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.)
So it was significant when Genomatica said earlier this week that it has signed a multi-year partnership deal with Italy’s Aquafil, a leading producer of nylon fiber used to make sportswear and apparel, carpets, brush bristles, and countless other products. It is one of Genomatica’s most-recent partnerships, and among the few deals the company has disclosed. Under their agreement, Aquafil is licensing Genomatica’s technology, and the two companies will work together to adapt and scale the methods Genomatica has developed to make bio-based versions of the nylon precursor caprolactam. Aquafil is providing development funding, although financial terms were not disclosed.
Schilling said the Aquafil deal also reflects a reception for sustainable, bio-based chemicals in Western Europe that has been both stronger and broader than in the United States.
“Europe has been booming [for Genomatica] over the past two to three years,” Schilling said. Most of our partnerships are there. Sustainability is more important there.”
Schilling said he’s also seeing some exciting developments in bio-chemicals, with companies like Boston-based Ginkgo Bioworks (which is a Genomatica investor) and Emeryville, CA-based Zymergen. Genomatica works with Gingko, which has been “developing new technologies that are bringing costs down for some of the things we do,” Schilling said.
All in all, “Our story was one of survival and perseverance to get through difficult times,” Schilling said. “It was a great feat to pull off for us.” A few minutes later, the Genomatica CEO said, “We’ve been humbled by what we went through,” but perhaps by building a self-sustaining business “now we can weather some of the ups and downs.”