renewable chemical pure-plays.

Why oil prices have doomed more chemical players than fuels

In a nutshell, there’s no Renewable Chemicals Standard and these standards are essentially not so much about ensuring a market during periods of high prices as about ensuring a market during periods of oil price collapse. The legislators of the 2000s well remembered how oil markets responded to the encroachments of alternative fuels (from new fossil sources or biofuels) in the 1980s and 1990s — buy collapsing the price of oil.

So, biofuels were essentially good and ready in the 2010s when the oil major players collapsed the price market again. Though, biofuels have lately been under incredible pressure from the new management at EPA, granting an estimated 40 waivers to smaller refineries and removing almost 2 billion gallons of demand from the pool. That’s another story.

For renewable chemicals, $25 oil left them nowhere to hide — exposed as they were to the market — technologies that looked interesting at $80 oil and of the first rank of importance at $100 oil suddenly looked like money-losing technologies with cheap oil. Investors wilted, offtakers disappeared, employees drifted off elsewhere. Some companies pivoted, several prominent ones remain.

But we’ve seen the end of Cobalt and Verdezyne, Chapter 11 restructuring at BioAmber, zombie company status at Myriant, and on and on. We’ve seen OPX Bio reposition and get sold, ZeaChem went over to fuels, then chems again, then was wound down. Joule died. LS9 was sold to REG where it has not yet flourished as hoped. Metabolix became Yield10 in a repositioning. Rivertop disappeared. Rennovia. Glycos Bio too.

For many, the exposure to commodity prices was a strategic error — some of them had come over from the safer, RFS-protected world of fuels sensing higher value opportunities in chemicals.

The Verdezyne backstory

We first penned about Verdezyne in 2010 in a review of the doings at the BIO World Congress, noting that “numerous early-stage investors appear to have shifted their integrated biorefinery children decisively towards the smaller, high-value markets in renewable chemicals as, at least, a “make money now” opportunity.”

We wrote then:

As a prominent CEO told me, “why would I make $2 fuel when I could make a $5 chemical using the same process?” That’s a good question for 2010. It wasn’t a bad one for 2007, either. In some cases it feels like a strategic shift – in others, a version of the “just win, baby” philosophy of Oakland Raiders owner Al Davis.

A number of companies that are focused solely on organic acids — Verdezyne’s adipic acid, Myriant’s succinic acid, Rivertop Renewables’ glucaric acid, Glycos Bio’s technical grade ethanol and acetic acids — are raising dollars and confidently moving towards small-scale commodities.

The company was on the move in 2011, and hot. And the investors arrived. The group grew to include BP Ventures, DSM Venturing B.V., OVP Venture Partners, Monitor Ventures, and Sime Darby. As we reported in May 2011, In California, BP and DSM invested an undisclosed amount in Carlsbad-based Verdezyne to fund the company’s start-up operations to help it build pilot plants that would (at the time) produce both ethanol and adipic acid from cellulosic feedstocks.

We wrote again about Verdezyne as part of The Brew Barons story in 2011 — Will the new fermentation technologies completely shatter preconceptions about biofuels and bio-based products? The new Brew Barons are working hard to make that so. Back then, Verdezyne was focused on a process that could beat petroleum-based feedstocks in producing adipic acid, a vital ingredient in nylon.

By year’s end there were high fives in Carlsbad, when in December, Verdezyne has opened its first pilot plant to produce adipic acid, a key component of nylon 6,6. The new facility, located in Carlsbad, California will be used to accelerate the commercialization of Verdezyne’s bio-based adipic acid, which is one of two components used to manufacture ‘green’ nylon 6,6 and thermoplastic polyurethane resins from renewable sources, such as non-food based vegetable oils.

In addition to lower production costs, we reported at the time, Verdezyne’s method used non-food, plant-based feedstocks to produce a variety of commercial diacids. What’s not to like?

