Isobutanol – a gateway to bioprocessing fortunes? Well, the lawyers are doing just fine too.
Here’s a 2-Minute Guide to all the Gevo (GEVO) and Butamax hollerin’, and how to separate the alcohol from the folderol.
In case it has escaped your attention, Butamax is suing Gevo (GEVO) and Gevo is suing Butamax. Enough paper has been issued by the parties, in court submissions and press releases, that INEOS New Planet might eventually consider this dispute a low-cost waste stream feedstock for their new biorefinery, if somebody can get it all hauled down to Florida.
Gasify the paper to make it go away? Possible. Gasify the issue? Not happening. Prompting Domestic Fuel’s Cindy Zimmerman to issue an appeal last week for an end to all the tit-for-tat releases.
Overall, in the stream of claims and counterclaims, we’ve seen most of the drama that people usually seek in wrestling matches between exotic dancers, excepting the hair pulling and the mud.
Here in Digestville, we doubt the issue will melt away soon, and with Gevo’s stock price in the toilet, we doubt there is going to be much dampening of the signal and the noise on this one any time soon. For the two companies, it’s big, it’s that big.
In today’s Digest, we are publishing a Two-Minute Guide to the controversy, and we would also like to make three points, for consideration by the broader industry.
The broader issues
1. There’s gold in them thar ‘cules. No one is suing anyone over, say, Cello’s technology, or to gain control of the Range Fuels process. At least not a positive suit aimed at gaining freedom to operate.
For the same reason, you never see a Western where two old prospectors duel it out over a worthless piece of land. In films like Treasure of the Sierra Madre, the fight is invariably over the gold, the map that marks the gold, or the entrance to the mine that guards the gold.
The mounting mountains of paper should be properly seen as a leading indicator of just how valuable a bio-based process to generate low-cost isobutanol from biomass can be, especially if you have figured out the engineering of separating the alcohol from the broth before it kills the microorganism.
(Note to readers: micro-organisms, it turns out, are just like humans in one respect, you wouldn’t last long, in a closed fermenter, in a swill of your own food and waste by-products either).
Let’s think of it this way. Think of the spread between carbohydrate and oil prices. At $6.50 per bushel of corn and $100 per barrel of oil, carbs are pricing at $305 per metric ton, while oil is pricing at $742 per metric ton. That $437 per ton spread is the foundational market opportunity.
2. The “Sue, Baby” gene that never stops expressing. In the bio-based space, if pharmatech and the Novozymes (NVZMY.PK)-Genencor wars offer any guide, one important byproduct of a successful fermentation process is a whole bunch of lawyering.
The titer of alcohols in a given beaker, from a given process, is sometimes not where we would like it to be. But yeast appears to robustly and effortlessly ferment claims, letters, and lawsuits from biomass. The titer and yield are never in question, and the “sue, baby, sue” gene never seems to stop expressing.
Nevertheless, lots of pesky legal activity does not generally correlate to long-term loss in company value, for robust management teams that have built companies instead of science projects disguised as companies. Novozymes has, for example, more than 6000 pending and granted patents and a $7.6 billion market cap, and Danisco and its Genencor subsidiary recently sold to Dupont for $6 billion.
3. Big Buckaroos at stake. Just in specialty chemicals, isobutanol is a $7B industry. On the speculative assumption that a bio-based prices could deliver into that market with a 20 percent margin, and that NASDAQ companies will continue to trade at around 20 times earnings, there’s roughly $28B in market value up for grabs in the isobutanol wars.
Throw in the addressable potential for $44 billion in specialty gasoline blendstock, globally, there’s another $176 billion there. Forget Gevo’s market cap of $236 million – DuPont’s market cap is $49 billion. Therein lies the potential for gateway molecules. And make no mistake, really foundational C4 molecules – those have gateway characteristics.
So, the lawsuits? Here’s what you need to know.
The 2-Minute Guide to Butamax vs Gevo, and vice-versa
1. The idea. To make isobutanol, you need a microorganism that makes isobutanol from biomass, and a separation technology. The first gives you isobutanol in a broth, the second gives you isobutanol as a recoverable product. The faster you can pull off the isobutanol, the faster you can make it without killing the little micro critter (keep in mind, when you want to sterilize a wound, you pour alcohol on it – its a real killer of microvarmints).
2. The system. Butamax has a system, Gevo has a system. Both can be bolted onto existing corn ethanol plants.
3. Butamax lands a foundational patent. Amidst a whole lot of patents and patent apps for both companies, Butamax was granted two patents, known colloquially as the ’188 and the ’889 (sigh, only lawyers could love nicknames expressed in three-digit codes).
4. Butamax vs Gevo. Also, last year – and, well you be the judge on the merits of the timing, right in the middle of Gevo’s IPO road show, Butamax sued Gevo over infringement of the patents. That’s Butamax vs. Gevo, and it is set for trial in April 2013.
5. The Gevo response. Gevo’s defense is two-pronged. One, they don’t infringe on the patent in their process. Two, the USPTO should never have granted ’188 or ’189 in the first place. So, Gevo has petitioned for re-examination of both, and the USPTO is in the process of doing so. Stand by, and we’ll advise further when there’s further to know – you can let the press releases sail on by.
6. Gevo vs Butamax. Gevo has, in turn, sued Butamax over infringement of its ’375, ’376, ’715 and ’808 patents. Butamax has denied the claims, and is seeking dismissal of the suits. There’s no trial date set yet that we are aware of.
Here’s a timeline of the dispute, as written up by Gevo, for scorekeepers.
Outcomes and dates
1. Gevo and Butamax have participated in court-ordered mediation, in March. Bet that was a barrel of monkeys. Might have been easier to mediate Alec Baldwin and Kim Basinger. Outcome not yet certain.
2. Butamax has filed for a preliminary injunction against Gevo. A hearing was held in March, and a ruling is pending.
3. Trial date for Butamax vs. Gevo is April 2013.
4. First switch-over of a corn ethanol plant to isobutanol in scheduled for the Gevo plant in Luverne, Minnesota, before the end of June. Expect that it will take some per
iod of weeks or months to ramp up to full production – if sooner, great, but don’t expect miracles before the 4th quarter. That’s the magic hour.
The Bottom Line
It’s a serious dispute, for the companys involved. For bio-based pathways to isobutanol as a class, there doesn’t appear to be a losing side, except to the extent that lawsuits slow companies down, and depress stock prices and thereby chill the financing of expansion at commercial-scale.
The scramble over the patents could drag on for years. The loser in the Butamax vs Gevo suit should be expected to appeal almost instantaneously; same with the losing side in Gevo vs Butamax, whenever that comes to trial.
So, eyes might generally turn more towards the commercial-scale activities at Luverne. Because that is the proof of the value of a bio-based process – whomsoever it is determined actually owns it. Something worth fighting to the death over, now that’s music to the industry’s ears.