April 26, 2018

How I Learned to Stop Worrying and Love Industrial BioTechnology

Is this the end of biotechnology? Ups and downs in oil markets.  Volatility in stock markets.  These are indeed strange times.  In the midst of all this, there has been considerable consolidation in the industrial biotechnology sector. Many big names in the industry have fallen in the past few years—Abengoa, KiOR, Solazyme, Joule, to name a few.  Problems with RINs (renewable energy credits for biofuels in the US) have even been blamed for the bankruptcy of an east coast refiner (Philadelphia Energy Solutions).   Does this portend the end of the industrial biotechnology sector? 

Hardly.  The path to success will be littered with the carcasses of those that have failed before.  Rather than suggesting that the industry is on a decline, the consolidation should be more viewed as the strengthening of the herd. If a biotech company survives this wave of consolidation, it will have done so because it has a robust and adaptable platform, and a plan for the future.  At the other end of the industry consolidation, will be a leaner, stronger industrial biotech sector.  

The trends that led to the green revolution in the early 2000s are still in place.  The globe is still warming at a record pace.  Sea levels are still rising. Diversified energy portfolios are being increasingly also seen as a form of national security, as domestic energy supplies are important from a strategic standpoint.  The Pentagon and intelligence community in the US and their counterparts around the world are firmly behind biorenewables because of this and because they see Climate Change as a potential national security threat.  Biofuels—most notably ethanol and biodiesel— along with other carbon neutral energy (e.g., solar and wind) represent a piece of a diversified, low carbon energy future.     Also recent volatility in oil markets has highlighted the attractiveness of renewable energy’s relative isolation from fuel-price fluctuations.  Energy and chemical companies know this, and have been making significant steps into the renewable energy and chemicals space.  Tesoro, Shell, ExxonMobil, BP, Eastman Chemical, Total, and BASF have all become players in this industry. Downstream of these, customer-facing brand owners in food packaging and bottling, furniture, automobiles, footwear, clothing, sports gear, cleaning and personal care, and aviation are demanding biorenewable fuels and materials and investing in their development.

Even taking all this into consideration, fossil fuels are not going anywhere.  They are too convenient, they are too cheap, and there is currently an insufficient supply of alternative fuels to replace them—however, renewable energy sources are continuing to transition from an alternative energy source to a staple of our energy and chemical industries, and they aren’t going anywhere either.  And to quote a movie, “there’s no point in getting hysterical at a time like this”.


Steve Slome, Managing Consultant