By 2012, there were some offtakers around. We reported in December that Verdezyne entered into a strategic relationship with Universal Fiber Systems, and its operating companies, Universal Fibers and Premiere L Fibers.  Verdezyne would supply its bio-based adipic acid to Universal Fiber Systems for certain exclusive fields of use.  “As leaders in sustainable fiber technology, we are extremely pleased to be partnered with Universal Fiber Systems in commercializing Verdezyne’s bio-based adipic acid for use in specialty products such as carpet fiber and performance apparel yarns,” said E. William Radany, Ph.D., president and CEO of Verdezyne.

And there was a focusing going on. Also in December 2012, we reported that Verdezyne announced the sale of its proprietary xylose isomerase technology, enabling the metabolism of 5-carbon sugars, to DuPont Industrial Biosciences. Under the terms of the sale, DuPont has purchased rights to Verdezyne’s patented xylose isomerase technology, covered by U.S. Patent Nos. 8,114,974 and 8,093,037, for use in the rapidly-commercializing biofuels and biochemical fields. This technology allows the fast and complete utilization of biomass-sourced C5 sugars in production of various products of choice.

Questions emerge

Was adipic just a slam-dunk, no-brainer? Perhaps not, as we began to think in 2013, as we reported on the birth of the Qualifying Renewable Chemical Production Tax Credit Act of 2013 — which never passed.

At the time, Verdezyne CEO Bill Radany said, “We have always emphasized the aspects of our growing industry that make it so exciting – the positive impact we can have on the environment as well as our national economy. Legislation such as the Qualifying Renewable Chemical Production Tax Credit Act is a clear affirmation that Verdezyne, along with the many players in our space, are onto something significantly valuable to our country.”

So, the makers of renewable chemicals were already beginning to see significant value in a tax credit mechanism that, for biomass based diesel, has proven to be very hard to maintain and very hard to get off. 

And, we began to warn on the future of fermentation technologies in early 2014, just before oil prices began to wane.  We wrote:

2007-2013 was the age of fermentation — when gigantically complex technologies like enzymatic hydrolysis, and other types of fermentation aimed at using the fermentation abilities of selected biobased organisms to convert sugars or gases into fuels and chemicals.

In that period, we’ve seen fermentation technologies completely change the landscape of the fuels and chemicals economy. From the likes of POET-DSM, Abengoa, Novozymes, DuPont, Beta Renewables, Dyadic, Clariant, GranBio, Inbicon, Proterro, American Process, INEOS Bio, Genomatica, Cobalt, Joule, Verdezyne, Rivertop Renewables, Solazyme, Amyris, Gevo, LanzaTech, Raizen, Iogen and others Companies like Calysta Energy are coming along with methanotrophs that can work on natural gas.

But the next wave is coming. Thermal and catalytic technologies. With exotic-sounding costs as low as $1.15-$2.18 per gallon. That is, low enough for fuels at scale with a solid RPI for investors. Several of them drop in to existing refinery infrastructure.

We became slightly alarmed by late 2014. In Time for Teddy Talk, we wrote:

There are times for TED Talks about wondrous advances in technology and the future that awaits us.

Then, there are times for Teddy Talks: of practical progress, problem solving, and turning wondrous advances into actual, scaled-up, sustainable, job-creating engines of the economy.

While the United States political establishment rocks and roils on the topic of immigration, there’s a topic that should occupy their time as well, and that is the problem of out-migration — specifically, technologies born or to an extent developed in the United States, being siphoned off overseas to serve the building of advanced, renewable, sustainable bioeconomies elsewhere.

This past year we have seen significant technology from Mascoma get snapped up by Lallemand, Allylix acquired by Evolva, Verenium acquired by BASF. Meanwhile, Solazyme and Amyris are commercializing with their first full-scale plants in Brazil, Verdezyne and Heliae have raised the bulk of their most recent announced financings from South-East Asia, Genomatica has been heavily supported of late from Europe. LanzaTech will build its first scaled plant in China, and probably its second.

By then, we had reported in July 2013 that Verdezyne had entered into a collaboration with Malaysian Biotechnology Corporation in its assessment of Malaysia as the destination for its first biochemical production facility in the Asia Pacific Region. The collaboration was set to accelerate Verdezyne’s process to full-fledged commercialization following the success from its pilot plant that was established in November 2011, with an eye on Malaysian palm oil. 

