Genomatica, a San Diego industrial biotech, has spent the past 12 years or more working to take the petroleum part out of the petrochemical industry.
In 2008, for example, Genomatica showed it had bio-engineered E. coli bacteria to digest sugar, oxygen, and other nutrients in a fermentation tank—and produce 1,4-butanediol (BDO), an intermediate chemical used to make skateboard wheels, dashboards, and other resilient plastic materials.
But advancing the processes needed to make bio-based chemicals from renewable feedstocks is one thing—and building a sustainable business on such technology is something else altogether. “Since 2013, it’s been kind of a roller coaster,” Genomatica CEO Christophe Schilling said in a recent interview. “We experienced very difficult times in 2014, ’15, and ’16.”
Genomatica cut its workforce from just over 100 to roughly 80, and re-assessed the merits of its line of bio-based chemical products, Schilling said. “BDO was okay, but we did feel our portfolio was overexposed to the price of oil,” he said. “We saw the prices for all the technology we were developing take a dive. We needed to diversify.”
Genomatica was forced into this retrenchment by the widespread adoption of fracking in the petroleum industry, which dramatically increased conventional oil and gas production. As Schilling tells the story, massive over-capacity plunged the international market for high-volume chemicals into disarray. Schilling said prospective strategic partners that were critical to implementing Genomatica’s technology called a time-out. “They told us you have fascinating technology, but we have other problems right now.”
Another sign of the times: Schilling said he visited a conventional petrochemical BDO plant near Nanjing, China, during a 2015 trip to Asia. The Chinese had spent $300 million to build the plant. “They operated for three months and then they shut it down,” Schilling said.
The situation led Genomatica to expand its product line to include more specialized chemicals like butylene glycol, a solvent and conditioning agent used in cosmetics, with a much higher price point than the intermediate chemicals in Genomatica’s pipeline.
The turnaround began in 2017. Schilling said revenues doubled as Genomatica signed five new strategic partnerships. “Our burn rate and cash operations were still negative, but we were on a path to be profitable by the end of 2019,” Schilling said. (At the end of 2016, he said the company had almost $40 million in available cash.)