Solazyme Shares Soar On Sasol Deal
Bioenergy’s #1 company surges on the exchanges after big Sasol, AkzoNobel partnership announcements.In California, Solazyme (SZYM) announced a Q2 loss of $25.8M, compared to a Q2 2012 loss of $19.2M, on revenues of $11.2M, down from $13.2M for Q2 2012, as government funded revenues declined as expected. Excluding the government sector, sales jumped 28% year on year despite the lack of the big capacity that Moema and Clinton will represent when completed. Product gross margins were a very healthy 70%, in line with guidance.
Solazyme shares were up 12.95 percent today at market close.
“We are making great progress as we approach commencement of manufacturing at our commercial production facilities later this year,” said Jonathan Wolfson, CEO of Solazyme. “Capacity build-out at our Brazilian JV facility remains on target, and we are actually accelerating plans at the Clinton, Iowa facility, which should allow us to begin producing product for market and application development during the second half of this year.
“Peoria is also being retrofitted to produce algal flour and protein products with availability of commercial development quantities also expected in the second half of this year. Tailored oil technology breakthroughs are continuing to open additional attractive end market opportunities, as evidenced by the announcement of the new high erucic tailored oil under development with Mitsui and the related commercial supply terms with Sasol (SSL).”
The White Hot NewsSolazyme and Sasol Olefins & Surfactants have finalized commercial terms for the supply of an algal oil rich in erucic acid under development at Solazyme for production of downstream derivatives such as behenyl alcohol. Sasol O&S produces and sells C22 derivatives such as behenyl alcohol to serve a number of applications in markets that include the paper, water treatment, personal care, lubricants, oil and gas, and paints, inks, coatings and adhesives industries.
High erucic oil is the second oil in the suite of tailored oils being developed under the JDA with Mitsui, with myristic oil being the first. Erucic acid is commonly found in some rapeseed and mustard seed oils and is currently used mainly as an emulsifier in multiple industries including cosmetics and as a plastics additive.
In addition to the agreement on commercial supply terms, the companies also executed a letter of intent to investigate expanding to a broad collaboration, including joint manufacturing and marketing of multiple tailored oils.
Why Big? Solazyme, which has been highly focused on building capacity, has faced criticism for not developing enough binding offtake agreements. Here’s one, with a brand-name partner, though with volumes not disclosed it is not possible to relate this back to the supply vs demand questions.
Red Hot NewsSpeaking of capacity building, Moema remains on track (now 80% complete), and the facility in Clinton is accelerating and is expected to begin commissioning in late 2013 instead of early 2014.
Orange-hot newsSolazyme and AkzoNobel Enter into Joint Development Agreement. The partnership targets the development of advanced tailored oils and commercial sales for the specialty surfactants and paints and coatings markets. The agreement is centered on a shared commitment to the production of high-performance triglyceride-based products that improve upon the performance of plant oils and animal fats.
More orange-hot news: The Algenist sales jump. Algenist sales rose 21% over Q2 2012 — a big jump, and a nice confirmation that that remains a growth channel for now.
Warm but not hot news.Solazyme is establishing new large-scale manufacturing capability for high protein and high lipid products that were previously part of the Solazyme Roquette Nutritionals joint venture. Production of both products is targeted to begin at Solazyme’s Peoria facility this year.
It could be hot.
Earlier this week, Solazyme and Twinlab announced the launch of Twinlab’s CleanSeries Veggie Protein Powder featuring Solazyme’s algal protein. In their annoucne, the partners noted that “whole algal protein is a vegan whole-food source, microalgae-derived, non-allergenic”, and contains “at least 50 percent protein by weight and 15-20 percent dietary fiber.” What we don’t know at this stage is the demand for the powder.
Analyst commentaryRob Stone, Cowen & Company: ”Q2 was essentially in line and 2013 guidance maintained. Capacity build is on or ahead of schedule, including initial quantities for nutritionals. A new high-Erucic oil expands the Mitsui relationship and adds a supply deal with Sasol. The volume ramp should drive CF breakeven by Y.E. 2014.”
Pavel Molchanov, Raymond James: “The versatility of Solazyme’s algae-produced oils opens the door to wide-ranging opportunities across the fuel, chemical, personal care, and nutrition markets. While fully recognizing the inherent execution risks in early-stage industrial biotech, we are bullish on the roadmap to commercialization, with two major proof points within months. The balance sheet is also in great shape, with by far the largest cash balance in the peer group, virtually eliminating equity dilution risk over the next 12 months. We reiterate our Outperform rating.”
More on the story.
Q2 results here.
Q2 earnings call transcript here.