Are Industrial Applications in Biotechnology Interesting for Investors

1
Are Industrial Applications in Biotechnology
Interesting for Investors?

• Helsinki, June 19, 2006

Dr. Werner Wolf Venture Partner
2
AGENDA

• The drivers
• The chances
• The hurdles, esp. in Europe
• Initiatives
• The Investor

3
Definition

• Industrial Applications in BiotechnologyNOTRed
  BiotechnologyBlue BiotechnologyGreen
  Biotechnology
• BUT
• White Biotechnology (with some overlaps) is the
  application of natures toolset to industrial
  production

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The World of Red Biotech is complex
Drug, Device, Service
5
But White Biotechnology is evenmore complex!
Product/Process, Service
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The Drivers

from McKinsey
Company

• Increasing energy demand
• Cost of fossil fuels
• Grain processors and chemical companies
• Increasing pollution
• Scarcity of pure water
• Need for stronger and lighter materials

7
The Chances main sectors

• Biofuels
• Fine Chemicals lt 10,000 t/yr
• Bio-based polymers
• Nutrition
• Bulk chemicals gt 10,000 t/yr

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Biomass to finished products
Industrial Corrosion inhibitors, dust control,
boiler water treatment, gas purification,
emission abatement, specialty lubricants, hoses,
seals
Fuel oxygenates
Ammonia synthesis, hydrogenation products
Methyl esters, Formaldehyde, Acetic acid,
Dimethylether, Dimethylcarbonate, Methyl amines,
MTBE, olefins, gasoline
Reagents-building unit
Biobased Syn gas
SG
Antifreeze and deicers
Linear and branched 1º alcohols, and mixed higher
alcohols
Transportation Fuels, oxygenates, anti-freeze,
wiper fluids molded plastics, car seats, belts
hoses, bumpers, corrosion inhibitors
Solvents
Olefin hydroformylation products aldehydes,
alcohols, acids
Iso-C4 molecules, isobutene and its derivatives
Green solvents
a-olefins, gasoline, waxes, diesel
Specialty chemical intermediate
Fermentation products, Propylene glycol, malonic,
1,3-PDO, diacids, propyl alcohol, dialdehyde,
epoxides
Textiles Carpets, Fibers, fabrics, fabric
coatings, foam cushions, upholstery, drapes,
lycra, spandex
Emulsifiers
Acrylates, L-Propylene glycol, Dioxanes,
Polyesters, Lactide
Chelating agents
Acrylates, Acrylamides, Esters, 1,3-Propanediol,
Malonic acid and others
Sugars Glucose Fructose Xylose Arabinose Lactose S
ucrose Starch Cellulose Hemicellulose
Amines
C3
Reagent, propionol, acrylate
Safe Food Supply Food packaging, preservatives,
fertilizers, pesticides, beverage bottles,
appliances, beverage can coatings, vitamins
Plasticizers
Pharma. Intermediates
Polyvinyl acetate
2-amino-1,3-PDO, 2-aminomalonic, (amino-3HP)
pH control agents
THF, 1,4-Butanediol, g-butyrolactone,
pyrrolidones, esters, diamines, 4,4-Bionelle,
hydroxybutyric acid
Resins, crosslinkers
unsaturated succinate derivatives (see above)
Environment Water chemicals, flocculants,
chelators, cleaners and detergents
Polyvinyl alcohol
C4
Hydroxy succinate derivatives (above),
hydroxybutyrolactone
Polyacrylates
Amino succinate derivatives (see above)
Polyacrylamides
Hydroxybutyrates, epoxy-g-butyrolactone, butenoic
acid
Communication Molded plastics, computer casings,
optical fiber coatings, liquid crystal displays,
pens, pencils, inks, dyes, paper products
Butanediols, butenols
Polyethers
Diols, ketone derivatives, indeterminant
Polypyrrolidones
Methyl succinate derivatives (see above),
unsaturated esters
C5
Phthalate polyesters
Many furan derivatives
Housing Paints, resins, siding, insulation,
cements, coatings, varnishes, flame retardents,
adhesives, carpeting
PEIT polymer
d-aminolevulinate, 2-Methyl THF, 1,4-diols,
esters, succinate
Polyhydroxypolyesters
Amino diols, glutaric acid,substituted
pyrrolidones
Nylons (polyamides)
Lactones, esters
Recreation Footgear, protective equipment, camera
and film, bicycle parts tires, wet suits,
tapes-CDs-DVDs, golf equipment, camping gear,
boats
Polyhydroxypolyamides
EG, PG, glycerol, lactate, hydroxy furans, sugar
acids
5-Hydroxymethyl-furfural
1,5-pentanediol, itaconic derivatives,
pyrrolidones, esters
Bisphenol A replacement
C6
Numerous furan derivatives, succinate, esters,
levulinic acid
Polycarbonates
Caprolactam, diamino alcohols, 1,5-diaminopentane
Polyurethanes
Lignin/ Pyrolisis oils
Gluconolactones, esters
Health and Hygiene Plastic eyeglasses, cosmetics,
detergents, pharmaceuticals, suntan lotion,
medical-dental products, disinfectants, aspirin
Phenol-formaldehyde resins
Gallic acid
Ar
Dilactones, monolactones, other products
polyhydroxyalkonoates
Ferulic acid
Glycols (EG, PG), glycerol, lactate, isosorbide
polysaccharides
Phenolics, food additives
Direct fermentation Polymers gums
poyaminoacids
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The Chances some facts