There were ominous signs reported in late 2015 when we published the 30 Hottest Molecules for 2016, based on a Digest reader survey. We wrote:

Shocker omissions? With glucaric acid and DDDA heading for scale at Rivertop and Verdezyne, we thought those were shocker rankings at #37 and #42. The low ratings for a number of organic acids was a surprise in these low oil price days where oxygenate molecules have that oxygen advantage of biomass. With all the noise around butadiene these days, how did that comes up at #41. We found ourselves surprised that so many sugar alcohols outranked the organic acids — only adipic, polylactic, acrylic, succinic and levulinic bucked the trend.

But that poor result didn’t deter Verdezyne, which  signed an exclusive agreement with Connell Bros. for sales and distribution of Verdezyne’s BIOLON DDDA (biobased dodecanedioic acid or DC12). BIOLON DDDA will be produced at Verdezyne’s commercial-scale plant in Malaysia and will be distributed in 17 countries throughout Asia-Pacific, including China, Japan and South Korea.  CBC is the largest Marketer and distributor of specialty chemicals in Asia-Pacific, the companies said.

By then, Verdezyne’s commercial scale plant was expected to be completed in 2017, is anticipated to have the capacity to produce up to 9,000 metric tons of diacids including BIOLON DDDA annually, or 20 million pounds. The agreement assures CBC of access to more than 10% of the expected plant capacity, or at least 2 million pounds.

High water mark: 2016

Perhaps the high-water point was in June 2016 when we reported that Verdezyne was a winner of the 2016 Presidential Green Chemistry Awards. Verdezyne was recognized for developing a yeast that produces a chemical used to make high performance nylon 6,12 for hairbrushes toothbrushes, adhesives, coatings, fragrances, and automotive and aviation oils. In addition to using a plant-based feedstock and having lower greenhouse gas emissions, this process is also safer because it does not use high temperatures or concentrated nitric acid. The product has qualified for the USDA Certified Biobased label.

Along the way, Verdezyne focused away from adipic acid and towards what it branded as BIOLON DDDA. Produced more sustainably than traditional petroleum-derived intermediate chemicals, it would be used to make a variety of end-user products including automotive parts, coatings, cosmetics, and fragrances, the company said at the time.

But it was never built. 

That, despite another big offtake deal. We reported in October 2016 that Verdezyne and Aceto Corporation signed an agreement for sales and distribution of Verdezyne’s BIOLON DDDA (biobased dodecanedioic acid). BIOLON DDDA will be produced by Verdezyne and will be distributed in the United States of America by Aceto.

A Silent 2017

The radio silence got pretty deafening throughout 2017 as the commercial plant just did not materialize. But Verdezyne did make an appearance at ABLC Next 2017, and we were able to share this slide deck.

Microorganism Factories: The Digest’s 2017 Multi-Slide Guide to Verdezyne

After that, nothing. Until the news today. As Lincoln once observed, “it hurts too much to laugh but I’m too old to cry.”

The Bottom Line

Ave Atque Vale, Verdezyne, hail and fair well. Your demise stings more than most, because among all the renewable chemical players it was one of the most promising, and had come so far down the road to scale-up.  It feels a little like Aldrin and Armstrong actually landing on the moon and then are unable to open the door and step outside. Verdezyne felt one small step away from taking a giant leap for mankind.

We’ll stand by to learn the exact fate of the IP, which is substantial and may well find a new home. For right now, there’s not much left but another trophy skull to nail up at Petroleum Hall. Ironically, just as oil prices begin to creep up again and chemical makers find themselves exposed to $77 Brent Crude. They must be betting that fracking technologies will keep them far away from the pain that $100 imposes on chemicals, and that customer indifference will keep them insulated from the pressure to green the production portfolio.

We’ll see how that market theory pans out for them. Verdezyne was “making a difference,” as the slides usually proclaimed — slienced not by technology mishap but by market forces. Perhaps we’ll know the complete story before long.

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