• Already 20 of gasoline sold in California
  stations is bioethanol
• New science converts biomass into petro-like
  compounds metasynth process

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Enzyme cost no longer dominates the bioethanol
cost picture
Cost comparison after recent achievements Grain
vs. biomass in USD/gallon ethanol, April, 2005

Modified from Determining the Cost of Producing
Ethanol from Corn Starch and Lignocellulosic
Feedstocks, NREL/TP-580-28893 joint USDA, NREL
study released in October 2000.
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In the year 2015 about 15 of the chemical
products with a sales volume of approx. 300
billion USD will be produced using biotechnology
Latest estimate April 2005
Sales 20041)
Sales 20151)
Share
Share
1,320 bn Euro
40 bn Euro
1,930 bn Euro2)
305 bn Euro
Fine chemicals
50
Polymers
20
10
2
Specialty chemicals
15
2
Base chemicals and intermediates
15
3
1) Global chemical sales without pharma products
but including pharma intermediates (source
CEFIC) 2) Calculation with an average growth rate
of global chemical sales of 3,5 p.a.
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The Hurdles

• Cost of biotechnology products
• Performance
• Lack of political support
• Lack of investor interest
• invisible Biotech
• Public resistance towards GMOs, regulatory issues
  

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Initiatives

• Technology Platform, Strategic Research Agenda
  www.suschem.org
• EuropaBio
• EC
• Austria, Baltic region, Finland, Germany,
  Netherlands, Sweden, UK

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The Investor

• Pros
• Shorter cycle times compared to drug dev. thus
  liqidity increase,
• Lower attrition rate,
• Rich RD base in Europe
• Exponential growth rates of markets

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The Investor

• Cons
• Different business model
• Low visibility of sector on stock markets
• Exit more likely to be trade sales
• Lower margins, higher volumes
• Logistics, infrastructure are important factors
• Public perception, political support not yet in
  favor

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The Investor Summary

• Yes, there is potential,
• Yes, there are investors,
• but changes in current situation are
  necessary!
• Increase visibility of existing contributions of
  biotechnology in our daily life,
• Change political climate and regulatory
  frameworks

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The Investor Summary

• Reduction of dependency on fossil resources -
  thinking in longer terms
• Revival of demonstration projects in FP7
• Success stories in Biotech

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TVM Capital Profile

• Leading German-American venture capital firm
• Founded by Siemens and TA Associates in 1983 in
  Munich Boston office opened 1985
• More than 1.3 billion raised
• Team rich operating, research, venture capital
  and corporate finance experience
• Network top industry and academic advisors
  strong links to Corporations in Germany and US

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Gunter Festel, Festel Capital Waldemar Kutt, EC
Austin Martin, BIFFIP Steen Riisgard, Novozymes
A/S Christian Suojanen, EFB
Thank you.
Munich Bostonwww.tvm-capital.com

• wolf_at_tvm-capital.de